Wednesday, February 24, 2010
What lies buried under BC Rail's track beds?
By Kevin Potvin
The Republic of East Vancouver
Reposted from May 20, 2009 with permission
... 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 allay 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 [this is an error: Bobby Virk worked for the Minister of Transportation, the second office raided. - BC Mary]. 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.
BC Rail continues to lose money from operations becuase A. it is a crown corp. B. it is poorly run, or C. its costs are too high, or D becuase it is poorly run because its a crown corp, or E becuase its revenues are too low, becuase its poorrly run, a crown corp., or E, becuae ... you get the idea.
Take a look at the annual reports. pay close attention to the notes, especially the wages and expenses paid to the eployees and upper management. yr in and yr out its outrageous. There is nothing endeering about this fleece factory. The sooner the Province can divest of this dog, the better.
Is it a swarm, or is it just one newbee that keeps logging in with different names? I would no longer trust many BC Rail "books" that can be had online, by this time they could all have been whitewashed by PABsters or their ilk.
What is "outrageous" is that you post things that are obvious lies or you know next to nothing about. A couple of years back, I had a deep look at the books on BC Rail; and it was a great money-maker with an asset to debt ratio that was well within the railway's abillity to service the payments on that debt while providing cash for the provincial coffers.
Last I looked, Bill Gates (with 26%) was the largest shareholder of assets (rolling stock, and rail-line right-of-ways) that were formerly known as BC Rail. He has made gobs of money off of BC Rail. Don't tell me you think the richest man in the world would purchase CN Railway while it was purchasing BC Rail because it was a bad deal! What a crock of nonsense you have tried to plant here. But I get it, that's most likely your job. In this economy, everyone needs a job.
He's definitely not a PAB. If it ever came to light that the PAB were actively involved on this blog heads would roll.....say..... doesn't the Pacific Gazetteer keep a running track on those who sign in from the Legislature buildings if you did the same thing here BC Mary you could lay to rest, once and for all, that there are those who "sign" in here without any credentials are maybe BC Liberal members... the Young Liberals... the Camosun Guys.
And holy smoke, Anonymous 7:12, ya think I have nothing better to do than keep a running track on all those who sign in here?
I definitely do wish you'd clue in on that "Anonymous" thing, though. Just choose a User Name and type it into the space BELOW the anonymous thing. OK?
As for Outraged, he or she needs to try a new brand of kool-aid...one labeled Truth might be a good place to start.
Most inteligent BCers know that BC rail made decent money until the Liebrels got to cooking the books. The same thing is presently happening at BC Hydro, taking the gold and trying to make it look like crap.
The hotter this issue gets and when we start singing “He’s in the Jail House Now” expect the neocons to crawl out of their stink infested holes to howl at the moon the nonsense as per the example in the first post.
"He's definitely not a PAB. If it ever came to light that the PAB were actively involved on this blog heads would roll....."
Guess what - Mary's blog and mine are visited HEAVILY from the BC Legislature network, and the Victoria Public Library, BC Systems, various health authorities, the mounties, and various municipal police depts. and many other BC government agencies - so I guess in a way we are paying our own visitors to spout crap and so are you, Outrageous, or maybe you are getting paid.
We both, especially Mary, could probably make some serious coin with advertising, based on just our tax payer supported visitors.
I'm confident also that at least some of the PABsters are intelligent enough to do their dirty work from home, internet cafes, using proxies or other means of masking their true identity. Their clear efforts at obfuscation, ad hominem arguments and general confusion (and lying) is enough to show their identity, even if they play games with the originating IP address.
even including the Fellow-Travellers who act the part on their own time.
It is a certain attitude ... je ne sais qua ... let's just call it Malice a Forethought
where, no matter what reply is given or what information is offered, they zing right past it, looking for another way to be hurtful or harmful.
I don't mean that they hold different opinions. I mean that they hold no opinion except to make mischief.
It's no fun and no benefit, talking to a PAB zombie.
Like, even the dumbest animal knows whether it's being petted or punched.
But I do think it might be a good thing to have that list of PABsters who walk among us here in Bloggerdom. Koot, we could publish the list, redactions and all.
They are the same species as many Republicans in the U.S. The unthinking, undead who walk among us.
I agree it would be good to have a list of these critters, especially for those who are new to the site.
PAB Zombies. Perfect! You just made my day.
If anyone signs in from the Victoria Public Library they are deemed to be PAB or some other dastardly devil.
Lighten up BC Mary. The mere fact that kootcoot knows who visits your site AND you choose not to speaks volumes. You're a puppet BC Mary. You're being used.
Thanks for the laugh. I needed that.
BC Mary, a puppet? Haarrrrrr ... a puppet who is "branding" innocent commenters ... Haaaaarrrrrr!
So please, when you sign in for your next comment, could you select a USER NAME of your own? It's right under the Anonymous option (which I don't know how to get rid of). And you obviously don't know what you're talking about or you'd know all about how much I dislike the anonymity of Anonomice.
Also, 7:58, I know perfectly well how to track and assess who is visiting my blog - the date and time of day that they visit, where they come from, what they read, how long they stay, etc.,
but frankly, I find it a waste of my time. Understand? So I rarely do that except in special circumstances. Got that?
Just let me enjoy that image a little longer: BC Mary as puppet ... but WHO is pulling the strings? Certainly not Gordo's Gang. And not Carole's sad bunch. So who ... ? You?
Hahahahahahahahaaaaaaa ... [Slaps knee, has coughing fit ... ]
I, he who is sometimes known as the PacificGazetteer did, indeed, during he election campagin keep track all the fine folks logging in with BCSC ISPs....Did it when my its got to be over 20% from such places for awhile....But Mary is right, it is exhausting.
A postscript to the story, is that when I started calling out to them by the last three numbers of their ISP (which was still anonymous, of course) it suddenly got very quiet....I did however, hear from a few folks that, unless they are real deep Segrettiests, most definitely not PABsters....
His return is likely to give PAB a major migraine, might even give a few MLA's indigestion - and I'd really enjoy them feeling some pain once in a while too.
Kevin, some of us are missing you.
Links to this post: