#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

#LiquorLeaks wonders why Christy met Rich on a Saturday?

Below is Premier Christy Clark's agenda for December 2011.

There is only one entry on Dec. 3 for an hour-long Saturday meeting with Rich Coleman.

There is no clue about the reason for the meeting. The location was censored. We don't know if anyone else attended.

Politicians often appear at weekend community festivals and parades and fundraising banquets. But I have read enough agendas of politicians over the years to know that a weekend meeting among senior members of a provincial cabinet is out of the ordinary. Frankly, it is unusual. Especially for Clark, who has a hockey-playing son that deserves her attention on weekends.

Why is Dec. 3, 2011 an interesting date? A Cabinet Concept Paper dated Dec. 1 is about "Liquor Retail and Distribution Model Options." Then-liquor minister Shirley Bond signed the report on Dec. 5. Bond had met on Aug. 25, 2011 with Exel vice-president Scott Lyons and lobbyists, including Mark Jiles and Rob Madore, after previously telling Exel the government wasn't interested in privatization. 


The liquor portfolio has never really strayed far from Coleman, who enjoys his whiskey. It keeps finding its way back to his desk. Coleman regained the responsibility on Feb. 8, 2012. 


Then, 13 days later, the liquor logistics privatization was announced in the Feb. 21, 2012 budget. 


Almost three months after he met with Clark on the first Saturday in December, Coleman met with Dennis Chrismas of ContainerWorld and his lobbyist, Mike Bailey on the first Friday of March. ContainerWorld is the only B.C.-headquartered and owned company among the six seeking the LDB monopoly, yet it has an interesting association with Exel.


Learn more about Exel's Long March to Control B.C.'s Liquor Distribution here, from The Tyee.

Premier Christy Clark's Agenda Dec. 2011

#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 reveals Exel's ContainerWorld strategy

In the May 29 edition of Business in Vancouver, I examine the potential symbiotic relationship between Exel Logistics and ContainerWorld, the largest liquor "pre-distribution" warehouse under contract to the B.C. Liquor Distribution Branch. Read it here. The government's privatization of LDB's warehousing and distribution will phase out the "pre-distribution" program, meaning ContainerWorld may be in trouble.

Or is it?

ContainerWorld hired a lobbyist to oppose any changes to the distribution model. But now it is bidding for the contract. Founder Dennis Chrismas (below) and lobbyist Mike Bailey even went to meet liquor minister Rich Coleman on March 2!

ContainerWorld also has an intriguing business relationship with an arm of the Deutsche Post DHL empire, Giorgio Gori of Italy. Gori is a sister company of Exel. In the Oct. 6, 2009 "Project Last Spike" internal memo, Exel's vice-president Scott Lyons considers what to do about ContainerWorld, which is also connected to the B.C. Liberal Party that is rushing to privatize LDB logistics before the May 14, 2013 election. Exel wants to merge the B.C. LDB warehousing and distribution with Connect Logistics, the monopoly it owns and enjoys in Alberta.

Among the many questions to ponder about this controversial government sell-off: Are ContainerWorld and Exel foes? Or might they really be friends? Read more below, from "Project Last Spike."

Barriers to this Project
- This initiative will mean the services of private bonded warehouses will not be required. As a result, this group will oppose this initiative and they will likely lobby industry and government against any changes. Private bonded warehouses will argue that jobs will be lost, and the government is driving them out of business. They will also contend that costs will be higher because of the BCGEU's higher wages and benefits, and if there are any savings the government will keep them for itself. Lastly, they will make a case for improved service by expanding their participation in the industry

Options to Overcome Barriers
There 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:
0 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 certainty, 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.

Richmond East Liberal MLA "Linda (Reid) pictured with Dennis Chrismas (left) while touring a local Richmond East business" 01/06/2010

Check out ContainerWorld's $36,261 donations since 2007 to the B.C. Liberals (including $500 to Rich Coleman's 2009 re-election campaign) via the Elections BC website. Chrismas gave an additional $1,300 under his own name in 2007 and 2010.

Compare that to the $85,704 donated to the Liberals by Gordon Campbell and Christy Clark's friend and (until March 30) Exel lobbyist Patrick Kinsella, and $57,500.50 donated by his right-hand man, Exel lobbyist Mark Jiles. Exel vice-president Scott Lyons donated $433.08 to the NDP before the 2009 election and $3,500 in 2011 to the Liberals, according to his disclosure.

ContainerWorld's Richmond warehouse on Port Metro Vancouver's Fraserport logistics campus.