#LiquorLeaks - Jay and the 8-Day Delay

On June 4, general manager Jay Chambers sent a memo to staff, assuring them he would guide them through the process that is the privatization of the Liquor Distribution Branch's non-retail functions.

He also invited staff to send him questions and even had a dedicated email address, askjay@ldb.com

LDB, through its parent, the Ministry of Energy and Mines (Rich Coleman, minister), shared modified versions of two of the emails with me via Freedom of Information, plus the prepared response. Were there more emails? Who sent them?

Ten days after Chambers invited questions from staff, he announced his resignation to join the Motor Vehicle Sales Authority of B.C. The sudden and inconvenient June 14 announcement had all the appearances of getting out of the kitchen while the privatization pot was burning. Predictably, both Coleman and Chambers claimed otherwise: Nothing to see here, move along. NDP critic Shane Simpson didn't buy it and unsuccessfully attempted to have the privatization's so-called fairness monitor, George Macauley, halt the tendering process. Macauley's power is extremely limited. He's a monitor, not a referee.

I don't buy it either. Chambers had a conference call on April 12 with the MVSA's hired headhunter George Madden, on LDB company time. It's in Chambers's daily LDB agenda!

Here's the kicker. Chambers told Coleman's deputy minister Lori Wanamaker on June 6 that he was resigning! That's eight days before the June 14 memo! Why the eight-day delay in telling staff?

"It is with very mixed emotions that I have made this decision," Chambers wrote to Wanamaker, giving her a month's notice. See the letter below.

Chambers's last day of work was July 4. He left two days early with an afternoon office party at the LDB headquarters. Roger Bissoondatt took over in the interim and is leading the committee vetting bids to take over LDB's warehousing and logistics.

Jay Chambers' resignation letter

Ask Jay FOI

#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

Does fairness monitor equal fancy monicker?

As the old proverb goes, all is fair in love and war. But is it fair in British Columbia government privatization?

The last week of June began spectacularly with the shocking Alex Tsakumis revelation of a 2003 Dave Basi memo-to-file that alleged Christy Clark (then Deputy Premier, now Premier) breached her oath of confidentiality. Yet another reason why a public inquiry into the BC Rail privatization scandal is a must.

The week ended with the British Columbia Government and Service Employees' Union announcing a brief strike at three LDB sites, including headquarters in Vancouver. The BCGEU hit an impasse with the government on talks for a new government-wide contract and it says it is fighting back against LDB privatization. Meanwhile, there are serious questions about two ex-BCGEU executives who were lobbied by LDB privatization frontrunner Exel Logistics, but refused to do interviews.

The BCGEU strike notice was made June 29, the same day that bidding closed for the Distribution of Liquor Project. That's the fancy name given the controversial privatization of the LDB warehousing and distribution.

NDP critic Shane Simpson complained in a June 22 letter to George Macauley, the so-called fairness monitor who has a $74,900 contract to oversee the process. Simpson wanted Macauley to recommend the government postpone tendering until a business case is released, industry consulted and a replacement hired for LDB general manager Jay Chambers. Chambers drives away from his job as the head drink retailer in B.C. on July 6 to preside over the Motor Vehicle Sales Authority of B.C. Roger Bissoondatt will act as g.m. until a replacement is hired.

Simpson, who cited my May 8 story in Business in Vancouver during Question Period, already called the privatization "tainted" because of the cozy relationship between Exel Logistics, B.C. Liberal lobbyists Mark Jiles and Patrick Kinsella and the liquor minister, Rich Coleman.

Simpson got his answer from Macauley on June 25. In a nutshell: the Victoria lawyer and economist says he has no power to intervene, because of the terms of his contract that were set by the government. He is watching the process and making sure bidders follow the RFP requirements. He will submit a report next March, after the contract has been awarded. He can't do anything else.

This seems to contravene Coleman's answer to Simpson during the May 29 budget estimates committee hearing:

Simpson: (Does the fairness monitor) have any other authority to be able to direct the RFP process in any way if they have a concern during the process that they think…? You know, maybe it isn't anything major, but they have a concern, and they want to recommend or direct an adjustment in the process to keep it more balanced based on their view. Do they have authority or an ability to do that, and if so, how?
Coleman: Through the process, he has the ability to raise concerns, keep the balance, make recommendations — all of those things as the fairness monitor with regards to the process, if he has concerns.
Simpson: Who would he make those recommendations to? Would he make them to Mr. Chambers? Would he make them to the minister? Where would those recommendations go? Would they be expected to be of a private nature, or would it be of a more public nature?
Coleman: It's probably the project team or the two deputies that are responsible, which is probably the same thing.

A fairness monitor not empowered to ensure fairness is like a referee not allowed to blow a whistle or a linesman prohibited from raising a flag. Yet another reason to question the integrity of an already controversial process.

Coleman, the minister responsible, has not responded to any of my interview requests.

Read my story here in BIV and see Simpson's letter and Macauley's reply below.

NDP critic complains about integrity of LDB privatization

Response to Shane Simpson 2012-JUN-25

#LiquorLeaks Privatization Primer

A pause to refresh and compile a list of links to media coverage and news releases about the controversial move by the British Columbia government to privatize the Liquor Distribution Branch's warehousing and distribution. 


