Judge approves City of Winnipeg's request to add defendants to police HQ lawsuit

The lawyer representing a Winnipeg company and its owner failed to convince a judge to keep his clients off the list of defendants in a lawsuit over the construction of the downtown police headquarters building.

Lawyer Bob Sokalski argued that a motion from the City of Winnipeg in its ongoing lawsuit contained no hard evidence against his clients, G&G Interiors Ltd. and its owner, Pietro (Peter) Giannuzzi Sr.

"There is nothing in these paragraphs that says, 'This is what G&G did,'" Sokalski said at a hearing in Manitoba Court of Queen's Bench Tuesday.

All of the city's allegations instead point to actions of Caspian Construction — the contractor hired by the city to oversee the police headquarters project — and have nothing to do with G&G or Giannuzzi Sr, Sokalski told the court.

"Caspian did this, Caspian did that.… There is no accusation that G&G did anything fraudulent," he said, arguing a defendant accused of fraud is entitled to be told what they are alleged to have done.

He was arguing against a request in a notice of motion filed May 4, in which the city asked Chief Justice Glenn Joyal for leave to amend its statement of claim in the lawsuit, originally filed in 2020 against more than two dozen defendants.

The lawsuit alleges a scheme to inflate and overcharge the city for construction costs through fraudulent quotes and invoices, altered quotes from subcontractors and kickbacks related to the police headquarters — a project completed in 2016, years behind schedule and more than $79 million over budget.

The original suit was filed a month after the RCMP ended a five-year investigation into the construction project, with no charges laid. A judge later approved the city's request for copies of the documents seized by the RCMP during the police probe.

Company was paid only what it was owed: lawyer

In the city's May 4 affidavit, a forensic accountant hired by the city to audit those records said he found Caspian claimed nearly $8 million for G&G invoices related to drywall work on the police headquarters. However, Caspian payments to G&G totalled less than $6 million.

Sokalski argued that his clients were paid only what they were owed.

After listening to his submissions, Joyal granted the city's motion.

In explaining his decision, he said that another group of defendants — collectively referred to in the city's court filings as the "Garcea group" defendants — also unsuccessfully opposed the city's motion.

In most fraud cases, the evidence is circumstantial, Joyal said, but the city should be given the opportunity to prove its allegations.

"It is important for the court to contextualize those allegations as being part of a circumstantial theory, as it touches all the defendants," said Joyal.

He said there are some "direct, factual allegations" that have already been presented by the city against some of the other defendants.

"It's against those defendants the city then draws its circumstantial theory as it relates to others," said Joyal.

2 defendants denied court costs

The chief justice also dismissed a motion by two defendants, who were hired as consultants on the headquarters project, to have the city pay their legal costs.

Lawyer Ivan Holloway, who is defending Peter Chang and Patrick Dubuc, argued he and his clients have repeatedly told the city they do not have documents related to the construction project the city continues to request. 

"We have nothing more to produce," Holloway said in court, arguing there should be consequences for what he  described as the city's "one-size-fits-all" strategy with the defendants.

Holloway said the city's refusal to accept his client's position led to hours of related work that produced no additional documents, and argued the city should have to pay the $7,000 in resulting legal fees.

Michael Finlayson, a lawyer for the City of Winnipeg, said the city received 13 additional documents from Chang and Dubuc on June 21, which they failed to produce sooner, even though the city had been requesting documents for months.

The city had been seeking a copy of a confidentiality agreement supposedly signed by Dubuc, Chang and Caspian owner Armik Babakhanians to no avail.

The city says it learned of this agreement through emails obtained by the RCMP during their five-year investigation.

In previous court filings, the city submitted an email Chang wrote to Ossama AbouZeid — an project director hired to look after the city's interests on the headquarters project.

In the email, AbouZeid asked Chang and Dubuc for documents to support an excess $20 million requested by Caspian for the HQ project.

According to Finlayson, Chang told AbouZeid "we have also agreed to sign a confidentiality agreement and to return our copies of all the documents to support an extra $20 million sought by Caspian."

Chang said that was because the bid information from Caspian was "proprietary and could hurt Caspian's tender negotiating abilities for future project bids tenders," according to Finlayson.

Chang and Dubuc were supposed to be looking out for the city's best interests, he argued.

But instead, they withheld information the city needed to evaluate the request for an extra $20 million "because of an agreement to be signed with … Caspian, who they are supposed to be monitoring and reviewing," said Finlayson.

He said as a result of repeated requests for documents, the city finally got some new information from Dubuc.

In a June 28 affidavit to the court, Dubuc wrote that while "a confidentiality agreement relating to maintaining subcontract quotes confidential was contemplated by Armik Babakhanians. Mr. Babakhanians provided no such draft agreement to me and, accordingly, no such agreement was executed."

Dubuc's affidavit also says he has disclosed all the documents in his possession. He says a few years ago his computer "ceased to operate" and all the information contained on it was lost.