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.