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Former B.C. Rail official denies 'failure strategy'

Dave Basi (L) and Bob Virk (R) make their way into Vancouver's BC Supreme court May 18, 2010 after a lunch break.

John Lehmann/Globe and Mail/John Lehmann/Globe and Mail

A former BC Rail board member has strongly rejected allegations from the railway's fired president that he was let go in 2001 because of opposition to a "failure strategy" by other executives to run the operation into the ground in order to strengthen the case for selling it.

"That's just absurd," Brian Kenning testified Wednesday, under cross-examination at the political corruption trial of three former ministerial aides. "He was terminated by the board for his personal conduct."

Mr. Kenning was referring to Mark Mudie, then president and CEO of BC Rail, who was dismissed, according to the railway, for having an affair with an executive colleague.

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Mr. Mudie sued for wrongful dismissal. BC Rail eventually settled the case out of court, and Mr. Kenning did not dispute suggestions by defence lawyer Kevin McCullough that the settlement included a payout of "several hundred thousand dollars."

In court documents filed to support his suit, Mr. Mudie alleged that other top executives intentionally set out a poor business plan for the railway in hopes that it would fail, "to convince the government of B.C. that there is no option but to sell the railway."

In B.C. Supreme Court, Mr. Kenning agreed that the railway had improved its profitability under Mr. Mudie's direction, but denied his claim that this was a factor in his dismissal.

"Mr. Mudie can allege whatever he wants. That is absolutely incorrect."

Mr. Kenning, appointed to the board of BC Rail less than four months before directors decided the Crown corporation should be sold, also denied they were under "marching orders" from the government to have the railway put up for sale.

In the 2001 election campaign, Liberal Leader Gordon Campbell promised to leave BC Rail alone, a reversal of his support during the 1996 election for privatizing the railway.

Within six months of Mr. Campbell becoming Premier, however, the government-appointed board of BC Rail recommended its sale, and in February of 2003, the Premier announced that it would be sold.

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Mr. McCullough wondered how Mr. Kenning could approve such a move so soon after his appointment, having attended only a few meetings, and, as the witness testified earlier, knowing little about the railway business when he joined the board.

"You really knew nothing about the business of BC Rail, when you recommended that it be sold," the lawyer suggested to Mr. Kenning. "That is completely untrue," he responded.

Earlier, court heard of numerous corporate perks that continued to flow to BC Rail and its CEO Kevin Mahoney, even after the business had dwindled to just a handful of employees running a short spur to the Robert Banks coal port.

The publicly owned company paid more than $72,000 for tickets to the Vancouver Canucks in 2004, another $45,000 in 2006, and $29,000 to the B.C. Lions in 2005.

As well, Mr. Mahoney had vehicle allowances and a private golf club membership, Mr. McCullough told the court, reading from a BC Rail spending list.

"That was a term of his engagement," Mr. Kenning explained. "Many executives ... have perks like that."

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David Basi, Bob Virk and Aneal Basi are on trial on corruption charges relating to the controversial sale of BC Rail in late 2003.

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