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)

TUESDAY, JUNE 17,1975

Night Sitting

[ Page

3631 ]

CONTENTS

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

27).

Committee stage.

section 1. Mr. Phillips — 3631

TUESDAY, JUNE 17, 1975

The House met at 8:30 p.m.

Orders of the day.

HON. E.E. DAILLY (Minister of Education): I ask leave of the

House to proceed with public bills and orders.

Leave granted.

HON. MRS. DAILLY: Mr. Speaker, committee on Bill 27.

BRITISH COLUMBIA RAILWAY COMPANY

CONSTRUCTION LOAN AMENDMENT ACT, 1975

(continued)

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

chair.

MR. D.M. PHILLIPS (South Peace River): I would like to ask

the Minister of Labour (Hon. Mr. King), who is trying to pilot

this third reading of this $200 million bill through the House,

what provisions there are in this borrowing to build the

railroad to the Sukunka coal field. Is there anything in the

projection if Brasscan decide to go ahead with their options,

and Brameda? Is there any money in this bill available to build

the railroad down to get this coal out and to get it to the

ports?

I would like to ask the Minister, Mr. Chairman, what port he

intends to take the coal to. Is it going to go to Squamish? I'd

like to know what the government has done to develop the port

of Prince Rupert, if this is where the coal is going to go, and

where in this regard we're going to go.

HON. W.S. KING (Minister of Labour): Mr. Chairman, the

matter of possible future development of the railway is

something that would be dependent on day-to-day decisions of

the management and the board. I have no information about

possibilities in regard to development of the coal deposit

referred to.

While I am on my feet, Mr. Chairman, I would like to jog the

House's memory regarding some statements that the Member for

South Peace River (Mr. Phillips) made earlier this afternoon

when he was discussing one Robert E. Swanson and accusing that

gentleman of a conflict of interest in terms of his duties as a

board member of BCR and certain alleged recompense which he

received for doing work with the BCR.

Now it has been clearly established, as I revealed earlier, that Mr. Swanson

received only expenses incident to his travel as a director of the board. At

that time I outlined also that Mr. Swanson, at a date prior to his appointment

as a board member, had formerly been the chief engineer for the provincial Department

of Commercial Transport under the previous administration, and during his tenure

in that position had, in fact, received payments from the railway over a six-year

period in varying amounts. I found that to be a serious type of conflict due

to the fact that he, in effect, was the regulatory authority over the operation

of the railway and at the same time was drawing pay from the railway that he

had the responsibility for inspecting and ensuring that the railway engineering

standards and so on were in compliance with the standards required under the

provincial Department of Transport.

At that time, Mr. Chairman, the Member for South Peace River

got up in his place and indicated to the House that Mr. Swanson

had been fired as soon as that information became apparent to

the former Minister of Commercial Transport.

Interjection.

HON. MR. KING: He said he was fired. He said he was

terminated. I find the Department of Commercial Transport

report under the signature of Mr. F.A. McLean, the professional

engineer and Deputy Minister of Commercial Transport for the

year ended December 31, 1971, and that report reads as

follows:

"I have the honour to submit the annual report of the

Department of Commercial Transport for the year ended December

31, 1971. Early in the year both the Deputy Minister, Mr. A.J.

Bowering, P. Eng., and the chief engineer, Mr. R.E. Swanson, P.

Eng., retired after a combined total of more than 66 years of

service to the Province of British Columbia. During the

subsequent period of adjustment a considerable load was placed

on various members of the staff, and their efforts during this

period are acknowledged."

It is very clear that Mr. Swanson retired in the normal

method as the chief engineer for the Department of Commercial

Transport, without censure or without any question being raised

as to a possible conflict of interest between the money he had

received from the railway and his duties as the chief

inspectional officer of BCR.

Now it is clear, Mr. Chairman, that the Member for South

Peace River has given erroneous information and left an

erroneous impression with the House.

AN HON. MEMBER: Character assassination.

HON. MR. KING: I really don't know what to expect from the

Member, Mr. Chairman. I would think that a Member of this

House. who was of good

[ Page 3632 ]

intent, would certainly want to clear up the kind of

impression he had left. I can only speculate on what the

conclusions of that group over there would be, had I provided

this kind of false information to the House. I would

undoubtedly be accused of lying and a variety of other

hysterical allegations which that group frequently levels. I

think it is important that the Members of this House understand

that the Social Credit party's concern with possible conflicts

of interest seems to be completely new-found. They are prepared

to stand in this House and assassinate by implication any

individual in this province who does work for the government

without respect to any evidence that politics are involved.

They are prepared to level charges in the most off-hand and the

most frivolous manner.

Yet, Mr. Chairman, when the facts are checked and the

evidence is in, it is clear that their own record was such that

perhaps they do have grounds for their wild suspicions of every

initiative this government takes. They can't seem to

acknowledge that it is possible for an administration to

approach the administration of Crown corporations on a

non-partisan and purely efficient and sound managerial

basis.

I think the Member should be prepared to stand in his place

and apologize to the House for a completely improper and false

impression that he left.

I believe that Hansard will show that he clearly and

unequivocally stated that this man was terminated summarily

when it was revealed that he had received recompense from the

railway for services rendered. That is completely untrue.

I pointed out, and will reiterate that if there are grounds

for suspicion, as there undoubtedly are from time to time, that

a top-ranking public servant or anyone else is in a

conflict-of-interest situation, in terms of their obligations

to the government and the position they hold, then there is a

responsible way to approach it. That responsible way is to,

first of all, elicit sound information as to what the facts

are, and to discuss those facts with the Minister responsible

so that a thorough investigation can be made before someone's

character and reputation is besmirched by innuendo that is

sometimes not supported by the facts. That is a pretty reckless

way to do business. I think the opposition owes it to the

public of British Columbia to be more responsible than

that.

Mr. Chairman, if all of the concerns that the opposition are

expressing are based on the same kind of faulty foundations,

then that is perhaps the kind of import that we should attach

to them.

The Member for Columbia River (Mr. Chabot) usually starts chirping away with

personal insults when they are caught out. That is just a measure, I suppose,

of the fact that they love to dish it out, but can't stand the heat at all when

they are caught out and exposed for the rather ineffective opposition that they

are.

MR. PHILLIPS: Mr. Chairman, we have listened to the

irresponsible statements of the Minister of Labour who is

probably the most irresponsible Minister of Labour this

province has ever had. As a director of the railway he was the

most incompetent director the railway has ever had. That is why

he was fired by the Premier.

Mr. Chairman, he is talking about letting people go in the

public service. I want to tell you that we don't fire people on

TV, as the present government does; we have a little more

regard for people who work for the public service. As a matter

of fact, when the previous administration was government, the

public service was not politicized; they were completely

independent. They had security of tenure. There was no

competition in the public service. They didn't have to worry

about opening their mouths and speaking against the

government.

SOME HON. MEMBERS: Oh, oh!

MR. PHILLIPS: They didn't have to worry about big Daddy Bear

coming along with a big club and firing them on TV. We had a

complete regard for the persons involved in the public service.

They respected the government, and the government respect them.

Mr. Chairman, this is now changed.

We have seen indiscriminate firings on TV — indiscriminate

firings by the Minister of Education (Hon. Mrs. Dailly), whom

we sometimes refer to as "the fire department." The disgraceful

way that the public service in British Columbia is being

treated today shows the complete disregard for it by this

socialist government that is supposed to be looking after the

little people of British Columbia.

We are not prepared to assassinate people the way the

Minister of Labour fired his Deputy Minister, with complete

character assassination. He fired him in a devious way. The

Minister of Economic Development (Hon. Mr. Lauk) fired his

Deputy in a devious way.

But, Mr. Chairman, when the Deputy Minister of Commercial

Transport was not given another tenure after he had retired,

there was no big to-do made about it because we respected the

Deputy Minister and the service he had given to the people of

British Columbia. It was unknown to the Minister of the day

that the Deputy was carrying on a business with the government.

As soon as this came to light, the Deputy Minister's tenure was

not carried on another three months. The great opposition of

the day, which had access to the public accounts and all the

records of the government, did not come up with anything. As

soon as the government of the day found it out, the Deputy

Minister was relieved of his duties.

But today, in the British Columbia Railway, all the

[ Page 3633 ]

supervisory staff are scared spitless.

AN HON. MEMBER: Hear, hear!

MR. PHILLIPS: They've got the fear of God in them for fear

of speaking out against that government and being fired by that

government, the same as the management that was replaced

because of a report by Mr. Swanson.

The public service in British Columbia today is completely

political. When that government came to power they brought in

political hacks...

AN HON. MEMBER: By the hundreds.

MR. PHILLIPS: ...by the hundreds, and put them in positions

of supervisory power over the Deputy Ministers who had carried

on for years and years in this province.

Mr. Chairman, I did not say that the Deputy Minister was

fired. I said that his services were terminated; he was no

longer required when it was found out that he was doing

business with the government. But, Mr. Chairman, that Minister

of Labour, who was so inappropriate as a director of the

British Columbia Railway, who proved yesterday to this

Legislature that he doesn't even know what depreciation is,

doesn't know any bookkeeping — and he has proved again today

his complete disregard for any of the principles of good

bookkeeping....

I asked him a simply question, and what did he do? He got up

and went on a tirade against the opposition. I asked him if

there was any forward planning in the British Columbia Railway

where we are asked to okay a $200 million loan to the British

Columbia Railway.

I asked him a simple question, a question that has been on

the minds at the British Columbia Railway for over two and a

half years, a question on the extension of the Sukunka coal

fields. He said that is due to the day-to-day decisions of the

management of the British Columbia Railway today because any

management that could lose $32 million of the taxpayers' money

in one year and suffer a cash loss of $46 million has not

earned my faith. I have no faith in them whatsoever but I will

ask the Minister again: is there any forward planning as to the

capital requirements of the British Columbia Railway, other

than one year ahead which is not enough?

If we are going to extend the railway into Dease Lake, we are going to have

to think more than one year ahead. Maybe that is the reason the Minister of

Labour was fired by the Premier as a director of the British Columbia Railway,

because he had no vision, no foresight and no aptitude for the job. I would

like to think that there are some people in management positions on the railway

who are better equipped to have some of that vision and courage that is needed

to carry on a resource railway. Certainly, they will get no

leadership from the Premier, no leadership from the Minister

Without (Hon. Mr. Nunweiler) and no leadership from the

Minister of Economic Development (Hon. Mr. Lauk) who is the new

vice-president of the railway. This is what is going to befall

the railway, Mr. Chairman.

What we need on the railway is a little of the courage and a

little of the vision that built these great railroads across

Canada, that united Canada — the same type of vision and

courage that built the railway into the north, that built it

from North Vancouver to Squamish, from Quesnel to Prince

George, on into Chetwynd and Fort St. John and Dawson Creek,

and on north into Fort Nelson. But all of that vision and

courage is lacking today. That is what concerns me today about

passing this legislation to loan the railway another $200

million when there is no forward-planning, no projection of

capital costs and no projection of load factor. The policies of

this government in resource development have completely killed

the potential of the Dease Lake extension.

HON. MR. COCKE: So vote against the bill.

