Talk to anybody in this city and they'll tell you the public perception is that the Winnipeg Firehalls Scandal has crossed an invisible line that separates collusion from corruption.
Er, said Winnipeg's senior civil servants, there's no documentation on that. Nothing. Nix. Not an email, not a note, not a scribble in the men's room. Zip.
Given that the Firehall No.11 (St. James) is being blamed for most of the $3 million cost overrun on the $15 million project to build 4 new fire stations, the city's answer is completely unbelievable.
Did somebody sweep the files clean of all references to Fire Station 11? CAO Phil Sheegl and the other top administrators were questioned by auditors and they had no paperwork? Were the auditors even told that there wasn't a document anywhere to explain why one fire station was built so big, that nobody knew what to do with the extra space?
At this stage, only the police can get answers to that question and every other outstanding question about the firehalls debacle.
City council spun off a legal review of one aspect of the project---whether the city can be sued for favoring one developer, Shindico, over other potential bidders by giving them privileged information the others didn't have.
Is it too late to ask for a separate legal opinion of what potential breaches of the law might be the subject of a police investigation given all the chicanery conducted by Winnipeg's "civil service"?
Or should we skip jumping through hoops and just ask the police and Crown to give us an opinion?
We combed the Ernst-and-Young audit of the firehalls project for examples of fishy activity that should interest police investigators. A sampling of what we found, including some of what we dug out ourselves:
* Shindico had an "inside man" who guided them on how to circumvent the public tendering process. The company was given information that was unavailable to other potential bidders and which set up a situation where then-CAO Phil Sheegl could scrap the tenders and give the contract to Shindico.
A Shindico spokesman admitted to the auditors that "somebody" within the city administration advised them to submit their own design for firehalls, even though none of the other bidders were advised they could do that.
Mr. X has never been identified. He's still there, willing and able to tip Shindico off to inside developments. The auditors didn't ask for his name or else Shindico refused to provide it. They know perfectly well who their Deep Throat is. Only a police investigation can demand that information.
* The bidding process was rigged to give the entire $15 million contract to Shindico without a fair and open bidding process. That was the conclusion of the firehall audit. But believe it or not, it might be bid-rigging, but it's not against the law. The law only criminalizes bid-rigging if it's between competitors, not a civil servant and a potential bidder.
But remember the term "procurement fraud".
* Sheegl arranged it so that Shindico could make an excess profit on the firehalls deal. Shindico could submit an artificially low price for the new firehall on Taylor in River Heights because it didn't have to include a price for land.
The fire station would be built on land owned by Shindico, which would be swapped later for three other parcels of city land. Shindico would make a profit on the construction of the firehall, and another profit on the development of the swapped land.
* Only the Crown prosecutors can determine what constitutes an illicit favour. Does Shindico's hosting of Phil Sheegl, the man who sole sourced their firehall contracts, at one or more Winnipeg Jets games count? It was and still is the most valuable, hardest-to-come-by sports ticket in Winnipeg.
(The Black Rod, September 14, 2012 Seen... Phil Sheegl sitting in Shindico's corporate seats. )
Four days after CBC reported on the secret and still-unapproved land swap (in August, 2012), Mayor Sam Katz bought a house in Arizona from the sister of a Shindico executive for $10 down. He afterwards claimed he paid fair market value, but refused to answer any questions, like how much and when, saying it was nobody's business.
* Winnipeg's senior civil servants, such as current-CAO Deepak Joshi, who is deeply implicated in the firehalls scandal, have said everything was done by the book. That raises the obvious question, how many other insider deals have been done by Sheegl, Joshi and others that they're not telling us because they, too, were done by the book?
* Why can't we get a straight answer about the St. James firehall? It was built in two stages to fool city hall about its real cost, it's way over budget, it was larger than the other three fire stations built as part of the same project, although nobody could say why? In fact, the scramble to find a use for the extra space was embarassing and very suspicious.
(More about the St. James station in days to come.)
Four years ago, Calgary had its own concerns about how contracts for construction projects were awarded. Boy, a lot of their concerns sound familiar, don't they.
September 20, 2010
Calgary to probe construction procurement fraud
The City of Calgary has hired an accounting firm to look into allegations of fraud in construction procurement, but a candidate for mayor in the upcoming elections says the auditor isn’t independent enough to protect the public interest.
“Even though it may not be true, the perception is that they are being hired to audit their own work,” said Calgary Alderman and mayoral candidate Ric McIver.
Deloitte & Touche LLP will review the city’s procurement practices and address serious concerns about fraud. The company is already the city’s external auditor and has been for a number of years.
“Those people that chose this auditor are running the risk that something may not be fully disclosed. Whether it’s good, bad or ugly the public needs to know,” he said.
The firm will start work later this month.
“It’s less independent than it should have been and doesn’t meet the highest standard of independence,” said McIver. “They should have chosen one of the other consulting firms.”
In response to a Request for a Proposals (RFP), Deloitte & Touche was selected to determine if there is any substance to allegations of procurement fraud raised by the former city auditor.
In June, city auditor Tracy McTaggart was fired for heading a department that failed to meet international accounting standards.
The decision was made after a review into the auditor’s office by PriceWaterhouseCoopers found a wide range of inefficiencies.
McTaggart released an audit on May 20 which also revealed systemic problems in the way contracts for construction projects are awarded.
One of the main conclusions of this audit is that there is an increased risk of fraud through the use of change orders and non-competitive procurement.
According to McTaggart, change orders were issued on purchase orders over $25,000 that totaled $747 million in a three year period ending April 2009.
However, many change orders were missing from contract files and, as a result, she said it was not possible to assess the underlying cause for the change order.
There was also a disproportionate use of sole/single sourcing to procure goods and services, without evidence to support the rationale for the lack of a competitive process and to ensure compliance with the Agreement on Internal Trade (AIT).
In response to McTaggart’s findings, city manager Owen Tobert produced his own report.
His report stated that the administration conducted its own analysis and found that there have been no circumstances of procurement fraud.
The Internal Control Risk Management group reviewed almost 600 files representing a value of $600 million or about 80 per cent of the dollar value of all the procurement files.
The group found that change orders and documentation were authorized and adequate.
Given the contradictory conclusions of the two reports, Tobert felt it was necessary to hire an independent auditor to address any lingering doubt in the minds of the city council or the public.
At this time, Tobert said, the administration is seeking expert advice from Deloitte & Touche to undertake a more complete and risk-based review of procurement activities that occurred between 2006 and 2009.
The risk-based investigative review will focus on higher risk procurement activities that are estimated to have a greater likelihood of occurrence and a more significant impact.
Following council’s approval, administrative staff identified seven higher risk areas in the RFP, including files related to single source contracts, change orders and limited tenders.