The owner of Caspian Construction told the Winnipeg police headquarters inquiry he submitted hundreds of falsified invoices to the city as part of the construction project but insisted he did not overbill the city for any work.

In his second appearance before the provincial public inquiry into the procurement and construction of the Winnipeg Police Service’s downtown headquarters, Armik Babakhanians testified he made up the numbers on hundreds of invoices submitted as part of progress claims in order to ensure the numbers matched those on line items in the project budget.

George Orle, Babakhanians’s lawyer, asked his client whether he agreed it was wrong to do this.

“I believe it was, and I’m disappointed we actually let it go that far,” Babakhanians testified Monday morning.

In response to questioning from inquiry counsel Heather Leonoff, Babakhanians admitted he altered the invoices of some of his subtrades and submitted some invoices for companies that did not do any work.

Babakhanians denied, however, submitting invoices for work that was not conducted at the police headquarters construction site but was instead done elsewhere, such as at the Soul Sanctuary church, which the inquiry previously heard Caspian was building around the same time, and the police department’s canine unit.

‘Where is that money? I could use it’

The police headquarters inquiry, which started in February, is examining the $214-million project that saw the city purchase a former Canada Post complex in downtown Winnipeg and convert it into a new home for the Winnipeg Police Service.

The project has already been subject to two external audits, a five-year RCMP investigation that concluded without charges and a pair of city lawsuits.

Earlier this month, forensic accountant Vic Neufeld told the inquiry Caspian submitted $45 million to $50 million worth of excess claims on the project.

Babakhanians denied overbilling the city and said he certainly did not derive additional funds from the project.

“Where is that money? I could use it right now,” Babakhanians quipped, adding the project would be missing key components if he didn’t spend tens of millions.

“Let’s put it this way. I’m not sure you would have [a] complete mechanical, electrical system. You wouldn’t have security, that’s for sure. You wouldn’t have backup [generators],” he said.

“You wouldn’t have that beautiful-looking structure outside.”

Babakhanians testified he is still owed $1 million for the project and has outstanding legal fees in the vicinity of $5 million.

Babakhanians also testified he is preparing to submit $23 million to the City of Winnipeg under the terms of a 2023 lawsuit settlement. Orle said Babakhanians is working with a Vancouver lender to release this money in order to meet a Tuesday deadline.

Missing the deadline will trigger the settlement payment rising to $28 million, under the terms of the settlement.

Babakhanians insisted he did nothing wrong. He said he only agreed to settle the city’s lawsuit over fraud, forgery and deficiencies because it was hurting his family.

“It was a commercial decision, but also a family decision. It just tore our family apart,” he testified. “I couldn’t see the pain, watching my granddaughters.”

A separate lawsuit launched by the city led a court to determine in 2022 that former Winnipeg chief administrative officer Phil Sheegl accepted a $327,200 bribe from Babakhanians in exchange for favouring Caspian during the bidding process.

Surreptitious recording played for inquiry

Babakhanians said his contract with the city did not require him to submit details of what Caspian paid his subtrades.

To back up that claim, his counsel provided the inquiry a recording made by Babakhanians’s son Shaun Babakhanians of a Jan. 23, 2014 meeting with City of Winnipeg officials.

The recording and a transcript of it was only provided to the inquiry days ago, commissioner Garth Smorang said.

While it’s legal in Canada to record a conversation without informing other people present, such recordings usually can not be entered into evidence at court hearings, Smorang said.

He said he is nonetheless allowing it to be entered as evidence, pending an explanation for the secrecy from Shaun Babakhanians, who is slated to testify later this week.

Inquiry counsel Leonoff asked Babakhanians Monday whether he falsified the invoices in order to make sure they added up to a value that would ensure there would be no cost savings on the project, which he would have had to share with the city.

Babakhanians said he should have refused to provide the city with backup invoices and should have quit the project early on.

“I should have walked. I should have walked,” he said.