NDP say B.C.'s move to privatize liquor distribution "highly tainted"
Newly-released government documents show the B.C. government changed its decision not to privatize its liquor distribution system after it was approached by a private logistics company using a paid lobbyist with deep Liberal Party connections.
In June, 2011 Solicitor-general Shirley Bond told the proponent, Exel Logistics that the government had no intention of proceeding with the privatization at that time. But documents released by the NDP on Thursday show that the government's position changed following one meeting Bond had with an Exel official at a golf event in Prince George.
The following month the official, Scott Lyons, Exel's vice-president of business development, met with Bond again with other company officials and a representative of Progressive Group, a well-known lobbying firm, to lobby for the government for its liquor distribution and warehousing business.
Progressive's principal owner, Patrick Kinsella, was an adviser to Premier Christy Clark during bid for the leadership of the B.C. Liberal Party. He was also the campaign manager for Premier Gordon Campbell in his 2001 and 2005 elections. The government's lobbyist registry shows Progressive officials were representing Exel since at least 2006.
In releasing documents it obtained under Freedom of Information, the New Democratic Party said Thursday the process was "highly tainted" and that the government appeared to be trying to get the deal done before the next election in 2013 because it knows it faces difficulty being re-elected.
But Labour Minister Margaret MacDiarmid told reporters there was nothing wrong with a company approaching government if they could offer a service cheaper than what it now costs. She said the government had considered privatizing the system as far back as 2002 and as recently as 2006. She said by some time in July, 2011 the government decided to reconsider privatizing its liquor distribution system as part of a larger government-wide review of assets it could sell in order to balance its budget.
However, she offered no documents supporting that instruction and there was nothing in the NDP's Freedom of Information file that showed the government had reconsidered its position on privatization as part of a budget-cutting exercise.
NDP MLA Shane Simpson said the province appears about to repeat mistakes it made in its failed plan to bring in the Harmonized Sales Tax and its controversial sale of BC Rail.
"It looks far too much like the mess around HST. It looks far too much like the debacle around BC Rail. British Columbians don't need this again. It is time for this to end now," Simpson said.
The government, which is riding very low in public opinion polls, announced in February it would proceed with plans to privatize the liquor distribution system. It named six bidders, of which one is Exel Logistics, a subsidiary of German-based Deutsche Post DHL, the world's largest logistics company. On July 20 the government plans to winnow the list down to a short list of three, with an expectation a "preferred bidder" will be named by mid-October. The government has said it expects to award a 10-year monopoly contract by March 1.
The next general election is on May 14, 2013.
But documents released by the NDP show that it was only at Exel's urging — with the assistance of Progressive Group's Mark Jiles and Kinsella — that the government began to consider privatizing its liquor distribution system. The documents show that Exel as far back as 2010 it was hoping to influence the government's procurement process, going so far as to offer criteria it thought should be used in the selection of a new partner.
In a briefing note to Bond for her August 24 meeting with Exel's Lyons, two B.C. Liquor Distribution Branch officials said the company had been after the government for years to privatize the system, claiming "that they could operate the LDB's distribution system more efficiently and could free up government money ... "
They said Exel has operated the Alberta Gaming and Liquor Commission's liquor distribution system since 1993.
Simpson said the most startling revelation in the documents was that Bond had clearly told Lyons, Exel's vice-president of business development on June 21, 2011 the government was not interested in privatization. But Lyons persisted, and met with Bond later in the month at a golf game in her riding in Prince George where he secured from Bond the promise of another meeting. Lyons then met with Bond on August 24 in Victoria, accompanied by another Exel executive, Frad Takavitz, Exel consultant Rob Madore and Progressive's Jiles. Shortly after that the government announced it would consider privatizing the system.
In a letter to Bond accompanying his request for the meeting, Lyons said Exel was proposing a public-private partnership in which Exel would "build, finance and operate a world-class distribution system for the long-term benefit of government, industry and consumers." He said the deal would allow Exel to "almost immediately unlock over $100 million of the B.C. Government's money tied up in assets."
Simpson said it was highly inappropriate for the government to be pushing ahead with a plan driven solely by a single company's overwhelming desire to control a monopoly.
"What I am suggesting here is that one company has aggressively driven and wanted this contract. They've been wanting it for years and they have been actively pursuing it," Simpson said.
"What we're saying is when you have no business case and you can demonstrate no benefit to the public and you have one proponent, a proponent who is actively supported by lobbyists who the public know are very closely connected to the government, you've created a perception MacDiarmid told reporters the privatization plan has to be good for taxpayers.
"As I have said before with respect to the distribution and warehousing of liquor if we don't find that there are savings for taxpayers, if it is not a good deal for British Columbians, we simply won't be going ahead with this," she said.
The documents show that as early as 2010 Exel was lobbying Housing and Social Development Minister Rich Coleman to sell off the liquor distribution system. It suggested using its Alberta model, in which suppliers fund the warehousing and distribution and reimburse Exel for the cost of operations. In his letter to Coleman, Lyons outlined 10 points he thought the government should consider including in any procurement process, including experience, stability and infrastructure of any bidder.
But MacDiarmid insisted that neither Exel nor any of the other selected bidders had any hand in designing the request for proposals.
MacDiarmid insisted the government had considered privatizing liquor distribution as long ago as 2002. But when asked what it was that Lyons said to Bond at their golf meeting to convince her to reverse her decision not to sell the distribution system, MacDiarmid couldn't say.\
The government ultimately decided to proceed with privatization of its distribution system, but not get rid of its two warehouses in Vancouver and Kamloops until 2014 or 2015. MacDiarmid said some of the bidders have indicated they may need those warehouses until they are able to build their own. After that the government will sell the properties, which MacDiarmid estimated are valued at $50 million.
Simpson said the government might save $5-$10 million over the life of the contract but it would come at the expense of jobs and higher costs for suppliers and ultimately end users.
"To this date there is not one shred of evidence to suggest there is any motivation for this other than appeasing Exel Logistics. They either show that there is evidence they have some reason to proceed with this or it is our view the government needs to halt this process right now, stop this privatization scheme right now."
B.C.'s move to privatize liquor distribution tainted by corporate interests:
The NDP is calling on the government to halt its plan to privatize liquor distribution in the province following the release of documents suggesting the process was initiated by a private company with links to the Liberal Party.
Freedom of Information documents released on Thursday by NDP critic Shane Simpson suggest that the government had no interest in selling its liquor warehouses -– one in Kamloops, one in Vancouver –- until Exel Logistics presented a business plan to Liberal ministers.
According to the Office of the Registrar of Lobbyists for British Columbia, Liberal insiders Patrick Kinsella and Mark Jiles lobbied several government ministers on behalf of Exel relating to privatization of the province’s liquor distribution system
Kinsella served as an adviser to Premier Christy Clark during her successful leadership run. He was also Gordon Campbell’s election campaign manager in 2001 and 2005.
He was also hired as a consultant to B.C. Rail shortly before it was sold.
“It is time for this to stop,” said Simpson. “It looks far too much like the mess around HST. It looks far too much like the debacle around B.C. Rail. British Columbians don’t need this again. It is time for this to end now.”
The privatization of liquor distribution was a plan put forward by Finance Minister Kevin Falcon on release of the budget in February.
More to come …