#LiquorLeaks reveals Coleman's Chrismas in March

Much has now been written about Exel Logistics and its thirst to become the private operator of the Liquor Distribution Branch's warehouses and distribution network. Exel proposed a private-public partnership, hoping to score the contract without a competition. On the alternative, Exel wanted to position itself as the winning bidder. A Sept. 24, 2010 letter by vice-president Scott Lyons to liquor minister Rich Coleman is the best proof so far that Exel sought to use its relationship with Coleman to influence the writing of the request for proposals, just as Exel contemplated in the "Project Last Spike" internal memo of Oct. 6, 2009.

Exel has contingency plans and one involves acquiring Richmond warehouse ContainerWorld, the biggest pre-distribution warehouse for liquor in B.C. A great deal of the bottles you see on shelves in B.C. went through ContainerWorld before entering the LDB system. ContainerWorld has a business relationship with Giorgio Gori of Italy. Gori is owned by Deutsche Post DHL, which, coincidentally, owns Exel.

ContainerWorld's founder and present owner is Dennis Chrismas, a BC Liberal supporter who donated to liquor minister Rich Coleman's campaign in 2009. Chrismas (whose name doesn't include the letter-T) hired lobbyist Mike Bailey to encourage the government to keep the status quo. Now that the LDB logistics monopoly contract is in play -- and the government is phasing out the pre-distribution program -- Chrismas had to throw his hat in the ring. As the document below shows, Chrismas and Bailey met with Coleman on March 2 from 12:30 p.m. to 1 p.m., according to a copy of Coleman's agenda I obtained via Freedom of Information. (The documents also show Coleman met with B.C. Government and Service Employees' Union president Darryl Walker and negotiator David Vipond on March 28, a week after the union and government agreed to a post-privatization job security and early retirement package. But that's another story, right here.)

Despite my numerous attempts to find out what was discussed in the meeting, neither Coleman nor Chrismas have responded to my interview requests.


If Exel doesn't make it to the shortlist on July 20 and ContainerWorld does, then don't for a moment assume that Exel is out of the game. The "Project Last Spike" memo spelled out Exel's ContainerWorld strategy. Read all about it here, from Business in Vancouver.


Rich Coleman Agenda

#LiquorLeaks examines the issue of influence

The picture became clearer July 12 when the NDP released the results of its Freedom of Information request for records about the privatization of the Liquor Distribution Branch's warehousing and distribution. We now have even more proof -- since my exclusive May 8 story in Business in Vancouver -- that all roads lead to Exel. A summary is in this July 12 BIV story.


There was a pivotal meeting on Aug. 25, 2011 between Exel vice-president and lobbyists Mark Jiles and Rob Madore with then-liquor minister Shirley Bond and Roger Bissoondatt, the chief financial officer of the LDB and the acting-general manager, since Jay Chambers left July 4. 


This pursuit, however, dates back to 2005 when John Les was the liquor minister. 

We now have proof that Exel was trying to influence the writing of the RFP. It is contained in a Sept. 24, 2010 letter from Lyons to Rich Coleman. 

Exel encourages the Government following a proper, timely, and effective procurement process that meets the business needs and objectives of the Government, industry, and consumers. We suggest the criteria for selection emphasize: 

> Actual experience operating alcohol beverage warehousing and distribution networks for entire provinces across an extended period 

> The long-term stability of the company, the financial capability to take on a project' of this size, and the ability to scale its operations as needed> A record of achieving excellent results in unionized environments and in particular a relationship with the BCGEU ' 

> Ability to demonstrate long-term successful operations of a similar size, scope, and complexity as the LOB warehousing and distribution operations 

> A record of successful start-ups including the availability of resources locally, nationally, and internationally to support the implementation 

> A commitment to and record of reducing green house gas emissions and waste 

> IT Infrastructure, systems redundancy and' data management capability including experience Integrating IT systems to government ERP systems and other third party applications 

> Proven record of successfully securing and controlling beverage alcohol products for provincial governments 

> Engineering and design capability 

> Availability to provide services beyond warehousing, and, distribution such as forecasting and demand planning, global freight services, real estate development

Did the attempt to influence Coleman, with whom Exel claimed a close relationship, carry over into the April 30, 2012-published  Distribution of Liquor Project Negotiated Request for Proposals? Compare the above with this excerpt from page 44: 

