Thursday, August 06, 2009

 

What lies buried under BC Rail's track beds?

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Republic of East Vancouver re-visited ... unabridged

Somebody had to have arranged for the huge profit CN quietly picked up on the side

By Kevin Potvin

It hardly seems possible the BC Rail affair is still snailing through the courts. Mysteries and intrigues enshroud the facts like morning banks of fog wrapping around the highrises of downtown. The outline of the story, by now nearly boring for its familiarity, still bears repeating for the morality drama it still contains, even while much of it still remains to be revealed, like so much wine awaiting tongue to spread across.

Mmm, like that?

In the lackluster eight years-and-counting regime of Gordon Campbell’s Liberal’s, there isn’t much selection when shopping for the definitive story that captures in a phrase what he and his time are all about. “BC Rail” more than suffices.

Originally built as a sort of mini-me Potemkin version of the national CP Railway, BC Rail also has the tinge of the greatness of BC Hydro about it. It was, like BC Hydro, as much assembled from pre-existing parts as constructed anew by the government, in one of those fits of socialist central planning right-wingers occasional go through, week-long sinners they be, confessing on Sunday.

The idea was to bring cheap and regular access to markets beyond to the small farming and mining towns squeezed in the creases of the mountains. It was a money loser economically by itself, the small towns being so far flung, but larger purposes were served well, like a sustained economy in those places where none could have developed without subsidized rail cargo service.

But as the 21st Century loomed, even the left-wing government of the 1990s spoke of it’s time having passed, it had accumulated such staggering losses on its books and, anyway, the mining, forestry and agricultural sectors were on their way out, truth be told.

That’s how BC Rail’s fate became a campaign issue in 2001. To court the votes of poor interior towns, the fresh-faced new leader of the newly-minted Liberal Party promised, if elected, to reverse the NDP’s callousness and vowed to never ever do such a dastardly thing as close or sell BC Rail. And then, upon winning the election, one of the first things Campbell did was put BC Rail up for sale. Why, I ask, do we bother with campaigns?

Even at the time of the auction, things looked strange. It was eventually sold to CN for $1 billion. The now-opposition NDP flew into a rage and the interior towns revolted. The government responded by insisting it had got a good deal for what had plainly been a money loser, as though it was the price they got and not the act of selling it that was the source of all the fuss.

To ally these invented fears, Campbell hired the services of a third party auditing firm to test whether or not the government got a good deal. The tactic worked: the price became the issue. But even here, questions arose. In general, the auditor said, the deal was in line with other similar deals, and this opening sentence in the conclusion was much touted by Campbell, eager to lay the issue to rest.

But a closer read of the report reveals the deal, in the auditor’s study, was broken down into two parts. The stamp of approval so warming to Campbell’s heart applied only to one part, the $700 million part covering the sale of the cars, tools and leases on the rail beds. Concerning the second part of the deal, the $300 million for the tax books of BC Rail, the auditor was quite explicit in saying not nearly enough information was ever provided to even begin considering whether $300 was a fair price. It refused to even ask, instead saying another examination was required, one that would be provided the necessary information. That never happened.

This is indeed the fulcrum around which the whole BC Rail deal swings, as The Vancouver Sun’s Harvey Enchin noted last weekend, in his strangely Johnny-come-lately article extolling the value of BC Rail’s tax accounting books that contain huge carried-forward losses. Keep your eye on that Harvey Enchin fellow. Read John Perkins. Then google Enchin, see if you can find anything out about him.

Funnily enough, it is the accumulated losses at BC Rail that made its tax accounting books worth so much. Simply put, if your company makes, say, $1 million in profits, it will need to pay something like $300,000 in taxes. However, your company could buy another company that lost $1 million, merge the two books together, and the resulting combined company will be able to report that it made no profit at all. Now it doesn’t have to pay that $300,000 tax bill anymore, does it.

That makes the money-losing company worth a lot of money to your profitable company, like say, something around $200,000 in this example. If you buy it for that much, cut your $300,000 tax bill to zero, you just gained $100,000, not a bad return on an initial outlay of $200,000, especially if you do it in the last month before tax reporting time. Companies that have lost a lot of money are worth a lot of money to companies that have made a lot of money. That don’t teach this at the university.

The government tax collectors allow losses by companies to be carried forward for up to seven years and to be applied against future profits by the same company, or any other company that buys it and merges books with it. At the time of its sale, BC Rail had on its books $1.3 billion in accumulated losses available for carrying forward, or for application against profits at any other company that chose to purchase it.

