Former mayor, CAO invested in Arizona land with division of Winnipeg development company

About two months after Sam Katz's tenure as Winnipeg's mayor ended, he and former chief administrative officer Phil Sheegl joined together on a land deal with Terracon Development Inc. the U.S. division of a Winnipeg company that worked on major projects for the city while Katz was mayor.

Terracon, one of Winnipeg's largest industrial developers, was part of a consortium that built the $110-million extension ofChief Peguis Trail from Henderson Highway to LagimodiereBoulevard in 2010.

Winnipeg ethics professor Neil McArthur said the optics are not good.

When city officials have worked with a developer on behalf of taxpayers, conducting personal business with the company "is certainly is the kind of thing that would raise people's eyebrows," said McArthur, the director of the University of Manitoba's Centre for Professional and Applied Ethics.

"We live in a time right now where people are very skeptical of the integrity of elected officials. And I think there's often good reason for that."

McArthur said relationships between developers, politicians and city officials have always been the subject of suspicion not just in Winnipeg, but around the globe.

Seeing close "post facto relationships"between elected officials after their terms and companies"is going to definitely, I think, confirm people's view thatthese guys are all in it for each other," he said.

"I think it's a perception problem."

Terracon contracts

The city had various dealings with Terraconduring Katz's time as mayor, from 2004 to 2014.

In 2011, the city awarded the contract toconsolidate older Winnipeg Public Works yards into the East Yards to ErnstHanschConstruction. The company created a joint-venture withTerracon to build the$49 million project, according to Terracon's website.

The developer is currently embroiled in alawsuit with the city, afterthe current administration cancelled an agreement made with Terraconunder Katz to turn 237 acres of vacant city-owned land into an industrial park.

In 2015, chief administrative officer Doug McNeil told reporters the City of Winnipeg would not be willing to pay Terracon's share of provincial education taxes, which was a condition of the original deal.

Arizona land deal

Winnipeg lawyer Robert Tapper, who representsSheegl andKatz, says they got together with U.S.-based Terracon Development Inc.in December 2014 to invest in Arizona land.

A few months later, they paid just over $1 million cash for a piece of property in Scottsdale, Ariz., according to land title documents. They later developed the property into a luxury-garage condo facility called The Toybarnat Scottsdale Airpark,along with thecompanythat originatedthe concept.

"As far as I know, the four entities went together into this investment,"Tapper said in a phone interview with CBC.

The four wereKatz, Sheegl, a Toronto businessmanand the U.S. division of Terracon.

In addition to Katz and Sheegl, Tapper also represents Winnipeg developer Terraconand Norbert Hansch,aTerracon executive and the company's former president.

Tapper says whileHansch would have been involvedon behalf of TerraconU.S., he is not personally invested in the land deal,addingHanschhas been divesting himself for years as a succession plan to other family members.

"Is the mayor not entitled to invest in Arizona?" said Tapper. "Is [Sheegl] entitledto earn a living?"

'Cut and paste' error with Terracon-related company

In 2014, four months before the Arizona investment came together andwhile Katzwas still mayor a company managedby the U.S. division of Terracon listed Katz'shome in Scottsdale as its domestic address.

The company went on to acquire two buildings, and Katz's home address also appeared on the deed.

Terracon executive Michael Falk told CBC News in 2016 that it was a clerical error andwould be corrected.

"There is no association between Sam Katz, his home address in Arizonaand these particular properties," said Falk at the time.

Falksaid the company had used the same lawyer as Katz and that was the source of the mistake.

"We do meet with the mayor, and had met with the mayor, and did know he had business interests down there, and we simply looked for a referral and he provided one," said Falk.

That lawyer later blamed the error on a "cut and paste" mistake because his associate likelyusedKatz's recently-formed company'sincorporation documentsas a template.

"Obviously, some lawyer made a mistake and that's the end of it," said Katz in 2016.

The company changed its address shortly after.

Sheegl and Katz controversies

During his time in office, Katz was widely criticizedfor what was viewed as mixing private and public business.

Sandy Shindleman owner of the Winnipeg real estate firm Shindico was a shareholder in Katz's Winnipeg Goldeyesbaseball team for nearly the entire time Katz was mayor.

Katz came under fire for buying a million-dollar house in Arizona from Shindleman's sister-in-law, and for purchasing an Arizona company from Sheegl, his CAO, for $1.

Sheegl was hired as director of the city's property, planning and development department in 2008. His time at city hall was controversial from the start because of his friendship with the mayor.

In 2011,Sheegl was promoted to CAO but resigned in October 2013, shortly before the release of an external audit that found Shindicoreceived information not available to other bidders for the construction of new fire paramedic stations.

In 2016, the RCMP searched Sheegl's and Katz's bank records as part of an investigation into the $214-million construction project that saw a downtownCanada Post building turned into the Winnipeg Police Service headquarters.

Court documents said the Mounties were looking into a $200,000 payment the contractor on the project made to Sheegl. Sheegl had split the payment with Katz.

Tapper said the money Katz and Sheegl received was a down payment for a portion of property they owned in Arizona.

"This was a land deal. It's as simple as that," Tapper said in January 2017.

'Still trying to sort out exactly what happened'

"I think we're still trying to sort out exactly what happened under the Katz administration," said U of M ethics professor McArthur.

He believes part of publiccynicism comes from the fact that deals made between governments and developerslack transparency because they're not done openly.

Tapper said the business relationship between Katz and Sheeglhas been reported on in the past and Katz is no longer mayor.

"We knew all along that Sam was doing land development in Arizona. We knew all along that Phil was doing land development in Arizona. We knew all along that the two of them are friends and did deals together. Is that a surprise?" Tapper said in an interview in 2017.

"I think it is very important that we hold politicians to a high standard and that we care about the things that they do,"said McArthur.

"When there's a perception that 'the fix is in,' thenit becomes harder for honest politicians to do their jobs and for everyone to make good democratic decisions."

Former mayor, CAO invested in Arizona land with division of Winnipeg development company

5 years ago

Duration 2:06

Former Winnipeg mayor Sam Katz invested in Arizona property with former CAO Phil Sheegl and a U.S. division of local developer Terracon, CBC News has learned.

• More stories from CBC Manitoba's investigative I-Team

With files from Bartley Kives

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