1975 Legislative Session: 5th Session, 30th Parliament

HANSARD

The following electronic version is for informational purposes

only.

The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

FRIDAY, JUNE 13, 1975

Morning Sitting

[ Page

3481 ]

CONTENTS

British Columbia Railway Company Construction Loan Amendment Act, 1975 (Bill

27). Committee stage.

section 1.

Hon. Mr. Barrett — 3481

FRIDAY, JUNE 13, 1975

The House met at 10 a.m.

Prayers.

HON. L.T. NIMSICK (Minister of Mines and Petroleum Resources): On behalf

of the Minister of Economic Development (Hon. Mr. Lauk) and myself, I wish to

table the report of the British Columbia copper task force. It has taken approximately

one year to bring forth this report which covers the full ambit of copper from

raw resource to fabrication.

I wish to thank the committee for the very detailed work

they have accomplished. The committee was chaired by my Deputy,

Mr. J.E. McMynn, and its members included W.M. Armstrong, H.

Horn, H.L. Keenleyside, J.T. Meredith, C.E. Sawyer and E.T.

Staley.

Much of this work was done at great inconvenience to the

committee members in many instances. I feel they have made a

contribution that I hope will prove valuable to the future of

British Columbia.

The report is tabled for public information, and at this

point does not constitute any commitment by the government.

MR. J.R. CHABOT (Columbia River): Mr. Speaker, we have in

the gallery, or about to arrive, 41 students from the Invermere

Elementary School in that great constituency of Columbia River,

and their teachers, Mr. Bryck, Mr. Wilkes and Mr. Wright. I

would like the Members to welcome them.

MRS. D. WEBSTER (Vancouver-South): Mr. Speaker, this morning

in the gallery we have 20 students from Seneca Community

College, Toronto, who are here to see our legislative

processes, and who are very interested in the political scene.

They are accompanied by their teachers, Lydia Kawun, Andrea

Diploc and Toni Tilly. I would ask this House to welcome

them.

Orders of the day.

HON. E.E. DAILLY (Minster of Education): Mr. Speaker, public

bills and orders — committee on Bill 27.

BRITISH COLUMBIA RAILWAY COMPANY

CONSTRUCTION LOAN AMENDMENT ACT, 1975

The House in committee on Bill 27; Mr. Dent in the

chair.

section 1.

HON. D. BARRETT (Premier): Mr. Chairman, last night I said

that I would be filing a report submitted by Peat, Marwick

related to their qualifications for taking on the job as

auditors to the railroad, and also the letter concerning the

Penn Central. Unfortunately, I didn't ask leave last night. I

would like to ask leave of the committee that I might file it

now with the committee.

Leave granted.

MR. W.R. BENNETT (Leader of the Opposition): Mr. Chairman,

I'd like to ask the Premier and president of the railway if he.... I can't seem to obtain a copy of the financial statement

for the year ended December 31, 1973, that is required under

the Public Bodies Financial Information Act. I have attempted

to get one, with no success. Under the Act, this report must

be printed within six months of the end of the fiscal year,

which would have been by July of 1974.

I wonder if the Premier could tell me if the railway was in

contravention of the Act if the report wasn't printed within

the six month requirement?

HON. MR. BARRETT: Mr. Chairman, that matter was raised with

me yesterday, and I have asked for a report. I had hoped to get

a report this morning.

MR. BENNETT: I understand there is a very unusual set of

circumstances here, and I have been doing a lot of calling

trying to get this report. The public information Act is very

specific in what it requires the railway to do. It states:

"Notwithstanding the provisions of any other Act, upon neglect or refusal of a corporation,

association, board, commission or society to comply with this

Act, the Minister of Finance may withhold any grants of

advance, or the Lieutenant-Governor in Council may withhold any

guarantee of borrowings authorized to be paid, made or given

under any statute named."

I wondered if this wasn't filed within the time it was

required to be filed with the Minister of Finance, was any

consideration ever given to withhold any grants or loans to the

railway?

Public Bodies Financial Information Act indeed gives the

Legislature and the public some scrutiny of the railway, the

type of scrutiny of individual expense that perhaps we have in

public accounts where we are allowed to pull vouchers. This

gives us a detailed expenditure of every person and everything

that costs over $500. It gives us the salaries of the railway.

It's a very important piece of public information and that's

why it's contained within this Act. I have attempted for some

time and yesterday, in my frustration, the calls ranged wider.

We have a

[ Page 3482 ]

series of stories that don't add up that seem to indicate

that this wasn't printed. I'm concerned. Will the Premier be

able to advise me within this morning's sitting?

HON. MR. BARRETT: Yes, I hope so. I'm waiting for the Deputy

Minister of Finance to come up. We'll get a message out and try

and find out what's happened.

MR. BENNETT: Well, the Deputy Minister of Finance, of

course, was advised of this yesterday. Much has been made of

the fact that I chose to speak to the Deputy Minister of

Finance. I wish to report to the Premier that he is a long-time

public servant, and yesterday when I was concerned about the

financial integrity of the province, I went not to get

information from him, but to give him the type of information

that I had and that I was raising in the House, and as an

additional courtesy, because I was raising this issue, I

advised him of it yesterday so that this could be provided to

us, because it should be information on which we can base a lot

of our questions in the committee stage of this bill,

information that we didn't have to bring up during the

Premier's estimates, and yet a lot of the expenditure that we

would like to question about the cost of detailed reports would

have been available to us by now. It's like searching in the

dark. I wonder, in advance of getting that information, if the

Premier would tell me, should they have been in contravention,

what steps he will take.

HON. MR. BARRETT: Mr. Member, I can't make any comment till

I have a report. The Deputy Minister of Finance, as you know,

did see you in his office. That was the point, Mr. Member. I

think that it's appropriate that any MLA go directly to the

source of the information rather than calling people at the

office. That's the point I made.

Interjection.

HON. MR. BARRETT: You don't agree with that? I do. That's

the way we functioned when we were in opposition. We did not

request or order or suggest that anybody come to our office; we

went to their offices. It's courtesy.

Secondly, the Deputy will be here shortly and I'll attempt

to find out from him, as he is aware of this, exactly what the

situation it.

MR. BENNETT: I'd just further point out that nobody was ever ordered

to my office. Someone who I've known personally for many years was out of the

things I was saying that involved him, and the situation had developed. As a

courtesy I was advising him of what I was doing. I wasn't demanding anything.

It was a personal courtesy. The only thing that surprised me is that it should

be used as part of a political statement in this House. I don't appreciate the

fact that the Premier and Minister of Finance again tries to hide behind one

of the senior civil servants and attempt to divert the attack and the issues

that have surrounded the BCR and particularly the issues that have surrounded

the financing and the two financial statements that are in question.

Now I'd like to touch those earlier, but I notice one thing,

in going through the British Columbia Hydro and Power

Authority's financing issue prospectus for $150 million, that

was underwritten by Kuhn, Loeb & Co. and the First Boston

Corp., and Salomon Brothers and A.E. Ames and Co. I've been in

contact with all of those firms plus the SEC. This bill deals

with us raising additional capital for the B.C. Railway, and

presumably the same type of offering would be made on the

market in New York, if we still have a credit rating after this

situation is cleared up. I'm wondering if the Premier could

advise me if he is going to borrow in the same manner as this

prospectus indicates, because it's of concern to me. Not only

is the coupon rate 9-5/8, but there's also a discount, and

proceeds to the authority is only 98-7/8 of the bond issue, but

the disturbing fact is that we're playing in the international

currently market. I'll go on. It says:

"The U.S. $150 million 9-5/8 bond, series DY, will mature

June 1, 2005, interest will be paid semi-annually on June 1 and

December 1, the bonds will be payable as to principle, premium

if any, and interest in lawful money of the United States of

America at the Canadian Bank of Commerce Trust Co."

Now it seems to me that just a short time ago in this

Legislature the Premier and Minister of Finance as fiscal agent

said he would never deal or gamble in any of the bond issues in

the financial currency of another country. Now not only at this

time do we have the U.S. dollar strengthening, and at a premium

over the Canadian dollar, but there's also a lot of rumours

coming out of Ottawa. I'm not predicting it but I would hope

that the Premier and Minister of Finance would have some

information that perhaps the Canadian dollar is going to be

devalued, so that rather than 9-5/8 and a discount, if the

dollar is devalued, we would be paying an exorbitant charge.

Certainly the concerns the Premier gave us then about borrowing

foreign funds, no matter what the country, are very much of a

concern to us. I see that he's borrowing $150 million for Hydro

in that manner. I see that the $100 million they borrowed at

10-1/4 per cent last year was in that manner, for Hydro — repayable in American funds. I wonder if he can tell us if

this is the manner in which he's going to borrow these millions

of dollars for the B.C. Railway.

[ Page 3483 ]

HON. MR. BARRETT: The financing of the B.C. Railway has

always been done internally. The change in the auditing

procedures as a result of the resignation and subsequent

censuring of Buttar and Chiene will not alter our bond rating

in New York.

The second thing is that Kuhn and Loeb, who were the

principal underwriters in handling this particular issue, were,

as I said last night, informed that there was a change in the

auditing procedure. Their statement was that only audited

statements must be submitted to the SEC according to SEC

regulations, and then when we go to another issue for B.C.

Hydro, the latest audited statements will be submitted.

In terms of asking me, Mr. Member, if I have any knowledge

that the Canadian dollar will be devalued and pegged, or

whatever, I would assume that the Member would know that if

that were the federal government's plan, that would be made at

the highest cabinet level and would not be shared with anyone.

Even speculation in this House on such a possibility can have a

very damaging effects on the money market, so I would say to

you very clearly and very loudly that your speculation is your

speculation, but I have absolutely no information on federal

government policies in regard to devaluation of the Canadian

dollar, and I hope that nothing goes abroad from this House

that gives the impression that such is even being considered,

because that kind of discussion could delay investment, could

delay major corporate decisions and government decisions right

across this country. It would be a mistake, even though it's

only a matter of days, for any one of us, with no bad intent at

all, to discuss that that is a possibility the federal

government is considering.

MR. BENNETT: These possibilities must always be considered by people

who have the responsibility for dealing with the finances. From time to time

the federal government in its financial policies for Canada, without tipping

specific financial action they will take, will advise the provincial governments

and their Finance Ministers and those public bodies not to borrow outside of

the country because of balance of payments. This is not unusual; it's been done

in the past. What I was hoping was that the Premier maybe is aware of such a

discussion with the federal government — that they're concerned about any financial

authority in this country borrowing outside. From time to time it has been traditional

the financial lead and give direction and ask cooperation of provincial and

municipal bodies in where they borrow and how they borrow. From time to time,

offerings have been withheld or held up for the good of Canada because of the

financial climate or some impending change, or it would be inappropriate to

borrow at that time because of the financial climate, or for the flow of dollars

back and forth out of the country. That is a normal procedure; it's a necessary

procedure. Finance Ministers and leaders of government must always be aware

of such conditions and such possibilities and they must also always be prepared

to cooperate with the senior government on the concerns for the finances of

this country and how the province can affect the financing.

asked the Province of Quebec to hold up offerings outside the

country. They were concerned with the flow of dollars. The

Premier knows full well that that type of information and that

type of responsibility is shared, and that type of direction is

given.

Forgetting the fact of rumour, forgetting the fact that

perhaps the senior government hasn't got that type of direction

right now, earlier in this session the Premier made the great

speech about dealing in international currencies, currencies of

other countries, in respect to our borrowings, and, of course,

we see now that the B.C. Hydro has borrowed in American dollars

and must repay in American dollars at a time when the American

dollar is strengthening, and many analysts suggest that it will

strengthen further. That would be an additional premium to the

people of this province, and it would add extra points or

partial points to the coupon rate or the interest rate on any

issue, and particularly the Hydro issue, which already had an

effective rate, with the discount of possibly around 10 per

cent. It is a high rate of interest for the people of this

province to pay till the year 2005. That sort of interest is

going to be on $150 million — that's $15 million a year. I'd

has issued any directive or advice as to borrowing outside of

the country at this particular time.