MR. PHILLIPS: I won't vote against the bill because I want

to see the railroad continue, but I do want some questions

answered.

Maybe, Mr. Chairman, we can beat a little sense into this

government. Maybe there's still hope.

HON. E. HALL (Provincial Secretary): Hah!

MR. PHILLIPS: Well, the Minister of....

HON. MR. HALL: Provincial Secretary's the word you're

looking for.

MR. PHILLIPS: The Minister of the Provincial Secretary

laughs and scoffs when we talk about forest planning. It was he

who publicly had to reprimand the Minister of Transport and

Communications (Hon. Mr. Strachan) for signing a contract with

the tourist bureau to put brochures on the ferry. He had to

reprimand that Minister publicly and then had to cancel the

contract. Give a contract that's costing the taxpayers of

British Columbia thousands of dollars a year — that's our

Provincial Secretary. No forward planning.

Mr. Chairman, I'd like to ask the Minister in charge of

putting this bill through — the Minister of Labour (Hon. Mr.

King) — if he has consulted with the Minister of Mines (Hon.

Mr. Nimsick) or the Minister of Economic Development (Hon. Mr.

Lauk) about the possibility of extending the line which will go

down to the Sukunka coal fields on into the Denison Mines at

Quintette Mountain, which hopefully will come on stream in at

least two years. Has there been

[ Page 3634 ]

any forward projection of load factor or the cost of

extending that railway down into that area?

HON. MR. KING: Mr. Chairman, the Members across the way are

fun to deal with, you know. They make all kinds of charges and

then when they're pinned down and it's demonstrated quite

clearly that their allegations are without foundation, they

branch off in all directions with another scattergun attack,

including personal attacks against the individuals involved —

that I was fired from the railway and all these kinds of...well, I wouldn't call them cheap, but they're certainly

inexpensive charges.

I suppose the theory is that if you repeat them often enough

then people will believe them.

MR. G.S. WALLACE (Oak Bay): That's what Goebbels used to

say.

HON. MR. KING: But anyone of good faith who has some regard

for the facts would have the common decency to accept the facts

for what they are and not to continue to mouth otherwise. I

suppose it would be appropriate, in view of the Member's

obsession with the operating revenue position of the railway,

to go back once again and to lay out the facts as we found them

when we took over from the former administration in September,

HON. MR. HALL: Don't call them cheap, Bill. Look how much

it's cost the taxpayers.

HON. MR. KING: Yes, indeed. The cost is high.

We accepted at face value the reports of the BCR as we found

them at that time. But during debates in the House, I believe

it was the First Member for Vancouver–Point Grey (Mr. McGeer)

was raised a serious question regarding the methods used of

reporting the deficit and profit picture of the British

Columbia Railway. The Premier assured that Member that in view

of his concern we would undertake an investigation of the

accounting methods and the financial control on the railway. As

a result of that investigation, which was undertaken by Mr.

John Minty, the comptroller-general of the province, certain

findings were noted, the most damning of which, I believe, was

the conclusion that the external auditors had not only been

unduly restricted in setting the terms of their audit

engagement, as appeared to be the case in the past, but there

had been undue restrictions placed upon the auditors by a

former board member, one Mr. Gunderson.

Mr. Minty reached very disturbing conclusions. That report of Mr. Minty was

tabled in this House and it led to a good deal of further speculation as to

the accuracy of annual reports and financial statements which had been filed

with this House over a period of years. It led to concern with respect to the

awarding of contracts for the extension of the railway on the Dease Lake line

and the Takla subdivision.

Subsequently, another more detailed investigation was

commissioned by Price Waterhouse. The Price Waterhouse report

revealed that the administration of the BCR was cumbersome,

inefficient and inadequate, when referring to financial

accounting and control practices. These were all matters for

grave concern as far as the new administration was

concerned.

It should be remembered that in one instance Price

Waterhouse noted that the cost of 1,000 freight cars bought in

1971 for $16.3 million was written off as a charge to equipment

rental over 15 years. They said: "In our view this is not in

keeping with generally accepted accounting practices." So we

had the Minty report by the comptroller-general. We had the

additional investigation by Price Waterhouse which came to some

of the conclusions referred to. Subsequent to that, the

existing firm of auditors of B.C. Rail resigned: the firm of

Buttar & Chiene.

At that time the Leader of the Opposition, in questioning

the president of the railway in this House, made some very,

very serious allegations. As I recall it he suggested that the

auditors had resigned because they had been subjected to undue

pressure by the government. I believe his exact words in

Hansard on November 18, 1974, were: "They resigned because they

were not prepared to change the auditing procedures because of

the mounting losses that the railway wished to hide this year."

That was a serious allegation that the Leader of the Opposition

made.

HON. W.L. HARTLEY (Minister of Public Works): What year was

that?

HON. MR. KING: That was on November 18, 1974. Subsequent to

that we found that the individual who was the central figure in

the firm of Buttar & Chiene was called before a panel of

the professional institute of chartered accountants, before an

inquiry board panel. A complaint had been filed regarding his

conduct in terms of auditing the British Columbia Railway

books. I'll read for the edification and for the refreshing of

memories in this House the findings that that panel came to. I

quote:

"And the panel having found unanimously that the said member,

Douglas McKenzie Walker, violated rule 21 of the code of ethics and rules of

professional conduct as alleged in paragraphs 1 and 2 of the statement of complaint

by reporting on and associating himself for and on behalf of the firm of Buttar

& Chiene with the financial statements and auditors' report thereon for the British Columbia Railway Co. for the year ended

[ Page 3635 ]

December 31, 1972, when he had failed to obtain sufficient information

to warrant the expression of the unqualified opinion expressed thereon and therein

and that the said member has been incompetent in professional matters within

the meaning of bylaw 67(a)(3) in force at all material times, and also of bylaw

68(a)(3) in force at the present time, as alleged in paragraph 3 of the statement

of complaint."

On December 20, 1974, the inquiry panel ordered by a vote of

four to one that Mr. Walker be suspended from the accountants

institute until December 17, 1975. That was a censure.

MR. WALLACE: I think we heard all this before.

HON. MR. KING: Yes, I think we have, but apparently the

official opposition is not prepared to recognize the matters

which created the whole debate in terms of the accounting

practices and the financial control on the railway. They keep

introducing, Mr. Chairman, matters which appear to be desperate

measures to divert attention from the facts as they were placed

before this House. And if I must keep reminding them of the

documented facts that are irrefutable and that have been

presented to this House, then so be it. If their attempts to

obstruct the extension of additional borrowing power to the

railway are going to be so transparent, then we must reveal

them for what they are: simply attempts to interfere with the

ability of the railway to serve the whole north-central area of

British Columbia.

So that's the background against which this government

engaged in an assessment of the financial controls on the

railway, against the accounting procedures that were revealed

to be less than factual. They were the facts against which we

had to compare the stated profit structure of the railway in

1972 when a profit of $992,000 was indicated for the year ended

1972. Peat, Marwick and Co., the auditors that were

subsequently retained by the railway to not only clean up the

accounting procedures but to reassess the records that had been

placed before this House and before the public, revealed that

in fact there was not a profit position in 1972 but a serious

loss amounting to quite number of millions of dollars. I

believe it was in the area of $8 million. Now they are facts

that are irrefutable.

So it's not good enough for the Member for South Peace River

to get up tonight in the House and suggest that the working

capital position of the railway has declined seriously in the

interim period. There is simply an honest method of accounting

now which lays it on the table.

The point is that they used any method to hide the loss position of the railway

in the past. It is now in conformity with not only proper accounting systems

but also with the Canadian Transport Commission accounting system — which was

alleged by the railway in all previous years.

These are the facts of the case. The opposition can rant and

rave as much as they wish but these are facts that are

documented by the most reputable firm of accountants in the

Province of British Columbia. They are facts that are on the

record with this House. It is futile for the opposition to try

to side-step those facts by simply filibustering this debate.

They can wiggle on the hook all they wish, but it becomes

pretty patently obvious what their game is. That is simply to

delay the passage and extension of borrowing power to the

railway at any expense.

The facts are all there and have been placed on the table

days ago. Simply refusing to accept the facts as they are does

not alter them one bit.

Mr. Chairman, I can only suggest that the official

opposition is not prepared to accept the facts even when they

are documented in an irrefutable way before this House.

MR. PHILLIPS: I just want to say, for the purpose of those

in the gallery because I certainly don't have to say it for

those in the House or in the press gallery, that if I seemed

disrespectful when the Minister of Labour (Hon. Mr. King) was

talking it is because I have heard that speech 14 times. Every

time I asked a question this afternoon about the future of the

railway, I got the same speech. I know it off by heart. The

Minister of Labour has been asked to pilot this bill through

the House while the Premier is off, at the taxpayers' expense,

on a little sojourn to New York and London. They asked the

Minister of Labour, who he fired as a director of the railway,

to pilot this bill through the House. The only defence that

Minister has is to get up and make the same old speech 14 times

over. After every question that I have asked him, I have heard

that same speech.

Also, for the benefit of those who did not listen to the

debate this afternoon, the Minister is trying to say that we

are holding up the passage of this bill and that people on the

railway can't be paid. As I said this afternoon, they should

have the Minister of Lands, Forests and Water Resources (Hon.

R.A. Williams) put this bill through because he spends public

money without passing any bills through this Legislature. He

has bought the Princess Marguerite at taxpayers' expense.

MR. CHAIRMAN: Order. That has nothing to do with

section

MR. PHILLIPS: Well, neither does what he said.

MR. CHAIRMAN: I think it was to do with the railroad.

MR. PHILLIPS: Anyway, those of you in the

[ Page 3636 ]

gallery can see that as soon as we touch a touchy point with

the government, the Chairman shuts us up. Anyway, the Minister

of Lands, Forests and Water Resources goes off and spends

public money without any legislation whatsoever. So I am not

really too concerned about the people of the railway getting

paid. If they had the Minister of Lands, Forests and Water

Resources, who is the most powerful Minister in the cabinet and

in British Columbia, he would spend taxpayers' money without

any legislation. So I am not really too concerned about the

Minister of Labour and his accusation that we are holding up

this bill.

The Minister of Labour referred to the Price Waterhouse

report. I would like to say again that as soon as the Premier

and Minister of Finance (Hon. Mr. Barrett) became president of

the railway, he commissioned three reports on the railway. One

had to do with a review of financial reporting and control

practices of the British Columbia Railway by a very reputable

accounting firm named Price Waterhouse & Co. He

commissioned a report on the engineering practices of the

railway by Swan Wooster & Co., which is a very well-known

engineering firm in British Columbia. And he commissioned a

report on the management and organization of the British

Columbia Railway by Mr. Cliff Sawyer, a very well-known adviser

to business in British Columbia and very well respected by the

government as well as the opposition.

I want to tell you that all of these three reports

practically gave the British Columbia Railway a clean bill of

health. In none of these reports is reference made to any

cheating, any method of trying to cook the books, any method of

trying to be deceitful to the people. But the Premier and the

other directors, of which the Minister of Labour was one at

that time, were not satisfied with this report. They knew that

in the year 1973 the railway was going to have a great loss

because of political interference in the management of the

railway.

