Wednesday, July 11, 2007


Auditor should answer real questions about BC Rail deal


First printed Tuesday, January 13, 2004 on "Paying Attention"
and reprinted here by kind permission of the author.


By Paul Willcocks

VICTORIA - Judith Reid is right. The legislature raids don't mean the BC Rail sale should be stopped.

But taxpayers should still ask for an independent review by the province's auditor general.

Deal opponents got a boost when police raided the legislature offices of Reid's aide Bob Virk and Finance Minister Gary Collins' powerful assistant Dave Basi. Police also searched the office of Erik Bornman, a federal Liberal wheel and a lobbyist who worked for OmniTrax, one of the unsuccessful BC Rail bidders. Virk was heavily involved in the sale. Basi worked closely with Collins, who co-chaired the sale steering committee with Reid. Bornman's company lobbied both ministers.
That's all we know. And it's not enough to suggest wrongdoing, or any reason for delay.

But there are still questions about the deal, separate from the investigation. And given the likelihood of more asset sales, it makes sense to make sure this one was done right.

Premier Gordon Campbell points to a review of the sale by a U.S.-based consultant and says it provides all the answers. That review, by Charles River Associates, found the process was fair and the price paid for the railroad was toward the top of the range you would expect. It is, overall, a positive report.

But it also raised questions suggesting that the way the sale was handled could have been unfair and cost taxpayers' money.

And with all respect to the company, it was paid $300,000 for the review, and likely hopes for more work. Its expertise is unquestioned - the consultants have helped governments around the world auction off assets and establish markets. It's reputation is important. But it was still paid by the government.

The consultants' report raised several questions.

They found that the $750 million CN Rail paid for the company was at the top of the expected range - good news for taxpayers. But Charles River didn't do any in-depth review of the fairness of the $250 million CN Rail paid to acquire the past tax losses of CN. Taxpayers don't know if fair value was delivered.

The consultant also found significant leaks. One of the finalists leaked information in violation of confidentiality agreements.

Another public leak revealed BC Rail management's forecast of the effects of the sale on the company and communities. That politically embarrassing leak sparked a big internal review, complete with forensic auditors, to find the source.

And in a third leak, the consultant said, information was sent to someone who shouldn't have had it. The report is irritatingly unclear about details. It says only that the lawyers involved promised the documents were returned or shredded. But were they forgotten? Were they important? The consultant says no, but doesn't give enough facts to support the conclusion.

Finally, the consultant raises concerns about the basics of the deal. The Liberals said they would evaluate proposals based on price and a range of other factors, from economic development to job preservation to benefits for First Nations.

But the fairness review says it was really all about the money. CP Rail and Omnitrax - unsuccessful bidders - complained that they couldn't get a handle on what the government really wanted. They put more emphasis on the entire package. After the decision, they realized the auction really focused on price. If they had better information, they might have offered more money.

These are all real concerns. And to make sure the mistakes aren't repeated - and to determine if taxpayers got a fair price for the tax losses - the auditor general should be provided with the funding needed to review the deal.

That's a problem. The government has foolishly chopped the auditor general's funding, despite warnings that critical reviews would be sacrificed. (The Alberta auditor receives almost twice as much money.)

Restore the funding. Support the review. We need the information.


Thank you, Paul. Amazing, isn't it, how we're still waiting for so many of those answers. - BC Mary.


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