CN annually makes a healthy profit. Since its purchase of BC Rail, CN has been using up BC Rail’s losses against its own profits and saving, by the time it’s done, $1.3 billion in tax payments. It is the same, essentially, as profiting $1.7 billion, since the profit here is an after-tax profit. For this guaranteed $1.7 billion profit (there was no risk, after all, since the tax department would not likely change carry forward rules), CN paid the princely sum of $300 million. Let’s see: $300 million for a $1.7 billion guaranteed profit. The portion of the deal the auditor did look at, covering the cars and sheds, pales by comparison. We can see why the government failed to provide the auditor with sufficient information to be able to evaluate whether the public received fair value for the sale of the tax books portion of the BC Rail deal. Paying $300 million for something automatically guaranteed to be worth $1.7 billion is called theft, at least the way I was raised.

Not long after the closing of the deal, police showed up at the legislative building for a shocking and completely unprecedented raid on elected officials’ offices. They gathered up and carried off boxes of documents and computer hard drives that have remained sealed from public scrutiny ever since. Specifically, they raided the office of the minister of finance and the office of the deputy premier. Police said only that the raid was related to the sale of BC Rail, and that they had been monitoring in secret deep dark corruption surrounding the deal’s negotiations the whole time. The two ministers affected were not charged with anything. But, curiously, while both were rising stars in the Liberal firmament, and both were widely known to be ambitious about leadership one day, they both, by surprise, soon after the raids found family life and other opportunities more attractive and left government for good, never to be seen again anywhere near their old, police-raided offices. Mere co-inky-dinky, shhhhhhurly, says the grinning guy down the bar from me, one eye rolling across the ceiling, the other across the floor.

The court case has centered on two non-entities accused of influence-peddling and bid-rigging. But from the start, there has always been the stench of something much bigger hanging over this whole curious affair. Specifically, there has always been the sense of the time-bomb ticking inside one of those sealed boxes or publication bans that populate the long-drawn out and excruciatingly procedural case.

We might think an elected official stuffing an envelope of cash in his breast pocket in return for arranging a sweet deal for public property is an outrageous impossibility. But who, at the time, would have imagined the then-dignified and thoroughly above-board Prime Minister Brian Mulroney stuffing envelopes of cash into his pockets outside the washroom in a restaurant out by the airport? Vander Zalm too, the self-described Christian moralist, down at Howard Hughes’ old digs, the Bayshore Hotel, jamming his pockets with unmarked envelopes of cash. Who’d have thought?

Such things can and do happen, involving those men who moil for gold. CN walked away $1.4 billion to the good, and that whole part of the BC Rail deal has all along been obscured, distracted, and hidden, and remains to this day still largely unknown. It had to have taken a few of those thickened envelopes to so effectively paper over such a thing, I say to the grinning guy down the bar.


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kootcoot has left a new comment on your post "What lies buried under BC Rail's track beds?" [repeated here]:

Anon-O-Mouse at 6:36 (The OT individual) mentions in his laundry list of Gordo transgressions the contracting out of BC Hydro billing to Accenture (the bastard child of Anderson Accounting and Book Cooking for Enron). I find it interesting that Accenture is BLACKLISTED from doing business with the State of California due to their illegal activities and the fact that they are off shore even from the US, much less BC, and were involved in ripping off California for BILLIONS during Enron's phony "energy trading" scams. Yet the Gordo Gang chooses them to handle the books for our once proud and successful ENERGY corporation.

It just proves to me that Birds of the Feather truly do flock together and who else would a criminal organization like the Campbell government ask to keep the books than a proven criminal accounting firm? The last kind of company the Campbelloids would want to be partnered with would be a company with integrity.

I am disgusted, but not surprised by this morning's announcement that Blair Lekstrom has offered the oil and gas companies an up to 90% discount on royalties for oil and gas in BC. Campbell the Green (for US DOLLARS, not environmental values) wants to undercut even Alberta as the cheapest source of energy reserves for foreign corporations to EXPLOIT. All the middle eastern suppliers and even the Africans demand more return for either their citizens or their elites from the rapists.

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Comments:
As I have said before about this giveaway, they didn't purchase a railway they were paid to take it.
And the majority of this province just doesn't get it.
 
Originally published on May 20, 2009...

Perhaps some enterprising person could prepare a big pile of reprints of this short article and distribute them to members of the public who show up for the big party on the Canada Line come August 17....

