Thursday, April 02, 2009

Defence alleges BC Rail executive "change of control" and retention bonuses show deal underway in 2002 – well before sale announced

Basi-Virk defence fires another bombshell: alleges BC Rail executives had "change of control" bonuses in contracts in 2002 - before BC Rail even put up for sale by BC Liberal government - alleges deal in works long before Core Review process - and there was no "auction" for Crown-owned railway company

A shorter version of this story will be published in Friday's 24 hours newspaper

By Bill Tieleman, 24 hours

A defence lawyer alleged Thursday that new evidence about B.C. Rail executives’ bonuses shows the 2003 sale of B.C. Rail was planned at least 15 months before the B.C government publicly announced it, and that it was not an auction of bidders as claimed.

In B.C. Supreme Court lawyer Kevin McCullough cited a February 19, 2002 email to Bob Virk from then-B.C. Rail Vice-President Kevin Mahoney that outlines significant “change of control” incentives as well as lengthy retention and severance payments for some B.C. Rail executives.

Virk, David Basi and Aneal Basi are former B.C. government aides facing corruption charges related to the B.C. Rail sale.

McCullough, acting for Virk, said the evidence shows Mahoney was promised a four-month “change of control” payment, a 12-month retention bonus and an additional guarantee of 16-months severance, although he had only been in his position for about two years.

McCullough alleged that the pay packages were put in place before the B.C. Liberal government had completed its “core review” of provincial assets like B.C. Rail and long before the May 16, 2003 announcement of a request for proposals to buy B.C. Rail.

“They [the B.C. Liberals] promise not to sell B.C. Rail in the election but before the core review, before the sale, they put these incentive packages in,” McCullough said.

“The election promise was broken way early – you can show the total politics of this deal and why it wasn’t an auction,” McCullough alleged. “The best way to get the smooth sale of these assets is to make a motivated package for these executives, to encourage executing and being behind the sale, to think it’s a good idea.”

Mahoney is now B.C. Rail’s president and made $569,975 in salary and other compensation in 2007.

B.C. Rail lawyer Robert Deane objected when McCullough alleged that the executives were offered ‘large, huge bonuses – these are not industry standard bonuses.”

B.C. Supreme Court Justice Elizabeth Bennett agreed, telling McCullough it was a matter that he might raise in trial “but not now.”

Earlier McCullough expanded on his allegation that the pay packages made clear the BC Rail deal was planned far earlier than the government told the public.

McCullough noted that the BC Liberals had changed their position on selling BC Rail after they narrowly lost the 1996 election - in part because of that policy. But in the 2002 email between Virk and Mahoney it's clear that the "change of control" and other bonuses are indication that the sale is already planned, he said.

"So you have in 2002, subsequent to the election of the Liberals, you have the position to not sell BC Rail. It was sell in 1996, not sell in 2001," McCullough told Bennett.

"You [BC Liberals] claim that the core review is the reason you sell the asset but these pay packages went in before that," he said.
"They promise not to sell BC Rail in the election but before the core review, before the sale, they put these incentive packages in."

"Mr. Virk is in communications in 2002 - well before there's any suggetion they are going to sell BC Rail," McCullough continued. "Mr. Virk seems to be and is worried about this. That's what Mr. Virk would tell you - he's trying to get information."

McCullough also argued with Bennett about the admissability of his arguments on the individual bonuses given in BC Rail executive contracts.

BC Rail's Deane told Bennett he was not objecting to the general discussion but the specific nature of McCullough's comments.

"I have no problem with talking about information that is public but I'm concerned about third parties where it's not necessary to mention them by name," Deane said.

But McCullough fired back: "How can I do that with someone who I say is the point man for BC Rail? I thought I was being quite kind by not referring to the dollar figures in these documents."

Bennett ended that debate with: "Let's move on."

The last session of the pre-trial hearing before May is Friday April 3 at 10 a.m. and is expected to end by lunch or early afternoon.



DPL said...

So one wonders why BC Rail, that has no running stock or control over much of anything still have high paid executives? Maybe it's so they don't blab. Nice work if you can get it and have no scruples. How can the sleep at night?

Anonymous said...

Interesting,but everyone who has been following this snail knows that Campbell was campaigning around the province in 2001 saying many things,including that he would not sell BC Rail.
Campbell had full intention of selling BC Rail as soon as he got elected,the only thing that slowed the sale down was his drunk driving charge.

Anonymous said...

The fat cats at the Crown Corporations certainly take care of themselves don't they?

At a time when Rail dependent communities have been losing jobs from CN Rail and forestry jobs any kind of bonus is obscene.

We have AIG executives taking bonuses and former CEOs having payouts that are scandalous.

This is a pattern with the Campbell government. First it is his Deputy Minister's getting 30% raises and now how many other Crown Corporation management have cozy bonus agreements??

It is about time we have a government that looks after the little guy and has the balls to rip these agreements up! Hey Campbell did it to the HEU why not to his Fat Cat Managers?

A. G. Tsakumis said...

The problem here is not a legal one..yet.

The problem is that while there may be, and, certainly it appears that there is, ample evidence that the Premier suffered from severe ethical lapses during and through the lead up and sale of BC Rail, will the NDP silo be able to exploit these lapses and make any headway in knocking off swing constituencies?

Doesn't look that way from here.

Anonymous said...

A.G.T., you are dead right about the NDP, they have dead weights running, like Elmore and James herself.

What can the NDP hierarchy be thinking? Are they that much out of touch? Are they living in an alternate universe? Have they died and been forgotten?

God help us, but at least in South Delta where i live, we have a viable third choice, Vicky Huntington and she will get my "x".

Sean Holman said...

This is major news Bill. I don't often leave comments. But props to you and your coverage.

DL said...

The federal Liberals were much further ahead of the opposition than are the BC Liberals right now. Then they collapsed as a result of the comparatively trivial sponsorship scandal and the fact that there was even the possibility of Ralph Goodale having done something unethical around income trusts. Ethical issues also sank Bill VanderZalm.

DPL said...

It's a bit late to flog the idea that the NDP is dead with James as Leader. So either run with her and expect changes, or vote for King Gordo and wonder what he would sell next, which promises he would break within 24 hour of keeping the job. The man simply cannot be trusted, just ask the HEU or the folks who once had OUR railway making money for US, that Gordo swore would nor try to scrap the contract or sell the railway. Up to you folks. Your choice can affect this province for a very long time. I find the choice easy to make. I'd vote against him just to keep the pompous ass out of the picture at the upcoming five ring circus.And for a lot of other reasons. He doesn't have your best interests in his thoughts. Remember the old comment" People don't vote to elect people, they vote to get rid of them"

Anonymous said...

Interesting that neither the Sun nor the Province had someone in the courtroom for this news. Was anyone else there?
I guess their reporters aren't sleuths like you! Nice coverage.

Now if there was a way you could get paid for writing this stuff, it would be a much better world.

NRF said...

DL writes about the "comparatively trivial sponsorship scandal" of the federal Liberals. I do not regard that systematic corruption as inconsequential. Many insiders knew and condoned improper acts over time and even if rewards are indirect or modest, the malfeasance is not mitigated. The same applies to the current provincial Liberals.

Campbell's pals may be the ones benefiting from inside deals but all Liberal Party associates who tolerate corruption, even if they gain no direct monetary reward, have breached their ethical duties. Those who tolerate graft by associates are as guilty as those who commit the acts.

We are left to assume that Campbell's minions watch others feeding at the trough because eventually, they expect to gain chances for themselves and their friends.