HON. MR. BARRETT: I'd like to advise the House and remind

them again of my earlier statement — a statement made by him —

advising all Finance Ministers in Canada to borrow outside of

Canada. That was official government policy just a matter of a

few months ago. I made that statement in the House and I can

pass that same communiqué back to you.

MR. BENNETT: It is not changed since then?

HON. MR. BARRETT: It is not changed since then.

In terms of the policy of the government on Canadian funds,

the position is that we do not borrow Canadian funds offshore.

All borrowings before New York and the borrowings now are on

the same basis, Canadian or U.S. funds, but there are no

borrowings offshore. If the statement reads "no

[ Page 3484 ]

borrowings in U.S. funds," then I was incorrect,

because I am advised that the position has always been that we

borrow in U.S. or Canadian funds. Then if we borrow offshore,

we borrow in Canadian funds offshore. When I say offshore, I

mean out of continental North America.

MR. BENNETT: Just further, then, could the Premier advise

why they would choose to borrow in American funds rather than

Canadian funds?

HON. MR. BARRETT: That is where the market is.

MR. BENNETT: Yes, but cannot loans be arranged using the

currency of our country?

HON. MR. BARRETT: That is not the normal pattern, not in the

U.S., and that has not been the normal pattern of the

government's dealings throughout its history.

MR. BENNETT: But in light of the Premier's strong position

taken earlier, did he not ask for this on behalf of British

Columbia — that we deal in the currency of our country? In

effecting this loan, was it made as part of the request or was

it not?

HON. MR. BARRETT: No, it wasn't, but we can look at it.

MR. D.A. ANDERSON (Victoria): Mr. Chairman, I would urge the

Premier, in the interests of some sort of national financial

policy between federal and provincial Ministers of Finance, to

say absolutely nothing about any possible discussions he could

have had with the federal Minister of Finance on a subject as

delicate as devaluation. I believe that a private corporation

might well discuss this in a board room, but for us to discuss

this publicly here is very irresponsible. We need a joint or

co-ordinated financial policy of governments in the country,

especially now that provincial governments spend more than the

federal. I welcome efforts of the Premier to work out common

policies with other governments, both provincial and the

federal. I urge him not to succumb to any temptation to blow

any chance of federal-provincial cooperation or even

interprovincial cooperation on something of this nature.

I would like to ask a number of specific questions.

HON. MR. BARRETT: Mr. Chairman, I think it is important to make a statement.

I appreciate your opening. I want to say categorically that at no time in my

presence has the federal Minister of Finance discussed with me — or, to my knowledge,

when I have been with other Finance Ministers — the question of devaluation.

The unfortunate situation is that when someone raises it, it raises speculation

that is absolutely invalid. I think it does an injustice. I am cautioning press

not to go out suggesting, because someone has raised this subject, that there

will be devaluation. I tell you absolutely that it has never been discussed

with me. I think it is very unfortunate that it is raised in this circumstance.

Had the question been worthwhile in terms of suspicion, I would have been available

in the corridor or at the end of a telephone to tell you exactly what I am telling

you now.

Mr. Member, your assessment is absolutely correct. I would

be surprised indeed if such a subject were ever raised with the

provincial Finance Ministers. If it were, it would only be on

the eve of an announcement and through a special meeting or

contact with us. I hope that we let the matter rest there,

because it is a mistake. It alters corporate decisions just on

speculation alone.

MR. D.A. ANDERSON: Apart from that, it would mean the

resignation of both the federal and provincial Finance

Ministers.

HON. MR. BARRETT: That's correct.

MR. D.A. ANDERSON: It is something that could be speculated

on in a private corporation, but for the public bodies to

speculate on it is unbelievable. We cannot do that. I just

repeat what you said and back it up 100 per cent. I sure hope

that this passes without comment.

I would like to ask a number of specific comments to the

Premier in the light of his statement last night. These are

specific questions referring to dates. Was there any

opportunity to alter or...?

MR. BENNETT: New friend.

MR. D.A. ANDERSON: The Leader of the Opposition says "new

friend." Well, I happen to have been in public life for some

seven years in this country and I feel it is

tremendously important we protect the Canadian dollar and

protect our external position. I feel it is irresponsible in

the extreme to start rumours from Legislatures and governments,

or what might be construed from governments at careless reading

of newspapers if the articles are written carelessly, about

devaluation — or indeed about the amount of information that

the federal Minister of Finance prior to a budget has made

available to people from one end of the country to the other.

This speculation is ludicrous, and it should be pointed out

that this cannot continue.

I ask the Premier and Minister of Finance: with respect to

dates, was there any opportunity to alter or amend the

prospectus between March 13, 1975,

[ Page 3485 ]

and May 15, 1975?

Was there any opportunity, to his knowledge, to alter or

amend that prospectus? Was it possible under the SEC

regulations? If it was so possible, or if it could have been

done, was any attempt made by the provincial authorities or the

B.C. Hydro, the B.C. government, to make such an alteration to

the prospectus? Those are my first and second questions.

My third question: did the attorneys for the underwriters

specifically state that no change to the prospectus was

required or no information was required unless it was audited

financial information? So, questions three and four. What did

the attorneys of Kuhn, Loeb indicate they wanted, and did they

specifically indicate that no change was required to that

prospectus in that period?

Were the attorneys of Kuhn, Loeb or the SEC specifically

informed that losses rather than profits would be reflected in

the audited statements? And on that question I would like the

Premier to indicate whether or not perhaps he was in a position

to indicate there would be losses rather than profits, or

whether they were warned that there might be losses rather than

profits.

There are four or five specific questions — one or two more

from earlier speeches made in second reading. Mr. R.E. Swanson

was and, I believe, is a director of BCR and he put in an

annual report. At what stage was he aware that the engineering

was not up to regular practice?

HON. MR. BARRETT: On the Dease Lake extension?

MR. D.A. ANDERSON: Yes, Dease Lake extension.

Another question, specifically with respect to the Wakeley

report: I'd like to know the circumstances surrounding the

instructions to Mr. Wakeley and the commissioning of this

report. Statements have been made in the House that this was a

report developed in a hurry — "this quick report, the hurry-up

report, the save-the-Premier report."

I would like to know how much time he was given and what the

deadlines put on him were, whether he protested or complained,

other than the statement in his report where he indicated that

a really detailed study would take six months, but whether at

any time he complained or protested that the time given to him

to make this report was impossibly short or would result in a

superficial or possibly inaccurate report. Were any indications

given by Mr. Wakeley, who unfortunately we cannot question,

about the time given for his report? In other words — and there

is one further quote about the Wakeley report: "It was

manufactured in a hurry" — I would like that commented on.

The same is true with the Hanrahan report. Did Mr. Hanrahan indicate that he

had been asked to give a report which was impossible to do in the short time

available, or a report which could not possibly be substantially accurate because

of short time available?

Are those perhaps questions that could be answered?

HON. MR. BARRETT: Let me start from the beginning, Mr.

Member. The specific question of whether there was an

opportunity to alter the prospectus between the period of March

13 and May 15 — the answer is no. The lawyers for Kuhn, Loeb

work out of the firm of Sullivan and Cromwell in New York. Mr.

Mestres is the lawyer who this government dealt through. Mr.

Mestres was told that a review of the railway accounts was in

progress and he was also informed — he was warned — that it

might result in restatement of past financial positions on loss

or profit. He was informed of that. His advice to Kuhn, Loeb

and to us was to follow the SEC regulation — that is, file

audited statements. And unless we had audited material to

provide him.... They were aware, as I say, of those two

things: one that there was a re-examination of auditing

procedures, accounting procedures and, two, that they warned it

might result in a restatement. He was aware of that.

Now the regulations of SEC is audited statement. We did not

have that audited statement from Peat, Marwick complete and

signed with their signature in my hands until I think it was

two or three days before I brought that into the House. So the

Lawyers Kuhn, Loeb knew all along.

MR. G.B. GARDOM (Vancouver–Point Grey): What did they say

about explanatory notes?

HON. MR. BARRETT: That was a decision they make. The

decision was related to the fact that the borrowing was for

B.C. Hydro, not for B.C. Rail. At no time did they ask us, nor

did they want to add any note. They were aware of what was

going on, as I have said in those two statements.

I have been advised that the Department of Finance actually

suggested such a note — actually suggested such a note. It was

the lawyer for Kuhn and Loeb who said it was not necessary.

MR. GARDOM: Is there written verification of that?

HON. MR. BARRETT: We have the verbal opinion, as I

understand.... It's all verbal.

MR. GARDOM: From the lawyer.

HON. MR. BARRETT: From the lawyer to the Deputy Minister of

Finance who handled the matter

[ Page 3486 ]

over the phone and through a visit to New York at the time

the issue was sold. I think the Deputy spent three days....

Interjection.

HON. MR. BARRETT: Okay. The Associate Deputy and the Deputy.

The Deputy then went to New York, and was there for the two and

a half days that the issue was on....

There was also the due diligence meeting where any question

could have been asked; the Deputy was available to answer those

questions.

MR. GARDOM: We should commend them for the suggestion.

HON. MR. BARRETT: I want to add some commendation of my own.

I was upset last night when it was suggested across the floor

that the Deputy had said other things than what I was reporting

in the House. I regret that very much. I hope that that

exchange across the floor from the Leader of the Opposition

(Mr. Bennett) was nothing more than intemperate, because the

Deputy Minister of Finance has acted throughout this whole

matter in a manner that I think is exemplary. Every aspect of

our responsibility has been covered because of that.

The other question was raised by the Member about Swanson's

report. He asked me, as I have notes here: "At what stage was

he aware that the engineering or pre-engineering on the Dease

Lake extension was not satisfactory?"

MR. D.A. ANDERSON: Right.

HON. MR. BARRETT: I don't know the answer to that.

MR. D.A. ANDERSON: You could find it.

HON. MR. BARRETT: But he wasn't on the board. When he came

on the board I asked him to give us a report on that

engineering — that's what led to his report. In the debate

mentioning Mr. Swanson's name, his reports were not discussed

on the railroad extension to Dease Lake; Swanson's report dealt

with the railroad before the Dease Lake extension was even

authorized. So the reports quoted by the official opposition

have no bearing whatsoever on the Dease Lake extension. That

distinction should be made, although it may be complicated for

some people.

Both Mr. Hanrahan and Mr. Wakeley were asked to give factual

summary reports

of what went on. I do not recall any time limit to either of them. In no way,

Mr. Member, will I accept any suggestion, as made by opposition Members, that

Mr. Wakeley was, in effect, told what to put in that report. That is absolutely

false. No one has made that suggestion about Mr. Hanrahan's

report — Mr. Hanrahan, of course, can defend himself, since

he's legal counsel. But I find it a bid disturbing that last

night it was suggested that Mr. Minty was told what to put in

his report, and suggested that Mr.Wakeley was told what to put

in his report. Those suggestions are absolutely false. I think

that the House, on behalf of those people, deserves an

apology.

Interjection.

MR. CHAIRMAN: Order, please. We have been following the

practice of allowing Members to ask follow-up questions.

MR. D.A. ANDERSON: Mr. Chairman. I will ask one or two

questions and then allow the Second Member for Point-Grey (Mr.

Gardom) to speak, and then, perhaps, speak later. I wonder

whether the Premier could indicate how many other directors

were aware of the direction to the auditors of which he talked

in his initial statement — whether there were only one or two

directors involved.

The second question is: how many directors were aware of the

instructions given to the auditors? If they were not generally

aware of it precisely who instructed the auditors as to how

they should operate?

The third question, which is linked to that, is: what led to

the examination of the auditors by the Institute of Chartered

Accountants? What first raised the red flag of concern in the

minds of that institute? Was it the railway? Were directors of

the railway questioning the auditors? How was it that they were

led into the position of having their activities as auditors

questioned? Was it internal, from the Department of Finance?

How did the thing start off, really is the question.

Mr. Chairman, one final personal remark. I was accused of

being a new friend of the Premier. Let me say that when the

credit rating of the province or the country is involved, or

the financial position of the country is involved, I will be

friends with anyone to make sure that we protect our position

from irresponsible statements.

AN HON. MEMBER: Hear, hear.

