The Black Rod

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Tuesday, July 15, 2014

Sheegl and Shindico. Five Years of Deceit, says Audit.


The looting of Winnipeg started almost as soon as Phil Sheegl got on the city payroll.

And it lasted almost until the day he quit.

That's the cold truth you're left with after reading the latest audit presented to city hall, an audit of five years of real estate deals conducted by the city under Sheegl's watch.

Phil Sheegl, the best friend of Winnipeg Mayor Sam Katz, was hired in April, 2008, as the director of the city's department of planning, property and development. In  November, 2008, he was appointed deputy Chief Administrative Officer, and in 2011 he replaced Glen Laubenstein as CAO.

Three months after Sheegl got the planning job, the city announced it was looking for real estate advisors and brokers to "assist the city with real estate transactions".  They eventually qualified five.

"In the transactions where an external advisor was retained, there was no documentation explaining the rationale why an external advisor was required for that particular transaction." stated the audit.
 
And...
 
"There was no documentation evidencing the selection process undertaken to determine which of the prequalified proponents to engage in all cases where an external advisor was retained."
 
Here, maybe, is why...
 
Of $1.2 million paid to advisors and brokers on four contracts, $1.1 million, or 95 percent, went to one of them -- Shindico, the company owned by Sam Katz's business partner, Sandy Shindleman and Shindleman's brother.
 
Two weeks before the official search for qualified advisors and brokers ended (July 31, 2008), Sheegl was busy tipping off Shindico to private city business. 
 
"Call me about Canada Post," Sheegl emailed Shindico on July 15, 2008.
 
*  In December, 2007, the post office announced it was closing its sorting operations at 266 Graham Avenue and moving elsewhere in the city. The news threatened to leave a giant, empty building in the heart of the heart of downtown. Rather than see a black hole in downtown Winnipeg for years, or forever, city officials decided to kill two birds with one stone -- buy the post office building and turn it into a new police headquarters. It would be cheaper, they said (ha ha), than fixing the structural problems with the old police headquarters on Princess.
 
While Sheegl and other city bureaucrats were twisting arms to get the exclusive right to buy the PO site, Shindico, all along, had the inside track on, ahem, "advising" the city on buying the facility.
 
*  The real estate audit, read in total, details like a pattern, like a paint-by-numbers game, of how the Sheegl-Shindico scam worked over the next four years, starting with the Post Office purchase.
 
-  First, Sheegl would tip off Shindico to some city business that hadn't been made public yet. 

- Then, Shindico would use the insider information to give itself the edge (on, for example, price, available land, or finding a buyer) by the time the city issued a public tender.  Sheegl would select Shindico as the best bidder and award them the contract. 

- Then, during the time of the contract, Shindico would wind up doing scads of extra work that wasn't in the tender but for which Sheegl would approve payment.
 
*  Once the City convinced the Post Office to deal only with it regarding the sale of the building at 266 Graham Avenue, Sheegl went into high gear. In July he had a meeting at Shindleman's home to prepare a proposal.
 
Twelve days later, the city signed an Exclusive Buyer Agency agreement with Shindico, backdated to January 1st.
 
The auditors wrote that the very next month, Deepak Joshi, the current CAO, was among the city bureaucrats warned that brokers in the city were "expressing concern over the decision making process" in hiring Shindico.
 
*  The audit doesn't say why, but it wasn't hard to suss out the truth.

-  In February, 2009, Shindico got caught red-handed trying to profit from another of Sheegl's inside tips. Shindico had listed on its website the Winnipeg Square Parkade for sale---except that the property hadn't been declared surplus by city council.
 
-  At the time, Sheegl, and Mayor Sam Katz, brushed off any hint of insider favoritism, claiming the listing by Shindico was just an error.  Only, it wasn't, as you'll soon see.
 
But it was this example of Sheegl's standard-operating-procedure that upset brokers and made its way to Joshi, who ignored the protests.
 
*  In November, 2009, the city bought the Post Office building for $29.25 million. A week earlier, Sheegl had made Shindico the manager of the property.  A formal management agreement was signed in June, 2010.
 
For the sale, Shindico was paid a commission of $804,000, roughly double what the Exclusive Buyer Agency agreement called for.  City officials told the auditors the extra money was for extra work performed by Shindico (see how the scam works, above). The auditors replied that if there was that much extra work, the city should have issued another tender.
 
The management agreement, said the auditors, was not reviewed by city lawyers, and contained a number of questionable clauses, including at least one that contravened the City of Winnipeg Charter.
 
When someone in middle management questioned why Shindico was made the facility managers when city staff could do the job, Sheegl sent an email declaring he wouldn't let the quibbler "meddle" in his decision. More on that, later.
 
Let's go back to the Parkade deal.

Shindico was the real estate broker on the sale of the parkade, starting way back in August, 2008, when Sheegl wrote them "I have informed that you will represent the city in any negotiations and/or listing."
 
