CONTENTS

British Columbia Railway Company Construction Loan Amendment Act, 1975 (Bill 27). Committee stage.

On section 1.

Hon. Mr. Barrett — 3481

FRIDAY, JUNE 13, 1975

The House met at 10 a.m.

Prayers.

HON. L.T. NIMSICK (Minister of Mines and Petroleum Resources): On behalf of the Minister of Economic Development (Hon. Mr. Lauk) and myself, I wish to table the report of the British Columbia copper task force. It has taken approximately one year to bring forth this report which covers the full ambit of copper from raw resource to fabrication.

I wish to thank the committee for the very detailed work they have accomplished. The committee was chaired by my Deputy, Mr. J.E. McMynn, and its members included W.M. Armstrong, H. Horn, H.L. Keenleyside, J.T. Meredith, C.E. Sawyer and E.T. Staley.

Much of this work was done at great inconvenience to the committee members in many instances. I feel they have made a contribution that I hope will prove valuable to the future of British Columbia.

The report is tabled for public information, and at this point does not constitute any commitment by the government.

MR. J.R. CHABOT (Columbia River): Mr. Speaker, we have in the gallery, or about to arrive, 41 students from the Invermere Elementary School in that great constituency of Columbia River, and their teachers, Mr. Bryck, Mr. Wilkes and Mr. Wright. I would like the Members to welcome them.

MRS. D. WEBSTER (Vancouver-South): Mr. Speaker, this morning in the gallery we have 20 students from Seneca Community College, Toronto, who are here to see our legislative processes, and who are very interested in the political scene. They are accompanied by their teachers, Lydia Kawun, Andrea Diploc and Toni Tilly. I would ask this House to welcome them.

Orders of the day.

HON. E.E. DAILLY (Minster of Education): Mr. Speaker, public bills and orders — committee on Bill 27.

BRITISH COLUMBIA RAILWAY COMPANY
CONSTRUCTION LOAN AMENDMENT ACT, 1975

The House in committee on Bill 27; Mr. Dent in the chair.

On section 1.

HON. D. BARRETT (Premier): Mr. Chairman, last night I said that I would be filing a report submitted by Peat, Marwick related to their qualifications for taking on the job as auditors to the railroad, and also the letter concerning the Penn Central. Unfortunately, I didn't ask leave last night. I would like to ask leave of the committee that I might file it now with the committee.

Leave granted.

MR. W.R. BENNETT (Leader of the Opposition): Mr. Chairman, I'd like to ask the Premier and president of the railway if he.... I can't seem to obtain a copy of the financial statement for the year ended December 31, 1973, that is required under the Public Bodies Financial Information Act. I have attempted to get one, with no success. Under the Act, this report must be printed within six months of the end of the fiscal year, which would have been by July of 1974.

I wonder if the Premier could tell me if the railway was in contravention of the Act if the report wasn't printed within the six month requirement?

HON. MR. BARRETT: Mr. Chairman, that matter was raised with me yesterday, and I have asked for a report. I had hoped to get a report this morning.

MR. BENNETT: I understand there is a very unusual set of circumstances here, and I have been doing a lot of calling trying to get this report. The public information Act is very specific in what it requires the railway to do. It states:

"Notwithstanding the provisions of any other Act, upon neglect or refusal of a corporation, association, board, commission or society to comply with this Act, the Minister of Finance may withhold any grants of advance, or the Lieutenant-Governor in Council may withhold any guarantee of borrowings authorized to be paid, made or given under any statute named."

I wondered if this wasn't filed within the time it was required to be filed with the Minister of Finance, was any consideration ever given to withhold any grants or loans to the railway?

Public Bodies Financial Information Act indeed gives the Legislature and the public some scrutiny of the railway, the type of scrutiny of individual expense that perhaps we have in public accounts where we are allowed to pull vouchers. This gives us a detailed expenditure of every person and everything that costs over $500. It gives us the salaries of the railway. It's a very important piece of public information and that's why it's contained within this Act. I have attempted for some time and yesterday, in my frustration, the calls ranged wider. We have a

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series of stories that don't add up that seem to indicate that this wasn't printed. I'm concerned. Will the Premier be able to advise me within this morning's sitting?

HON. MR. BARRETT: Yes, I hope so. I'm waiting for the Deputy Minister of Finance to come up. We'll get a message out and try and find out what's happened.

MR. BENNETT: Well, the Deputy Minister of Finance, of course, was advised of this yesterday. Much has been made of the fact that I chose to speak to the Deputy Minister of Finance. I wish to report to the Premier that he is a long-time public servant, and yesterday when I was concerned about the financial integrity of the province, I went not to get information from him, but to give him the type of information that I had and that I was raising in the House, and as an additional courtesy, because I was raising this issue, I advised him of it yesterday so that this could be provided to us, because it should be information on which we can base a lot of our questions in the committee stage of this bill, information that we didn't have to bring up during the Premier's estimates, and yet a lot of the expenditure that we would like to question about the cost of detailed reports would have been available to us by now. It's like searching in the dark. I wonder, in advance of getting that information, if the Premier would tell me, should they have been in contravention, what steps he will take.