Nothing new here of course, but it's nice to see it so tellingly presented.

Thank you Kevin and thanks Mary, as always.

GW
 
Great article. It seems to me that gordo's name is all over this disaster. Maybe if he was a man, he would "fess up". But he is not a man, but he is a criminal. We are spending millions on the court case, and up to this moment in time, there is nobody in the hot seat. maybe we should be questioning our lawyers. Ask Bill B what is going on, and why he is on the take. Perhaps he might be in line for a senator's seat? Gordo may becoming cornered in this whole mess. Lets push a little harder, get him and his rabble. Give us our province back!
 
Kam Lee says "Give us our province back." However, if we have to tolerate four more years of the Campbelloid Crime Spree there won't be anything left to return, other than diverted streams with no fish left alive, farm land covered with pavement, depleted bug infested and burned out forestland and the remains of a blown up Texada Island. Meanwhile Gordo and the Gang will be on Maui and elsewhere counting their ill-gotten gains and ordering Piña Coladas.

BTW, if one goes over to the full article by Robin posted just before this, one might notice that some real chowderheads seem to comment over there at ViveleCanada - the level of discourse may be even lower than at the Mild One (the Tyee - which would seem middle of the road at best in a world with a real media spectrum - but can pretend to be "left" when compared to the Canned Waste universe that is B.C).

Bankruptcy for Canned Waste would be a blessing for the citizens of British Columbia and the equivalent of a mercy killing for a waste of wood fibre.
 
G West:

That's a straightforward, uncomplicated idea that could work very nicely ... if people celebrating a new railway on August 17 handed out copies of Kevin Potvin's informative analysis. I hope a lot of people decide to do that. Thanks, G.


Koot, Kam:

I've been thinking about the fires devouring so much of the wild, beautiful spaces we love ... and thinking there's a kind of biblical vengeance at work ...

Like, you can imagine a mighty voice saying "OK, Gordo, you've had your fun destroying British Columbia ... now stand back while I show you what it's like when destruction goes out of control ... !"

I know it's nutty ... but the past week of forest fires has been so bloody awesome, huge, and ... well, full of anger. All the wild creatures ...

And what do you think of that new name - "wildfires" -- which seems to sound less threatening than "forest fires". Are they helping us forget ... because the BC forests are gone?
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and another thing, Koot:

I'm glad you remarked upon those chowderheads ...

Long, long ago I wrote an essay about Vive le Canada which I called a noble experiment. I stand by that -- it really is a marvelous idea where any citizen can nominate any published article to be included in Vive's publications. Or anybody can write an original article which will probably be published (without payment, of course). There's scrutiny, but most submissions are allowed to pass and that's an amazingly free, open, democratic approach.

But there's a critical weakness in Vive's set-up too, and that's (as you point out, Koot) the chowderheads who are allowed to say any terrible thing they can think up. You wouldn't believe the godawful stuff that was said, after my "Noble Concept" essay in praise of Vive was published. Unbelievable. There's no doubt that it brings the level of discourse down, down, down ... and Vive suffers for it. There's absolutely nothing wrong with editing to a set of standards. But Vive never seems to clue in. It's a great pity.

The chowderheads and potty-mouths create an abhorrent abuse of a truly noble concept and I wasn't able to go near Vive for a very long time. Still can't.

Robin Mathews soldiers on, willing and able to contribute to Vive's strengths -- and to ignore their weaknesses. It just seems such a pity that -- with so little effort -- the chowderheads could be deleted and the full value of Vive le Canada could be allowed to flourish.

I'm glad you spoke about it. Thanks, Koot.
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kootcoom we will have no choice, so long as carol james is the alternative.
 
... and here is the proof that carol james is not up to the task: she is spending all her time and energy fighting the harmonized sales tax, something her own party would have done long ago.

The Liberals havent taken James eye off the ball since, alas, it never was on the ball to begin with, but feigning outrage as issues present themselves:

Export of raw logs and jobs. Where is the NDP?

Sinking of the Queen of the North. Where was the NDP?

Privatisation of Medical Services (housekeeping, foodservices/Compass % billing) and BC HYdro (Billing/accenture). Where was the NDP?

Why didnt the NDP make the necessary improvements (massive) to the billing system, (IS) of MSA when they were in power?

Instead, the NDP waste their time on such trilial BS like miminum wage, arguing against hamonizing taxes (something that has beem the focus and agenda of the federal govt's cra from the get-go). To express outrage over paying 7% extra for a hair cut while logs are exported out of bc, while jobs are lost in our health care system, while BC rail is given away, while emails are destroyed, IS MADNESS!

