Revenue Canada wants to tax former Winnipeg CAO and his company on bribe money, court documents reveal

The Canada Revenue Agency wants former Winnipeg chief administrative officer Phil Sheegl and his company FSS Financial Support Services Inc. to pay taxes on bribe money the company received from the contractor that built the Winnipeg Police Service headquarters, court documents reveal. 

The revenue agency said it was reassessing Sheegl's and FSS's taxes for 2011, according to a court document.

The CRA says that's because the company received a $200,000 "secret commission," which is considered income that it did not declare, according to a notice of appeal filed by Sheegl on April 19, 2022, in Tax Court of Canada.

"In failing to report all its income for the 2011 taxation year, the appellant made misrepresentations attributable to neglect, carelessness or wilful default," the attorney general of Canada said in a reply to a separate notice of appeal by FSS, which was also filed on April 19.

The documents say the money Financial Support Services received came from Mountain Construction — a company controlled by Armik Babakhanians, whose main construction business is Caspian Projects Inc.

That happened in 2011, two days after Caspian was awarded a contract to build the Winnipeg Police Service headquarters, the documents say.

The police HQ construction project was later the subject of a five-year RCMP investigation that ended in December 2019 with no charges laid.

Documents filed in the Tax Court of Canada say Babakhanians, through Mountain Construction, paid FSS a $200,000 cheque marked "consulting fee" in July 2011. Sheegl gave half to then Winnipeg mayor Sam Katz and wrote "loan" on the cheque.

Sheegl "has no knowledge as to why the payor of the deposit referred to the amount as a 'consulting fee' on the cheque, as the amount was not an income item," said the FSS notice of appeal.

It says the amount was "sale proceeds from the disposition of part of the interest" in a share of a piece of undeveloped land in Tartesso, Ariz.

WATCH | A 2017 CBC report on the Arizona land deal:

FSS said it didn't declare the money as income because the money did not belong to the company.

It said $100,000 was owed to Winnix — an Arizona company owned by Sheegl. The other $100,000 was owed to Duddy Enterprises LLC, an Arizona company owned by Katz, according to FSS.

Sheegl says the $200,000 was sent to FSS because it's a Canadian company.