HON. MR. BARRETT: Mr. Member, my instructions to the board

were that the mini-board with which we function was to ask for

applications for auditing firms which wished to make up the

responsibility of auditing after the resignation of Buttar

& Chiene. I gave one instruction, and one only. In front of

all the board members who were present at that meeting, that

one instruction was that I want the truth. I did not care what

had gone on in

[ Page 3487 ]

the past, but I wanted to know exactly how it took place:

what was involved; how much money was involved. I wanted

nothing covered. I wanted nothing buried. I wanted a

professional group of auditors to tell the truth. That was

their one and only instruction on this board, and there was to

be no interference from them in doing their duties, as had been

claimed by Mr. Minty in his report in terms of interference

with the other auditors.

MR. D.A. ANDERSON: How did that interference start off? Who

did it?

HON. MR. BARRETT: Mr. Member, it was started off by the

resignation of Buttar & Chiene. I was asking detailed

questions after the Minty report. People have asked why this

took so long. I have tried to explain why it took so long. I

was handed a report, in the fall of 1972, to sign as soon as we

were in office. I had no reason to doubt that that report was

the truth.

MR. D.A. ANDERSON: You signed it?

HON. MR. BARRETT: I signed it. It had a statement in there

from an auditor saying that Canadian Transport Commission

regulations had been followed. I accepted their word. I signed

the report.

MR. D.A. ANDERSON: Did the secretary of the company or

anybody else talk to you about that report and raise any doubts

in your mind?

HON. MR. BARRETT: No one raised any doubts in my mind about

that report because there was not any reason for the secretary

to raise doubts because that had been the pattern up to then.

However, if you will recall, I accepted the word of the

auditors. There was no reason for me not to sign the report

with the information that I had. The former government had

always said that the books were correct. I wasn't going to go

off wildly and say: "I'm not going to sign that because I don't

believe the books are correct." I believed that the books were

correct and I signed it.

AN HON. MEMBER: When was that?

HON. MR. BARRETT: That was in the fall of 1972.

AN HON. MEMBER: Before the end of the fiscal year?

HON. MR. BARRETT: When the report was submitted to me....

No, it wasn't the fall of 1972. It would have been the spring

of 1973 — that's correct.

Then there was a question in the House. I am quite sure it was the Member for

Vancouver–Point Grey (Mr. McGeer), now an independent, the first one to go independent,

who asked about B.C. Rail and B.C. Hydro. I said: "Mr. Member, we will ask the

comptroller-general to go in." You recall that? That's right. It was the First

Member for Vancouver–Point Grey who raised doubts and questions about the statements

of B.C. Rail and B.C. Hydro. Once he raised those, I immediately asked Mr. Minty,

the comptroller-general, to go in. I said to the House that I would file those

reports and I did.

You will recall, Mr. Member, that I filed two reports by Mr.

Minty — one on B.C. Hydro, and one on B.C. Rail. Mr. Minty's

report led us to development concerns about the auditing and

accounting procedures of B.C. Rail.

MR. D.A. ANDERSON: Buttar & Chiene had not resigned by

then?

HON. MR. BARRETT: They had not resigned by then, and we had

no reason to suspect anything was wrong until we got the Minty

report.

Based on Mr. Minty's recommendations, the next step,

logically, was to examine what was going on in the suggestions

that he made. In the process of doing that, Buttar & Chiene

left.

On the occasion of their leaving, a frightful statement was

made, which has not been withdrawn by the official Leader of

the Opposition, that the reason for the Buttar & Chiene

leaving was that they had been given orders by the government

to hide losses in the B.C. Rail, and they refused to do it. A

very serious allegation made by the official Leader of the

Opposition, and which has not been withdrawn, has not been

substantiated by the facts, and which is totally

irresponsible.

To suggest that the government telling auditors what to do

was the reason for their resignation, and not producing one

shred of evidence for that accusation, and letting the

accusation stand in light of subsequent events, is something

that I hope everybody in this province seriously judges.

After Buttar & Chiene left, a charge was laid against

Mr. Douglas Walker with the chartered accountants' professional

association.

MR. D.A. ANDERSON: By the association?

HON. MR. BARRETT: Apparently by the association, although I

do not know that absolutely. That took place last fall. As soon

as that happened, we then instructed the board to find us new

auditors. The new auditors were selected — Peat, Marwick — and I

have filed with the House today their submission because the

official Leader of the Opposition raised the Penn Central case.

We have his word that it was done only...for what reason

I'm

[ Page 3488 ]

not sure, but only for that reason — not to suggest that

anything was wrong with Peat, Marwick according to him, but

only for some other reason.

I agree with the Member for West Vancouver–Howe Sound (Mr.

L.A. Williams) that it should not have been raised at all.

Nonetheless, Peat, Marwick was given the instruction through

the board to tell the truth and to do what had been said but

not been done in the past, and that is to conform with the

Canadian Transport Commission regulations and auditing

procedures.

Mr. Member, that is really the whole crux of this long

debate. Take away all the rhetoric from any Member, be he

government or opposition, the matter of this case simply rests

with the fact that the audited statements submitted by Buttar

& Chiene were false, in that they said that the Canadian

Transport Commission auditing procedures had been followed, and

they were not followed, as a reason. Now the institute did not

say that, but it is a fact. Peat, Marwick told us that the

institute suspended Mr. Walker and suggested that he have an

updating in accounting courses. That's what happens when you

doctors and lawyers and accountants have your own governing

bodies. The doctors have got it better. They can bury their

mistakes. (Laughter.)

MR. G.S. WALLACE (Oak Bay): Withdraw!

HON. MR. BARRETT: The lawyers can put them away for a few

years; the accountants have to go through this procedure. But

the fact is, Mr. Member, that there was a lie in those annual

reports. If anybody wants to go around speculating on who

should have known about that lie....

MR. GARDOM: That's what you're doing.

HON. MR. BARRETT: Of course I'm speculating on it.

MR. GARDOM: Why don't you have a judicial inquiry?

HON. MR. BARRETT: Well, Mr. Member, we will have a court case in November,

and after the court case is over there are other decisions that have to be made,

including related to a judicial inquiry. There is a court case hanging over

this whole matter of extensions. Every step of the way I have been cautious.

I have been deliberate in double checking because I knew the volatile nature

of this kind of bringing forward of information. But I tell you this, and I

say it again plainly and clearly: there was absolutely no way that I was going

to withhold any of this information from the Legislature of this province. For

people to say that it was hypocritical to do this, "blah, blah, blah, blah,

blah," I have no other option other than to bring the facts in front of this

Legislature, and I'd do it again because I'll be darned if I'm going to be nailed

to the wall for someone else's accounting procedure that hid losses.

Had we been the opposition and made the statements made by

the official Leader of the Opposition, the old "wild man"

syndrome that they used to drag out on Bob Strachan would have

been smeared through every editorial page in this province. I

find it interesting that I have yet to see one editorial mildly

criticizing the official Leader of the Opposition for saying

without substantive information or facts that we ordered Buttar

& Chiene to hide losses. I tell you that had it been an NDP

Leader of the Opposition that made such a charge without any

facts and without backing it up, that NDP Leader of the

Opposition would be castigated in editorials right across this

province, but because it's a Social Credit, so-called free

enterpriser, I have yet to see one single editorial castigating

him for that malicious charge that has no basis in fact.

MR. P.C. ROLSTON (Dewdney): He calls that freedom.

HON. MR. BARRETT: He calls that freedom. I call it total

irresponsibility, and I wonder what has gone wrong with the

sensitivity or the fairness of the editorial writers.

MR. D.A. ANDERSON: When did they have any?

HON. MR. BARRETT: That's something they have to live

with.

MR. D.A. ANDERSON: When did they have any to go wrong?

HON. MR. BARRETT: They have sensitivities, I am sure. They

want to sleep at night. Fair is fair, but I can tell you if it

had been a "socialist" leader who made that statement, his name

would have been smeared throughout every editorial page in this

province. Please, someone, send me a copy of the editorial

saying that the Leader of the Opposition was making wild

charges — Wild Bill.

You know, there was one mistake made, Mr. Speaker, about

comparing his speech and his approach as being the son of

W.A.C. It was not that at all; it was a reincarnation of Phil

Gaglardi's style of politics in this House.

MR. CHAIRMAN: Order, please! I would ask the Hon. Premier to

use the highest titles of a Member when he's referring to a

Member of this House.

HON. MR. BARRETT: The official Leader of the Opposition is

not acting like the son of W.A.C.; he's

[ Page 3489 ]

acting like the reincarnation in this House of Phil

Gaglardi.

Now, Mr. Chairman, the question about Hanrahan and

Wakeley.

Interjection.

HON. MR. BARRETT: You made your statements, Mr. Member. You

go round and tell the people of this province that I ordered

Buttar & Chiene to alter those books. You have a Member

sitting behind you who suggested last night that I ordered

Minty to write his report the way it was. That's what they

said, and they haven't withdrawn it.

The First Member for West Vancouver–Point Grey (Mr. McGeer)

is thinking of joining that group, with his high principles and

his background of castigating that group. Would he throw

himself with that den? I don't believe he'd do it. Even he

hasn't got that much political ambition.

AN HON. MEMBER: Oh, I don't know. (Laughter.)

HON. MR. BARRETT: Time will tell.

AN HON. MEMBER: Did you get any sleep last night?

HON. MR. BARRETT: I had the best sleep I've had in months

and I'm still waiting for the stone to fall.

MR. GARDOM: Then wake up.

HON. MR. BARRETT: Through you, Mr. Chairman, the Second

Member for Vancouver–Point Grey (Mr. Gardom) is perhaps the

most uneasy Member of all in terms of your future political....

MR. GARDOM: No, no.

HON. MR. BARRETT: Because if you join that group, you....

Mr. Chairman, back to the matter in front. of us, there was no

restriction. I can understand the other ones, but not you.

There were no instructions to Hanrahan and Wakeley, in

answer to your last question.

MR. D.A. ANDERSON: I would like to have the House welcome a

distinguished visitor we have in the gallery, the Hon. Barney

Danson, the federal Minister.

I'm sure he will find a close parallel in the British Columbia press editorial

pages with the incredible treatment in the Ontario press of his colleague, John

Munro, who turned out to be totally innocent of any of the charges made by the

press. The press, of course never bothered to apologize, or I should say a number

of the papers never bothered to apologize.

I'd like to go, Mr. Chairman, to one or two other questions.

This morning's Daily Colonist, appropriately for June 13, talks

about the SEC, U.S. Securities and Exchange Commission,

requesting copies of B.C. Railway's latest financial statement

after releases of information yesterday.

Now it appears to me from everything the Premier has said so

far that they were fully informed all the way along, that there

was new, audited material that would come to them, and they

were expecting it because they were forewarned that it would be

coming and they were forewarned that there would be

re-examination of the financial picture of B.C. Hydro as a

result of the revelations on B.C. Rail.

Dates were given in this article, and one of the statements

I would like to refer to is that of the Minister of Economic

Development, the Hon. Gary Lauk — I'm quoting the paper, so I

use his name — on April 9.

Now it appears from what the Premier has said that the

original prospectus was filed on March 13 and that on April 9,

while there were already some doubts in that period the U.S.

lawyers for Kuhn, Loeb, Micer, Mestres and Budd, I believe they

put down here — or is it Sullivan and Cromwell? — were informed

in that period in early and mid-April.

HON. MR. BARRETT: Prior to that.

MR. D.A. ANDERSON: Prior to early April or prior to

mid-April?

Interjection.

MR. D.A. ANDERSON: So we have, then, the information made

available to the American authorities in the States before

March 13 — the prospectus was dated March 13, wasn't it?

HON. MR. BARRETT: Yes.

MR. D.A. ANDERSON: Yes. At that stage they had no knowledge

and none of your government Ministers had any concrete audited

knowledge or incorrect financial material.

HON. MR. BARRETT: We had the warning that we shared with

them, but we had not audited material.

MR. D.A. ANDERSON: Well, the final question I leave with the

Premier before yielding the floor is this. I wonder what he

could find out from his deputy Minister of Finance or any other

member of the railway or people involved as to when the first

indication was to the American authorities and to those lawyers

that there were troubles, because it appears that the dates

don't completely coincide with

[ Page 3490 ]

the Daily Colonist article.

