Thursday, September 13, 2012

#LiquorLeaks: notable quotes about potent potables

(Note: scroll down for new information added Sept. 27)

Why does the Sept. 6-sworn Deputy Premier Rich Coleman get so much media attention?

Luckily, Rich Coleman didn't fumble the Grey Cup.
Not only is he British Columbia's minister of natural gas, oil, hydroelectricity, dams, mines, social housing, gambling and booze, but the four-term Aldergrove-Fort Langley Liberal MLA often says outrageous things in the Legislature, in media scrums and to those reporters that he decides to speak to. (My requests for a one-on-one interview with Coleman, dating back to 2005, have been denied.)

Coleman, on at least three occasions in 2012, has made odd statements about the controversial Liquor Distribution Branch privatization that demand analysis.

Part I

On April 30, when the LDB logistics privatization request for proposals was published, Coleman told reporters in a scrum at the Legislature:

“They all have an opportunity, in the next 60 days, to come and make a presentation and an offer, a bid, whatever you want to call it... then they’ll come back with the selected, maybe a short-short list of one or two, and they’ll have to go through that and decide which one is the best deal for the government, and then we’ll move forward.”

The RFP, on page 40, stated “up to the top three proponents” would be shortlisted. That could be reasonably interpreted to mean any number from one to three. Coleman knew or ought to have known that, but he didn’t mention the number three.

Why was “one or two” on his mind? Why not the number three?

On May 8, the public learned through my story in Business in Vancouver that one company had positioned itself ahead of the pack and had been lobbying for seven years. That company is Exel. In its Oct. 6, 2009 "Project Last Spike" internal memo, Exel pondered using its relationship to Coleman to influence the writing of the RFP, if its proposal for a public-private partnership went nowhere. Another strategy involved the potential acquisition of ContainerWorld, the giant pre-distribution warehouse in Richmond on contract with LDB. 

As it happened, four bidders were shortlisted on July 20, because then-Citizens’ Services 
Minister Margaret MacDiarmid claimed there was a third place tie. The rankings, however, weren’t released. 

Should one of those four, namely Kuehne + Nagel, have been disqualified? I found out, through a Freedom of Information disclosure, that K+N submitted its proposal after the “prior to 4 p.m.” deadline on June 29! Read my Sept. 12 BIV story here. Government records show it was a minute late. K+N wouldn’t offer an explanation when I sought comment. A massive loophole means K+N remained in the game, because, as one bureaucrat said in an email: "There is no deadline in this process." See that shocking email below.

Five of the other bidders reasonably adhered to the deadline in the RFP. They submitted their proposals before 4 p.m. June 29. Why did K+N go into overtime? K+N wouldn't answer my questions. Neither would Finance Minister Mike de Jong. He is overseeing the privatization because Citizens' Services Minister Ben Stewart's blind trust-held Kelowna winery supplies both the B.C. LDB and Exel-owned Connect Logistics in Alberta. 

The six bidders, including K+N, are in an industry that is, in-part, based on deliveries according to schedule.

Part II

In a July 19 Tweet, Coleman (whose handle is @ColemanCountry) wrote to talkshow host Simi Sara of CKNW AM 980: 
“What I said on your show is no I don’t know who all LDB bidders are because the bid doesn’t close till June 30.”
The RFP stated that the close of bidding was June 29 “prior to 4 p.m.” Coleman knew or ought to have known that. 

Maybe he didn’t now who “all LDB bidders” were, but he knew or ought to have known who some were. Particularly "one or two" of them, such as Exel and ContainerWorld. 

Exel’s October 2009 internal memo indicated the company had discussions with Coleman about the desired takeover, and that Coleman offered his encouragement. His predecessor, John Les, had talks in 2005 with Exel lobbyist Mark Jiles. Les liked the idea of an Alberta-style system. Exel-owned Connect has held that booze hauling monopoly since 1994. 

ContainerWorld’s owner Dennis Chrismas and his lobbyist, Mike Bailey, met with Coleman on March 2. 

Bailey was originally hired in summer 2011 by Chrismas to oppose Exel’s proposal for a new liquor distribution system. Chrismas eventually had to shift gears and enter the bidding process because the RFP says pre-distribution warehouses, like his, would be phased out under the new, private operator. The survival of ContainerWorld may hinge on the outcome of this process.

Part III

The Globe and Mail’s Andrea Woo wrote a Sept. 8 feature on liquor regulation that said, in part: 
Industry enthusiasts have also called for the province to do away with the excise taxes and markups, or to consider a flat-tax system on alcohol similar to that of Alberta. Mr. Coleman said he doesn’t see that in the near future. 
“The biggest challenge is: How much can government afford? We have $800-million that comes into government coffers [each year]” through liquor,” he said.“If you take a couple hundred million off that, you have to find the revenue somewhere else. 
“It’s a significant contributor to the revenue of the province.”

The LDB annual report for 2011-2012 (which was addressed and presented to Coleman, the minister responsible) said the LDB’s profit was $911.145 million on $2.89 billion gross sales. On page 31, it says payments to the Province of B.C. for the year ended March 31, 2012 were $908,587,000.

That’s $108 million more than the $800 million that Coleman was quoted as saying in the Globe story. The difference is substantial. Coleman knew or ought to have known that $908.587 million came into government coffers from LDB in the most recent fiscal year. 

Liquor ministers say the darnedest things!

UPDATE (Sept. 27): On May 17, Coleman's office received an "advice to minister" information note (see "Rich Coleman's privatization script, by Jay Chambers" at bottom) written by then-LDB general manager Jay Chambers. It includes recommended responses to anticipated media questions about the LDB privatization. It is apparently the only briefing note prepared for Coleman between April 30 (the day the request for proposals was published) and July 31. I received it Sept. 27 after a Freedom of Information request.

"There is no deadline in this process."

Rich Coleman's LDB privatization script, by Jay Chambers

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