7.2.1 In Scope Evaluation Criteria 
1. (a) Proponent Capability and Capacity
a) Proponent Profile (Lead and subcontractors if any)
b) Demonstrated experience in large scale warehousing and wholesale distribution of retail products and controlled substances such as the beverage alcohol business
c) Demonstrated experience with transition planning and transitioning services of similar size and magnitude to the In Scope requirements

1. Demonstrated experience in inventory, demand and delivery management on a scale similar to the requirements described in the NRFP

1. (b) Proponent Corporate and Financial Capacity

1. Corporate and financial capacity

I exclusively obtained the "Project Last Spike" Exel internal memo, which was authored by Lyons from Oct. 6, 2009. Here is a key section which must now be viewed through the lens of the documents published July 12 by the NDP. Exel, it seemed, wanted to influence the writing of the RFP. But it also hoped to do a private-public partnership with government to avoid an RFP process altogether.

Options to Overcome BarriersThere are three options to overcome the opposition of private bonded warehouses.  

Convince the government to award the contract to Exel without an RFP. 
This avoids the risk of losing an RFP. It may also enable the government to realize savings more quickly as time is not lost in the RFP process. It will require a high degree of industry support. Vocal complaints from unions or industry participants could generate public scrutiny and force the process to RFP. This option may require the purchase of ContainerWorld to be successful.

 Win a competitive bid process. 

This option does not require the purchase of ContainerWorld, and follows standard government procedures. It does carry the risk the Exel might not win the bid. This risk can be mitigated if Exel can influence the writing of the RFP. Exel would push to include criteria such as previous industry experience, appropriate resources, and a solution incorporating the BCGEU. A likely response from the private bonded warehouses may try and limit the scope of the RFP to not include their activities. Failing this, the private bonded warehouses will use their influence to have the RFP written in their favour. 

Purchase ContainerWorld. 
It is by far the largest of the approximately 7 private bonded warehouses. Once ContainerWorld is onside the opposition of the remaining private bonded warehouses would be much less. 
This would enhance the odds that the government does not go to tender or Exel wins a tender. Dennis Christmas (sic) the principal owner of ContainerWorld is a key player in the current BC industry. Treating him fairly and getting him onside will assist bringing the BC government and the industry along. An added benefit of this approach is that ContainerWorld has a brand new 495,000 sq. ft. site that is expandable to 600,000 sq ft. This should meet the needs of this initiative, though Exel requires further analysis to confirm this site is sufficient. Dennis Christmas could be retained as a consultant and public relations specialist. The downside to this option is sharing the economic benefits with ContainerWorld. Though it may be possible to amortize the purchase price across a number of years and build the cost in to the operating model. Another consideration is the complex internal approvals required to purchase ContainerWorld. Further details on this option include:
ContainerWorld's revenues are estimated at $40M. Exel estimates that $20M is
generated from freight forwarding activity, and $20M from distribution activities for BC Wineries and BC Small Brewers. A high level estimated purchase price ContainerWorld's business is $24M assuming a 7.5% margin and paying eight times earnings. This is a dimensional number which needs to be confirmed but supports the premise that an acquisition approach is overall economically viable.
0 The union representing ContainerWorld's employees is the Teamsters. Exel will •be represented by the BCGEU. Upon purchasing ContainerWorld, and consolidating operations the BCGEU would take over the Teamsters members.
This is not a certainy, but the BCGEU membership is almost two times the size of the Teamsters membership, and the BCGEU collective agreement is more lucrative.
0 Deutsche Post DHL holds a 100% stake in Giorgio Gori. Giorgio Gori does not have an ownership stake in ContainerWorld, but has a long standing relationship where it is understood that at some point they would purchase ContainerWorld. Exel could use this avenue to negotiate a reasonable deal with Dennis Christmas.

#LiquorLeaks presents NDP's Exel FOI documents

NDP liquor critic Shane Simpson dropped a bombshell July 12 at a Vancouver news conference where the results of a Freedom of Information request by the NDP Caucus were revealed. The 38 pages show the depth and breadth of Exel Logistics' lobbying to privatize the B.C. Liquor Distribution Branch. 

The company, which hired BC Liberal-connected lobbyists Mark Jiles and Patrick Kinsella, was not seeking to compete in a tendering process. It wanted to cut a direct, private/public partnership deal. That was part of the strategy mentioned in the "Project Last Spike" Exel internal memo of Oct. 6, 2009. Plan B was to go through a bid process, but Exel contemplated using its relationship with liquor minister Rich Coleman to influence the writing of the request for proposals. It's plan C was to strike an alliance with or take-over Richmond's ContainerWorld, which has a business relationship with Giorgio Gori, an Exel sister company.