HON. MR. BARRETT: Mr. Chairman, in answer to that question I

am informed that Mr. Hugh Ferguson, who is Deputy Minister of

Finance, was assigned to work with Kuehn Loeb, and they were

informed before the final draft of that March 13 filing with

SEC was completed.

They were informed, as I already mentioned to you

earlier.

MR. GARDOM: I would just like to make a couple of comments

here. I was pleased to hear the remarks this morning of the

Premier concerning the position taken by Mr. Bryson and the

Deputy Minister of Finance, in requesting that there be

explanatory note to the report of B.C. Rail as it appears in

the prospectus of B.C. Hydro, which is filed with the SEC. I

must say that I thoroughly concur and agree with the position

that was taken by the Deputy Minister of Finance and do not

agree at all with the position that was taken by the advisers

of the underwriters, Messrs. Sullivan and Cromwell, if they

felt it was not necessary to file those explanatory notes.

I see from the prospectus, Mr. Minister of Finance, that the

validity of the bonds and the guarantee will be passed upon, for

several underwriters, by Messrs. Sullivan and Cromwell in New York, who

may rely, as to all matters of Canadian and provincial law, on Messrs.

Macdonald and Mitchell, referring to the Attorney-General and, I

assume, Mr. Mitchell, the senior solicitor of B.C. Hydro, and Messrs.

Clark, Wilson & Co., which are a firm that's listed in Vancouver.

I put the question to the Hon. Premier as to whether or not

it was discussed with the Attorney-General, with Mr. Mitchell

or with the firm of Clark, Wilson & Co., in Vancouver as to

the efficacy or validity of the statement of B.C. Railway as it

did here in this prospectus, because I do not think it is

correct at all to have gone in there in the form that it went

in, and it certainly is not correct, in my view, to fall within

the statement found on page 43, signed by the

comptroller-general, that the financial statements are "all in

conformity with generally accepted accounting principles

applied on a consistent basis," because they are not —

they're just not that.

The Deputy Minister of Finance is correct, and I think it would be a most helpful

thing if we could have sort of a chronological assessment of this, prepared

by the Deputy Minister of Finance, or yourself, Mr. Premier, and filed in the

House. This is a matter that requires an explanatory note. That's all there

is to it. There are no ifs, ands or buts about that and, as I say, I'm just

delighted to hear of the wise counsel offered by the Deputy Minister of Finance.

I congratulate him for that indeed.

Secondly, it's my impression that the Pacific Great Eastern — B.C. Railway as it's now known — falls within the ambit of

the British Columbia Railway Act. The British Columbia Railway

Act preceded it, and I gather that the B.C. Railway has to

comply with the provisions of our own railway Act. Now our own

railway Act lays down a number of provisions concerning

accounting, concerning inquiries, concerning directors'

meetings, and so forth. I would refer to

section 136 of the

railway Act of this province, which is

chapter 329, and it says

this:

"Books and Records:

"In addition to any specific provisions in this behalf in

this Act contained, it is the duty of the board of directors of

the company to keep, and to cause to be kept, adequate and full

and complete records of the transactions at all meetings of the

shareholders of the company, of the board of directors of the

company, and of all transactions, matters, acts and things

affecting the undertaking of the company, and the carrying on

management and conservation thereof."

I'd ask the Premier whether or not that practice is being

followed and has been followed.

Secondly, I'd refer the Premier to....

HON. MR. BARRETT: Sorry, Mr. Member, will you repeat that

last one?

MR. GARDOM: Yes, I asked you whether or not the provisions

section 136 of the railway Act have been followed and are

being followed?

Interjection.

MR. GARDOM: Yes, I just read it, but it deals with the

responsibility of the board of directors and shareholders to

keep adequate and complete records of all meetings and of all

things affecting the undertaking of the company. I asked

whether or not that procedure is being followed today and, if

not, why not — and whether it was followed in the past and, if

not, why not?

Also, under

section 279 of the same Act, or

part 42, I

should say, of the same Act, under

section 283, the specific

powers to the Minister.... And I believe the Minister is the

Minister of Transport (Hon. Mr. Strachan); that's my

interpretation, and you might help me in that, too. Quite

frankly, this is a statutory dog's breakfast, this railway.

It's high time these private Acts were compiled and we had a

revision of those as well as the public statutes in this

province.

Interjection.

HON. MR. BARRETT: You won't attack them as

[ Page 3491 ]

providing awesome powers for the state, Mr. Member?

MR. GARDOM: Oh, if you provide awesome powers for the state,

it's not a question of attack, it's a question of a democratic

privilege if those don't come in, Mr. Premier, and it's too bad

that you're bringing so many in. This is one of the great

reasons why you'll not be returned to office next time around.

Make no mistake of that fact.

HON. MR. BARRETT: You want to bet on that, Garde?

MR. GARDOM: Yes, how much?

HON. MR. BARRETT: I'll meet you in the corridor.

MR. GARDOM: Okay. Who'll hold the stakes?

HON. MR. BARRETT: We'll work it out.

MR. GARDOM: That's a good bet in this day and age, you know — actually a steak. (Laughter.)

Interjections.

MR. GARDOM: Well, have some neutral member of the press hold

the stake. How's that?

HON. MR. BARRETT: Can you find one?

MR. GARDOM: Ummm...what about that...? (Laughter.)

Dealing with

section 283 of the Railway Act, it is incumbent

upon the Minister at his election to request from any officer,

servant or agent of the company written statements dealing with

its assets and liabilities, its stock issue, the amount and

nature of consideration received for issue, the gross earnings

or receipts or expenditures, the amount and nature of each and

any bonus or gift, bonds that are issued, the amount and nature

of consideration received by bonds, the character and extent of

any liabilities outstanding, the cost of construction of the

company's railway, the amount and nature of consideration of

particulars of lease, generally the extent and nature of value

and particulars of the property, earnings and business of the

company.

Has this ever been requested from this company over the past

10 years? Have you made that request? Or are you going to say

that the request for the Minty report brought that about?

I'd just like to say one word about the Minty report before sitting down. Again,

criticizing the procedures that were followed in this prospectus, the Minty

report was known to this government two years before this prospectus was filed.

The Minty report stated to the effect that there were not generally accepted

accounting principles applied on a consistent basis to B.C. Rail. The statements

in the Minty report and the statements in the certificate of the comptroller-general

in the prospectus are contradictory.

As I said yesterday, I'm taking no issue with Mr. Minty,

whom I thoroughly respect, whatsoever. But I again emphasize

that it is unfortunate, and I think indeed appalling that there

were not explanatory notes furnished to this.

Before sitting down, I'm not going to reiterate what I said

yesterday, but the Premier has not given any indication to this

House that he's going to clean up the accountability in this

province. This is the worst part of the whole thing. We have to

have fair, true proper accountability so the general public

will know that they're getting value — and they're getting out

of something like this political heat, political smokescreen.

The whole thing is rife with politics, which it should not be.

This should be down to dollars and cents and the public should

know whether or not they are getting value. They never ever

will get value or know they're getting value in this province

until such time as there is an independent check and balance

and an auditor-general. Make no mistake of that fact. It is

proven that it is not within the competence or responsibility

of the Deputy Minister of Finance or the comptroller-general of

this province to prevent the things that allegedly have

occasioned in B.C. Rail from happening.

HON. MR. BARRETT: I'd just like to answer. There is no

allegation about the fact, Mr. Member, that the statement was

made by the former auditors: the Canadian Board of Transport

Commissioners was followed in auditing. That's not an

allegation. It's a fact that that statement is not true; it's

not an allegation.

You talk about avoiding politics — this is hardly the place

to suggest that.

HON. D.G. COCKE (Minister of Health): And hardly the guy to

suggest it.

HON. MR. BARRETT: No, I'm not adding that. But on occasion

this chamber has been known to be political. As a matter of

fact, to be very candid about it, I can't recall a time when

this place wasn't political.

When you hear those famous lines given by some people who

say, "Let us put the province ahead of politics,"

nothing could be more political than a statement like that. It

means: "Wash away all my political past — I'm swimming for the

high shore if the tide doesn't catch me." It reminds one of

that famous statement. Santayana says: "Those who do

[ Page 3492 ]

not learn from history are condemned to relive it." That is

non-solicited advice to the people of British Columbia.

MR. CHAIRMAN: Order, please.

HON. MR. BARRETT: The second statement related to that

Member's comment was: "The last refuge of a scoundrel is

patriotism." I just want to remind the Member of those

statements that were made: "Let's put the province ahead of

personal political gain. Just because I jumped to another

political party, I only do it to destroy my future, not to

enhance it. I'm putting ambition ahead of the desire for

office" — or vise versa.

MR. GARDOM: Oh, come on!

MR. CHAIRMAN: Order, please. Would you return to the

bill?

HON. MR. BARRETT: Mr. Member, that pious presentation is

just a bit much, especially in morning.

MR. GARDOM: You're suffering.

HON. MR. BARRETT: No, I am a practitioner of the political

art, too. That is the Uriah Heep syndrome taken to politics —

"I'm just a country boy." (Laughter.)

Now we go back to your question about

section 136 of the

Railway Act. Yes, Mr. Member, minutes are kept, signed and

recorded by the secretary to the board of directors. The

question was asked about the financial statements. I do not

have a full explanation of why these were not filed before,

although I have had flown over to — me copies of the financial

statements for the year ended December 31, 1973, and an

additional column for the 1974 financial statements, a copy of

which is also enclosed in the same statement. I will find out

as soon as I can why they were not put into two years instead

of one. I'd like with the leave of the House to make these

available to the Members, since I've just received them. These

are the financial statements for the fiscal year 1973 and they

also include 1974. I'm trying to determine why they were not

presented separately and earlier.

With leave of the House, I'd like to present them to the

House. There are copies for the three leaders and the leader of

the independents. (Laughter.)

MR. GARDOM: Since the Hon. Premier....

HON. MR. BARRETT: Just a minute, Mr. Member. Would you like

a five-minute recess to determine which one of you is going to

receive the report?

MR. GARDOM: First of all we have to caucus, you see.

HON. MR. BARRETT: Oh, I see.

MR. BENNETT: Mr. Chairman, will the Premier be able to

provide the information I also asked for: whether this was

filed within the statutory limit of within six months of the

end of the fiscal year?

HON. MR. BARRETT: I'm trying to determine that, Mr.

Member.

MR. BENNETT: And you'll bring the information?

HON. MR. BARRETT: As soon as I get the whole story.

MR. GARDOM: Mr. Chairman, since the Hon. Premier informed

the House that minutes are indeed kept, pursuant to

section 136

of the Railway Act, of the board of directors' meetings and of

the shareholders' meetings of B.C. Rail, is the Hon. Premier

prepared to file those minutes in the House for the period 1971

to date?

HON. MR. BARRETT: I'll consider it.

MR. GARDOM: Has the Premier read those minutes?

HON. MR. BARRETT: I've read the minutes, yes.

MR. GARDOM: Of the B.C. Rail?

HON. MR. BARRETT: Of the B.C. Rail.

MR. GARDOM: Did they bear reference to the Minty report?

HON. MR. BARRETT: Since we came to office?

MR. GARDOM: Yes.

HON. MR. BARRETT: Oh, yes.

MR. GARDOM: And other matters dealing with the extensions?

And the accounting procedures? And the overruns?

HON. MR. BARRETT: Okay. I'll check on it, Mr. Member.

MR. GARDOM: Well, you're not prepared to give an undertaking

today that you'll file those....

HON. MR. BARRETT: No.

[ Page 3493 ]

MR. GARDOM: Why not?

HON. MR. BARRETT: Because I want to consider it.

MR. GARDOM: For what purpose? Aren't they public

documents?

HON. MR. BARRETT: I want to consider it, Mr. Member. I'm not

going to give you a flash answer, because I don't have a flash

answer.

MR. GARDOM: Now, that's one thing you do have: flash

answers. You've gone a little too far when you say you haven't

got that. You've got some flash flood answers, as a matter of

fact.