They also foresaw that in 1974 they were going to have a

loss which would be greater than the previous 15 years of the

operation of the railway, and they wanted in some way to think

up a scandal to cover the losses on this railway. They wanted

something to cover the fact that the Dease Lake extension was

going to be a complete dud because the resource policies of

that government had killed any load factor on the railway. So

in an endeavour to cover these losses, in an endeavour to cover

up their incompetence, in an endeavour to cover up the fact

that the top five people in management of the railway had

either quit in disgust or been fired because of political

interference in the railway, they wanted to dig up something

from the bottom of the barrel. So they commissioned other

reports and they got political reports.

I would like to read, as the Minister of Labour did, from

the Price Waterhouse report. The Price Waterhouse report is

dated August 31, 1973, and it states that they were not impeded

in any of their investigations. They had a full, open book to

do any investigation into the accounts practices of the British

Columbia Railway. It says, and I quote from the report: "Our

study was carried out in accordance with your instructions" —

and they are referring to the Minister of Finance's

instructions — "to review certain of the matters raised in the

special report of the comptroller-general dated March 29,

1973." The report of the comptroller-general, to which the

Minister referred and to which Price Waterhouse referred is the

comptroller-general of the Province of British Columbia.

"Your terms of reference excluded any requirement for us to

examine the financing of the railway or its physical operation" — and, as I said, there were other reports being conducted at

the same time by other people — "in this aspect and it was

understood that other consultants had been retained to examine

overall corporate planning and organization and construction,

estimating, bidding and costing procedures. In all other

respects there were no restrictions placed on our review and we

were requested to exercise our own judgment in determining its

scope."

Now this is the report that was sent to Mr. G.S. Bryson, the

Deputy Minister of Finance, August 31, 1973.

"We advised you that we did not consider it appropriate to

undertake a detailed financial audit of the railway accounts

but, in light of all the circumstances, a management-oriented

review designed to produce constructive recommendations for

improvement would be desirable. To this end it was agreed with

you that the main emphasis of our study would be placed on such

matters as management reporting, financial planning, budget

control, accounting practices and systems..."

Of course, this is what the Minister of Labour was referring to a short time

ago — accounting practices and systems.

"...electronic data processing,

internal auditing and other accounting practices and finance division organization

and so forth."

It goes on to say:

"We would also note that while the report of the

comptroller-general" — which the Minister of Labour referred to

a short moment ago — "raised a number of valid concerns about

the effectiveness of the railway's financial systems and

controls, in other instances our more detailed studies placed a

different perspective on the comments and criticisms that

were

[ Page 3637 ]

made."

Now I'm not going to say that Price Waterhouse differed with

the comptroller-general. I will leave you people to make your

own decision. But nowhere in this report is there one word

about cheating or hiding any of the financial facts or figures

of the British Columbia Railway which is alluded to by the

Minister of Labour and which the Premier of this province and

president of the railway, when he gave his sermon on the mount

a week ago last Friday, took an hour and a half to try and

scrape the bottom of the barrel to dig up a scandal on the

British Columbia Railway.

Now I just want to read you some of the report, some of the

recommendations with regard to management accounting, and I

want you to pay close attention, and I want you to be the judge

as to whether or not there has been any cheating, any methods

of deception on the part of the past management of the British

Columbia Railway.

"The accounting systems of the British Columbia Railway in the past have been directed primarily

towards the traditional role of reporting financial

transactions in a manner consistent" — and I want you to pay

specific attention to this — "with the requirements of the

uniform classification of accounts of the Board of Transport

Commissioners for Canada."

Now both the Minister of Finance and the Minister of Labour

would have you believe that the accounting on the British

Columbia Railway was not consistent with the Board o f

Transport Commissioners of Canada. But this is a report from

Price Waterhouse which says, and I quote again: "...with

the requirements of the uniform classification of accounts of

the Board of Transport Commissioners for Canada."

Now I ask you to believe...who? This is the Price

Waterhouse report which was commissioned by the Premier and the

president of the railway. They go on to say:

"While existing accounting and reporting practices may have been adequate to meet requirements of the

railway management in the past, with the anticipate; growth and

diversification of the railway there is now a clear-cut need

for change and improvement."

Certainly the British Columbia Railway has been a resource

railway, but with the anticipated growth.... And of course

this anticipated growth was certainly before the resource

policies of this province came into being, before this

government pushed the petroleum industry out of the province.

There was anticipated growth particularly in the north and

particularly on the Dease Lake extension, and that's why that

extension was going ahead.

Now I ask you to listen to me while I read some more recommendations from the

Price Waterhouse report, particularly with regard to capital expenditures. It

says: "Our principle conclusion, stated briefly, is that financial control and

reporting of capital expenditure in the British Columbia Railway is inadequate

and should be improved as soon as possible." It should be improved, but they

didn't say that there was any method of cheating or trying to cook the books

or political chicanery, as the Premier alluded to. What did they say? "This

is not meant to imply there has been an improper use of railway funds in the

past, rather it means that from a management control standpoint, present practices

are lacking in effectiveness," which we accept.

I ask you again: is there any allusion to cheating,

deception or trying to cook the books? None whatsoever. It's an

independent report that I'm quoting from — Price Waterhouse,

one of the well-known accountants in the Province of British

Columbia.

With regard to accounting practices, which the Minister of

Labour is trying to allude to and which he tries to cover up on

any questions I ask him about the future of the railway....

Depreciation. This is what the whole new financial statement

of the British Columbia Railway is based on — a new method of

depreciation. It says: "On January 1, 1956, the British

Columbia Railway adopted the uniform classification of accounts

prescribed by the Board of Transport Commissioners for Canada."

Yet that government would have everybody in the province

believe that the British Columbia Railway was not using

accounting practices adopted and recommended by the Board of

Transport Commissioners of Canada.

It goes on and says: "....commenced depreciation

accounting for capital assets with provision for $492,000 in

the year 1956." So you see, Mr. Chairman and ladies and

gentlemen, all of this scandal and this deception is nothing

but a phony smoke screen put up by the socialist government to

cover up the loss which the railway has had in 1973 and

With regard to depreciation, I'd like to read something more

from the Price Waterhouse report. It says: "We recommend that

the company determine and define the objectives that it wishes

to achieve through depreciation practices, following which,

comprehensive accounting policies should be developed which

would include

definitions of what assets should be capitalized

and the value placed on them."

Mr. Chairman, I'd like to reiterate that depreciation, so

far as income tax, is a decision of the company. When you're

doing your income tax as a private company, as long as you

don't change your method of depreciation over a period of

years, the income tax people will never bother you.

But depreciation is a policy of management. It was

[ Page 3638 ]

the socialist government that changed the policy of

depreciation in order that they could bring in more severe

losses over the previous years of operation of the railway so

that they could try and dig up a scandal, as it were, to try

and hide the fantastic losses that have been on the British

Columbia Railway since they took over. Since they took over

political interference in the management of the railway, the

railway has gone downhill.

This is the method, the devious method, that that government

has used to try to put a smoke screen over their incompetence

and their inability to manage that great railway that has

brought prosperity over years and years to British Columbia,

that great railway that could have brought prosperity to the

north and opened up the natural resources of this province.

Mr. Chairman, I had to go over this again because of the

speech just recently made by the Minister of Labour. For the

sake of those who haven't heard this debate before, I want to

point out one other fact. I am referring to the auditor's

report, the financial statement, of the British Columbia

Railway for the year ended December 31, 1974. Any of you who

are in business know that your real profit is based on your

actual cash flow.

Last year the working capital, the actual liquid cash, of

the British Columbia Railway decreased by $46,105,057 —

decreased in one year. The financial statement of the British

Columbia Railway, which was tabled by the Minister of Finance

and president of the railway, shows that the railway had a loss

last year of some $32 million. I want you people to know that

had we used the old accounting system, the accounting system

that has been used for years on the British Columbia Railway,

the railway last year would have lost not only $32 million, but

the railway would have lost close to $60 million. That is why,

Mr. Chairman, the accounting practices on the British Columbia

Railway have been changed — not to bring up losses in the past,

but to depreciate the loss on the British Columbia Railway

during the year 1974.

In the year 1973, just as comparison, the cash flow of the

British Columbia Railway increased by $7 million, and in the

year 1974 it decreased by $46 million. Mr. Chairman, you know

as well as I know that the management of the railway has been

completely intervened in by that socialist government. The top

five management people in the railway have been replaced by

political appointees or quit in disgust. The directors of the

railway have been political appointees.

HON. MR. COCKE: Name one!

SOME HON. MEMBERS: Who? Who?

MR. PHILLIPS: Mr. Chairman, the Minister of Health, who is also commonly known in this Legislature as

the "Minister of Defence," says: "Name one." I will ask

the people to be the judge. In two and a half years, the top

five management of that railway have either quit in disgust or

been fired or been asked to resign by Mr. Swanson, the new,

politically-oriented director of that railway. That is the

reason that the railway is losing money. Over the years, many

of those people grew up through the railway, particularly Mr.

Trask, who was the mucilage that held the morale of that

railway together. I ask you: were they politically oriented, or

did they just quit in disgust? You will have to be the judge.

The Premier and the Minister of Finance says: "Oh, no, never

have we entered into political appointments on the railway." Name one," he says, "name one."

I have to ask you Mr. Chairman: if those people just quit in

disgust, why are we losing millions and millions of dollars on

the railway when before we were actually making a profit? It

was the best-run railway in British Columbia, the railway that

brought 20 years of prosperity to this country, that opened up

the natural resources and now is losing millions of dollars. We

ask that Minister of Labour who was asked to pilot this bill

through the House. When we ask him a question, we get the same

old speech 14 times over about the politically oriented reports

that he brought in.

So I will have to ask the Minister one more question. When

this government came to power, we heard that great agreements

had been made with the CNR for northwest development, opening

up the Port of Prince Rupert: "Oh, when we are going to run our

natural resources out, and there is going to be a line from

Ashcroft over to Clinton, and there is going to be cooperation

with the CNR." And there were grandiose plans about the

northwest of the province. Oh, we heard it all from the

Minister of Lands, Forests and Water Resources (Hon. R.A.

Williams) and we heard it from the Premier and Minister of

Finance, who is on a world trip tonight at taxpayers' expense.

China, Japan — you name it, he's been there. What happened to

all of those agreements with the Canadian National Railway?

What happened with the agreement to get the line from Ashcroft

over to Clinton? What happened to the agreement to extend the

CNR north of Terrace and up to meet with the Dease Lake

extension?

Where are all those grandiose plans that we heard about in this Legislature?

Where did they go? Are they continuing? Is it part of this $200 million that

the taxpayers of British Columbia are being asked to underwrite tonight going

to cover the costs of those extensions? Is part of it to cover the agreement

with the CNR? These are the questions that we want answered, Mr. Chairman, and

we don't want another tirade from that Minister of Labour about all of those

politically oriented reports and all those scandals he

[ Page 3639 ]

tried to bring up! We

want some definite answers before we pass this legislation this evening.

MR. D.E. LEWIS (Shuswap): Hallelujah!