Much more to come. Remember, #LiquorLeaks is the #hashtag, this is the story that started it all, in the May 8 edition of Business in Vancouver and here are the new documents below.

LDB Privatization FOI-NDP

#LiquorLeaks reveals another LDB privatization foe

Is it beyond the tipping point yet? 

I'm referring to the controversy over the B.C. Liberals' rush to privatize the Liquor Distribution Branch's warehousing and distribution -- without a business plan or cost-benefit analysis (I've tried hard to get one, but it either doesn't exist or is a #hiddenplan) and without any formal industry consultation. 

Prominent B.C. Liberals have a too-close-for-comfort connection with the leading bidder, Exel Logistics. Exel is the subsidiary of German giant Deutsche Post DHL and owns the private Alberta monopoly Connect Logistics. Exel has used the services of B.C. Liberal lobbyists Mark Jiles and Patrick Kinsella for seven years, since John Les was the liquor minister. In Exel's own words, in an Oct. 6, 2009 internal "Project Last Spike" memo, the company contemplated using its relationship with liquor minister Rich Coleman to influence the writing of the request for proposals.

Now the Campaign for Real Ale of British Columbia, part of an international network of beer aficionados, has joined the chorus of those seeking to postpone or cancel the privatization. On July 11, CAMRA sent the following letter to Coleman, finance minister Kevin Falcon, citizens' services minister Margaret MacDiarmid, fairness monitor George Macauley and Roger Bissoondatt, the acting general manager and chief financial officer of LDB. 

From: CAMRA President <pres@camravancouver.ca> Date: Wed, Jul 11, 2012 at 5:38 PM  Subject: Campaign for Real Ale of British Columbia position LDB Distribution Warehouse Privatization
To: rich.coleman.mla@leg.bc.caCc: <Shane.Simpson.MLA@leg.bc.ca>, kevin.falcon.mla@leg.bc.ca, margaret.macdiarmid.mla@leg.bc.ca, Roger.Bissoondatt@bcldb.com, office@macauley.ca, <Karen.Ayers@gov.bc.ca> 

Dear Mr Coleman   

I am writing you this letter on behalf of the Campaign for Real Ale of British Columbia (CAMRA BC), a craft beer consumer advocacy group who represent more than 1000 individual and 100 corporate members here in British Columbia and of which I am the Vancouver Branch President and member of the BC Executive.  

Since the announcement of the BC Liberal Government’s plan to sell off the Liquor Distribution Branch’s warehouses and with them the province’s warehouse distribution system, many groups have come out against the plan, including the opposition NDP Party, Alliance of Beverage Licensees of BC, the BC Government Employee’s Union and the Craft Brewer’s Guild of BC.   

There have been complaints of the complete absence of consultation with BC’s liquor industry or the general public, and the lack of guarantees that this privatization plan will not negatively impact the alcohol industry and alcohol consumers of this province.   

It is now our turn, the craft beer consumers of BC, to voice our dissent due in large part to  the lack of information as to how this privatization will affect the craft beer industry and craft beer consumers and because the current government cannot guarantee 100 percent that this privatization deal, when completed and implemented, will not have a negative impact on the craft beer consumers of BC.   

No business case has been presented. A clear cost-effect analysis should be completed and presented to both the liquor industry and general public in order to clarify exactly how privatization will affect liquor prices before this process goes any further.   

No study has been done and no guarantees have been made as to whether privatization will affect access to BC-brewed beers from local, craft breweries.  

At the moment, the Provincial Government has a mandate to make these beers accessible, but will this continue after privatization?   

In short, CAMRA BC cannot currently support this privatization plan and will continue to voice dissent until the following steps are taken:

1. Conduct a study to provide objective data showing how this move will impact the craft beer consumers of BC  

1. Make public a business case and/or cost-effect analysis

1. Have a full and meaningful consultation with both the private and public sectors of the province in regards to the planned sale and privatization of the Liquor Distribution Branch's warehouses and warehouse distribution system  

If, after those steps have been taken and it is shown that this privatization plan will not negatively impact the craft beer consumers of BC, CAMRA BC will be willing to support this move publicly on behalf of our membership. Thank you for your time. 