-  The auditors discovered that in early February, 2009, Sheegl confirmed to an unidentified questioner that "Yes, they (Shindico) are representing our interests in negotiations."

-  That was on a Friday.  The next Monday, the Parkade was listed for sale on Shindico's website.  One day later, after the press spotted the listing, it was down--- and Katz was lying about how it got there.

First posted: Thursday, February 12, 2009
Katz downplays parkade-for-sale ad
SUN MEDIA

Mayor Sam Katz downplayed the listing of a city-owned parkade on a commercial real estate company's website, saying it was nothing more than a simple mistake.
On Monday, Shindico had listed the Winnipeg Square Parkade for sale on its website. The three-level, 932-stall structure, worth anywhere from $20 million to $50 million, also includes the air rights to the structure. That space could be available for an office or hotel tower.
Problem is, it's not for sale.
The listing was removed from the website Tuesday. Shindico informed Winnipeg's chief administrative officer Glen Laubenstein of its error and that explanation was enough to satisfy Katz yesterday.
"It's my understanding from the CAO that the company made an honest mistake and they apologized," he told reporters. "That's the end of it. I don't know of anybody who hasn't made a mistake."
"The bottom line is the property is not listed for sale."
The city is still debating the idea of selling off the parkade.

*  On March 20, 2009, the city formally put the parkade up for sale.  The tender did not reference any brokers fees or commissions.
 
-  Then---surprise, surprise---who should pop up representing a potential BUYER?  You got it.  Shindico.
 
-  The auditors gently pointed out that Shindico never had to sign a confidentiality clause when it got the job as the city's broker on the deal. So they knew the city's bargaining position---and could freely spill it all to the buyer Shindico didn't collect anything from the city, but did get a hefty commission from the Parkade buyer.
 
*  Here's where you can insert the uber-scandal involving Sheegl and Shindico -- the firehalls scam. 

This was dissected in the first of the trifecta of audits involving Phil Sheegl's tenure at city hall, and you can read the details in The Black Rod.
 

Suffice to say here that it followed the pattern exactly:

-  a  tip off from Sheegl,
-  use of insider information to get the contract,
-  Shindico's involvement kept a secret from city council,
-  extension of one contract to other, lucrative, work,

and  "abracadabra", taxpayers pay Shindico millions.

Literally millions. 


Oh, and Shindico built a firehall on land they owned, and now they're taunting the City to expropriate them and pay vastly more than they themselves valued the land at when construction started.
 
They also noted with interest that Shindico's advisory role was never disclosed to city council or any of council's committees.
 
The next rung on the Sheegl scandal ladder is of particular interest because it involves The Black Rod.  Really, it does.
 
You see, way, way back on October 9, 2010, The Black Rod broke the story that a new stadium promised by David Asper was going to cost as much as $190 million, instead of the $115 million pricetag he started with.
 
The reverberations of that story were immediate. Despite Asper's denials, the story was true. The federal, provincial and city officials who were backing Asper's plan were shocked into action.  They booted Asper and cobbled together a deal of their own to fund a new football stadium.
 
Guess who sat on the board of the Winnipeg Blue Bombers as the city's representative. 

Yep, Phil Sheegl. 

Guess who would have known that Asper was out before anyone

Yep, Phil Sheegl.
 
Guess who he would have told.
 
*  Dec. 8, 2010, Shindico, coincidentally, came asking for a site plan for the old stadium at Polo Park.  With Asper out, the site of Canad Inns stadium was in play.
 
Only the public wasn't told that Asper's company, Creswin, was out until five days later, Dec. 13, 2010.  
See how this works?
 
Not convinced? 

How about when you learn the auditors discovered that Shindico received an advance copy of the city's Expression of Interest in the stadium site.  It was 3 days later that the EOI was public knowledge.
 
For comic relief, the audit contains this response from city management:

 "PPD  (Property, Planning and Development), Legal Services and Materials Management were not aware that the EOI for the Polo Park Stadium site was provided in advance." 

Gee, now who could have leaked it then?
 
The Polo Park stadium site was eventually sold --- to a partnership between Cadillac Fairview and Shindico.
 
*  Remember the Post Office sale?
When we left it, Shindico had signed a management contract. It was June, 2010.
 
Almost two-and-a-half years later, a city committee voted to cancel the management contract with 90 days notice.
 
Guess what?  230 days later, Shindico was still being paid to manage the property.
 
City staff reported to council's property and development committee that public service management would save the city almost $350,000 over 3 years compared to what private companies that answered a public tender would charge.

"A city committee voted to cancel the property management contract within 90 days and the city's administration decided to keep it going to 230 days or so," Colin Craig, Manitoba director of the Canadian Taxpayers Federation, said to the Winnipeg Sun. "If the city can do it for so little, why did they hire a private company in the first place?"
 
The answer came a month later. Phil Sheegl quit on the eve of the release of the firehalls audit.



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