At first blush, there is little newsworthy about a legal dispute involving the dissolution of a long-standing partnership between two commercial real estate developers.
However, a civil trial that started this week in Winnipeg is not a run-of-the-mill dispute.
The lawsuit pits a numbered company controlled by John Pearson, president of ICI Properties, against Shindico Realty Inc. Although none of the allegations has been proven in court, documents filed to date, and the opening days of testimony, have the potential to damage Shindico, one of the city’s most powerful real estate developers.
In a statement of claim, Pearson alleges that Shindico principals Sandy and Robert Shindleman breached the terms of a two-decade-old partnership and in the process, breached their fiduciary duty.
In court this week, Pearson painstakingly detailed the work he did to bring numerous high-value commercial developments to fruition in Winnipeg, Brandon, Selkirk and Yorkton, Sask. In court documents, Pearson said the three men collaborated on more than $222 million in commercial real estate assets involving some of the biggest brands in retail.
Pearson is seeking $5.1 million in damages, an equal distribution of assets still controlled by the partnership and an accounting of all fees the Shindlemans paid to themselves during the life of the partnership. Pearson alleged in court the Shindlemans charged unwarranted commissions and fees on the commonly owned properties, contrary to the original partnership agreement.
However, the most unusual aspect of the lawsuit is the reason Pearson ultimately decided to start unwinding his business affairs with the Shindlemans: concerns about “political corruption” in deals involving Shindico and the City of Winnipeg.
Simon Bieber, Pearson’s lead attorney, said in an opening statement Monday that as the stories linking the Shindlemans to controversial land deals with the city mounted, “he grew more and more concerned about whether there was something to it. And although Mr. Pearson was not involved at all in the conduct that was the subject of the reporting, he was worried that the negative publicity would impact him because of his relationship and affiliation with the Shindlemans.”
In direct examination on Tuesday, Pearson repeated those concerns. He said the stories detailing “corruption allegations between (former mayor) Sam Katz and Sandy Shindleman” had finally convinced him to start withdrawing from business dealings with Shindico.
It would be fair to say there were significant concerns raised about the relationships between Katz, former city chief administrative officer Phil Sheegl and the Shindlemans, who remain among the most influential property developers in Winnipeg.
The four men, longtime friends and business associates, found themselves at the centre of numerous stories about controversial land deals with the city.
In July 2004, just a month after Katz took office in a byelection, the city agreed to sell the old Winnipeg Arena site near Polo Park to Shindico for a net profit of $2.1 million, amid concerns the bidding process had not been competitive. The deal was done despite the fact another bidder had offered $6.2 million to build a water park.
In 2013, an audit of city real estate transactions found multiple examples of concern involving Shindico, including evidence of inappropriate “favouritism” in approving an $18-million land deal with the Shindlemans.
In one example, the audit found contracts won by Shindico to build four new fire stations were awarded on a “non-competitive” basis and that Shindico was given inside information not available to other contractors. It was also learned that a fire hall on Taylor Avenue was built on Shindico-owned land even though the city owned land nearby.
Then came the city’s decision to buy the former Canada Post building downtown, a first step in a complicated plan to retrofit it to serve as the new headquarters for the Winnipeg Police Service.
Shindico was involved at various early stages of this deal, earning an $800,000 broker commission (which the audit determined was 68 per cent higher than market rates) and a sole-source contract to provide real estate-management services at the site.
Originally estimated at $135 million, the project ballooned to $214 million. The project — conceived and executed by Sheegl with Katz’s blessing — would end up sparking two separate RCMP criminal investigations.
The relationship between Sheegl, the Shindlemans and Katz, who appointed Sheegl to serve as the city’s top bureaucrat, sparked dozens of news stories about preferential treatment in city business.
Although Manitoba Justice ultimately decided against laying any criminal charges, a civil suit brought by the city resulted in a damning judgment against Sheegl.
In 2022, Glenn Joyal, the chief justice of the Court of King’s Bench of Manitoba, determined Sheegl had accepted a bribe from the project’s general contractor, and described his actions as a “breach of trust and a breach of loyalty.”
Joyal ordered the former CAO to pay the city more than $1 million.
Sheegl’s appeal was thrown out by the Manitoba Court of Appeal in July 2023.
Premier Wab Kinew has promised an inquiry into the WPS headquarters scandal and in particular, the decision not to lay charges. Although there has been no movement, the Kinew government earmarked $500,000 for preliminary work to set up an inquiry.
Until then, many in civic politics and property development will be interested in what happens in a Winnipeg courtroom where, over the next few days, a divorce among business partners may end up writing the next chapter in this story.
dan.lett@winnipegfreepress.com
Dan Lett
Columnist
Dan Lett is a columnist for the Free Press, providing opinion and commentary on politics in Winnipeg and beyond. Born and raised in Toronto, Dan joined the Free Press in 1986. Read more about Dan.
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