I do feel this matter would have been better attended in an

independent, judicial inquiry. The Premier has indicated this

morning that he's thinking about that. He's also indicated to

us that he's awaiting the outcome of a case.

HON. MR. BARRETT: That's right.

MR. GARDOM: When's the trial date of that case?

HON. MR. BARRETT: The last advice I have was that it is this

fall. But judges are very busy. They need new judges all the

time, Mr. Member. (Laughter.)

MR. GARDOM: No flash answers, eh?

HON. MR. BARRETT: I've been working on that one for a long

time.

MR. GARDOM: Yes, I think you have; I think you were up a

little later last night than you said you were. But I do feel,

Mr. Premier, that it should be incumbent upon you to make that

material available to the House, and let's see just what has

happened since and what has happened before.

MR. WALLACE: Mr. Chairman, I've listened to this whole long

debate very carefully and I'm sure I'm like many members of the

public in British Columbia: just a little confused. I sometimes

think that in this chamber we manage to make life more

confusing than it need be, and that probably again reverts to

the point the Premier made a moment ago that we all indulge in

political rhetoric.

Be that as it may, the question, I think, has been clarified to some extent

but I would like to ask just one or two other small clarifications. The basic

question is that the people of British Columbia are asking whether this whole

matter has been revealed for the reasons the Premier quoted, or whether or not

the material has been publicized for purely political reasons. That's what the

public have to try to judge for themselves.

HON. MR. BARRETT: I wasn't going to sit on it, I'll tell

you.

MR. WALLACE: Well, that's a very reasonable interjection,

Mr. Premier, that you weren't going to sit on figures which you

knew were wrong. But with the greatest respect, when we start

commenting about the way it's related in the media I can look

up at the gallery today and say that a certain member of the

press gallery, when I agreed with that opinion, accused me of

being an apologist for the Premier. So it's not easy for a

Member in this House to try to remain rational and objective

and fairly critical; and when he happens to agree with the

other side of the House be accused of being an apologist for

the Premier of this province.

HON. MR. BARRETT: Must have been an editorial writer.

MR. WALLACE: I don't take to that kind of criticism kindly.

I'll say what I think needs to be said in this House and out of

this House, based on the evidence as I see it before me. And if

the editorials can't take cognizance of some of the points you

raised regarding the false statements of the Leader of the

Opposition, then of course there's little hope for

professionals to go into politics.

One of the elements has been uncovered in this whole debate

is the very fact that the Member for West Vancouver–Howe Sound

(Mr. L.A. Williams) mentioned and which I want to emphasize in

the strongest possible terms, and that is that if professional

people are asked to take on public functions and act within a

professional capacity and then have their motives questioned or

their integrity questioned by politicians, it's as clear as day

that very soon you won't find responsible people willing to

take

part in that function.

MR. CHAIRMAN: Order, please! The Hon. Member for Oak Bay has

the floor.

AN HON. MEMBER: Shame on you!

MR. CHAIRMAN: Order! I'd ask the Premier and the Member for

Langley (Mr. McClelland) to be quiet, while the Hon. Member for

Oak Bay speaks.

MR. WALLACE: During this debate we have had many accusations

thrown across the floor about individual professionals, who are

not politicians, who are asked to take upon the function within

their own professional realm of expertise and experience.

Regardless of which government it is today, yesterday or

tomorrow, I think it is unfortunate and

[ Page 3494 ]

undesirable if that kind of person in a professional

capacity has to ponder before he takes on the job that if the

report shows something which has political disadvantages to

either side of the House, he will then be accused of having

submitted the report under pressures. We can perhaps hope that

if this debate has revealed nothing else, it has revealed....

AN HON. MEMBER: I hear doctors bury their mistakes.

MR. WALLACE: Yes, doctors sometimes bury their mistakes, Mr.

Member. I don't think that was any revelation of history when

the Premier said that.

HON. MR. BARRETT: I was quoting someone else.

MR. WALLACE: I would like to think that, contrary to burying

clerical mistakes in books, doctors, if they have to bury their

mistakes, never do it with wilful intent, as was done in this

case.

Mr. Chairman, to return to the specific content, I am just

trying to reflect the comments that I hear among the community

who don't know all the intricacies of a balance sheet or all

the procedures that are followed when one gets into these

realms of high international finance. The man in the street

wants an unequivocal answer to one question in the light of the

last day or two. And it's the answer I want personally.

The Premier has said that in New York on March 13, the

underwriters were made aware that a review was underway of the

financing of the BCR, and that the facts and figures previously

used in previous annual financial reports were probably

inaccurate. What I am being asked and what I hear is that there

had been a great deal of government investigation going on. The

Premier has stated that in the House.

The implication has been made to me by members of the media

that the BCR report of — whatever date you introduced it in the

House, a week ago I think — June 6 was purposely held back so

that the financial....

Interjection.

MR. WALLACE: Now just let me finish the question because all

I am trying to point out is that this is what I am being asked.

This is the comment I hear, and let's clear it up right on the

floor of this House.

The implication is that the Premier knew a great deal more than he says he

knew on March 13, but he purposely — and I am paraphrasing the public comments

I hear — delayed the tabling of the BCR report on June 6 so that he could have

the financial arrangements for borrowing completed in New York at an earlier

date.

I am not making that accusation, but I want the Minister of

Finance to tell the House, and tell us in some detail, why that

is not true.

While the exact figures may not have been known until June

6, the feeling exists among many minds and among people in the

street that by March 13, and certainly by May, when the

borrowing was completed, the Premier knew a great deal more

than just a general outline that something had been wrong in

the accounting over preceding years. So I just want to ask

these one or two specific questions.

Between March and May, when the borrowing was arranged, were

any approximate ballpark figures — if I can use that

colloquialism — mentioned to the people in New York? In other

words, we now know that the figure quoted by the Premier as

misrepresentation in the auditing is something on the order of

$62 million. In negotiations for the loan in New York, were any

approximate figures mentioned? At any time, did the Minister,

his Deputy or Associate Deputy give the people in New York some

percentage approximation of by what degree they were out of

line in the figures?

The other question, of course, has been partially cleared

up. The public are the persons who ask me: "Why did the

Minister submit figures, knowing they were wrong?" The Minister

has stated that he had made that fact known to the people in

New York, that the figures were wrong, but he was not yet in a

position to give the accurate figures. This is the answer

today, but I would like to know if any approximate statement of

the percentage amount by which the previous books were

inaccurate was given.

The suspicion seems to linger that the Minister of Finance

knew more than he said he knew during the negotiations in New

York, even although he was given the assurance that he made the

underwriters aware of the fact that the previous audited

statements of the B.C. Railway were not in fact what they had

presented as being, and that certain accounting procedures

which the auditors said had been used were not in fact used. We

know that. But the last degree to which the Premier could

clarify this whole issue would be to answer that question I've

asked about whether any approximate figures or any percentage

of error was discussed during the arrangements to borrow

money.

I just want to add that I think the idea of a judicial

inquiry, while it is obviously not appropriate when there is

such a large litigation case awaiting trial.... But I do think

that it might establish two or three of the very important

points that have been raised — first of all, to establish the

facts by a neutral body beyond all doubt, once and for all;

secondly, to clear beyond all doubt the professionalism and the

integrity of the various professional people who were involved

and, thirdly, to demonstrate without any question

[ Page 3495 ]

the fact that in the future the railroad should be run by

managers and efficient professionals in that field, completely

free from the kind of political interference which has

obviously gone on in the past.

For these three very fundamental reasons, a judicial

inquiry, or some kind of official neutral inquiry, I think,

would be most appropriate, even if it has to follow the

termination of the court case. I wonder if the Minister could

tell the House if he has decided, at least in principle, that

there should be an inquiry, and whether or not he has any more

specific information to give me in relation to the specific

questions I've asked.

HON. MR. BARRETT; Mr. Member, no decision will be made on a judicial

inquiry until all that litigation is over. It would be totally inappropriate,

in our opinion, to have such an inquiry while that massive court case is pending.

Interjection.

HON. MR. BARRETT: No, we have not decided one way or

another. What I said is that we are considering it. But

certainly no decision will be made until that case is over.

Now on the question you raised, Mr. Member, I was urging the

auditors and the chief financial officers of the railway to get

that final report done and get it in here as quick as they

could. I was under pressure in this House...asking where the

report was, and I kept on saying that they've got work to do

and I kept on telling them to get on with it and get busy as

quickly as they could. I was promised the report earlier, at

the end of May, and then it didn't come until the very first

day of June.

Now if anyone is suggesting that there was any attempt on my part, deliberate

or otherwise, to keep the audited statement away from the people in New York,

that is absolutely false. I think that if anyone's going around saying that,

that's being very malicious. I repeat again — and I didn't answer that part

of the Member for Point Grey's question — that also on the team handling the

SEC information that was filed by Kuhn, Loeb were the solicitors for B.C. Hydro

as well, Mr. Wilson and Mr. Mitchell. So they were there with Mr. Ferguson as

well. We told, through the Department of Finance, the lawyers for Kuhn, Loeb

that there was a review underway of accounting procedures, and we warned them

that that review might result in a restatement of past financial statements.

We were asked if we had any audited statements to file and we said no. There

was no discussion on percentages, ballpark figures or anything else. That fully

meets every requirement of the SEC. But they were aware that the auditing procedures

were being looked at and they were warned. They were also given the further

advice from the Deputy Minister that they should consider putting in an explanatory

note. The decision was made by Kuhn, Loeb that that was not necessary, since

there were no audited statements. At no time did anyone discuss ballpark figures

with them.

The Minister of Economic Development (Hon. Mr. Lauk) made a

statement in this House that in his opinion a scandal of

monumental proportions was on the edge — in April. He was a

member of the board, and he made that statement because we were

aware by that time, since February, that the Board of Transport

Commission regulations had not been followed by Mr. Walker,

because it was in mid-February that Walker had been suspended.

But we had no ballpark figures.

MR. WALLACE: Well, I just wanted to follow up, since the

Premier raised one of the elements in the situation which has

given rise to doubts. It was the very statement by the Minister

of Economic Development (Hon. Mr. Lauk), perhaps an intemperate

one, but a statement that the problem was of monumental

proportions. When somebody uses a phrase like that, it suggests

some massive situation which suggests that at least he knew in

ballpark figures what kind of sums of money were involved.

I am not holding you, the Minister of Finance, responsible

for what some other Minister says. But the man in the street

reads the newspapers, he reads that phraseology, and if the

Minister of Economic Development uses a phrase like that which

suggests that it is an enormous sum of money involved and then

we hear that the Premier or his office of his Deputy in

discussing the situation in New York gave no outline of the

approximate dimension of the problem or the percentage sum of

money involved, no wonder there is confusion in the public

mind.

I would just be reassured, and I am sure the House would be,

to know that the statement by the Minister of Economic

Development really was not accurate in relation to the amount

of knowledge he had. Or did he have more specific knowledge

about how much money was involved which he did not impart to

the Premier? These are some of the questions that people are

asking. I think they are legitimate questions.

HON. MR. BARRETT: Mr. Member, in my frame of reference, I

think it is a monumental scandal that audited statements were

submitted with false claims in them. That is not necessarily

related to figures. There was a false statement in the audited

report saying that they followed the Board of Transport

Commission. That describes a scandal of monumental proportions,

in my opinion. We were aware of that only when that

confirmation came on February 18. For the other Member to day,

"Well, you didn't hurry enough, you didn't hurry enough" for

[ Page 3496 ]

goodness' sakes, there was no way that I was going to go

running around saying that this is wrong and this is wrong and

this is wrong, unless I came into this House and documented

every step of the way.

I've got a lot of scars in politics and most of the scars

come from making statements that can't be backed up with facts.

The only way to correct those scars is to apologize or else

they become open wounds and then you carry them as open wounds.

But, Mr. Member, having checked over my scars, I decided that

when I came and reported there was no way I wasn't going to

tell the story. Those editorials that said those things —

that's nonsense. There is no way that I was going to carry the

can for this mess. No way! It wasn't my mess. I've got enough

problems without carrying someone else's load in this

business.