Finance Minister Kevin Falcon revealed the plan in the Feb. 21 budget. Rich Coleman, whose portfolio includes gambling and liquor, launched a negotiated request for proposals on April 30. Deadline for bids is June 29 and a shortlist, that could be as small as one company, is expected July 20. 


Full coverage in Business in Vancouver

Logistics giant targets lucrative LDB contract

NDP blasts liquor privatization process

Alberta’s experience: product diversity booms, costs balloon

Industry irked over Liberals' push for liquor privatization 


LDB privatization a ContainerWorld game changer - B.C.'s biggest bonded liquor warehouse: Exel's friend or foe? 

The Tyee: Exel's long march to control B.C.'s liquor distribution 


#LiquorLeaks


Reveals Exel's expansion strategy


Reveals Exel's contract terms 

The influence of Rich 


Whither the workers in booze privatization?


Launching #LiquorLeaks 


Libs keep lid on privatization plan 


The Province's Mike Smyth: Booze brawl brewing in B.C. 

Glacier newspapers' Keith Baldrey: Liquor sale smells fishy 

Shaw TV's Sean Leslie: This Week in B.C. 

Global TV's Marisa Thomas: Are liquor prices set to get higher? 

Alex G. Tsakumis: Rebel With A Clause


B.C. Conservatives news release -- Cummins: Don't sell the Liquor distribution branch if it means higher prices for consumers

B.C. Craft Brewers Association news release -- B.C. Craft Brewers Guild opposes privatization of B.C. Liquor warehouse  

B.C. Legislature video: NDP critic Shane Simpson challenges liquor minister Rich Coleman in Question Period 

Canadian Restaurant and Foodservices Association news release -- CRFA applauds intention to privatize Liquor Distribution Branch  

Note: CFRA cites the 2005 Ontario government's Lacey Report and a Montreal think-tank's 2005 report, both recommending an increased private role in the liquor industry. Neither, however, offer in-depth analysis of the supply chain and its costs. The B.C. government did no such study before embarking on the distribution and warehousing privatization.

Ontario Ministry of Finance report: Strategy for Transforming Ontario's Beverage Alcohol System  

Montreal Economic Institute report: Is government control of the liquor trade still justified?  

Note: In 2007, the Alberta government was reeling from 2006 supply chain chaos at Connect Logistics, the Exel-owned company that became the private monopoly in 1994. The labour shortage and management of the warehousing and trucking created a perfect storm of trouble for the industry. 

PricewaterhouseCoopers report for Alberta Gaming and Liquor Commission: Liquor Warehousing and Distribution in Alberta Supply Chain Analysis

CFRA's key comments are on page 23: 

"AGLC and CLS (Connect Logistics Services) must do a better job forecasting demand and planning for spikes in volume. There must be performance incentives in CLS' contract to ensure service levels are maintained and delivery times are guaranteed during busy peak times. Given the monopoly CLS enjoys there is no risk of losing market share due to poor service. Why would CLS increase their costs by providing more staff to ensure service levels are maintained when there is no risk of losing customers? In the absense of competition AGLC must ensure CLS maintains service and delivery standards without passing on additional service costs to retailers and licensees."

Mark Hicken: Two wine neighbours, two approaches to liquor regulation

Conclusion:

All evidence so far shows that the privatization tender in B.C. is driven by one company, Exel, and its B.C. Liberal-connected lobbyists. There are serious questions about the integrity of the bidding process, but my repeated requests to interview Minister Rich Coleman have been denied. 


Did the government learn any lessons from the tainted BC Rail sale? This is a process governed by a hard deadline of March 1, 2013. The next scheduled election is May 14, 2013. The cash-strapped government desperate to hold onto power is hungry to cut costs and increase revenue by any means necessary. 

There is no business plan or cost/benefit analysis and the government does not want to show you or me what's hidden in the cabinet documents. If the idea to privatize liquor logistics is solid, if there is data to back it up and if it will benefit the province, why does the government refuse to show us proof? 

The sale of alcohol is a major revenue generator and contributor to our economy and I'm among many proud supporters of B.C. wines and microbrews. LDB poured $890.4 million of profits into provincial coffers in 2010-2011. Some of those dollars helped fund the operation of schools and hospitals. The government wants more, so it's opening up a new sales channel via movie theatres. Cineplex hired lobbyist and Liberal insider Marko Dekovic to arrange a meeting with liquor minister Rich Coleman.

In the rush to wring more revenue out of the taps, is the government neglecting the social side of the equation? Alcohol is a legalized drug that is addictive. Visit any Provincial courthouse on any weekday and you will be shocked at how frequent the misuse or abuse of alcohol is in the foreground or background of trials. You will see sad, broken people from disintegrated families. They are the opposite of the smiling, young people having fun in beer ads. Maybe you know someone who has battled alcoholism?

The Centre for Addictions Research of B.C. study called Alcohol Pricing and Public Health in Canada: Issues and Opportunities is worth a read. The pricing and taxation of booze, it says, "is arguably the single most important issue to tackle when addressing alcohol misuse from a public health perspective. It is also the hardest to engage because of the multitude of interests involved." Among its many recommendations are tying alcohol taxes and markups to the rate of inflation and simplifying alcohol volume and strength-based taxation to encourage the consumption of lower-alcohol drinks.