(The following story by Scott Simpson appeared on the Vancouver Sun website on March 6.)
VANCOUVER, B.C. — The British Columbia government acknowledged for the first time on Friday that it released confidential information to Canadian National during a critical stage in the bidding for BC Rail.
Transportation Minister Kevin Falcon described it as “an accident” which had no impact on the fairness of the process that led last November to CN’s selection as the successful buyer of BC Rail.
Falcon said the process leading to Canadian National’s selection as the buyer for BC Rail was “scrupulously fair” and said the release was not a factor in the bidding process.
He said the company managing the bid for the government, CIBC World Markets, inadvertently provided Canadian National with information about the tariffs that rival railways including Canadian Pacific were paying to run trains on BC Rail lines.
The information was sent at an early stage of negotiations before it became clear that CN was the best choice to take over the provincially owned railway.
Railways closely guard the financial details of their contracts with customers, and both CN and CP had contracts with BC Rail that allowed them to use BC Rail’s lines to carry freight, including one of the highest volumes of forest products in North America.
Falcon said such mistakes have been known to happen, albeit infrequently, during complex financial negotiations among several parties.
“The information was immediately retrieved and a commitment signed by CN that they had not put the information to any use, and that they retrieved all of it and destroyed it,” Falcon said.
Falcon added that the same confidential information was officially provided to Canadian National several weeks later after the government decided on CN as the best choice to take over BC Rail.
At that point, Falcon said, the information conferred no special advantage on Canadian National because both the province and CN were confident of completing a takeover agreement and CN would be acquiring BC Rail’s rights to the information.
Also on Friday, Falcon’s office provided The Sun with a letter attesting to the integrity of the government’s handling of the bids.
The letter went from BC Rail board chair John McLernon to Canadian Pacific Railway on December 17, 2003, three weeks after the government named CP’s archrival Canadian National as the successful bidder for BC Rail.
McLernon’s letter was a written response to Canadian Pacific’s allegations that the British Columbia government had given CN an unfair advantage in the bidding.
A week before CN was announced as the government’s choice to take over BC Rail, Canadian Pacific complained to the government that CN had been provided “enhanced access to shippers” and was formally withdrawing from the bidding.
The Vancouver Sun used a Freedom of Information request to Premier Gordon Campbell’s office to obtain several letters of complaint by Canadian Pacific to the government.
In the letters, Canadian Pacific alleged that the government made a “clear breach” of fairness in the bidding process for BC Rail.
CP said that BC Rail shipping customers were aware of details of all the bids, even though they were supposed to be confidential.
Canadian Pacific said the situation made it look “naive and out of the process loop” relative to Canadian National and gave its archrival an edge in negotiations with shippers.
It also said CPR was “at risk of losing existing business” because of the government’s handling of the bids.
In his December 2003 letter to CP, McLernon did not specifically describe the release of information to CN as an accident.
But he said the government’s advisors in the bidding, CIBC World Markets (CIBCWM) and law firm Borden Ladner Gervais (BLG) took immediate steps to have CN dispose of the confidential material it had obtained.
He also said CN did not exploit the opportunity to use the material it obtained in order to gain advantage in the bidding.
“Although a release of confidential customer tariff information to CN did occur at the beginning of October [2003], immediate steps were proactively taken by CIBCWM and BLG to have this information destroyed, with CN also confirming in writing that no improper use was made of the information,” says McLernon.
The letter says Canadian National got additional access to BC Rail customers while bids were being mulled, but McLernon says that came about because CN’s proposed tariff formula for a new CN/BCR operation in British Columbia was extremely complex.
As a result, the province arranged a 90-minute meeting between CN and four shippers, with government representatives in attendance.
McLernon says a “strict protocol” was observed during the discussions including an agreement by CN that it not arrange an independent follow-up to the meeting.
He adds that the federal Competition Bureau was apprised in advance, before the meeting occurred.
Meanwhile a Colorado-based railroad, mentioned this week in a summary of RCMP warrants leading to last December’s raid on the B.C. legislature, asserted on Friday its innocence of any connection to the scandal.
The B.C. Supreme Court on Tuesday released a limited summary of the warrants, including information that RCMP are looking at the BC Rail deal in connection with an investigation of two civil servants and a lobbyist for influence peddling.
A lobbyist for a failed BC Rail bidder, OmniTRAX, was previously identified by The Sun in connection with the raids.
The lobbyist, Erik Bornman, represented OmniTRAX and was communications director for the B.C. chapter of the federal Liberals.
On Friday, OmniTRAX issued a news release stating that “none of the individuals that we enlisted during the exhaustive bid process acted improperly.”
“OmniTRAX was never involved in any illegal activities regarding the B.C. Rail bid,” said Dwight Johnson, president of OmniTRAX.
“We have determined that no one affiliated with OmniTRAX ever offered anyone a position of employment as has been alleged.”