So I decided that when I came in here I was going to have

every single step documented, not thinking for one minute, Mr.

Member, that the professionals who document it would be

attacked as a defence. That is a new low by the official

opposition. The Member for West Vancouver–Howe Sound (Mr. L.A.

Williams) in raising that fact about Peat, Marwick was right

on. If the official opposition wants to take the position of

attacking the messenger rather than the message and in effect

smearing professional people, there will be a question of

whether or not professional people will take such jobs.

Mr. Member, having had all the documented evidence, I came

to the House as soon as possible. We got the audited statement,

I think, two days before the Friday when I presented that

material. It is all there. It is all a matter of record.

Nothing can wash away the fact that those annual reports did

not reflect a true picture of that railway. It is a fact that I

did not order Buttar & Chiene or anyone else to hide

losses, thus leading to their resignation. Everything that I

presented in this House has been documented, including our

contact with the lawyers for Kuhn, Loeb. I am thankful that all

angles and approaches have been nailed down by our own

Department of Finance, and it is all there on the record.

MR. BENNETT: Mr. Chairman, I think the Premier is in some error in some

of the statements he has attributed to people and some of the statements and

questions that have been made inside this House. I would like to deal starting

with yesterday and the Premier's dramatic offer to resign if he was wrong over

charges that they had violated the SEC. If he had been in the House in the morning

when the matter was brought up for debate, where we had hoped to have a debate

that would ask for a judicial inquiry, no suggestion was made of it being in

violation of the SEC. In contrast, it was said: here is a situation; it has

been identified as some in which we have one financial statement as part of

a prospectus in New York, a prospectus which has been signed to accurately reflect

the credit of the Province of British Columbia as it pertains to the request

for money for Hydro, as it pertains to the province and other Crown corporations

which have the government's guarantee, and a different statement which was read

and brought in the Legislature in June, just a few weeks later.

[Mr. Liden in the chair.]

At no time, either in the motion I introduced in the

afternoon or in my statements, was it ever suggested that we

were in violation of the SEC. What I said relates to British

Columbia's financial reputation in the market, both with the

underwriters and the SEC, and the resultant publicity. The

information I received in phoning the underwriters and the SEC

from my office....

I would like to run through some of the conversations we

had, why we were concerned and why I think there should be an

independent judicial inquiry that doesn't have to wait on a

court case but would have authority to go into both the Finance

department and the B.C. Railway to ascertain when certain

events took place.

I'd also like to point out that in — the Premier brought it

up — an exchange across the House concerning what I had said

earlier in the day to reporters and anyone else...and there

was a privileged conversation with the Deputy Minister, out of

courtesy, which was never going to be a part of this debate

until the Premier introduced it — whether on his information I

had used his information to make a charge against the

Premier.

Here is what I said: "I have personal information that the

Minister of Finance of this province knew that a rewrite of the

financial statement was going on at the same time that he

authorized the statement to New York." That is the point I am

making.

The point is that this report, the direction for rewriting,

restating, depreciation in the B.C. Railway had to eventually

be directed by the president and directors of the railway. In

asking for a restatement of depreciation, they, in effect, were

saying, on the basis of their Minty report and the basis of a

recommendation, that it is their opinion that the type of

depreciation they wish to show on this railway will take items

out of capitalization and transfer them to expenses. This will

change the profit picture as it has been shown from 1957 on and

as it will show in the future in B.C. Rail. They were changing

the historical depreciation factor. That is what they were

doing.

They knew that whether they had the final figures or not,

indeed, the financial statements would show a different result

than the financial statements that were contained in the

prospectus that was filed in New York. They knew that when they

gave the instructions to the auditors; the Premier knew that

when he gave the instructions to the auditor. I'm glad

[ Page 3497 ]

he confirms that. He knew the statement would be different

and that it would change.

The Premier also controlled two events: the Premier

controlled when that prospectus would be issued, and the

Premier also controlled the date at which the amended restated

financial statements would be presented in this House — the

rewritten financial statements, rewritten because the directors

have decided to use another depreciation factor. Both of those

events could be timetabled and controlled by the Premier.

I am talking about an ethical and responsible position that

the Premier could have withheld. I state that he should have

withheld that prospectus from being presented in New York

knowing that he was going to propose and present to this

Legislature a different, amended and a rewritten financial

statement. He knew it. He had the final authority as the fiscal

agent for this province — the president of the Treasury, the

Premier and Minister of Finance — as to the timing of this

prospectus. He could have presented it in May; he could have

held it till June. If he'd held it till June and put in the new

financial statement, there would be no question, no question

that the Premier, who had control of these two events.... But

he didn't.

He has said in this House that he knew that there would be a

restatement of values, and that the financial statement in that

prospectus would not be the same as the financial statement

presented in this Legislature just a few weeks later. It was

his responsibility, I maintain, and his failure to meet that

responsibility to hold up the issuing of the prospectus.

When this was first brought to our attention, we phoned

Kuhn, Loeb and we phoned the SEC. When we phoned the SEC, we

talked to a Mr. William Malloy, Jr., of the Securities &

Exchange Commission, Washington, D.C. Mr. Malloy, Jr. is

responsible for 800 companies of which B.C. Hydro is one, which

have filed prospectuses with the Securities & Exchange

Commission. My office outlined to Mr. Malloy the discrepancy

between the statements on BCR in the May 22 prospectus and the

annual report of the BCR tabled June 6. He advised that he was

not aware of the matter, but that he would be most interested

to receive immediately the information available to us. On his

request, that information has been forwarded airmail, special

delivery.

He also stated that he was not aware of any effort to change

or amend the prospectus, but that he would have to check the

files to confirm the information. He also stated that he was

not aware of any communication from the B.C. government or from

B.C. Hydro, but would check the files. He also stated that he

is not aware of any investigation by the Securities &

Exchange Commission but that he will have to check the

files.

Interjection.

MR. BENNETT: He identified him as Mr. William Malloy, Jr.,

who is responsible for the 800 companies of which the Hydro is

one. He is responsible; he has the responsibility for

Hydro.

Interjection.

MR. BENNETT: He was the one after inquiries that they

referred us to in our call to the Securities & Exchange

Commission. I'll repeat again exactly what they said.

Mr. William Malloy, Jr. of the Securities & Exchange

Commission, Washington, D.C. Mr. Malloy Jr. is responsible for

the 800 companies of which B.C. Hydro is one, who have filed

prospectuses with the Securities & Exchange Commission.

Now these are the answers that Mr. Malloy gave to us, and he

is going to contact us further. We're concerned over the

promise. We also telephoned Kuhn, Loeb, who are the managers of

the consortium floating the $150 million Hydro loan, and we

spoke to a Mr. Peck. Mr. Peck could not tell us when his firm

was contacted by the provincial government, except to say that

it was after June 6. That's what Mr. Peck said. That was the

day the statements were tabled. He stated further that his

company was experiencing some embarrassment because they were

the last persons to find out about this matter. He, too, would

check further and report back. As a general comment he stated

that even if there is a discrepancy established between BCR

finances contained in the prospectus and those tabled in the

House, the question or materiality of the offering would not be

affected. But he was concerned....

Interjection.

MR. BENNETT: Yes, the materiality in terms of the offering

would not be affected. That's why at no time did we ever say

that you would be in contravention of the SEC. That is why we

called for an inquiry, because the answer we get is one of

ethical financial responsibility from both the SEC and from

Kuhn, Loeb, and from the others who say they weren't advised in

writing. No letter is there....

Interjection.

MR. BENNETT: At no time would we attempt to do the selective

reporting of the telephone calls or statements, and that is why

we give the full statement from Kuhn, Loeb. What he did say was

this: that his company was the last to know, that they were

embarrassed, and that indeed British Columbia's financial

reputation was undergoing some concern. But that's just his

statement. The SEC, as I read out,

[ Page 3498 ]

was a little stronger and we'll hear back from them, because

they're the ones that are concerned with the filing.

What we have, then, is this: concern from the SEC that they

hadn't been advised; a statement from Kuhn, Loeb that no

written statement of qualification was written to them; concern

that the issue would go ahead when the statement was being

restated and that, upon questioning, it could have and, in

their opinion, should have been held up.

This is a question for the Premier in assessing his

responsibility in presenting the financial statements and the

financial position of this province fairly in the international

money markets. It's not a question of procedure and the

procedure of filing a prospectus taking a long time; it's a

question, knowing that he had directed the financial statement

and the depreciation to restate the financial statement of BCR,

that he had the authority to hold up the prospectus. That has

been the whole question of whether he has acted well, whether

he's acted responsibly, whether he's acted ethically.

The whole reason for asking for a judicial inquiry was not

that we were willing to prejudge the ethics, but to arrive at a

solution and an answer and a timetable that would deal with

when the Premier knew that the figures would be substantially

changed on the amended rewritten statement that he filed in the

House, and why he didn't — if he knew that in advance of the

filing of this prospectus — withhold the prospectus to allow

the amended statement, the rewritten statement, to be a part of

that prospectus.

That's a very, very serious question. It's not a question of

legality; it's a question of what is right and how the province

should be presented in the major financial market, which the

Premier indicated we will be using more and more....

HON. MR. BARRETT: Did I tell Buttar & Chiene to fix the

books — cover losses?

MR. BENNETT: No, and I'll go further than that.

HON. MR. BARRETT: Did I tell Buttar & Chiene to fix the

books?

MR. BENNETT: Here we have a statement from Mr. Peck of Kuhn,

Loeb, who says that his company was experiencing embarrassment,

and they were the last persons to find out about the matter. We

have a more serious statement from the SEC who say they weren't

advised.

HON. MR. BARRETT: Did I tell Buttar & Chiene to fix the

books?

MR. BENNETT: Mr. Malloy, Jr. made some very clear statements as to what

he knew or what he didn't know as a member of the SEC responsible for this underwrite.

Now with regard to the depreciation factor, the fact of

restating depreciation, the question of Buttar & Chiene and

Mr. Walker, who has been well mentioned in this House, I think

it should be stated clearly that the year in question is the

year 1972.

The Premier, earlier today, until I questioned him, said

that he was handed a report in the fall of 1972. Then when it

was pointed out that the fiscal year hadn't even ended yet, he

amended that quickly to the spring of 1973. He wasn't in office

just a few months then; he'd been in office for a substantial

time and was the president of the railway.

Now what we're saying is this: there was no question, no

reason to question Buttar & Chiene until such a report as

Minty's had suggested that they were doing an incomplete audit.

The year that he was reprimanded for was the year 1972. It

didn't suggest any year previous. It suggested, specifically,

the year 1972 when the new president and board of directors

were there.

[Mr. G.H. Anderson in the chair.]

Also it is stated that the Province of British Columbia is

not bound to follow the procedures that Mr. Walker stated he

used in auditing the railway. It is discretionary upon the

management of that company to state and stay with a procedure

for depreciation in accounting. As long as it is consistent,

then that method of accounting can be accepted. It's like

depreciation in a business — say it's between Eaton's and

Woodward's, they may arrive at a different depreciation

formula, and both would argue that they're right. But to the

tax department, as long as they are consistent, eventually the

depreciation factor comes back into what would normally be

called profit.

What they're talking about here is a restatement of

depreciation that, in the opinion of the new directors of the

railway, would more adequately reflect the position they wish

to present — and it can be argued. It's argued by the former

people who built the railway, the former general manager, Joe

Broadbent.

Studies by the research and development department would

show that as a relationship to revenue on depreciation, they

ran on the same theory and to the same percentage as the CPR.

It was also stated in one of the reports which I read the other

night, and which were commissioned by the BCR, that they did in

fact claim depreciation in the same manner as the Canadian

Pacific Railway.

Now the B.C. Railway has a particular difference: it's a resource railway,

and as such was built on a different principle. It was built with a different

way of exploring into the north, which is building a minimal road that would

be upgraded when freight

[ Page

3499 ]

and the development of resources would require it, That way

the railway would deal with cash and flow, and the adjustments

that are always made to roadbeds and roadbeds are never

depreciated in railways could take place as it settled or was

rerouted as changes were made.

