Sleaze, Amnesia, and Strange Policies in the BC Rail Scandal. Second Witness in the Basi,Virk, and Basi Trial. September 2010.
Some observers in Courtroom 54 (not allied to the big corporations and the big corporate press and media) felt a sinking feeling over the last two days. The BC Rail Scandal trial of three Order in Council appointees proceeded in its alarming fashion – verbal shadow-boxing and strategies of avoidance seeming (to some) to occupy the prosecution witness, Brian Kenning.
Mr. McCullough, for the Defence, was (and will be) cross-examining Brian Kenning, longtime director and chairman of BC Rail board and Chairman of the BC Rail (preparation for sale) Evaluation Committee and chairman of the BC Rail audit committee. (He was those things until 2010 when the sliver company remaining after the sale of all major assets, BC Rail, was absorbed into the Transportation Ministry.)
We observers sat through the incredible days of the cross-examination of Martyn Brown, first witness called in the Basi, Virk, and Basi trial (involving accusations of breach of trust, fraud, and money laundering related to the transfer of BC Rail to the CNR). We watched with astonishment as Mr. Brown, longtime Chief of Staff in the Campbell government, exposed an amnesiac propensity of astonishing proportions. It would not be an exaggeration to say he seemed unable to remember anything ... of consequence....
Almost as strange - to a few of us, at least - was that Associate Chief Justice Anne MacKenzie didn't seem to find Mr. Brown's eradication of memory unsurprising. She never asked him once, as far as I can remember, if he didn't think his memory loss would be considered irresponsible, unconvincing ... even reprehensible... or even think to ask if he really did forget that much?
The second witness is Brian Kenning. There may well be 25 or 30 more. We observers tremble to think that we may sit for months as witnesses play variations on the Martyn Brown theme.
The 'sleaze factor' has filled the Mainsteam Press and Media in relation to Brian Kenning's cross-examination. That will doubtless go on ... after he is gone. The big press, however, seems to stop after churning out the headline stuff.
They have recorded Mr. Kenning's "take" (about $550,000) for sitting on BC Rail and BC Ferries boards. They recorded he went on making large annual earnings as a director - more than $30,000 a year - when most of BC Rail was disposed of, and there were few employees. They recorded the pulse of donations by Kenning-related corporations into the Liberal Party. They have reported that even when BC Rail was a shadow operation with almost no assets left, it paid (meaning British Columbians paid) more than $150,000 for Lions Football and Canuck Hockey "expenditures", and for a golf club membership for Kevin Mahoney, president, for four years after BC Rail was "sold".
They recorded that after BC Rail was "sold" (and remained a sliver company) Patrick Mahoney, its president was paid $797,000 in 2004. He was paid $421,000 and $38,000 in expenses in 2005. He was paid $622,000 and $24,000 in expenses in 2006; $676,000.00 and $48,000 in expenses in 2007; $488,000 and $52,000 in expenses in 2008 (in numbers rounded out). Presumably, he continued receiving such lavish emoluments until (and after - by severance payment) the sliver of BC Rail was absorbed into the Transportation Ministry.
The "sleaze factor" doesn't end there. Mr. Kenning appears to believe that "the business model" common to private corporate life should be maintained in public corporations owned by the people. Whenever questioned about golf club or lunch club fees being paid - and such like things - Mr. Kenning claimed that such was the practice in the corporate world. Private corporate sleaze, apparently, sets the style for sleaze in public service.
As Neal Hall writes in his Sept. 17 article: "Mahoney's compensation package was decided by a committee that looked at comparable industry salaries, and was approved by the BC Rail Board" (of which Mr. Kenning was chair). No "comparable" corporation existed at that time, of course, but why should we quibble over trivial details?
The sleaze factor is one of the most visible ways the public gets an insight into the way corporate "experts" swill at the public trough. But the sleaze factor - bad as it is - is only a portion of the story. Mr. Kenning's cross-examination, thus far, has revealed that important strategies of behaviour and response under questioning may suggest deeper violations of public trust and strategies (amnesia again, and perverse analyses of facts) to avoid full frankness about the realities of the transfer of BC Rail to CNR.