HON. MR. KING: Mr. Chairman, I will certainly try not to go

into a tirade. I think the House has had quite enough tirades

for one evening.

The question of the Price Waterhouse report, as opposed to

the Peat, Marwick report, should be stressed and should be laid

to rest once and for all in this House. I indicated earlier,

and it has been indicated many times, that first of all, the

Minty report was commissioned by the comptroller-general in

response to questioning raised by opposition Members in this

House. That revealed ground for concern by the new board of

directors. It was a rather superficial report, but it was

enough to determine that procedures were not as they should

be.

Accordingly, the Price Waterhouse firm was engaged to go

into a more detailed report, but not a full audit, by any

means. There were enough disconcerting findings in the Price

Waterhouse report that it led to further concern on the part of

the board of directors of the railway. In the interim period,

of course, the firm of auditors of Buttar & Chiene, who had

been the auditors and accountants for the railway for quite a

period of years, resigned. I have already outlined the

controversy that surrounded the resignation of that firm and

the subsequent action taken against the principal of that firm

by his own professional association.

A full audit of the railway was conducted by the new

auditors, the firm of Peat, Marwick, Mitchell & Co.,

chartered accountants who are a world-famous firm, a perfectly

reputable firm, both in this province and elsewhere.

Let me repeat what the auditor's report said:

"To the Lieutenant-Governor-in-Council, Province of British

Columbia, dated June 3, 1975.

"We have examined the balance sheet of the British Columbia

Railway Company as of December 1, 1974, on the statements of

income and deficit and changes in financial position for the

year then ended. Our examination included a general review of

the accounting procedures and such tests of accounting records

and other supporting evidence as we considered necessary in the

circumstances.

"As described in note 2 of the notes to the financial statements,

a review of the past accounting policies of the company has been carried out.

It was concluded that the financial statements as of December 31, 1973, on an

overall basis, did not present fairly the cumulative operating results of the

railway to that date, and that certain of the past policies did not conform

with the accounting regulations of the Canadian Transport Commission.

"In our opinion these financial statements present fairly

the financial position of the company at December 31, 1974, and

the results of its operations and the changes in its financial

position for the year then ended in accordance with the

generally accepted accounting principles, including certain

changes in accounting policies which were instituted in 1974 as

a result of the conclusions, with which we agree, described in

the preceding paragraph and applied retroactively to 1973 and

prior periods, and which, after giving such retroactive effect,

have been applied on a basis consistent with that of the

preceding year.

"Signed Peat, Marwick, Mitchell & Co., Chartered

Accountants."

The Member for South Peace River (Mr. Phillips) got up and

said that there was no suggestion that the previous audit had

not been in compliance with the Canadian Transport Commission

regulations. But the annual audit by one of the most reputable

firms in North America found that was the truth, that, in fact,

the audit had not been in compliance, that financial statements

had been filed with this House showing an improper picture of

the financial state of the railway. Mr. Chairman, it is like

arguing with quicksilver to argue with the Member for South

Peace River. You pin down one erroneous conclusion that he has

drawn and he simply oozes out in all directions attacking

individuals and simply ignoring the facts as they are. I find

it futile to engage in any further dialogue with the Member.

The facts are on the table, and they are completely supported

with reports of professional groups — not by political

assessments. And that is as it should be.

I would just comment on one other matter that relates to the

position of the railway in terms of its financial position. The

Member makes much of the fact that there was a decrease in

working capital of $46,105,057 in 1974. A perusal of the

financial statement clearly indicates that that relates mainly

to the long-term debt of the railway and the differences in

government grants that were made between 1973 and 1974.

There was a long-term debt in 1974 of $55,681,000. In 1973

it was $84,597,000. But there was a $25 million grant made by

the government in 1973 which increased the debt to

$109,597,000. Therein, basically, lies the difference. The

difference is basically related to the amounts that were made

available by the government in terms of grants, and hence

increased the long-term debt of the railway. That is accounted

for in the Peat, Marwick reports. The page is not listed, but I

believe it follows the

[ Page 3640 ]

statement of income and deficit of the railway in the Peat

Marwick report. That information is all contained in the audit.

It is all available to the Members and they should be able to

draw their own conclusions from it.

HON. MR. HALL: Mr. Chairman, I think that....

AN HON. MEMBER: Don't you usually shift from side to

side?

HON. MR. HALL: There are 38 Members on this side, Mr.

Member. I think we are entitled to speak 2-to-1 to you fellows

any day of the week.

MR. PHILLIPS: Yes, the crushing majority.

MR. CHAIRMAN: Order.

HON. MR. HALL: Mr. Chairman, this debate on Bill 27 has been

going on for over a week now. I think the gallery and the

Members are entitled to some sort of

summary, as well as some

observations, from other Members, other than the particularly

dramatic people who are taking

part in the debate to date.

Mr. Chairman, I want to tell you that there are about five

basic questions we should be asking ourselves as we enter this

debate and as we look upon this chamber, this Legislature and

Bill 27 over the last seven days. Those five questions I will

deal with, Mr. Chairman.

The first question is: what does

section 1 purport to do?

The second question is: what has been the role of this

Legislature, the government Members and the opposition Members,

over the years when we have seen bills like this before? The

third question I think we should ask ourselves is: what has

been proven to date in the debate so far? The fourth question

we might ask ourselves is: what is the official opposition

trying to do vis-à-vis Bill 27 and the debate of this

seven days duration? The fifth question I think we're entitled

to ask ourselves as we engage in committee debate on Bill 27:

what can we learn and what can the public draw from the debate

to date?

Five questions, Mr. Chairman, which I suggest to the Members

may have some consequence of some significance if they can seek

out the answers.

The first question — reiterating — is what the bill purports to do. This bill,

Mr. Chairman, purports to increase the borrowing powers of the British Columbia

Railway Co. from $440 million to $650 million. That is an increase, as the Member

for Langley (Mr. McClelland) will tell you, as he has 10 fingers and 10 toes,

of $210 million. Much of the debate has wandered from that subject. Much of

the debate has been taken up with a discussion and an analysis of what has happened

on the railway for these last four or five years. The fact of the matter is

that all the legislation purports to do is to increase the borrowing power.

That brings us to question two. What has been the record of

this Legislature in bills of a similar consequence? What has

been the rule of the government Members and the opposition

Members in times hitherto? The answer to that question, Mr.

Chairman, is very easy. There has been consistent support from

either the Social Credit Party or the New Democratic Party for

an increase in borrowing powers for the Pacific Great Eastern

Railway — and the British Columbia Railway after the name was

changed.

On each and every occasion, when the positions were reversed

in terms of the years prior to 1972, the New Democratic Party

Members supported unequivocally the increase of borrowing

powers of this railway. Unequivocally.

MR. L.A. WILLIAMS (West Vancouver–Howe Sound): Never asked

any questions, eh?

HON. MR. HALL: Unequivocally. We always laid it on the

record of Hansard , partial though it may have been in the years

1970, 1969 and 1971. Partial though it may have been, it did

deal with the question on second reading, did record the debate

on second reading. We always laid on the floor of this

Legislature opposition regarding support of this railroad and

the fact that though we knew we were buying the shares over and

over again, this railway should be supported. We voted for that

legislation. The Social Credit opposition today will vote for

this legislation, even though they've taken five days of

haranguing. Even though they've taken five days of mischievous

debate, they will vote for the legislation. Make no mistake

about that. That's been our position over the years.

The third question is what is happening in terms of what is

the political role that's sought to be achieved. What is the

official opposition attempting to do on

section 1 of this bill?

What has been the record of administration before this one?

Well, let me deal with the questions that the Minister of

Labour (Hon. Mr. King) has just referred to. The fact of the

matter is that the Social Credit administration in the years

prior to 1972 are now inextricably interwoven with charges of

misleading the public in the sense of cooking the books.

AN HON. MEMBER: Hear, hear!

HON. MR. HALL: No question at all about it! The Social

Credit administration is inextricably accused and interwoven

with those reports that the Minister of Labour and the Minister

of Finance last week

[ Page 3641 ]

referred to. All the circumlocution, all the erudition, all

the persiflage of the Member for South Peace River (Mr.

Phillips) cannot eradicate that fact. It cannot eradicate that

fact. And you will swallow that as you will vote for the

legislation.

The fourth question I asked is what is the opposition now

trying to do. This is in the

summary, the story so far, as the

serials used to have it when I was a lad. Mr. Chairman, it's

unfortunate and I regret having to say this, but the opposition

currently is prepared to ruin the economic reputation of this

province by their actions over the last five days.

Mr. Chairman, while the Premier of this province is in New

York, as his predecessor was in New York each and every year at

this time, they are prepared to ruin the economic reputation of

this province. The predecessor of the current Premier of this

province went to New York every year at the taxpayers' expense.

Believe it or not, he actually presented a bill to the Treasury

Board to go to New York. W.A.C. Bennett didn't pay his own way

to New York — isn't that terrible? And we're supposed to accept

the criticism — that frivolity — from the Member for South

Peace River (Mr. Phillips) that the Premier of this province

has gone to New York at the taxpayers' expense. Mr. Chairman,

if I may add parenthetically, to send Premier W.A.C. Bennett

about the province in 1972, if you examine public accounts,

cost us $13,000 a year. I've never heard the Member for Langley

(Mr. McClelland) stand up and criticize the level of

expenditure of the Premier to go on those affairs hitherto.

Have you ever heard the Socreds once talk about the travel

expenses of their Ministers? Not on your life.

Interjection.

HON. MR. HALL: While the Premier of this province is in New

York the Leader of the Opposition (Mr. Bennett), in

contradistinction to any previous Leader of the Opposition, is

prepared to blacken the name of the province economically.

The last question I ask you to consider, Mr. Chairman, is:

what should the public, draw from this performance? I ask you

to consider what they've done over the last six or seven days.

It's obvious that their lust for power far transcends any sense

of responsibility they have for the good name of this province

in any other place in this world. That's the conclusion the

public must come to. The irresponsible actions and

irresponsible criticisms should be registered by the public and

frankly measured in the sense of what other oppositions in

other jurisdictions and what the opposition in this

jurisdiction in the last 20 years has done on the kind of bill

before it.

Two final points, Mr. Chairman. First of all, to hear the Member castigate

and attack a public servant in this House is really a bit much when I think

of what we've been attempting to do in this province for a number of years about

improving the public service. To attack Mr. Swanson, as the Member for South

Peace River has done, is really a bit much. Mr. Swanson has achieved much for

this province; Mr. Swanson has worked hard for this province. Mr. Swanson's

efforts on behalf of some of the things that are currently success items in

this province are well recorded. For that Member at this point in time to attack

that kind of service is a bit much. I just ask all public servants — all people

who seek a career serving this province, serving the public of this province

— to remember the words from that side of the House well. Remember them well.

Lastly, Mr. Chairman, may I deal with this argument that I

keep hearing chirping from the back from the Member for

Victoria (Mr. Morrison), the Member for Saanich (Mr. Curtis)

and the Member for Langley (Mr. McClelland) regarding the

testified, signed note on the balance sheets of the B.C.

Railway that the accounts are subject to the basic CTC

standards. They say it's not required, as though that's an

answer. It's a simple enough matter. Go to the Clerks' office

and ask for document 42 that was filed in the last session.

