$10M in 'excess payments' made on Winnipeg police HQ; city wants docs from subcontractor to help explain why

The latest court filing in the City of Winnipeg's civil lawsuit alleging fraud in the construction of its police service's headquarters says one of the subtrades involved in the project is trying to get out of providing documents in the case.

The city has been asking McCaine Electric Ltd. — which is not among the companies accused of taking part in a scheme to defraud taxpayers — for documents since September 2021.

The city says it needs the documents to make sense of millions in excess payments it made for electrical work on the project.

In a May 27 affidavit, the city says it paid Caspian Construction — the general contractor on the project — $33.8 million. That was supported by McCaine invoices and approved change orders — a construction industry term that refers to an amendment to a contract that changes the scope of a contractor's work.

However, "the known Caspian payments to McCaine are about $23.7 million," wrote Gabrielle Lisi, one of the lawyers representing the city, in an October 2021 email attached to the affidavit.

Lisi said the city is trying to account for about $10 million in "excess claims" relating to change order amounts approved for extra McCaine costs.

The city launched a civil lawsuit in Manitoba Court of Queen's Bench in January 2020 against Caspian Construction and dozens of other companies and individuals involved in the construction of the downtown police HQ.

In an amended statement of claim filed May 4, the city detailed how the alleged scheme to defraud taxpayers took place.

The city says fraudulent and or inflated subtrade quotes, invoices and change orders were created "to wrongfully inflate the cost of the project," which was completed in 2016 — years late and more than $79 million over budget.

Those documents were approved for payment by the project manager hired by the city to look out for it best interests, and consultants working on the police headquarters.

The documents also say secret commissions and kickbacks were promised or paid to contractors, consultants and their related companies.

'Fake' invoice request

The city says handwritten notes were found within Caspian's file on McCaine's work on the police HQ project.

In an email to McCaine's lawyer in October 2021, Lisi wrote "Ask Hayley ... for fake inv dated July 26. Inv. $124,980.14."  

The email says the city "understand[s Hayley] was a McCaine employee."

The city's lawyer said she wants an explanation for why the invoice was issued and any email correspondence between McCaine and Caspian about it.

One of the exhibits filed by the city is a copy of a Dec. 9, 2012, quote McCaine sent to Caspian, which had a $23.1 million "all inclusive price." The document had a sticky note attached that said "Caspian eyes only."

That quote came a few days after Caspian's owner, Armik Babakhanians, told the city he had fired McCaine.

The city wants McCaine to provide documents showing why the company agreed to remain involved in the project despite a breakdown between Caspian and McCaine in early December 2012.

Previous court filings in the city's lawsuit show that on Dec. 3, 2012, Babakhanians sent an email to then city chief administrative officer Phil Sheegl, with then mayor Sam Katz copied, saying he just fired McCaine because the company exceeded its budget by $10 million.

The message did not state what the budget amount was.

McCaine paid Caspian $105K: documents

In court filings, the city submitted a cheque showing McCaine paid Caspian $105,000 in October 2012. The city's filing says it wants to know if it was payment for part of an outstanding debt connected to the construction of another project.

Caspian was also the general contractor hired to build a mail processing plant near the Winnipeg James Armstrong Richardson International Airport — a completely different project paid for by Canada Post. That plant was completed in 2010.

In the May 27 court filings, the city said it wanted McCaine to explain how the company owed $160,000 to Caspian that "apparently arose through McCaine's billings" to the mail processing plant project. 

"How did this work and who arranged it," wrote Lisi.

Both the police HQ project and the mail processing plant projects were part of an RCMP investigation into alleged fraud. The police probe lasted five years but wrapped up in December 2019 with no charges laid.

This isn't the first time the city has alleged one of the police HQ subcontractors paid Caspian during the project.

Last month, the city's court filings said Caspian paid Strada Construction almost $1.2 million in 2012 and that five days later, Strada paid Caspian the same amount.

Company registry documents say McCaine Electric's only listed shareholder is Canem Holdings Ltd.

Bird, a national construction firm based in Mississauga, is the parent company of both entities.

Court documents say in September 2021, Bird's lawyer said he was finally able to reach someone at McCaine Electric who was working for the company when the police HQ was being built. He said he expected to have documents by the end of the week to review, and would then be in touch with the city. 

The court filings say last month, McCaine's lawyer told the city it would seek an adjournment — either a postponement or indefinite delay — on the city's May 4 notice of motion, which asked the court to order McCaine to preserve the requested documents. 

In an email to McCaine's lawyer, the city said it would oppose the adjournment.

"Your client has known about the city's concerns, and its request for documents, since September 2021," wrote Lisi.

The city's latest court filings say trial dates are expected to be set in this case for the fall of 2023, more than three years after the initial statement of claim was filed.