As readers may know, Mr. Virk is one of the accused. Mr. Virk sat on the Evaluation Committee representing the minister of transportation. Mr. Virk participated in the matters engaging the attention of the committee. He spoke fairly often to Mr. Kenning, it would seem. Apparently, he cautioned Mr. Kenny that the contract to CIBC World Markets to be financial advisor in the sale of the BC Rail Freight Division should go to tender because of CIBC’s wounded reputation in the ENRON scandal. He also, it seems, spoke to Mr. Kenny about a legal claim against BC Rail, and about Mr. Kenny carrying a briefcase bearing the logo of a company involved in the CN bidding and sale. In addition, he apparently spoke to Mr. Kenning about the damage being done by various kinds of leaks that favoured CN Rail. He also, it seems, discussed the use of National Labrador, a public relations firm (paid $273,000 in 2003) with Mr. Kenning, saying it was doing almost nothing and should not be employed. Mr. Kenning didn’t recall that or any other conversation … with Mr. Virk.
Mr. Kenning remembers nothing in relation to Mr. Virk. And I think it is fair to predict that he never will remember anything.
His memory lapses are stunning. He frequently reports no recollection of conversations with key people on key issues or knowledge of key facts.
He doesn’t know if Patrick Kinsella was employed by CN. He didn’t know until 2003 BC Rail was being sold. He didn’t remember if he got a legal opinion on contracting with CIBC World Markets without a tender. He didn’t remember exactly if Rocky Mountain had partnered with CNR in the bidding process. He didn’t remember if Kevin Mahoney’s “perks” were terminated because of publicity around his luxurious remuneration. He didn’t recall if Mr. Mahoney had his vehicle paid for by BC Rail. He didn’t recall how many meetings of BC Rail Board he attended before recommending sale of the Crown Corporation.
Mr. Kenning didn’t remember that fired Mark Mudie, manager, claimed he was terminated because he wouldn’t support the Campbell “failure strategy” for BC Rail. He didn’t recall what was said in the one visit by “government” to the Board of BC Rail. He didn’t remember asking Chris Trumpey about government energy policies (Kenny having energy interests). Mr. Kenning couldn’t remember. When Mr. McCullough reported Virk’s assertion that Kenning did ask Trumpey questions, Mr. Kenning said: “Okay”.
Mr. Kenning didn’t know that Gary Collins met Pat Brough, president of Omnitrax on December 12, 2003, didn’t recall knowing until 2004. Though confidentiality was key to the BC Rail transfer process, Mr. Kenning didn’t know who signed a confidentiality agreement. He didn’t remember talking to fellow committee members about confidentiality. He didn’t recall the details that CPR complained that CNR was given information about the deal which wasn’t fair. He didn’t recall that CN was said to be getting special treatment. He didn’t recall if cabinet ministers were told not to speak directly to bidders. He didn’t recall whether Gary Collins spoke to him directly about the meeting with Pat Brough, president of Omnitrax.
He didn’t seem to remember key matters concerning the bidding for BC Rail spurline to Roberts Bank. If he had conversations at the time, he forgot them.
When the BC Rail analysis of the CN bid for the freight division was leaked, Kenning was asked if they tried to find the source of the leak. Kenning didn’t recall specifically. Asked if other bidders complained, he didn’t remember. Chris Trumpey was on the Evaluation Committee and he was Chair of the BC Investment Management Corporation which might have interests in CNR and create a conflict of interest. Did Trumpey, Kenning was asked, ever have to “step down” during sale discussions? Mr. Kenning didn’t recall.
Later, a CIBC spokesperson publicly stated that CN would be the most logical candidate to get BC Rail. Then after that Pierre Mongeau, CEO of CNR told a conference in Montreal the same thing. CPR had complained that CN was getting special treatment. Nonetheless, Mr. Kennning insisted the bidding process was not flawed (information about BC Rail, of course, was unsullied).
Except when challenged by Mr. McCullough, he had admitted to two completely conflicting pieces of information (in testimony) about the efficiency of BC Rail on two successive days – the latter being one Kenning had not offered, information that the freight division in 2003 was doing significantly better than “first class carriers”.
Indeed, in my recollection Mr. Kenning only insisted he knew, categorically, three things: that the bidding process wasn’t flawed; that there was no “failure strategy” in the sale of BC Rail, and that neither the BC Rail Board nor the Evaluation Committee had “marching orders” to sell BC Rail.
Sitting through the long days of Mr. Kenning’s testimony made me recollect a very brief exchange Mr. McCullough had with Mr. Kenning fairly early in the cross-examination process. As I recall Mr McCullough asked if there can be some kind of liability when directors act against the interest of shareholders. [In the case of BC Rail the province/the people of B.C. are the shareholders in BC Rail.] Mr. Kenning, I remember, said there could be. Mr. McCullough asked then if “you at BC Rail” got “indemnity”, and Mr. Kenning said they did. The dictionary gives one definition of “indemnity” as “legal immunity from the penalties or liabilities resulting from an action, granted to public officials”.
Stumble It!