RCMP search bank records in Canada Post plant fraud investigation
Mounties requested records from AECON and Caspian Projects joint venture bank account
The RCMP have received court permission to force TD Bank to turn over banking records that they say may produce evidence of fraud in the construction of Canada Post's Winnipeg mail processing plant.
In an information to obtain a production order dated Feb. 2 of this year, the Mounties said there are reasonable grounds to believe evidence of fraud could be found through a search of bank records relating to a joint venture between AECON Buildings and Caspian Projects Inc. — the two companies who together designed and built the multi-million dollar facility near Richardson International Airport.
The order, which was granted, asked for all records of the joint venture bank account between July 2008 and Jan. 1, 2016. The RCMP are specifically looking at quotes and invoices associated with Abesco Ltd., one of Caspian's subcontractors on the project.
In a sworn affidavit, RCMP said Abesco provided Caspian with several quotes for specific work on the postal plant. The Mounties compared those quotes against contract documents provided by Canada Post and found the numbers didn't add up.
"Several quotes appear to have been changed; much of the content of the quote appears to be the same, however the dollar value representing the cost of work received by Canada Post appears to have been changed to a higher value," Const. Davide Masi wrote in the affidavit.
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RCMP first alerted Canada Post about their investigation into possible fraud in February 2016. They said they became aware of discrepancies in billings when they seized documents from Caspian in December 2014, as part of their investigation into Caspian's construction of the new Winnipeg police headquarters building.
In separate production orders, RCMP said there are reasonable grounds to believe Caspian's owner, Armik Babakhanians, defrauded both Canada Post and the City of Winnipeg of more than $5,000.
Construction of the 200,000 sq. ft. Winnipeg mail-processing plant started in 2008 and was finished in 2010. It was billed as the flagship of Canada Post's $2-billion postal transformation project, which involved buying, selling and reconstructing buildings across the country.
RCMP seize documents from the RCMP
In November 2016 the Mounties got a search warrant to seize documents related to the mail plant from RCMP investigators working on the Winnipeg police headquarters case.
"Noted within these binders are handwritten comments and spreadsheets organized by sub-trade that summarize what Caspian paid them," said Const. Masi in the Nov. 30, 2016 affidavit to support the search warrant request to seize the binders.
"There were instances of what appeared to be two, but similar versions of the same document. Written across these documents were the writings 'true' versus 'inflated.'"
Police said there were 29 different sub-trades listed in the binders, but in order for officers working on the postal plant case to use any of the information in their investigation, they had to get a judge's authorization to take the binders from their colleagues assigned to the police HQ case.
In the court affidavit, the Mounties said they interviewed Abesco's owner, Wally Fast, and he told them his company periodically provided quotes to Caspian for several change order notices, issued every time the contractor or Canada Post needed to change an aspect of construction on the postal plant. But what Caspian sent back was a higher value purchase order.
"Nearing the end of his work, Abesco made two payments to Caspian. These payments were the sum of excess monies that Caspian paid Abesco for the work completed at WMPP [Winnipeg mail processing plant], which Wally Fast believed not to belong to Abesco."
There are no allegations of criminal wrongdoing against Wally Fast or his company Abesco Ltd.
Fraud alleged through change orders
The Mounties said the change orders totalled more than $17 million.
"Though the process of how the Caspian/AECON JV [joint venture] was paid is still being investigated, I believe that Canada Post did receive fraudulent quotes associated to change orders," said Const. Masi.
Babakhanians declined to comment.
Calls to Abesco's owner, Wally Fast, were not returned.
In March 2016, RCMP said they were not investigating AECON.
The RCMP investigation into the Winnipeg mail-processing plant and the Winnipeg police headquarters construction project are ongoing. No charges have been laid, and none of the allegations have been proven in court.
The Winnipeg Construction Association didn't want to weigh in on the police allegations, but agreed to break down the process of change orders.
"Typically in the construction process a change would be identified, the contractors and subcontractors involved in putting the work together would price the change," said construction association president Ron Hambley.
"The general contractor would compile the pricing, add their markup — overhead and profit to it, present it to the owner, and the owner could say, 'That's too much, I don't want to go ahead with it,' or 'That's fair, let's go ahead with it.'"
Hambley said changes during construction can be very disruptive so contractors generally try to avoid them. But when they do occur, contractors don't just factor in the cost of labour and material in their billing.
"It may include things like the extension of the project in terms of the number of days or the number of weeks that the project is extended. It may have no change to the schedule of the project, [or] it may have significant change. So there's costs added into that."