You'll see there the original document that is the statement of

accounts of the B.C. Railway It's signed in ink — not a

photostat, not a typewritten document, but in longhand it is

signed — by the comptroller of the company and by Messrs.

Buttar & Chiene. In that paragraph they signed, they talk

about the CTC requirements.

Mr. Chairman, if there's no requirement for them to have

observed the requirements — if there's no legal responsibility

for them to have done so — I just simply ask myself a question:

why did they bother to tell us that they had done so? It's as

simple as that. To say to us over and over again that they

didn't have to is no answer to the charge that they did. They

damn well did, whether you like it or not — they said so. I'm

talking to you, Mr. Member for Saanich and your ilk of today. I

say that to chirp away like that shows a complete lack of

appreciation of what independent audits are all about; it shows

a complete lack of appreciation of what financial accounts are

all about.

Mr. Chairman, those five questions are the ones that should

be pre-eminent in this debate. Why are we doing what we're

doing today in terms of borrowing money? What has been the

record of this Legislature in similar bills? What have the

Social Credit administration of the railway of previous years

done, and what do they stand charged as having done? What is

the Social Credit opposition party currently trying to do to

this province? Fifthly, what is their motivation for doing what

they're trying to do to this province? That's the debate and

that's the problem on which the vote should be taken.

[ Page 3642 ]

MR. PHILLIPS: That was a very interesting speech that the

Provincial Secretary made. He alluded to the fact that the

Premier of the province is in New York, and talked about the

previous Premier making trips. But the Premier is in New York

now, when the heat is on. Last fall, when there was a strike

threatening the ferry system, when there was a strike

threatening the teachers' association throughout British

Columbia, when we were facing a crisis in British Columbia, at

that time the Premier took off for China to view the Great Wall

of China and to consult with his socialist friends in

China.

I believe he said that the opposition is trying to ruin the

financial situation of the province. Mr. Chairman, it is known

throughout the width and breadth of this province, from north

to south, that it is the socialist government in British

Columbia that has wasted the resources of this province, that

has killed the resource industries of this province, and that

has spent the surpluses that were left to them by the previous

administration.

The Provincial Secretary said he wanted you people to know

what had happened in the last six or seven days in this

Legislature. I want to tell you what has happened, Mr.

Chairman. I see the Provincial Secretary has left the chamber —

he, like the Premier, runs when the heat is on. What has

happened in the last six or seven days is that the Premier of

this province and the president of the railway took an hour and

a half over a podium a week ago last Friday to unveil his

supposed scandal on the railway, a scandal which had been

alluded to in this Legislature since April 10. Yet, knowing

that they were changing and cooking the books of the British

Columbia Railway, they still filed a prospectus in New York

based on the old financial statements of the railway, when they

knew full well that they were trying to change the financial

statements of the railway and that they were trying to change

the depreciation methods of the railway.

I want to tell you, Mr. Chairman, losses in British Columbia

amounted to $34.2 million in the Insurance Corp. of British

Columbia under this socialist government. The Transit Authority

of British Columbia last year under B.C. Hydro lost $20

million. The ferry system in British Columbia lost $25 million.

The flippant Attorney — General says: "Oh, when these

corporations lose money, the people of British Columbia gain."

He doesn't seem to realize that it is the ineptitude and the

financial bungling of the present government that makes these

Crown corporations lose the money they lose. Political

interference, the same as it is on the British Columbia

Railway, has caused us to lose money.

I want to tell you, Mr. Chairman, and I want to tell all the people here this

evening, that it is the socialist government that has ruined the financial status

of British Columbia. That is why our financial rating in New York has decreased!

Make no mistake, you can't blame the fact that the ferry

system lost $25 million on the opposition. You can't blame the

losses of the British Columbia Railway on the opposition. You

can't blame the losses in the Insurance Corp. of British

Columbia of $34.2 million on the opposition. You can't blame

the fact that the Minister of Public Works (Hon. Mr. Hartley)

has spent over $400,000 on vacant office space on the

opposition. You can't blame the fact that 15,000 new civil

servants have been hired in the Province of British Columbia.

You can't blame that on the opposition. You can't blame the

opposition for ruining the resource industries of this

province. No, Mr. Chairman, all of those chickens are going to

come home to roost on the socialists who have ruled this

province for nearly three years.

This government filed a bogus financial statement in New

York when they knew there was going to be changes in the

financial statements of the British Columbia Railway, It is

this government that went to the OPEC countries to put the

people of this province in debt at high-interest rates and

would not divulge to this Legislature what country they were

borrowing from, what country they were indebting the people of

this province to when they borrowed money in a secret country.

When we asked, they tried to involve us in a conspiracy of

secrecy. They were the ones who went to those countries and

secretly borrowed money when there was no need to borrow

money.

Since 1966, the previous government never had to go outside

the Province of British Columbia to borrow money for any of

their Crown corporation operations. But because this government

has spent money like a drunken sailor on a Saturday night and

wasted the taxpayers' money, now they have to go not only

outside of the borders of Canada, not only outside of the

borders of North America, but they have to go to the OPEC

countries to indebt the people of this province for years and

years to come. Your sons and your daughters and your

grandchildren will be paying the interest and repaying that

money, and that is the full responsibility of that socialist

government over there. With money rolling in 1973 and 1974 like

it was going out of style, when the lumber industry demands the

highest price and they would never agree to the demand, the

money rolled into the coffers of that socialist government, and

they spent it like water!

In 1974 with the greatest demand and the highest prices for

minerals, the money rolled into the coffers of the socialist

government like it was going out of style. And what did they do

with it? They wasted it; they squandered it like a drunken

sailor on a Saturday night. In two years that government

overspent their budget by $719 million. Had they been frugal

with the taxpayers' money there would have been sufficient

money in the coffers of British

[ Page 3643 ]

Columbia today that we wouldn't have to be passing this bill

to borrow $200 million to shore up the British Columbia

Railway. It would have been in the bank here in British

Columbia. Let no mistake be made about that.

I want the taxpayers of British Columbia to know how that

socialist government has squandered their tax dollars in the

last two years. Money rolled in like it was going out of style,

and what did they do with it? They presented two budgets, and

then went out and overspent by $719 million.

MR. CHAIRMAN: I hope the Member will try and get back to

section 1.

MR. PHILLIPS: I'm talking on

section 1 because the whole

policy and the whole principle of

section 1 is overspending by

that socialist government.

MR. CHAIRMAN:

Section 1 deals with the railroad.

MR. PHILLIPS: The cost of running the Province of British

Columbia under that socialist government has increased two and

one-half times in two years.

MR. CHAIRMAN:

Section 1 deals with the railroad, I remind

the Member. I want to remind the Member that

section 1 deals

with the railroad.

MR. PHILLIPS: I realize that

section I deals with the

railroad, and we are talking about borrowing additional money

to shore up that railroad due to losses incurred by political

interference in the management of that railway. It is a scandal

of colossal height. It all rests on the shoulders of that

socialist government because had they been frugal, had they

looked after the taxpayers' money, we wouldn't have to be

debating this bill tonight to go to New York and borrow money

from those horrible capitalists which the Premier stands in

this Legislature and condemns day after day after day.

Mr. Chairman, I'm going to ask that Minister of Labour the

same question that I asked him a moment ago, and to which he

gave no answer. He got up and gave a tirade, and the Provincial

Secretary (Hon. Mr. Hall) got up and gave a tirade. Where is

the agreement with the Canadian National Railway to build those

lines in the northwestern

section of this province? Where are

those grandiose plans? Where are the plans to build the spur

line into Ashcroft, which the Minister of Lands, Forests and

Water Resources (Hon. R.A. Williams) talked about?

Mr. Chairman, I asked a simple question a few moments ago. I got no answer.

I remember when this government came to power they were talking about a new

deal with Ottawa. They were going to cooperate with Ottawa. They said the previous

administration left millions laying on the table because they couldn't cooperate

with Ottawa.

What has happened now? Our relations with Ottawa have never

been at a lower ebb due to the fact that they don't know how to

negotiate with Ottawa. This government of British Columbia is

the laughing stock of Canada. What do we get when the Premier

goes down there? We get political flamboyancy; no negotiation.

He goes down there unprepared. He comes back and says, "Oh, I

won a great victory for the people of British Columbia." He's

won nothing. He's leading us down the garden path.

I want the Minister of Labour to stand up at this time and

answer a simple question: at what state are negotiations with

the CNR with regard to the development in the northwestern part

of the province, and with regard to the extension line into

Ashcroft? Is part of this $200 million going to be used to

build those extensions? Is there going to be an agreement with

the CNR? Are the people of the northwestern part of this

province going to be disappointed by this government again, as

the people in the rest of the province have been disappointed,

or are you going to go ahead? How much of this money is going

to be used for those rail line extensions?

HON. MR. KING: Mr. Chairman, there are two answers I would

like to give the Member. It is not true that the financial

rating of the Province of British Columbia has deteriorated. It

is as good now as it ever was in New York. That is absolutely

false, and I would not think that the opposition would want to

leave that kind of impression abroad and impair in any way the

financial rating of the Province of British Columbia. Those

facts are not true. I think the Members in the opposition, if

they are responsible, should applaud that fact.

The negotiations with the CNR are continuing. I think the

Members in the opposition will appreciate that negotiations

sometimes take a long time to develop. Certainly those who were

involved in the negotiations of the Wenner-Gren deal, under the

previous administration, recognize that sometimes negotiations

even bog down and disappear altogether. But negotiations with

the CNR and the federal government are still underway. When

there is a conclusion, undoubtedly the president of the railway

will be reporting to the House.

MR. H.A. CURTIS (Saanich and the Islands): Mr. Chairman,

this is the first opportunity I've had to speak since the Hon.

Provincial Secretary (Hon. Mr. Hall) gave us his version of why

we are here and what we should be doing.

I want to correct an impression which I'm sure he left

mistakenly with the committee. While other Members in the

opposition seats have referred to the CTC in the course of this

debate in second reading

[ Page 3644 ]

and in committee, I , speaking this afternoon for the first

time, made no mention whatever of financial statements of the

B.C. Railway nor of the CTC. I did refer to one point that I

would like to canvass again with the Minister — whether we are

heated with this or whether others wish to learn as much as we

can.

I discussed with the Minister of Labour today the basic

issue before the committee. It is fundamental to the shortest

bill, I believe, but I could be wrong, on the order paper this

session. The briefest bill on the order paper this session is

Bill 27, British Columbia Railway Company Construction Loan

Amendment Act, 1975. The entire purpose is to permit the BCR to

increase its borrowing authority from $440 million to $650

million.

I referred this afternoon also to what I believe is known in

the financial world, and certainly in the area of funding over

a long period of time, as a comfort letter. I explained to the

best of my ability to the committee and to the Minister at that

time that this comfort letter, or cold comfort letter, is sent

out by the borrower, in this case the Province of British

Columbia or one of its Crown corporations, to either — and I

add this this evening — the Securities and Exchange Commission

in the United States or to the underwriters — either the

principal underwriter in the management group or the entire

group. It is an updating from the time the prospectus and other

material has been prepared and forwarded.

