Winnipeg Mayor Sam Katz said he no longer co-owns a major piece of real estate with Shindico owner Sandy Shindleman.

The news came after a damning city-commissioned report was released on Monday, detailing a myriad of issues with a fire hall land swap deal.

The report found preferential treatment for local-land developer Shindico in a fire hall land deal that cost taxpayers more than $18 million. It also found gross mismanagement, cost overruns and problems with the amount of authority the city gave its chief administrative officer.

Sam Katz

Mayor Sam Katz said he is no longer business partners with the owner of Shindico. (CBC)

​CAO Phil Sheegl resigned last week, just days before the report came out. That report put much of the blame for the costly mismanaged deal on him.

Former fire chief Reid Douglas was put in charge of a development deal that would see four old fire halls sold and three new ones built. The report said Sheegl tasked Douglas with the deal, despite Douglas not having the training or knowledge to carry it out.

It also found the former CAO showed favouritism toward Shindico, with the company getting extra information other bidders didn’t have when they prepared to bid on a Sage Cree fire station.

The report also noted a private conversation between former fire chief Reid Douglas and former CAO Phil Sheegl on April 20, 2009, in which Sheegl apparently said, "I want Shindico to build these fire halls."

Douglas replied, "Then lets [sic] hope they're the low bidder then," according to the report.

Shindico was not the lowest bidder for the Sage Creek fire station. It was, in fact, the highest bidder, and its bid was accepted. It was then also awarded three other contracts for the remaining fire halls, and no proposals were accepted on those locations.

The report noted Shindico suggested a land swap for some of the locations, to which Douglas agreed.

“Initially I was approached by Shindico, which was Bob Downs, their developer, who said, ‘What are you going to do with the old fire halls?’”

Douglas said Shindico was eager to complete the deal, and he was under the understanding land exchanges were common practice at the city.

The deal was also beneficial for his department, as it meant the exchange wouldn’t count against the project’s capital costs.

For one fire hall in particular – the Taylor Avenue location – Shindico wanted three pieces of city-owned land in exchange. Two old fire halls and one empty parcel on Mulvey Avenue.

Despite contracts not being signed, construction began on a fire hall on Shindico owned land on Taylor Avenue.

“I had a conversation with Bob Downs one day saying, ‘You could have a very expensive 7-11 on [the Taylor Avenue] property one day that looks like a fire hall because if we don’t get this land deal done or a contract with you, you’re going to own the building,” said Douglas.

Douglas said he was taking a huge leap of faith by moving forward without a signed contract, but the report noted Sheegl sent Douglas an email about the potential exchange telling him to, “Get it done.”

Concerns swirled around city hall, but people were directed to talk to Sheegl.

In March 2012, the city’s real estate manager sent an email to Barry Thorgrimson, the director of planning, property and development that said, “I need some coaching Boss. How are we going to justify this land exchange This deal favours Shindico by about $1.03M.”

The manager also wrote, "We did advise Reid [Douglas] early on not to include the Mulvey site and rather just include the other two fire halls and pay the balance in cash. Also, there are complications with Mulvey (ie. lane widening required, variances, subdivide out Harbour Master)."

According to the report, Thorgrimson advised the real estate manager to meet with Sheegl.

It still remains unclear why Shindico was shown favouritism at the time.

Katz and Shindico

Now, Katz’s involvement with Sheegl and Shindico is being called into question by city councillors.

Until earlier this year, Katz was business partners with the owner of Shindico, Sandy Shindleman, and it is well-known Katz is friends with Sheegl.

In 2012, he also purchased a house from the sister of Diane Shindleman, Shindico's chief financial officer, in Arizona.

Katz emphatically denies he knew anything about the specifics of the land swap deal, and said he has never personally showed any company favouritism.

“Absolutely not,” said Katz. “I will go further than that, and I will be happy for you or anyone else to come here with a notary and basically say that on a bible.”

Coun. Paula Havixbeck said the controversy doesn't bode well for the mayor.

"It doesn't look good. He is so closely tied," she said. "We know Phil Sheegl is his friend. When we went through this hiring process, he asked most of us to support him for the CAO. Look at where we've come. City hall has never looked worse."

Read about Katz’s previous questionable land deals in our web feature.