--Paddy Treavor  

President CAMRA BC
Vancouver Branch

The First Epistle of Peter (Brown)

It's a "Sky's Falling" letter, but the author is definitely no "Chicken Little."

Peter Brown

Peter Brown is one of British Columbia's top captains of industry and a champion of free enterprise for a half-century. In the letter below, sent to the B.C. Conservative Party and provided to me by a source, Brown paints a bleak picture of the world economy and suggests the only local solution in British Columbia is to keep the NDP from taking office in the 2013 provincial election. Brown mentions the NDP three times, but not the B.C. Liberals or Premier Christy Clark.

"...we are in a very troubled global economic condition that is more serious and likely to be longer in duration than the normal relatively short term post war recessions and that will, in my opinion, impact on global growth, investment and job creation for some time to come. It is a time that responsible British Columbians need to get past their partisan beliefs to hopefully ensure that our politicians don't add another level of uncertainty in an uncertain and economically dangerous world."

Brown is obviously attempting to do his part to unite the right in B.C. But how can it work when every week brings another announcement of a B.C. Liberal leaving the fold? Why would John Cummins and his Tories want to board the sinking Liberal ship? On July 9, MLA Dave Hayer was the latest to announce he would disembark after the election. Hayer recognized former Premier Gordon Campbell in his announcement, but omitted his current manager, Premier Christy Clark.

Clark's government is among the least-trusted in the country. Calls for a public inquiry into the BC Rail scandal intensified in June. The Liberals proceed stubbornly on a controversial and potentially tainted privatization of the Liquor Distribution Branch's warehousing and distribution. Community Living B.C. chairman Denise Turner was given another three-year term on July 3, despite that Crown corporation being a controversy magnet.

(Note: Brown later issued a correction. The last paragraph of page 2 should read 'expiry of the Bush tax cuts which could impact the US economy by over 3% of GDP' not 30%.")

UPDATE JULY 11: Brown's missive was addressed to BC Conservative official Al Siebring and I wondered how Mr. Siebring reacted. He sent me the reply below to Brown's letter, which is displayed in-full at bottom. The problem is not the Conservatives, Siebering concludes, it is the Liberals and their lack of leadership and policy direction.

Mr. Mackin:

My reaction Mr. Brown's letter?  First of all, he lays out an excellent case for fiscal conservatism; precisely the kind of positions that the BC Conservative Party is advocating.  I find myself in agreement with much of his analysis with respect to macro-economics and political/governance philosophy.  Where he loses me is with the line:  "It is critical... that those who contribute to fragmentation of centre right vote come to realize that they are an unintended ally of the left." 

Left unsaid in that line, (but the intent is clear), is the notion that the BC Conservative Party is somehow responsible for the fragmentation.  But I would assert that to the degree the centre right is being "fragmented", it's not the BC Conservative Party which is responsible for the problem.   Rank and file voters who are inclined toward fiscal conservatism are growing increasingly disenchanted with the aimlessness and lack of true leadership that we have seen in the BC Liberal Party; it has become a movement that is seen to be advocating for legislative and policy directions which can no longer be considered "conservative" by any honest measure of the word.

I certainly appreciate Mr. Brown's point that, from his perspective, the goal is to keep the NDP out of power.  However, if we in the BC Conservatives were to fold our tent tomorrow, it's clear the Liberals would lose the next election in any event.  And as John Cummins has clearly said, even if the leadership of the BC Conservative Party were to accept the Liberals' invitation to "crawl back into the tent", our membership simply wouldn't follow us.  There are thousands of former Liberal supporters, myself included, who literally "stayed home" in the last Provincial election.  These people are now being re-engaged with the emergence of a new, truly "centre-right" option which they can enthusiastically support.

Further, as illustrated by the most recent Angus Reid poll released this week, Mr. Brown might wish to ask himself how it is that the leader of the governing party in British Columbia - with all the attendant media attention that comes with that position - can be tied in voter approval with the virtually unknown leader of a "third-place" party?

Mr. Brown is a very intelligent man.  I trust that over time, he will come to see that the BC Conservative Party is not the problem in BC's "centre-right coalition."  The problem is the Liberals, both in terms of their present policy direction and their lack of credible leadership.

Thank you for your question.

Al Siebring,
Chair,
Policy and Platform,
BC Conservative Party

The First Epistle of Peter (Brown)