It is a reassurance, if you wish to use that word, to the

underwriters or the Securities and Exchange Commission, or

both, that nothing significant has taken place in the interval

which would affect the credit of the borrower, that there has

been no major development or serious problem. Throughout this

debate we have asked and debated on both sides of the House the

possibility — and I emphasize possibility — that information

transmitted to New York at the time of the B.C. Hydro and Power

Authority $150 million loan may not gibe fully and completely

with information that has appeared elsewhere. It is a

possibility. A number of Members have canvassed that.

The Provincial Secretary (Hon. Mr. Hall) rushed in this

evening and gave us his version of why we are here and what is

wrong with the opposition. I think at the opening of his

remarks he referred to the official opposition; he identified

the Social Credit Party. I would like to remind the House, with

just one paragraph, of the statements yesterday in this

committee by the Hon. Member for West Vancouver–Howe Sound (Mr.

L.A. Williams). According to the draft version of Hansard , he

concluded his remarks in this way:

I think we are entitled, before we give this government the right to go into

the market or use funds under the control of the Minister of Finance to the

tune of $210 million, to know what this government is going to do in a positive

way which will change this revenue picture....

He had detailed at length the very sorry state of the

revenue of the British Columbia Railway. I digressed for a

moment, but continuing with his statement:

...which will continue to flow into that railway instead

of the steady drain out of that railway.

To repeat just part of it, Mr.

Chairman:

I think we are entitled, before we give this government the right

to go into the market or use funds under the control of the Minister of Finance

to the tune of $210 million, to know what this government is going to do in

a positive way...

That is why we are here, and that is why this debate has

taken so long. And that is why a number of concerned Members on this side of

the House have repeatedly risen in their places to put questions first to the

Premier and Minister of Finance and now, in his unavoidable absence, to the

Minister of Labour (Hon. Mr. King), who must really wish that the Premier, were

here carrying on with what is one of his first responsibilities.

I referred to the British Columbia Hydro and Power Authority

prospectus which is dated May 22, 1975. As the committee well

knows, it is necessary to catalogue the indebtedness of Crown

corporations. This leads us directly to the British Columbia

Railway Co. On page 33 or the prospectus there are three or

four paragraphs which are well known to the committee and to

the House as a result of earlier debate. We have, in the second

paragraph:

"The province owns all the issued capital stock of the railway, representing an investment of $185

million at December 31,974. The British Columbia Railway

Construction Loan Act authorizes aggregate net borrowings by

the railway and by the province for railway purposes of $440

million, which is proposed to be increased to $650 million.

"At December 31, 1974, securities outstanding with the

provincial guarantee" then parenthetically "(before deducting

sinking fund investments of $53.5 million) totalled $442.3

million." We're discussing, therefore, the present indebtedness

of the British Columbia Railway. All the other issues, I feel

personally, are perhaps secondary to this very fundamental

issue.

I again ask the Minister of Labour, as the individual

piloting this bill through committee stage, if he would seek

from the Department of Finance what is called a comfort letter,

or file with the committee or with the House — whichever he

prefers — all other documentation which has been sent to New

York from the period December 31, 1974, to the date that

prospectus for the B.C. Hydro and Power Authority was

filed.

From what little I know about this business, Mr.

[ Page

3645 ]

Chairman, I would suggest that a prospectus is not just

slipped into a brown paper envelope and put in the mail to New

York. There must be accompanying documentation. There must be

documentation which is either sent either before the prospectus

is filed or documentation which is sent as a follow-up — an

update, if you wish, after the prospectus has been filed.

I think that the Minister of Labour could assist the

committee greatly and perhaps resolve a number of unanswered

questions to the satisfaction of the committee, and indeed, the

people of B.C., if he issued tonight, or first thing tomorrow

morning, the instructions. Let's have everything that has been

sent along to New York, to the SEC, to the underwriters or to

anyone else associated with the May 22 B.C. Hydro and Power

Authority loan — the $150 million loan. May we have that

information? May we have it tabled?

Today when I referred to the cold comfort, the Minister said

that it was in the prospectus. Again, I submit to the Minister

that there must be material other than that contained in the

prospectus. I hope he will comment on it tonight or in a

subsequent sitting.

HON. MR. KING: Mr. Chairman, the Member who just took his

seat, due to his municipal background, should know something

about those matters. He should know that the letter of cold

comfort referred to in the Hydro prospectus is authorized only

to deal with Hydro matters. There is no authority for the Hydro

auditors or directors to deal with railway matters. The

information that he apparently is seeking has all been made

available in the prospectus that was provided for the borrowing

for the railway in New York, as I understand it.

Interjection.

HON. MR. KING: The supporting document to the prospectus —

it's been made available in that way. But there's no authority

for embodying the railway material in the Hydro letter of cold

comfort. That should be clearly understood. He wouldn't find

the information he is apparently seeking in that way.

[Mr. G.H. Anderson in the chair.]

The Member asked one other question regarding the borrowing limitations of

the railway, and stated that it appeared that the railway had, indeed, exceeded

the borrowing authority. That could well appear to be the case. But it should

be understood that from the aggregate sum there are deductions for payment of

discount, for commissions, for brokerage and for all other expenses involved

in such loans, so the gross amount indicated is not in reality the exact amount

borrowed. Therefore after those deductions the amount did not, as I understand

it, in fact exceed the borrowing limits. That is the normal practice — to deduct

those kind of facets from the total amount. There may have been appearance of

exceeding the borrowing authority, but that is not the case, as I understand

it.

MR. P.L. McGEER (Vancouver–Point Grey): Mr. Chairman, as you

know, I haven't taken a great deal of the committee's time in

discussing this bill. It has been difficult — there have been

some loquacious debaters during the past week. The Provincial

Secretary (Hon. Mr. Hall) referred to them. But I think perhaps

a remark or two is in order at this juncture.

Before the Premier left for his trip to New York and

Britain, his parting shot was that we were faced with a crisis

as far as the B.C. Railway was concerned. He's the president of

the railway.

It's becoming an increasingly transparent fact that the

trips of the Premier and the cabinet Ministers are no more than

tourist junkets at taxpayers' expense. It isn't quite good

enough, Mr. Chairman....

MR. CHAIRMAN: Would the Member please refer his remarks to

section 1, not to the Premier's trip?

MR. McGEER: Yes, I'm pointing out, Mr. Chairman, that the

Premier is the president of the railroad. If he's got no more

respect for that railroad than to leave a critical bill for

that railroad in the middle of debate, he should have resigned

before he left. To disappear to New York and abandon the House

in mid-session is something that no Premier in the history of

this province would dare to have undertaken. We're told, Mr.

Chairman, that following his holiday in New York he's off to

Britain for an audience with Prime Minister Wilson, for

heaven's sake, to discuss a refinery in Surrey, a refinery that

we have no guarantee of oil from; and the only person who can

give us that guarantee is in Alberta, unless it would be in

Washington, D.C.

What is he going to do — get oil piped from the North Sea

down to his refinery here in British Columbia? This is what the

president of B.C. Railway is doing at a time when a bill which

he himself described as a crisis for the railway is before this

House. Mr. Chairman, I tell you that that is gross

irresponsibility and the Premier should resign forthwith from

New York and abandon any responsibility for that railway,

because he is clearly not in charge either of the railway or

this House.

MR. P.C. ROLSTON (Dewdney): Boy, you should talk!

MR. McGEER: Now, Mr. Chairman, I want to talk

[ Page 3646 ]

about another meeting that was scheduled for 8:30 this

morning before the public accounts committee. I said that I was

very pleased yesterday, when I finally got the floor, Mr.

Chairman, to see some of the chief executive officers of the

railway sitting in the background while this bill was being

debated; because we're looking not at the executives and

directors but at the management of the railway. Then I

discovered, Mr. Chairman, that the reason for the cancellation

of the public accounts committee meeting to discuss the affairs

of the B.C. Railway at a time that the railway was coming,

through its management and directors, before this House for

emergency funds was a refusal of those directors and managers

of the railway to appear before public accounts at a time when

they were in the City of Victoria. I consider that again the

kind of gross irresponsibility that should require responsible

Members of this House to vote against the bill....

MR. R.H. McCLELLAND (Langley): Lack of respect for this

House.

MR. McGEER: ...as I intend to do. On the one hand, Mr.

Chairman, people are coming before this House claiming an

emergency and, on the other, the president of the railway is

vanishing on a trip at taxpayers' expense. The management of

the railway is right here in the City of Victoria refusing to

appear before public accounts.

Now, Mr. Chairman, I'm not accusing the management of the

railway. I'm accusing the directors of the railway who sit on

the Treasury benches of blockading the appearance of those

people and of preventing the public from hearing at first hand

what the situation is.

Mr. Chairman, it's nothing short of disgraceful that we

should have a bill before this House, an alleged emergency in

the B.C. Railway, when the people who are responsible for

directing the affairs of that railway, responsible for carrying

out the day-to-day management, are ducking the elected Members

of the House who are here to ask the questions on the public's

behalf.

Make no mistake about it, it is the public of British

Columbia, not the users of the railroad, who are being asked to

pay the bill. They're being asked to pay for it in their

gasoline taxes, in their income taxes, in their sales taxes and

in all the general taxes that would otherwise go to services

for the people of British Columbia. And while this kind of

subsidy is going directly towards the B.C. Railway, the

directors and the executive officers are ducking the elected

Members.

Mr. Chairman, it isn't good enough. There should be a shake-up in that railway

starting right with the president and going through the directors and the managers.

And I'm going to vote against this

section and against this bill.

HON. MR. KING: Mr. Chairman, the Member made quite a number

of statements but he shed very little light on the debate. As

far as the willingness and the ability of the railway

management to come before the public accounts committee of the

House, the officials of the railway tell me that they had one

day's notice....

Interjections.

MR. CHAIRMAN: Order, please!

HON. MR. KING: Mr. Chairman, would the opposition like to

have some answers or not?

SOME HON. MEMBERS: Yes!

AN HON. MEMBER: Let's get on with it!

HON. MR. KING: Okay. When they run down, Mr. Chairman, we'll

proceed.

It is my information from....

Interjections.

HON. MR. KING: They're a group of complete obstructionists

over there, Mr. Chairman. They make long, high-powered

speeches, then they don't want to give me...

Interjections.

MR. CHAIRMAN: Order, please.

HON. MR. KING: ...the courtesy of an opportunity to answer.

It seems like there is a coming together over there of certain

groups that have splintered off recently. The Member who just

sat down issued a call, a clarion cry, for the Premier's

resignation. Well, those three people in the back benches over

there know all about resignations. They don't stay in any one

spot long enough to be consistent in any way, so perhaps we

will seem them moving on again very shortly and that is why

they are piping up at this point in the debate. But that is

kind of frivolous stuff.