The railway was built and directed by Mr. Broadbent for many

years with great success. Now we have reason to be alarmed at

costs. Certainly we're alarmed at costs. All of us are alarmed

at losses in government corporations. All of us are alarmed

that whether you use the former method of depreciation or the

new, politically rewritten depreciation method. B.C. Railway

has had its most excessive operating losses — nothing to do

with capital construction — in the last two years under the

management and direction of the present president and the

present board of directors. The most dramatic losses and

profit-loss related to expenditures, related to revenue that

this railway, for the first time, is over 100 per cent of

revenue with its expenses in the year 1974. The first time. Now

even the CNR has only gone over the 100 per cent figure once.

Yet here we have losses accelerating in the last two years.

Certainly we've got to be concerned.

But the question isn't just one of accounting procedures and

one of depreciation; it's one of accountability and management.

And there are a lot of concerns we have about the management of

that railway.

Last winter when the Premier was in China there was a very

serious strike on the BCR and I commissioned three of the MLAs

that were concerned with the interior, that represented

communities, to do a survey of the line, to talk to the men in

the union, to talk to the communities involved and the resource

suppliers who normally shipped on the railway. They came back

with a report that was shocking. It was one that the railway

was riddled with strife, that there was a lack of morale, and

that the high morale that was mentioned in the reports that

were filed in this Legislature and read many times in debate no

longer was there on the B.C. Railway. Well, no wonder, with

this type of absentee management during the most crucial time

the railway has trouble. No wonder it has these extreme

operating losses.

The fact that we have the confusion of two financial reports, one of which

is part of a prospectus, is just indicative of the lack of control of what's

really going on on the railway. The fact that I still can't find out if the

report for 1973 was printed as it should have been by statute, and the fact

that this report should have been available for detailed discussion during the

estimates of the Premier and president of the railway, or whoever will take

responsibility in this Legislature and in fact is just brought in now, in a

hurry, for us to analyse the figures make it very difficult for the opposition

to assess both expenditures for wages, expenditures from supply and expenditures

as they should be scrutinized.

One of the key reports...and I just look in quickly, and

that's why on Monday and Tuesday and Wednesday when we're still

in this committee debate, and we have had the weekend to study

this report and these expenditures we would like to question

some of them. One of them that comes immediately to mind is one

payment here under "Schedule of Payments to Corporations and

Individuals for Supplies and Services Rendered" to a Robert E.

Swanson. I'd like to know if there's any conflict with a

director of the railway also selling a service to the railway

through his company, because he's already been paid as a

director under a separate classification. Is there a rule

prohibiting directors of the railway from selling services or

materials to the railway? Are the directors prohibited? I'd

like to just find out what this $766.80 to R.E. Swanson, under

"Schedule of Payments to Corporations and Individuals for

Supplies and Services Rendered" is about, and whether there is

such a policy — the policy of how the government and how the

directors, and what standards they work to on the railway. But

it's difficult to pick out an isolated instance like this when

we just get the report now.

Of more serious concern is whether that report was printed

as required within the six-month period after the end of the

financial year, after the financial statement. This is what was

done in 1972 and all the years previously. It gave the scrutiny

of the oppositions that they could get into the detailed

spending of the railway. There's many, many different things

concerning the operation and management of the railway — the

way they raise money, the fiscal responsibility, the controls,

the restatement of depreciation. Are directors allowed to sell

services to the railway? Are they allowed to deal with the

railway and do business with the railway? Is that a misprint?

Is it an error for the year 1973?

The Premier also stated that he would be filing the expenses

for 1974 as part of this report, but I can't see it in here. I

see just the figures for 1973, and I don't see the detailed

spending for 1974 as he suggested when he tabled the document.

It's just for 1973.

So we'd be interested in that, and we'd be interested if he

is going to table the expenditures for 1974 so we can do even

more work and research over the weekend in assessing the

payments and detailed costs of running the railway. That's a

lot of what will go to make up the losses. The depreciation

factor is not the major expense. The major expense appears to

be supply and wages, and the dramatic increase in costs of

operating the railway between 1973 and 1974 will probably prove

most enlightening as to

[ Page 3500 ]

where the money is going and what the cost of running this

railway is.

When we're talking about a bill that's going to authorize

extension of this railway into the north of this province,

certainly the detailed operating costs, forgetting the

political discussion that's taken place about bond issues and

about depreciation, are of very real importance to continuing

operating, whether it's with a political president, or whether

it's with, as the Premier stated and has been recommended by

one of the reports, that we remove the railway from political

management. We should be concerned in this Legislature with

these bills as to how this railway is operating, to what cost,

whether there is any effective cost control, and we should see

if such items as I mentioned are allowable or against the rules

laid down by the railway. The Premier said he was bringing in

the 1974 figures too; they certainly weren't in the report I

got, so I would like to see them. There is just the 1973

figures.

We're also concerned in this bill, when we're extending to

the north, about the loading factor on which this is

predicated, and that's on the minerals and the expansion of the

lumber industry is not taking place and the particular loading

factor that we talked about the other day and the fact that

some mines alone would establish 48 cars a day are not taking

place, whether the Premier can assure us that some of these

projects will be revived, whether the climate will be such that

we can expect a loading, because there is no sense for the

railway to continue to build if it is going to sit idle with no

freight. These are all factors that have to be discussed in a

bill asking for an increase in borrowing for both operating and

capital for the railway of such magnitude. The amount of the

borrowing, how the money will be borrowed, the interest rates —

all of this is very important and I would like some

answers.

HON. MR. BARRETT: Mr. Chairman, the Member stated that he

had been in touch with Mr. Peck and Kuhn, Loeb, and he said

that it did not break SEC rules, and even if it did, it was not

material.

HON. MR. BENNETT: No. It did not materially affect the

statement.

HON. MR. BARRETT: Did not materially affect the statement.

Did you get that down? Materiality in terms of offer would not

be affected. I never thought that I would have to sit here this

morning and hear him defend the government's position!

MR. BENNETT: I'm not defending it.

HON. MR. BARRETT: You are so, Mr. Member. You don't even know what you

are saying half the time. You had a phone call to Mr. Peck, and Peck tells you

that it would not materially affect the submission. That is the point that we

were told all along, and you are trying to tell us the same point as an attack

on us! Yesterday you were running around like the wild man you are, making outrageous

statements, making outrageous claims, attacking the government, and now you

are coming and backing up on thin ice. You have fallen in over your head! You

are gasping for air! You are floundering around like a limp seal!

Then he makes a long speech about: "You've got to examine

the north, the south, the east, and the west, the sky, and the

earth, and the waters." But he still does not address himself

to the statements that he made on November 18 on Buttar &

Chiene. I quote again: "They resigned because they weren't

prepared to change the auditing procedures because of the

mounting losses that the railway wished to hide this year." He

made a charge in this House that Buttar & Chiene had been

ordered by this government to hide losses. He has never proved

that statement! He has never submitted one shred of evidence!

And he doesn't even have the feeling in his gut that it is

necessary to apologize for such a wild charge!

Do you still hold the position, Mr. Member, that Buttar

& Chiene resigned because they weren't prepared to change

it? Do you still hold that position?

Interjection.

HON. MR. BARRETT: Do you still hold the position that Buttar

& Chiene were ordered by me to hide losses?

MR. BENNETT: You're the Premier of this province and you are

responsible for....

HON. MR. BARRETT: Ohhhhh! I am the Premier of the province

and I am responsible for my statements. You are Her Majesty's

Leader of the Loyal Opposition and you are responsible for your

statements. You have got your mouth open as wide as you can

because you don't want to hear these words. These words are

from your own mouth. You said: "They resigned because they

weren't prepared to change the auditing procedures because of

the mounting losses that the railway wished to hide this year."

That is what he said. He said this government and I as

president of the railroad had ordered Buttar & Chiene to

cook the books. That is what he said. It is on the record. He

doesn't have the decency to stand up and apologize for that

statement...

AN HON. MEMBER: Shame!

HON. MR. BARRETT: ...but he comes in this

[ Page 3501 ]

House and skates all over, trying to cover up his own

inadequacies. How many people come in this House, make

mistakes, and get up and say: "Look, I made a mistake — I'm

sorry"? A lot of people have. But you have not withdrawn this

statement, Mr. Member. It stands to condemn you and every

minute that goes by in which you don't correct it — and you

haven't corrected it since November 18 — means that you are

prepared to say anything that comes to your mind!

Further, in his statement that went on about his

interpretation of accounting of this and everything else, the

words were uttered from his mouth and they will show in Hansard

that the government — he just said it a few minutes ago — had

the audit politically rewritten. That is what he said. He is

accusing Peat, Marwick of politically rewriting the audited

statement.

MR. BENNETT: You gave the direction to rewrite it.

HON. MR. BARRETT: Mr. Chairman, after denying that they were

attacking Peat, Marwick, he now admits that that is what he

said, that it was politically rewritten. You are suggesting

that Peat, Marwick took political instruction from me and the

board of governors, just as you accused me of giving political

instruction to Buttar & Chiene.

MR. BENNETT: They take instruction from the president of the

railroad.

HON. MR. BARRETT: The words you used were "politically

rewritten." You are saying that Buttar & Chiene politically

rewrote the audits to suit political purposes. That is what you

said.

Interjections.

HON. MR. BARRETT: Mr. Member, don't try to fudge your words

within 15 minutes, weasel your words in 15 minutes. Peat,

Marwick — no, it is Buttar & Chiene first, then Peat,

Marwick. He said on November 18 that Buttar & Chiene

resigned because they weren't prepared to change the auditing

procedures because of the mounting losses the railroad would

have this year.

In effect, he was accusing me of ordering Buttar &

Chiene to cook the books. Then he wasn't satisfied with that.

Within 15 minutes he said in this House that the audits were

politically rewritten. I don't mind attacks on me, but after

the statements by the Member for West Vancouver–Howe Sound (Mr.

L.A. Williams) and after the statements by myself, he still

comes in this House and accuses, in effect, Peat, Marwick of

taking political instructions from this government — subject

for another editorial.

Interjections.

HON. MR. BARRETT: Subject for another editorial — that's two

they owe. Had it been a socialist Leader of the Opposition who

had said that, the wires would be burning right now — "Irresponsible Wildman At It Again." Wild Bill's done it twice

today. Do you want to bet whether it's going to show up in the

editorial pages? Hang on in the galleries; buy all the papers

you can. It ain't gonna show up.

Interjection.

HON. MR. BARRETT: Oh, it's doomed not to appear. (Laughter.)

How can you sit there and say these things over and over and

over again and then get up a few minutes later and say: "That's

not what I meant. What I meant was da-da-da-da-da-da-da." You

said that they were politically written. You're suggesting that

I'm misinterpreting your statements, like the Sun

misinterpreted your statements about Eric Kierans. Well, I know

how you feel about The Vancouver Sun , you know. But

"politically rewritten"?

Interjection.

HON. MR. BARRETT: Ohhh, don't you cry and whine over there.

If you're going to be Wild Bill, stick with that role. But

you're crying and whining and moaning over there instead of

having the decency to stand up in this place...

Interjection.

HON. MR. BARRETT: ...the decency to stand up in this House

and say: "I was wrong in making that charge against the

government. There is no evidence that Buttar & Chiene were

ordered to hide losses. I am wrong in saying that Peat, Marwick

was instructed politically and that the audit was politically

rewritten." Stand up and say that they were not politically

rewritten and that you deny your statements.

MR. BENNETT: The Premier gets hysterical and tries to put

his own

interpretation. The more excited he gets as his

government crumbles, his voice gets higher and higher. Let me

say once more that you are the president of the railway and you

are political. The people that are directors of that railway

that you have appointed that are Ministers are political. It

was your direction to the auditors — it was under your

instructions — that they change the accounting procedures. That

means they got political direction; it would be politically

rewritten. That's what I said and that's what I say now.

Accountants take

[ Page 3502 ]

instructions....

AN HON. MEMBER: What about Buttar & Chiene?

MR. BENNETT: I am not attacking Peat, Marwick.

SOME HON. MEMBERS: Oh, oh!

Interjections.

MR. CHAIRMAN: Order, please.

MR. BENNETT: The Premier is....

HON. MR. BARRETT: He's not attacking Peat, Marwick!

