Thursday, December 25, 2008

 

Auditor should answer real questions about BC Rail deal

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By Paul Willcocks
Paying Attention - January 14, 2004


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.

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Re-printed here with the always-generous permission of Paul Willcocks, given on Christmas Day 2008. - BC Mary.

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2 Comments

Blogger Gary E said...

The questions Paul raises here, sre they from the actual report. I ask this because I have never seen the ACTUAL REPORT. I do have a copy of the watered down interim report and that says the full report will follow. The reason given was that government lawyers needed to go over it first. And that interference would not allow the report to be published on time. So we were given a watered down report. I would like to see the full version of the original if anyone can point me in that direction.

December 25, 2008


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Blogger BC Mary said...


Gary E,

I have something called:

Report of findings: Fairness Evaluation of the Restructuring of the BC Rail Freight Division ... prepared for the BC Ministry of Transportation by Charles River Associates Incorporated, Boston, dated December 11, 2003.

Note two things:

1) that Charles River was also the "fairness advisor" in the matter of the negotiated sale, so how likely is CRA to report that their work was imperfect?

2) there was an earlier Interim Report (also by CRA) dated Nov. 14, 2003 ... which may be the report you have.

December 25, 2008


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Comments:
The questions Paul raises here, sre they from the actual report. I ask this because I have never seen the ACTUAL REPORT. I do have a copy of the watered down interim report and that says the full report will follow. The reason given was that government lawyers needed to go over it first. And that interference would not allow the report to be published on time. So we were given a watered down report. I would like to see the full version of the original if anyone can point me in that direction.
 
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Gary E,


I have something called:

Report of findings: Fairness Evaluation of the Restructuring of the BC Rail Freight Division ... prepared for the BC Ministry of Transportation by Charles River Associates Incorporated, Boston, dated December 11, 2003.

Note two things:

1) that Charles River was also the "fairness advisor" in the matter of the negotiated sale, so how likely is CRA to report that their work was imperfect?

2) there was an earlier Interim Report (also by CRA) dated Nov. 14, 2003 ... which may be the report you have.


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Hi Mary

I had the interim report and thanks to you I now have the full report. It's a long read but should be interesting to see how it is whitewashed.
 
Way off topic All the best to You BC Mary
Keep well and safe, you are needed and appreciated
 
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Anonymous 6:38,

Truth is, you are needed and very much appreciated here too.

We're all in this BC Rail Case together.

Very best wishes to you.

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