The liberals must go, but firstly, so must the NDP. They just are not up to the task, imo.
 
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Anon 6:36 ... can't say I disagree with what you say here BUT

remember?

this is a non-partisan site

(except where Gordo is concerned)

and you're way, WAY off-topic.

OK?
 
Anon-O-Mouse at 6:36 (The OT individual) mentions in his laundry list of Gordo transgressions the contracting out of BC Hydro billing to Accenture (the bastard child of Anderson Accounting and Book Cooking for Enron). I find it interesting that Accenture is BLACKLISTED from doing business with the State of California due to their illegal activities and the fact that they are off shore even from the US, much less BC, and were involved in ripping off California for BILLIONS during Enron's phony "energy trading" scams. Yet the Gordo Gang chooses them to handle the books for our once proud and successful ENERGY corporation.

It just proves to me that Birds of the Feather truly do flock together and who else would a criminal organization like the Campbell government ask to keep the books than a proven criminal accounting firm? The last kind of company the Campbelloids would want to be partnered with would be a company with integrity.

I am disgusted, but not surprised by this morning's announcement that Blair Lekstrom has offered the oil and gas companies an up to 90% discount on royalties for oil and gas in BC. Campbell the Green (for US DOLLARS, not environmental values) wants to undercut even Alberta as the cheapest source of energy reserves for foreign corporations to EXPLOIT. All the middle eastern suppliers and even the Africans demand more return for either their citizens or their elites from the rapists.
 
"I find it interesting that Accenture is BLACKLISTED from doing business with the State of California due to their illegal activities and the fact that they are off shore even from the US, much less BC, and were involved in ripping off California for BILLIONS during Enron's phony "energy trading" scams."

Uh, if they're blacklisted by the State of California shouldn't that mean that California should have en embargo or boycott on power from BC Hydro? Not that kilowatts come with "made in BC" stickers, but it strikes me if they're not allowed to do business with the State of California, then who deals with the contracts between BC Hydro and California buyers??

And I'd like to know, as I'd asked before though rather vaguely, if when BC Hydro's administrative functions were privatized, was that put to open tenders or was it another "favour" like the preferred/tainted transfer-with-benefits of BC Rail to CN?? Ditto with Maximus and other "outsourcings of government". Were there bidding processes for any of these?? Or were they just all golf club deals struck at the 19th Hole of the BC Liberal Party fundraising golf tournament?
 
"ven the left-wing government of the 1990s spoke of it’s time having passed"

Since I elsewhere pissed in the Tyee's pool about mis-use of the possessive apostrophe, it's only fair that I point out Kevin's (sole) punctuation error in this piece, out-of-date and beyond re-editing though it is. I guess the problem is over-correcting; someone confused by the rule of the its/it's exception to the contraction vs possessive role of the apostrophe.....all too common and even more irritating is to see the apostrophe used for plurals, especially on not just hand-drawn signs but professionally-made ones too - e.g. "hot dog's" and "nacho's".....
 
Skookum,

Your comments are almost always zingers ... especially good one, that whistle you blew on the State of California sucking up BC electricity despite Accenture ...

and now the apostrophes. It's a disease, isn't it? I mean people like me (and you) who can't reconcile to the abuse of the nifty little ' that tells us so much, with just that little ' when it's in the right place, but shrieks when it isn't in the right place. It seems such a simple thing: use it for the possessive noun, use it for the abbreviated verb, but have some respect for the simple plural which needs nothing added. Sheesh.

Only yesterday (Skook, I am not making this up) I bought my only sibling a birthday card -- not a very splashy card but I knew it was the one -- because it has the apostrophe error right in the greeting.

Bear with me: "On Your Birthday," it says, amidst flowers and hearts and butterflies, "Today, may dreams come true, hopes be fulfilled and may the future bring happy days and even brighter tomorrow's." Honest. I know she'll scream "tomorrow's WHAT?" because she's a retired schoolteacher and we always had fun competing to see who could spot the most atrocious abuse of that poor little ' ... and the game goes on.

In fact, punctuation is capable of changing the meaning of a sentence. Lynn Truss picked up on that with her incredible book filled with laughter, all about punctuation, especially the apostrophe. For those unfamiliar, the book is "Eats, Shoots and Leaves".

But we digress. Wow, did we ever digress! Thanks for that, Skookum1.
 
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