How BC Rail was made to disappear

In retrospect, only small timers got caught in the BC legislature raid.

by Bill Tieleman

No question is so difficult to answer as that to which the answer is obvious.
– George Bernard Shaw

What happened when an unprecedented police raid on British Columbia's legislature took place eight years ago, during the winter holidays?

How did the BC Liberal government's $1 billion privatization of BC Rail spark the province's biggest political scandal in decades?

Why did David Basi and Bob Virk — ministerial aides to then finance minister Gary Collins and then transportation minister Judith Reid — defend themselves against charges of breach of trust and fraud for six years, only to make a surprise guilty plea bargain when their trial had heard just two of a likely 40 witnesses?

 

Two reputable international railway companies dropped out of a bidding process because both felt it was designed to favour CN Rail.

Who knew what and when? And when, if ever, will we find the answers to these questions? Through a public inquiry repeatedly rejected by Premier Christy Clark but promised by New Democrat leader Adrian Dix, should he form the next government?

Perhaps some of those answers are already obvious.

One clue requires us to travel back in time and space to Princeton University in September 1969.

An ancient American Revolutionary War cannon, partially buried in the Princeton grounds and anchored with cement, disappeared overnight.

The only trace of the extremely heavy cannon's former hallowed location was a giant mound of earth left when the suspected perpetrators — Rutgers University students who had left graffiti insulting Princeton behind — had somehow silently removed the artillery piece in the dead of night.

It was a total mystery how this stunning feat of theft done with astonishing speed and impressive logistics could have been accomplished.

But the secret was eventually solved when Princeton's student newspaper got a tip that led to the dirt on the crime: look underneath the pile of earth!

The cannon had never moved an inch, nor been disinterred from its resting place.

Instead the brilliant plotters correctly predicted that no one would think the cannon was exactly where it always sat — and that the mountain of dirt it was buried in would convince all observers that an amazing criminal act had taken place.

What's more, it wasn't Rutgers students who did the dirty deed. Rather, it was a group of Princeton seniors, who covered their tracks by leaving behind slurs on their own school, knowing that the 100 years of university rivalry would enrage Princeton.

So a missing cannon was exactly where it always was and perpetrators of the perfect crime turned out not to be whom everyone presumed.

That analogy may help explain the mystery of BC Rail's disappearance and how it happened right in front of our eyes.

Campbell's 1996 vow to sell
Let's go back to basics.

Then-premier Gordon Campbell narrowly lost the 1996 election to NDP Premier Glen Clark, in part because the BC Liberals promised to sell BC Rail. That means a clear intent was formed to privatize a Crown Corporation that had net income in 18 of the 21 years before it was put on the block.

During the 2001 election campaign, Campbell learned his lesson. He promised the reverse of his 1996 pledge. In 2001, he said in the campaign that this time he would not sell BC Rail.

But after an election victory that eviscerated the hapless NDP under then-premier Ujjal Dosanjh, leaving him commanding a 77-2 seat margin in the BC legislature, Campbell secretly went back to his original plan — to get rid of BC Rail.

Campbell put the railway company on the auction block and invited bidders to make their best offer in a competitive process — may the highest price win.

Unfortunately, some bidders were more equal than others.

During the process it was discovered and reported that CN Rail had wrongly been given confidential BC Rail operating information. Due apologies were made and the bidding continued. But major rail companies were increasingly uneasy about the whole situation.

CP Rail dropped out of the bidding a week before the announcement that CN had won, saying in a letter to Campbell's senior deputy minister Ken Dobell that the process was "unfair".

The Nov 17, 2003 letter from the CPR vice-president of strategy and law, Marcella Szel, to Dobell says that its "market intelligence" showed "that CN was speaking directly to BC Rail shippers about their bid, with what we must consider the approval of the [BC Rail] Evaluation Committee, since the confidentiality agreement clearly stated no such discussions were to be held without consent."

"This feedback included the marketplace being aware of the actual value of the bids," Szel wrote to Dobell, just eight days before the BC government announced the sale of BC Rail to CN.

Anger by bidders at process
That letter was part of 8,000 pages of documents ordered released in early 2009 by then-BC Supreme Court justice Elizabeth Bennett in response to a court application filed on behalf of New Democratic Party MLA Leonard Krog.

Another major rail company — Burlington Northern Santa Fe Railway — also dropped out before the bidding ended, writing in a letter also disclosed in 2009 that it was "extremely dismayed with the handling of the BC Rail Transaction…. because of the lack of fairness in which the process has been conducted."

The letter went to CIBC World Markets, which handled the BC Rail sale for the province.

BNSF had been a business partner supporting the bid of OmniTRAX, which ended up being the only other bidder left competing with CN.