The fact of the matter is that the railway management is

prepared to appear in Victoria to give a full and factual

accounting for the policies and the expenditures of the

railway. They would like to have some notice so that they can

get their staff together and have prepared for the public

accounts committee all the records to which they will have to

refer in answering the questions. I don't think it is

unreasonable to suggest that the railway management should have

a few days or, hopefully, a week's notice

[ Page 3647 ]

so they can prepare to have the kind of staff here necessary

to deal with every aspect of the railway's operation, to have

at hand the records and so on that would be required. I can

just imagine, Mr. Chairman, who the first critics would be to

level their fingers at the railway management if they were

unprepared for some of the questions that will be asked.

Certainly they are going to have their records intact and they

are going to be prepared to give a full and factual accounting

of the railway's operation over the past year.

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

should not try to relate that to the present debate going on in

this House. It is certain that this bill before the House to

increase the borrowing power of the railway is a critical bill

to the railway's operation. It is uppermost and overriding in

terms of the management's preoccupation on the railway. While

they are here in Victoria to provide support and interest in

terms of the passage of this bill, they are hardly in a

position to get geared up for the public accounts hearing that,

hopefully, will follow soon after passage of this bill.

MR. FRASER: I want to say a few things regarding the public

accounts committee. As the chairman of that committee, I said

it this afternoon, and I will say it again tonight: on June 6,

this House was informed of the financial statement of the

British Columbia Railroad by the Premier and president of that

railroad. As chairman of the public accounts committee, I wrote

that railroad, the executive house, on June 11. That was last

Wednesday, Mr. Chairman, not one day. I wrote them last

Wednesday to be available to a public accounts committee the

following Tuesday, which would be this morning, the 17th, at

8:30. As I repeated to you this afternoon, I was in the

interior and I phoned here to find out if any word had been

received from the BCR. It had not been. Then I said: "Find out

what is going to happen, because there are 14 MLAs on this

committee." There are not six public servants, there are 14

elected MLAs on this and it is hard to get them together, as

you well know, being a chairman of a committee. I said that I

am not having them at a committee meeting if we can't get these

senior management people to the meeting for Tuesday, the 17th.

An hour later I got a phone call in Horsefly, Mr. Chairman, to

say that the management couldn't be available and they needed

10 days notice.

AN HON. MEMBER: Ten days?

MR. FRASER: Ten days notice to appear before a public

accounts committee with 14 elected MLAs.

MR. CHABOT: Shame!

MR. FRASER: They are too busy to appear.

MR. CHABOT: Shades of King Farouk.

MR. FRASER: I want to say here tonight, Mr. Chairman, to

that Minister: give a commitment to this Legislature tonight

that this senior management of this railroad will appear before

the public accounts committee on Thursday morning, at 8

o'clock, June 19.

This Minister made a big harangue all day about the public

accounts committee and how we can find out what we want to

know, I say to you: how do you get the management of the

railroad to the committee? He says that the committee should

look into it. I throw it right on him here tonight to give

assurance to me and the 13 other MLAs that senior management

will be here on Thursday morning, June 19, at 8 o'clock in the

morning. They are here. They are here now, and I can assure you

they will be here tomorrow too, for the debate on this bill

increasing the credit line of the railroad. I want this

Minister to reply tonight. What is he going to do to assure

that they are at this meeting?

HON. MR. KING: I would like to tell this Hon. Member for

Cariboo that we will certainly do our best. The facts of the

matter are, as I understand them, that, indeed, the Member for

Cariboo did write his letter on June 11. The operating

vice-president of the railway tells me that that letter was on

his desk yesterday morning, Monday morning. Now I think any

realistic individual would admit....

AN HON. MEMBER: Six days from Victoria to Vancouver for a

letter?

HON. MR. KING: That's when that arrived on the desk of the

operating vice-president of the railway. There is a Liberal

government federally, so anything can happen.

I think the Members should understand that there is

considerable preparation involved in getting ready to appear

before the public accounts committee. I would not want to

arbitrarily send out a dictum, a command to the railway

management that on such and such a day you appear before me and

my court to answer for the policies of the railway. I think any

reasonable Legislature and any reasonable group of people would

want to provide adequate time for the management to get

together their staff and their records so that they can give a

full and proper accounting of the questions that will

undoubtedly be raised.

Interjection.

HON. MR. KING: Well, I don't see any reason

[ Page 3648 ]

why the committee can't have adequate time in terms of

giving advance notice to the railway board. There is no problem

there. There should be no diminution of the time available to

the public accounts committee to do their questioning and their

investigation. We are all full-time Members of this

Legislature. There is no problem there.

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

just further, the statement of the B.C. Rail was late this year

and I would have thought that the senior management of the

railway, realizing the date that it was being brought down, and

realizing that public accounts had been advised to wait until

such a statement would be brought down, in anticipation would

be prepared.

I notice that they are well prepared to come here quite

quickly to back up you, because you apparently don't have any

answers on the railway. Certainly that information should be at

their fingertips in anticipation of the legislative committee

and particularly a legislative committee in which the statement

has been brought down in what the Premier said were the dying

days of the session. He kept saying the session was going to be

over quickly, and certainly if public accounts was to have the

opportunity it should have been prepared.

Part of the job would be anticipation that they would be

called before public accounts. Now I think the chairman has

made a reasonable request. The Minister is there and senior

management is there. Certainly we could come to an

accommodation and an answer tonight on staying over and being

able to sit for the 14 MLAs from both sides of this House....

MR. CHAIRMAN: Could we have order, please, for a moment? I

think this subject has been well canvassed and I would like you

to return to

section 1, if you wouldn't mind.

MR. BENNETT: Well, I am, Mr. Chairman, but it is only that

the Minister many times, when he was stuck for an answer said

it would be better brought up in public accounts, and I'm not

trying to find out when public accounts will be allowed to have

the opportunity to question the senior management. That is

all.

Interjection.

MR. BENNETT: That's what he said. I would like to find

out.

Further to the statements and the questions from the Member for Saanich and

the Islands (Mr. Curtis) regarding the covering letter to the underwriters for

the preparation of the prospectus for the Hydro underwriting in New York which

incorporates the statements of other Crown corporations with provincial guarantees,

I would remind the Minister, who said that only the letter from the Hydro Authority

was necessary and they couldn't send statements from the railway, that this

prospectus is signed by the Deputy Minister of Finance, who is also the secretary

of the railway, and in the statements contained with the financial statement

of the railway and the statement of earnings for the year 1969, 1970, 1971,

1972 and 1973, there is an updating qualification that says that the railway

is going to get more money — and that bill was brought in in February of this

year. It wasn't brought in previous to last year, so you have partly amended

already. What I would like to know is why the letter wasn't sent, because there

is no letter from the Deputy Minister advising the changes. There is no letter

on file that we can find advising changes. Phone calls are not letters.

Now it says in here that there is a proposed change in

borrowing from $440 million to $650 million. That is a partial

updating. That bill was brought in February 28, so the argument

that only the statement as of the end of December, 1973, was

necessary is wrong, because you have provided additional

information.

Now why, when you have gone that far, wouldn't you have told

them right in the notation that the earnings were being

restated because of the restatement of depreciation? I find it

even more curious that there would be a partial qualification

without a covering letter. Even better, what should have been

done in the first place by the Premier of this province was to

withdraw this prospectus until after he had brought down his

amended statement. The confusion that exists in New York, the

distrust of the financing of the Province of British Columbia,

isn't the responsibility or the fault of the opposition, Mr.

Chairman, it is the fact that the Premier didn't recognize his

ultimate responsibility to withdraw the prospectus until he

could give them the amended statement on the BCR.

Right now we have a statement as part of the prospectus that

does not agree with the statement he filed in this Legislature

a few weeks later. As the Premier of the province, the Minister

of Finance and the president of the railway, he had the

opportunity, authority and responsibility to either present the

statement earlier to the Legislature or hold the prospectus up — one or the other. Clearly I see that the Minister of Labour

is upset because he has probably got word back from New York,

from the Premier, that they are upset. I don't blame them, but

the opposition didn't do it; the government did; the Premier

did. He had the authority and he is the one who should have

withheld the prospectus or brought his amended, rewritten

statement down earlier in this Legislature.

[ Page 3649 ]

The Minister of Health (Hon. Mr. Cocke) can chew his gum and

chomp and smirk all he wants. This doesn't relieve the

responsibility of the Premier of this province and president of

the railway from taking one action or another. If we are the

laughing stock of New York it rests on his head, not the

opposition's that pointed out what was wrong, not the newspaper

columnist who wrote it up, but the Premier who didn't recognize

his responsibility to withhold that prospectus until he had

brought down his amended financial statement and included it

within the prospectus.

If they are laughing in New York, they are laughing at your

Premier, your leader and your government. Although I hate to

see it happen to British Columbia, I don't blame them.

MR. A.V. FRASER (Cariboo): I asked the Minister to give a

commitment that the senior manager would appear before the

public accounts committee and he did his usual push job and

said this, that and everything. He could get here fast enough

for this debate. I now ask him formally to withdraw this bill

so they can appear before the public accounts committee. We can

go on after that.

HON. MR. KING: Mr. Chairman, there is no intention of

withdrawing this bill. Public accounts will be available to the

Members. The railway management will require reasonable time to

prepare. I should mention once again that if the official

opposition would appoint a responsible chairman to the public

accounts committee it should function very, very well. They

have that option now when the opposition in this House never

used to have the option of having an opposition Member chair

the public accounts committee. There are no undue restrictions

placed on that committee whose one manner of courtesy and

common sense was required. That is to give the railway

management of this very, very large Crown corporation an

opportunity to prepare for what will undoubtedly be a day of

very, very detailed questioning on their operations.

The haste with which the opposition wants to get them there

would indicate that they are more concerned with trying to

embarrass the railway and impede it in some way rather than

trying to elicit information from the railway in an organized

and intelligent way.

The Leader of the Opposition has gotten into his tirade

again about what he hints is the impropriety of the prospectus

filed in New York not being qualified to the extent that an

investigation was underway on the railway and to the accounting

system.

Interjection.

HON. MR. KING: A re-statement or re-appraisal or whatever you want to

refer to it as. The fact of the matter is, as the president of the railway and

the Premier stated and as I am re-assured by the people from Finance, both the

underwriters and their counsel were notified of the investigation and re-assessment

that was going on on the railway. In their wisdom, they chose not to ask that

that be noted or that there be any caveats contained in the prospectus. I am

informed that the Deputy Minister of Finance was apparently in telephone conversation

with the individuals involved. They were satisfied and I find no reason on earth

why the Leader of the Opposition would not be similarly satisfied unless he

has motivations other than that which was accepted by the underwriters and legal

counsel for the people putting up the finances.

The Hydro borrowing, of course, pertains only to the Hydro

prospectus. There is no authority for them to comment or

provide data on the railway. That was provided in documents

accompanying the prospectus. The Deputy Minister and the

Premier have indicated and I am informed by Mr. Harvey of the

Department of Finance that both the counsel and the

underwriters accepted that. The Hon. Leader of the Liberal

Party, the Second Member for Victoria (Mr. D.A. Anderson)

indicated that when he was in telephone conversation with the

individuals in New York that he found the....

Interjection.

HON. MR. KING: That was my understanding — that a

representative from his office substantiated the facts as I

have laid them out. If the Members of the official opposition

are unprepared to accept that, then I can only ask what their

motivation is. Are they seriously trying to impair and

undermine the financial reputation of this province? If that's

the case, they are taking a very good position to so do. I

think it's absolutely unacceptable and a scandalous performance

by the official opposition in this House.

