Caspian Construction paid $45M to $50M above and beyond work it conducted, police HQ inquiry hears

The main contractor on Winnipeg's police headquarters was paid $45 million to $50 million above and beyond the actual work it invoiced for the redevelopment, says a fraud investigator hired by the provincial public inquiry into the project.

Forensic accountant Victor Neufeld told the Winnipeg police headquarters inquiry Monday that in his professional opinion, Caspian Construction inflated some invoices on the project, did not pay for some work it told the city was done, charged the city for some work that wasn't related to the project, assigned some invoices to companies that did not do the work and inflated the quotes for some change order work — that is, work that was not agreed to previously by the city — done by subtrades.

"These concerns appear to have had the effect that Caspian's project costs were reported to the city at amounts that were higher than they actually were, resulting in excess claims that appear to total in the tens of millions of dollars," Neufeld said in a slide deck he presented to the inquiry.

Neufeld made his statements on the first day of the second phase of the five-month police headquarters inquiry, which was called by the province to examine the procurement and construction of the police headquarters.

Over the past 12 years, the project has been subject to two city-commissioned audits, a five-year RCMP investigation and a pair of civil lawsuits launched by the City of Winnipeg.

One of those lawsuits ended in a pair of court decisions, in 2022 in 2023, that determined former Winnipeg CAO Phil Sheegl received a $327,000 bribe from Caspian pricipal Armik Babkhanians.

A second was settled by Caspian and dozens of other defendants in 2023 for a maximum of $28 million.

Neufeld said he based his conclusions on a combined 4,150 hours over six years sifting through "irrefutable evidence."

The evidence was compiled in several ways: from millions of documents and other data obtained by or freely given to the RCMP during its fraud and forgery investigation of the police HQ project; through the legal discovery process when the civil city lawsuits were proceeding; directly from some individuals and project subtrades; and through a document-review analysis conducted by consulting firm Deloitte with the use of an artificial intelligence platform called Relativity.

Neufeld said he looked at the project both in a broad manner and by reviewing specific examples, including notations on individual invoices.

"This is real. These aren't just numbers," he told the inquiry.

As an example, Neufeld said Caspian billed the city for $24.4 million based on invoices Caspian attributed to a subcontractor called Fabca. Neufeld said he could only find evidence of $5.4 million in actual work related to those invoices, meaning $19 million of the claims were in excess of the work Caspian actually covered as the main contractor on the job.

Neufeld also showed the inquiry two sets of invoices for the same work. In one example, one invoice was attributed to Fabca and another to Mountain Construction, a company controlled by Caspian.

Neufeld describes 15 instances of what he called "flow-through" pairs of cheques, where Caspian paid Fabca, which then paid Mountain.