In an earlier (Nov. 18, 2003) letter, from Peter Rickershauser, Burlington Northern Santa Fe vice president network development, to Allan Wallace, managing director of CIBC World Markets, Rickershauser blasted CIBC World Markets with both barrels:

"I and Burlington Northern Santa Fe Railway are extremely dismayed with the handling of the BC Rail Transaction, especially in recent weeks as managed by CIBC World Markets. Our dismay arises because of the lack of fairness in which the process has been conducted so far, the apparent favoritism of certain bidders, and the lack of timely information provided to all participants involved in the process," Rickershauser wrote.

"Reports and rumours of CN talking directly with BC Rail shippers and communities have been circulating for several weeks in shipper, government and media circles…. In fact, reports from shippers indicate that CN has been discussing what it will or will not do when it is awarded the BC Rail concession," Rickershauser ended.

We cannot determine the accuracy of either CP or BNSF's allegations of a tainted process that unfairly favoured CN Rail.

It is also worth noting that none of the huge railway companies that bailed out ever went to court to recover their costs in participating in the bidding, let alone filed legal action to have the process overturned because of that alleged unfairness.

Why not? CP Rail's Szel pretty much answers that question in her own bitter letter.

Szel wrote that she would like to: "discuss with you how the British Columbia government can re-establish this kind of confidence with the CPR."

In other words, there's still far too much business to be done in BC to pursue a scorched earth approach. No doubt BNSF felt the same way, despite its anger.

David McLean and CN's win
There was also a "fairness" advisor interim report by Charles River Associates into the bidding stating that: "the Province and its advisors designed and managed the BC Rail restructuring process in a manner consistent in all material respects with current best practices usually followed in similar transactions."

But still — two reputable international railway companies dropped out of a bidding process because both felt it was designed to favour CN Rail.

Who was and remains the chair of CN Rail?

David McLean, one of Gordon Campbell's biggest and most long-standing supporters. And CN Rail was one of the BC Liberal Party's most significant donors, contributing $113,000 between 1994 and 2004, and another $155,000 between 2005 and 2009.

Campbell's then-chief of staff Martyn Brown testified as the first witness in the Basi-Virk trial that he was unaware of CN donations to the party and that neither that nor McLean's role as Campbell's chief fundraiser in 1996 affected the sale.

"It was not at all a factor in the consideration," Brown swore in May 2010.

And with only complaints by competing companies but not any action, and with only allegations by lawyers for Basi and Virk under the protection of a court pre-trial hearing, that's the end of the matter.

Basi and Virk avoid jail
The defence for Basi and Virk made many bombshell claims in BC Supreme Court, allegations that if ever proven would have rocked the province and likely brought down the BC Liberal government.

But they weren't.

Basi and Virk's lawyers were negotiating hard in secret with Special Prosecutor Bill Berardino to make a guilty plea bargain deal for their clients.

In October 2010, that deal was done. Basi and Virk would spend two years on probation and not have to pay back any of the roughly $6 million in legal fees collected over the years by their lawyers Michael Bolton and Kevin McCullough. Nor would they spend any time in jail, as prosecutors originally demanded.

The deal meant no more testimony as planned from BC Liberal government insiders — from ex-cabinet ministers like Christy Clark and Gary Collins — or from a series of party operatives like Patrick Kinsella, the lobbyist who collected $297,000 as an advisor to BC Rail over four years, doing work that was unknown even to some of its senior executives.

Basi and Virk admit passing confidential government BC Rail bidding information on to Erik Bornmann and Brian Kieran —lobbyists representing OmniTRAX — and justice is seen to be done.

What's that shape under the dirt?
So, let's go back to our missing cannon at Princeton University in 1969.

Just like the artillery piece hiding under a mountain of dirt, the BC Legislature Raid case is actually right where it always was.

Premier Gordon Campbell's government broke an election promise and sold BC Rail to one of his political party's biggest backers — CN Rail — in a competition where all but one other bidder dropped out, citing an unfair process they believed favoured CN.

The last remaining bidder, OmniTRAX, lost despite whatever advantages its lobbyists managed to procure from Basi and Virk in exchange for about $30,000 and a trip to Denver, Colorado for a football game.

And despite much of the BC Rail case being known to those voters who cared to look, the BC Liberals were twice re-elected to government after the 2003 raid, in 2005 and again in 2009. It's that simple — unless you actually want to know everything that really happened.

That will still take a public inquiry. You can support that position at a Facebook page I set up called Basi-Virk Public Inquiry.

 

© Copyright 2012 Bill Tieleman, All rights Reserved. Written For: StraightGoods.ca