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Michael Graydon of Paragon Gaming is pictured on the site where the company plans to build an urban resort featuring a casino next to B.C. Place in Vancouver, on February 12, 2014.Ben Nelms/The Globe and Mail

An expert on executive compensation says Michael Graydon's contract as CEO of the B.C. Lottery Corporation was so badly flawed he's surprised the Crown agency negotiated such a deal.

"This is a poorly drafted and negotiated executive contract for someone in Mr. Graydon's position. This poor agreement is a failure on the part of the BCLC board of directors," said Richard Leblanc, an associate professor of law, governance and ethics at York University.

"The most important decision of the board is to hire, fire and compensate the CEO and they got it wrong because they negotiated a contract that had a whole bunch of holes in it," he said.

Mr. Leblanc questions how Mr. Graydon was allowed to quit as head of BCLC in February and a week later start as president of PV Hospitality ULC, a partnership of Paragon Gaming Inc. and 360 VOX Corp., which is developing a casino resort in Vancouver.

His sudden move from a highly sensitive government job to private industry has raised questions both inside and outside the legislature.

BCLC has defended its standards, saying conflict of interest conditions are clearly set out in an ethical code of conduct that applies to all employees.

Mr. Leblanc, who was provided a copy of the contract by The Globe and Mail, said Tuesday he was surprised by how little there is in the document.

"I was expecting 10, 20 pages and it ended at three and then there were appendices. It was sparse," Mr. Leblanc said.

He said the contract, signed in 2008, did not contain a non-compete clause that would have stopped Mr. Graydon from going to work for the gambling industry. Nor did it clearly define conflict of interest, set out how much BCLC would have to pay him if he quit, or stipulate the notice he'd have to give.

Mr. Leblanc said such clauses are standard in executive contracts – and should have been in place at BCLC, which is responsible for the conduct and management of gambling in B.C.

"If you ask any director the most important thing you should be thinking of, it's 'OK, [what if] this person quits and starts working for a competitor?' That should have been the number one issue in their mind," Mr. Leblanc said.

"How could [the board] read this contract and not ask the questions I ask … which are: 'How are we protected? What's our downside in terms of competition?'"

Mr. Leblanc said the contract simply did not adequately protect BCLC.

"The number one thing you should have done is what you didn't do," he said, chastising the board. "I mean I teach this in my executive compensation course … Like you should not have to teach a sophisticated, gaming, major Crown corporation in British Columbia something that is contract 101."

The BCLC issued a statement saying Mr. Graydon was bound by the standards of ethical business conduct, which includes guidelines for conflict of interest.

The Finance Minister's office also issued a statement saying it takes conflict issues seriously. It said the government is "not aware of any valid concerns or wrongdoing, but out of an abundance of caution, the finance minister has asked government's Internal Audit service to conduct a review of Mr. Graydon's involvement and interaction with Paragon and PV Hospitality prior to his departure. The review will focus on any potential conflicts of interest or breaches of confidentiality that may have occurred."

Shane Simpson, gambling critic for the NDP, said the most telling thing about the contract is what's not in it.

"It's just remarkable there are no safeguards of any kind in the contract. It's very bare bones. And you would think for somebody who had such a sensitive position that … Mr. Graydon would have had a series of conditions about what he could and couldn't do … and that doesn't appear to be there at all," he said.

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