MR. BENNETT: The Premier of the province, in an attempt to

skirt all around and cover up the fumble of his Economic

Development Minister (Hon. Mr. Lauk) with his intemperate

statements, will try to place any

interpretation on any

statement in this debate he wants. But it still comes down to

this: the president of the railway and the directors who are

cabinet Ministers are political. It was their decision as

directors, because the directors are the ones who might

authorize and ask for and direct any accounting change.

The procedure hasn't changed since 1957 or whatever the date

was — 1956 or 1957. It is a major change to restate

depreciation.

HON. MR. BARRETT: Because they found out it was false.

MR. BENNETT: The Premier says that the depreciation was

false. That's exactly where the Premier has made a

mis-statement again in this House. The Premier has made a

mis-statement in this House by saying that the depreciation was

false.

AN HON. MEMBER: No, he said the statement of the auditors

was false.

MR. BENNETT: He has said that the.... No, he said the

depreciation was false. He said the depreciation was false, and

that is not correct.

What was false in the charges in 1972 against Mr. Walker was

that he did not do a thorough and comprehensive audit, as he

signed on the statement. At no time was there any illegality

ever suggested there or in reports that the manner in taking

depreciation was illegal or wrong. It's a matter for the

management of the day in the procedure that is set up to stay

consistently with the same depreciation factor or accounting

procedures, and they did.

Whether Mr. Walker in 1972 did a thorough enough audit has

nothing to do.... I'm shocked that the Premier said that that

statement was made that the depreciation was wrong.

HON. MR. BARRETT: Ohhhhhh!

MR. BENNETT: Let the record show that the Premier has made a

statement that is not correct.

HON. MR. BARRETT: Did you say that I ordered Buttar &

Chiene to hide losses?

MR. BENNETT: The Premier has made a statement that is not

correct.

[Mr. Dent in the chair.]

SOME HON. MEMBERS: Oh, oh!

MR. BENNETT: Depreciation is a matter of setting a formula

for any business, whether it's a railway or anything else.

Depreciation and accounting principles that are legal and

acceptable are always open to

interpretation and change. But

when he said that the depreciation was wrong, he is making a

charge that cannot be substantiated in those reports.

He wishes to show items of expenditure that were taken as

capitalization — because of the history of the way this

resource railroad was developed and to the type of standards it

was constructed — on a ferry of revenue to capital expenditure.

Don't let the public be fooled when he makes that inaccurate

statement, that false statement because he's implying

dishonesty, and that's not true. It goes with the irresponsible

statements he made about chicanery and everything else. That

statement and the depreciation factors, as being in the same

accounting practices for many years on that railway, because he

wishes to change them, do not say that they were crooked or

false, because that's not true.

It's a matter of accounting opinion and procedure, and

because he wishes to show in expenses items that were,

preliminary to that, shown as capital costs because of the

accounting procedure set up and because this railway was

unique. Don't let the public be fooled because that's the type

of impression he tried to leave when he presented this

statement to the Legislature a week ago.

You know, he would have them believe there were criminal

charges. In fact, I can remember one time that one of the

Ministers said something about fraud. Somebody said that, yet

it wasn't pointed out. What they want to say is because of a

recommendation that they want, and which they re-wrote in their

way, they want the railway to show as expense some of the items

that before then were shown as capital costs. They want to

change the depreciation factor, the

[ Page 3503 ]

amount of depreciation, and rather than the 10 per cent

figure, 10 per cent formula that was used and was in line with

the ratio to revenue that is used by the CPR and was used by

the B.C. Railway, they wish to restate the depreciation in a

different way.

Interjection.

MR. BENNETT: And they've made it retroactive; they've

rewritten the financial history. Be that as it may, but don't

ever try and present to the public of this province that there

was fraud. Don't ever try to say, without proof, that there was

something illegal. Don't leave that impression. That's

completely irresponsible.

That's like allowing the financial statement to go forward

as part of the prospectus when you know you're amending it, and

you have the power to hold it up for another month so it will

not be in conflict with the figures you're presenting at home.

One set of figures in New York to get money; another set of

figures in B.C. to get votes for the NDP.

But don't, don't, don't try and leave the sort of impression

that there was fraud. Don't try and make that type of

allegation, or leave that impression, in the way you choose to

play with words. Don't continue in the way you choose to play

with words. Don't continue to try and put words and impressions

and your

interpretation on other statements because, when I say

that the procedure was politically rewritten, it was because

the direction came from the political officers of that railway

who are the political people in this House, people who twist

and turn and put their own

interpretation on every event for

political benefit, or to try to achieve some political

benefit.

I hope the Premier.... It says right in the financial

statement: "Management has concluded...." It doesn't say the

auditors concluded, it says that management has concluded that

the financial statement...and it goes on to talk about the

change as a management decision. The management is Dave

Barrett, Premier, president of the railway. The management who

gave that direction was the Minister of Labour (Hon. Mr. King)

who was relieved of his duties as a director because,

apparently, during the strike last winter, just before

Christmas when the railway was in dire straits, and the Premier

and president of the railway was holidaying somewhere, he as

Minister of Labour, and as a director, had a very difficult

time figuring which hat he had to wear in resolving that

dispute.

Interjections.

MR. BENNETT: We've got to be concerned with the types of attitude, and

that the Premier doesn't continue, as he has in the past, to try to put words

in people's mouths.

Here we have management-directed change: management directed

the accounting procedure change; management directed the

restatement of profit and loss; management directed that we

would effect the depreciation formula. Because they did this,

the president of the railway, the Premier of the province, the

Finance Minister of B.C., knew when he authorized that

prospectus in New York — and it is he who has the power to

authorize or withdraw — he knew that statement contained in

that prospectus would be in variance with the statement that he

would present in this House in June.

He had an obligation to withhold that prospectus until the

new financial statement could be incorporated in it as a true

reflection of his opinion of the new directors of the railway,

of what the statements and the financial history of the BCR.... They have chosen to rewrite it; they have chosen to

restate it. They should have chosen to wait one month more on

that prospectus to let New York know what they thought of the

railway, and what they thought its financial position was.

There's only one person who is accountable and responsible

for the simultaneous presentation of these two documents that

are given — that is, the president of the railway, the Premier

and Minister of Finance, who happen to be the same

gentleman.

It is true that in New York the underwriter and member of

that firm was embarrassed. The SEC did not know. There was no

written document they knew of that suggested that the statement

was being rewritten, not only for this year but for past years.

There was no written statement that went along with that

prospectus to the SEC, and that is why the SEC asked us to send

a copy.

I would have been remiss if I hadn't read all of the

statement that was given to us about the material change, We're talking about the responsibility of a Premier who

should have withheld the issuance of that prospectus, knowing

the statement he was going to present to the Legislature. Yet

he didn't do it, and we don't know why. There are a hundred

different reasons why he might have done it, but we don't know

why.

Was this another one of his honest mistakes? Was it a

mistake? That's the question we have to ask in this House. The

Premier still hasn't told me. I hope when he gets up he will be

able to tell me again whether the financial statements were,

under the Acts of this Legislature, presented and printed

within the six-month period after the end of the fiscal year

1973. Will he be able to tell me, as he suggested when he

tabled this document and sent it over, whether we will get the

list of 1974 expenditures? They are not in here — just the 1973

detailed expenditures. This weekend a lot of us would like to

study it, so that

[ Page 3504 ]

when we take our place in this debate again in committee, we

will be able to ask some very pointed questions about

individual expenses that affect the high operating costs of

this railway, an operating cost that has gone out of

relationship to the revenues it achieved in the years 1974 and

1973. The fact that operating is higher now than revenue is a

very serious consideration and consequence to the future of the

BCR.

Now all railways have experienced some difficulty in North

America. But, as I say, only one railway that I can find has

ever gone over the 100 per cent operating over expenditures in

recent years. That was one year with the CNR when they went to

103 per cent. But no matter what financial accounting procedure

you use — the new one the president and directors have had

brought in for the railway or the old one that was there for

many years — we are still in excess of expenditures over

revenue. And that gives us concern for the operating costs of

this railway in the future.

This Premier, who is presenting this bill, is the president of the

railway, and we would like to know about the operating costs. We would

also like to know about such items as what the Premier as president of

the railway has laid down as a condition of directors — whether the

directors, at the time of being directors of the railway, can do

business with the railway both corporately or individually and make

charges to the railway while they are a director.

I would like to have some comment on that.

HON. MR. BARRETT: Mr. Speaker, we've had a 10-minute

explanation of what he meant when he said "politically

rewritten."

Interjection.

HON. MR. BARRETT: Oh, 25 minutes? I listened very closely.

Let us review his

interpretation of what he meant by

"politically rewritten."

He said he was not attacking Peat, Marwick. Let us accept

that position. What he was saying is that the president of the

railroad, the Minister of Finance and Premier, ordered the

auditors to behave in a certain way. Therefore it was

politically rewritten.

I'm not a lawyer, but I think if we follow through logically

what he says on the basis of statement of fact, we are going to

come to some interesting conclusions. He said "politically

rewritten" means that the board of directors, the president,

the Minister of Finance and the Premier politically ordered the

auditors to do a certain thing — although he is not attacking

Peat, Marwick. I must put this caveat...that's a lawyer's

word.

Does that mean to say that in his opinion auditing firms will do anything they

are told? Or do they have no professional responsibilities at all? I leave that

question for you to answer.

Let us assume that his thesis is correct, that the Premier,

the Minister of Finance, the president of the railroad ordered

the accountants to politically rewrite the audited statement.

What he forgets is that there is someone else who was the

Premier, the Minister of Finance and the president of the

railroad other than myself, and that someone else in that

troika in one person — that's like a three-cornered hat — was

none other than W.A.C. Bennett. Evidence has been presented to

this House that Buttar & Chiene was making false statements

and signing their name to their false statements, and instead

of Buttar & Chiene having been criticized by the chartered

institutions, W.A.C. Bennett should be hauled into court on his

definition of political interference with the railroad.

I'm not a lawyer, but his thesis is...

MR. BENNETT: Thank goodness for justice.

HON. MR. BARRETT: ...that the president, the Minister of

Finance and the Premier politically motivated the audit.

MR. BENNETT: No. Changed the accounting procedure.

HON. MR. BARRETT: Changed the accounting procedure. Yes,

yes, yes. Qualify it all you want. You're so far out in cold

water now all we get is "Blub, blub, blub." What you're saying

is that in the one case in which it has been proven that the

auditor made false statement, the Board of Transport

Commissioners' regulation was not followed. In that one case,

who was the Premier, the Minister of Finance and the president

of the railroad? W.A.C. Bennett. So by his definition he

condemns W.A.C. Bennett as cooking the books and ordering

Buttar & Chiene to cook the books.

Now who is going to tell daddy about this? Who is going to

phone him up and say: "Your kid just blew it in the House and

is now blaming you for Buttar & Chiene's mistakes"? It has

been a bad day. It has been a bad day. I have never said that

daddy cooked the books — the kid did. Wild Bill blew it again,

all in an attempt to avoid coming up front and saying: "No, I

do not believe that any auditing firm would deliberately take

orders to politically rewrite books."

MR. CHAIRMAN: Order, please. Before the Hon. Premier

continues, I would ask him to address Hon. Members by their

title rather than nicknames and so on.

HON. MR. BARRETT: Yes, sir.

HON. G.R. LEA (Minister of Highways): Who were you referring

to?

[ Page 3505 ]

HON. MR. BARRETT: Mr. Chairman, I was referring to the

official Leader of the Opposition. There may be a change. The

leader of the official opposition. The official leader. When

those three independent hatchet men get through with him, he'll

wonder what hit him.

HON. MR. LEA: David can testify to that.

HON. MR. BARRETT: Yes, look what they did to young David. It

took three of them to become Goliath and he got them all with

one stone. (Laughter.) I'll loan you another one.

He said that the report was politically rewritten. He is

saying that his father, the former Premier, politically

instructed Buttar & Chiene, and he is saying that I did

that to Peat, Marwick. Now I don't mind being accused, but he

can't prove that. What he is really saying is that a firm like

Peat, Marwick