Interjections.

MR. BENNETT: I would only ask the Minister, Mr. Chairman, to

file a copy of the letter. It's easy to talk about phone calls.

I found out the other day that with three people listening on a

line in my office I could get a different answer from the

Liberal leader (Mr. D.A. Anderson) as to what took place on

that phone call the next day although three people listened in

the day before. Certainly there are phone calls and there are

phone calls. Government business should be transacted on the

printed word and on contract and with copies. I would ask the

Minister to file the copies of the letters with those

qualifications in the House. If this bill is passed or if we

have gone through the votes on this bill, I would ask the

[ Page 3650 ]

Minister to make a commitment to file that copy later in the

session.

SOME HON. MEMBERS: Oh, oh!

MR. BENNETT: That's all — file it later in the session and

I'll accept it.

HON. MR. KING: Mr. Chairman, the Leader of the Official

Opposition purports to be a well-qualified big businessman, and

he frequently derides Members of the government for lacking the

experience that he allegedly has. He should know that these

kind of arrangements are often conducted through committee

meetings between the principals involved. If the prospectus and

the accompanying documents that were presented to the

financiers were acceptable, if it was acceptable to their legal

counsel, if it was discussed in committee stage between counsel

in Victoria and the principals in New York, I find it peculiar

and I find it quite mystifying that the Leader of the

Opposition insists that there must be a letter to cement what

was something that was completely acceptable and found to be

not an issue in terms of the agreement for financing between

the principals involved.

Interjection.

HON. MR. KING: There is no letter; this was not required.

The underwriters were completely satisfied with the knowledge

that they had relating to the reappraisal of the railway

accounting system and the possible profit and loss picture. The

other thing that the Leader of the Opposition should know is

that the market is very fluid. The market conditions change

rapidly and frequently, and timing in terms of going to that

market can be extremely crucial. To attempt to set up

unnecessary obstacles that might interfere with the proper

timing could again be invidious to the interests of this

province. I don't think the Leader of the Opposition would like

to see that kind of situation obtain.

MR. BENNETT: Mr. Chairman, everybody wants the best deal for

the province.

AN HON. MEMBER: Oh, yeah?

MR. BENNETT: Certainly. Long after you're gone this province

will be paying for your mistakes and your high interest rates.

Don't try and kid us that we're not looking for the best deal.

What we're talking about here is a matter of weeks.

Interjections.

MR. BENNETT: A matter of weeks. Certainly the accuracy with which the

province presents however they want to write the financial statements.... Even

if that statement had said, "The province is restating the depreciation which

will ultimately change the financial years in the view of the present management

of the railway," it would have been accurate. But you didn't do it. You did

say that you were going to go from $440 million to $650 million — that bill

came in February 28. The management of the railway had already made arrangements

and given direction to the accountants to restate depreciation by that time

— that was already going on. So you could have said that you had instructed your

auditors that the management of the railway — the directors — had instructed

the auditors to restate depreciation. But you didn't do that. Instead, you chose

to have the type of confusion which has proved embarrassing to the Province

of British Columbia — not just to the NDP but to all British Columbians. Your

government abroad is considered the representatives of all our province.

One thing I would like to bring up, because the Minister has

continually talked about Buttar & Chiene. He has talked

about them as if they had been an employee of the British

Columbia Railway. I want to state — because the confusion

exists in the way the Minister has presented it — that there is

some difference between the former comptroller, Robert Miller,

who was an employee, and Buttar & Chiene, who are the

outside auditors and were the outside auditors before the last

government took office and had been for many, many years, and

through 1973 were the auditors for the Vancouver Stock

Exchange. I notice you are not blaming the Vancouver Stock

Exchange for....

Interjections.

HON. MR. KING: He was irresponsible.

Interjections.

MR. BENNETT: The Minister there will yell all sorts of

inaccuracies over in his attempt to interrupt. But the point I

am making is that the comptroller of the company who worked for

the BCR was named Mr. Robert Miller. He has since been

replaced. He was accountable to the directors. He was

accountable to management. The outside auditors are accountable

to the ethics of their profession in meeting certain

requirements. That is to guarantee that the client, the client

in this case being the B.C. Rail, the client in other cases

being the Vancouver Stock Exchange, gets a satisfactory and

accurate audit that is represented to them.

That is exactly what auditors are for. External auditors are

there to give an outside opinion on the external auditing. They

must give a full audit under the

[ Page

3651 ]

requirements of their own professional organization. They

are not an employee directly responsible to the management of

the day. These are outside accountants who authenticate the

documents. If they do a bad job, if they don't meet their

professional requirements, they are in trouble with their own

profession.

The particular case you suggest on Buttar & Chiene and

Mr. Walker has to do with one fiscal year only. It has a

professional reprimand on the amount of time and the accuracy

of the search, or the extent of the search of the books that

took place in conclusion of the fiscal year ended December 31,

1972, an audit that would have taken place in the spring of

I would point out to this Minister, Mr. Chairman, that that

audit took place while he was a director, while the Premier,

Dave Barrett, was the president, and while Mr. Swanson and

others were directors of the railway. It didn't take place

under the last government. Neither were the years 1971, 1970,

1969, 1968 mentioned in the reprimand — only the year 1972. The

reprimand dealt with the extent of the audit and that they

didn't do as extensive an audit as they had ascertained they

would do. Let's get that clear.

The comptroller of the company was a Mr. Miller. The

comptroller of a company is responsible to the directors. If

the Minister wishes to make a charge against the comptroller,

that is entirely on them, because the auditor would clearly

work with the comptroller of the company then as they would

work with the comptroller now. But let us not try to confuse

external auditors with financial employees of the company,

particularly the function of the comptroller. That has been a

confusion that has been elaborated on and expanded right from

the Premier until we have the Minister of Labour repeating over

and over the same political attack that the Premier gave us on

Friday.

I would hope that nobody is confused as to the distinction

between the functions of the comptroller and the external

auditors, Buttar & Chiene, or the new external auditors for

the railway. The comptroller is responsible to the management

and the directors. The external auditor is responsible to his

client for doing the audit he said he would do. The safeguard

the clients have throughout B.C. Is that their own professional

organization will reprimand them when they don't live up to

that audit.

Now as far as restructuring the financial statement for a company, when you

wish to restate depreciation, yes, your external auditors can take instruction

such as they can from business. I know the First Member for Victoria (Mr. Morrison)

is an expert, but in business it is quite usual, and not improper, for companies

to have varying degrees of depreciation and varying methods of accounting and

to give instructions to their chartered accountants as to

which method they want to use on a continuing basis.

MR. C. LIDEN (Delta): To cook the books.

MR. BENNETT: No, because you would be saying that the change

in accounting that took place.... There was no change in

accounting in all of these years: the first change in

accounting has taken place now in the year 1974 for

restatement. But there was no change in accounting procedures.

The documents I tabled this afternoon relating to the

provincial study of depreciation, studying both the national

railway and the provincial railways, should give you, if you

bother to read it, some of the discussion that went on in all

provinces and all jurisdictions about depreciation as it

related to different types of railroad operation and the

differences between resource-development railways and mainline

railways and the fact that the CTC did not have necessarily a

standard of accounting that was applicable, or should have been

applicable, to all railways.

Regardless of what some Members may wish to try and present

to this House, at no time has there been any suggestion of

fraud. At no time has there been any suggestion that there was

fraud. I've yet to hear it said.

What we have is a difference in management opinion and a

difference in restatement. It is a difference in restatement

that has embarrassed the province internationally on the

financial market. Make no mistake about it. It is the

responsibility of the Premier, president of the railway and

Minister of Finance in this province who had control over the

timing of his prospectus and his restated financial statement.

Let's be perfectly clear about that.

HON. MR. KING: Mr. Chairman, the Leader of the Opposition

again seeks to distort the facts. That's really the only way I

can put it. He completely ignores the auditor's report, which

has been read into the record of this House time and time

again, where in the second paragraph it says:

"As described in note 2 of the notes to the financial statements, a review of the past accounting

policies of the company has been carried out. It was concluded

that the financial statement as of December 31, 1973, on an

overall basis, did not present fairly the cumulative operating

results of the railway to that date, and that certain of the

past policies did not conform with the accounting regulations

of the Canadian Transport Commission."

That is signed by Peat,

Marwick, Mitchell & Co.

MR. BENNETT: You didn't read it all. You said

[ Page 3652 ]

you would read it all. You left out the words "completed

management." You left them out purposely. They were right

there; you left them out.

HON. MR. KING: The hysterical Leader of the Opposition, with

his puzzled hazel eyes, starts to shout and snipe away whenever

he is caught in a distortion again. I can only say that he is

not interested in the facts; he is simply interested in

twisting them. That is all he is interested in, Mr. Chairman.

He is an irresponsible, pale, very pale, and insignificant,

anemic image of the former leader of that once great party over

there. I think it is a shame the way he has brought that party

to disrepute and the way he jeopardizes, for his own political

motivation, the economic health of the railway and the economic

health of this province. It is a shocking performance. He went

to extremes to say that it wasn't important that the CTC

regulations were not complied with in 1972. He tried to infer

that that was the only year in which the auditors had

unequivocally stated that they had complied with that

accounting procedure with an acceptable standard laid down for

all railways in Canada and adopted for application on the BCR.

In each report the auditors did certify that their audit was

done in compliance with CTC standards. In each case that was

concluded to be absolutely false by the detailed audit conduct

by Peat, Marwick & Co.

I think it is shocking that the Members on that side are prepared to fly

in the face of facts. They are prepared to distort and divert attention from

the sorry record of the predecessor government in terms of their operation of

the railway. They are prepared to write off completely the unbiased, professional

assessment of qualified chartered accountants and auditors in this province.

They are prepared to ignore the reports of unbiased engineering firms in this

province who have looked at the operation and found it to be lacking. They just

continue to attempt to obstruct this bill which is essential for the operation

of the railway by building straw men which will get them off the hook in terms

of culpability for the sins of the father.

Mr. Chairman, if they had done the right thing in the first

instance when the startling and shocking facts were revealed in

this House, and if the Leader of the Opposition has been more

of a statesman than a replica of something of bygone days, he

would have stood up and disassociated himself from the

practices which were revealed by his predecessor. But he failed

to do that. He has associated himself with all the questionable

practices of the former administration. Now he is trying to use

distortion, filibuster and obstruction as a method of diverting

public attention from those facts. I don't think he is going to

get away with it. He is heaping onto that very poor political

judgment he has embarked upon the fury and the wrath of the

people of the central interior who know that the opposition is

simply here on the childish exercise of obstruction, throwing

sand in the gears and trying to interfere with the efficient

operation of the economy of this province. They will be judged

for that facet too, Mr. Chairman.

The House resumed; Deputy Speaker in the chair.

MR. CHAIRMAN: Mr. Speaker, the committee reports progress

and asks leave to sit again.

Leave granted.

Hon. Mrs. Dailly moves adjournment of the House.

Motion approved.

The House adjourned at 10:55 p.m.

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