Documents released this week by a judge in a political corruption trial trace the government's route from staunch denial to talks with bidders and then a media strategy on how to sell privatization to the public

MARK HUME

The Globe and Mail (National Edition) - March 7, 2009

VANCOUVER -- When Gordon Campbell swept to office in 2001 with a stunning victory that gave him all but two seats in the provincial legislature, his Liberal Party had a clear mandate to remake British Columbia just about any way it wanted.

And it didn't take the Premier long to start making big changes, as he announced a 25-per-cent tax cut on his first day in office, dramatically underlining his message that B.C. was "open for business."

Privatization of Crown assets and a revitalization of B.C.'s aging transportation system were both high on Mr. Campbell's action agenda, and within months he was thinking about selling BC Rail. But offloading the iconic, debt-ridden railway owned by the province since 1918 would prove to be one of the most troubling deals his government has ever made.

Thousands of pages of partly censored internal documents were released last week by the Supreme Court of British Columbia in response to an NDP motion in a political corruption trial involving Dave Basi and Bobby Virk, former ministerial aides charged with fraud, breach of trust and accepting bribes in relation to the sale of BC Rail. The documents are shedding new light on how the government strategized on the controversial $1-billion deal, which continues to haunt Mr. Campbell even as he seeks a third term in the May 12 vote.

Within months of taking office, Mr. Campbell was being advised that a key part of his transportation plan should be selling BC Rail. "Let the market drive public policy, for so goes the economy of the province," states one internal government note that, like many of them, has the sender's identity blanked out.

By fall the government had a task force examining privatization opportunities, and by the following spring a note urges Mr. Campbell to sell BC Rail quickly.

"The BCR Group of Companies is a $1-billion dollar public asset, that is currently losing 10 per cent per year or more, due to changing times. As a crown corporation it has peaked, stalled and rolled over the top onto a downhill slide. ... Now is the time, to maximize the corporate return from the BCR Group of Companies, to reduce the deficit!" it states.

The files do not reveal Mr. Campbell's response. But throughout 2002, he repeated his "New Era" campaign promise not to sell BC Rail.

In an Aug. 19, 2002, e-mail to a BC Rail employee, name blanked out, Mr. Campbell couldn't state it more clearly: "I assure you that the government is not looking at the privatization of BC Rail as part of our transportation strategy."

By that fall, however, Mr. Campbell was meeting with officials from other railways, including Matthew Rose, president of Burlington Northern Santa Fe Corp., which would later become a bidder along with another U.S. company, OmniTRAX.

And while publicly denying BC Rail was for sale, the government began secretly preparing to announce the deal. A file marked "confidential" shows that by November, 2002, the government had a media plan drafted.

"The communications strategy presented in this document has been prepared to provide guidance for planning and implementing an announcement regarding a decision to sell the industrial freight division of BC Rail," it says.

It notes the "New Era campaign promise 'not to sell or privatize BC Rail' " will cause problems, but tells ministers to focus on the demand of BC Rail customers for better service, and on the "serious financial risk to BC taxpayers" posed by the railway's $639-million debt.

It says supporters should be lined up in advance.

"The key spokesperson(s) will be media trained prior to the announcement using key messages and master Q & A document. ... In advance of the announcement a select group of customers and supporters will be provided with relevant factual information and messages to support the sale announcement and respond to media enquiries," it states.

And the strategy sought to have officials "make calls to select business media" to help guide coverage. "The decision to sell would be positioned in terms of a response to overwhelming evidence against retaining the freight railway in government hands," it says.

After issuing a request for proposals for BC Rail's freight division, in May, 2003, the government studied bids from CN, CP and a combined offer from OmniTRAX-Burlington Northern Santa Fe.

The files include minutes that show Mr. Virk, the ministerial aide who would later be charged with accepting bribes for allegedly leaking information in exchange for money and gifts, was involved with the committee evaluating the bids.

"Virk to work with [deputy minister Chris] Trumpy and the Office of the Premier to finalize letters of invitation ...Virk to confirm with [Transportation] Minister [Judith] Reid the relationship between BC Rail, the Northern Transportation Strategy discussed at the fall session. ...Virk to ensure Minister Reid confirms outcome," state various entries.

On Nov. 25, 2003, the government announced a deal that gave CN the right to operate on BC Rail's roadbed under a 60-year lease renewable for up to 990 years.

But behind the scenes it hadn't gone smoothly. CP and the U.S. bidders complained because CN alone had been given an opportunity to meet with BC Rail shippers, gaining valuable knowledge about rates that other bidders didn't have.

"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," Peter Rickershauser, vice-president of Burlington Northern, wrote on Nov. 18.

CP raised similar concerns a week earlier - and dropped out of the bidding.

But while the complaints were unsettling to the government, which insisted it had run a fair process, far worse was to come.

On Dec. 28, 2003, police raided the legislature and hauled away files from the offices of Mr. Basi, who was a ministerial aide to then-finance-minister Gary Collins, and Mr. Virk, an aide to Ms. Reid.

The government didn't let the raids stop the BC Rail deal, which closed in July, 2004, but a second privatization offer, for a BC Rail port subdivision at Robert's Bank, was cancelled when police told officials confidential information had been leaked.

The joint case against Mr. Basi and Mr. Virk remains in pretrial hearings. Many more documents are expected to emerge at trial.

What's in the files

The information contained in the 8,000 pages of documents includes:

Heavily edited cabinet minutes where even the subject headings are blanked out.

Media strategies that call for reporters to be "hand picked" for inside scoops and the presentation of groomed "supporters" to validate the government's message.

A 2003 letter to Martyn Brown, then Premier Gordon Campbell's chief of staff, that contains a job application from Bobby Virk, saying he was referred by Mr. Campbell and Lara Dauphinee, the executive assistant to the Premier.

An audit that shows op-ed pieces submitted by Mr. Campbell, and run by many newspapers including The Globe and Mail, "have been written for the Premier by IGRS [Intergovernmental Relations Secretariat]."

Heavily redacted correspondence tracking notes from Mr. Campbell's office that contain heads such as "RCMP raid on the Legislature" and "Basi/Virk cases rel'd to BC Rail partnership." Notes indicate material was blanked out under various sections of the Privacy Act.

Documents online

The New Democratic Party posted on the Web yesterday digital copies of thousands of pages of internal government documents released recently by the Supreme Court of British Columbia. The NDP got access to the material by filing a motion for material that defence lawyers in a political corruption trial had earlier obtained under the Freedom of Information Act. The documents are related to the $1-billion sale of BC Rail by the government in 2003. "These documents shed some light on the B.C. Rail corruption scandal, and the public deserves to have access to this information," NDP attorney-general critic Leonard Krog said in releasing the material.

The documents are posted at:

http://www.bcndpcaucus.ca/en/bcrailcorruption

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It has always been difficult to "snip" paragraphs (to avoid copyright infringement) from Mark Hume's reports, because he packs each line with solid information in a smooth-flowing narrative. This March 7, 2009 column -- at such a critical time in B.C. history -- is especially valuable. So I am hoping that Mark Hume and The Globe and Mail will forgive me for posting the column in its entirety. I hope they will see it as a sign of respect for its value to the public. It is reprinted here, with appreciation. - BC Mary.