HON. MR. BARRETT: Mr. Member, I can't make any comment till I have a report. The Deputy Minister of Finance, as you know, did see you in his office. That was the point, Mr. Member. I think that it's appropriate that any MLA go directly to the source of the information rather than calling people at the office. That's the point I made.

Interjection.

HON. MR. BARRETT: You don't agree with that? I do. That's the way we functioned when we were in opposition. We did not request or order or suggest that anybody come to our office; we went to their offices. It's courtesy.

Secondly, the Deputy will be here shortly and I'll attempt to find out from him, as he is aware of this, exactly what the situation it.

MR. BENNETT: I'd just further point out that nobody was ever ordered to my office. Someone who I've known personally for many years was out of the things I was saying that involved him, and the situation had developed. As a courtesy I was advising him of what I was doing. I wasn't demanding anything. It was a personal courtesy. The only thing that surprised me is that it should be used as part of a political statement in this House. I don't appreciate the fact that the Premier and Minister of Finance again tries to hide behind one of the senior civil servants and attempt to divert the attack and the issues that have surrounded the BCR and particularly the issues that have surrounded the financing and the two financial statements that are in question.

Now I'd like to touch those earlier, but I notice one thing, in going through the British Columbia Hydro and Power Authority's financing issue prospectus for $150 million, that was underwritten by Kuhn, Loeb & Co. and the First Boston Corp., and Salomon Brothers and A.E. Ames and Co. I've been in contact with all of those firms plus the SEC. This bill deals with us raising additional capital for the B.C. Railway, and presumably the same type of offering would be made on the market in New York, if we still have a credit rating after this situation is cleared up. I'm wondering if the Premier could advise me if he is going to borrow in the same manner as this prospectus indicates, because it's of concern to me. Not only is the coupon rate 9-5/8, but there's also a discount, and proceeds to the authority is only 98-7/8 of the bond issue, but the disturbing fact is that we're playing in the international currently market. I'll go on. It says:

"The U.S. $150 million 9-5/8 bond, series DY, will mature June 1, 2005, interest will be paid semi-annually on June 1 and December 1, the bonds will be payable as to principle, premium if any, and interest in lawful money of the United States of America at the Canadian Bank of Commerce Trust Co."

Now it seems to me that just a short time ago in this Legislature the Premier and Minister of Finance as fiscal agent said he would never deal or gamble in any of the bond issues in the financial currency of another country. Now not only at this time do we have the U.S. dollar strengthening, and at a premium over the Canadian dollar, but there's also a lot of rumours coming out of Ottawa. I'm not predicting it but I would hope that the Premier and Minister of Finance would have some information that perhaps the Canadian dollar is going to be devalued, so that rather than 9-5/8 and a discount, if the dollar is devalued, we would be paying an exorbitant charge. Certainly the concerns the Premier gave us then about borrowing foreign funds, no matter what the country, are very much of a concern to us. I see that he's borrowing $150 million for Hydro in that manner. I see that the $100 million they borrowed at 10-1/4 per cent last year was in that manner, for Hydro — repayable in American funds. I wonder if he can tell us if this is the manner in which he's going to borrow these millions of dollars for the B.C. Railway.

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HON. MR. BARRETT: The financing of the B.C. Railway has always been done internally. The change in the auditing procedures as a result of the resignation and subsequent censuring of Buttar and Chiene will not alter our bond rating in New York.

The second thing is that Kuhn and Loeb, who were the principal underwriters in handling this particular issue, were, as I said last night, informed that there was a change in the auditing procedure. Their statement was that only audited statements must be submitted to the SEC according to SEC regulations, and then when we go to another issue for B.C. Hydro, the latest audited statements will be submitted.

In terms of asking me, Mr. Member, if I have any knowledge that the Canadian dollar will be devalued and pegged, or whatever, I would assume that the Member would know that if that were the federal government's plan, that would be made at the highest cabinet level and would not be shared with anyone. Even speculation in this House on such a possibility can have a very damaging effects on the money market, so I would say to you very clearly and very loudly that your speculation is your speculation, but I have absolutely no information on federal government policies in regard to devaluation of the Canadian dollar, and I hope that nothing goes abroad from this House that gives the impression that such is even being considered, because that kind of discussion could delay investment, could delay major corporate decisions and government decisions right across this country. It would be a mistake, even though it's only a matter of days, for any one of us, with no bad intent at all, to discuss that that is a possibility the federal government is considering.

MR. BENNETT: These possibilities must always be considered by people who have the responsibility for dealing with the finances. From time to time the federal government in its financial policies for Canada, without tipping specific financial action they will take, will advise the provincial governments and their Finance Ministers and those public bodies not to borrow outside of the country because of balance of payments. This is not unusual; it's been done in the past. What I was hoping was that the Premier maybe is aware of such a discussion with the federal government — that they're concerned about any financial authority in this country borrowing outside. From time to time it has been traditional for the senior government in this country, the Government of Canada, to take the financial lead and give direction and ask cooperation of provincial and municipal bodies in where they borrow and how they borrow. From time to time, offerings have been withheld or held up for the good of Canada because of the financial climate or some impending change, or it would be inappropriate to borrow at that time because of the financial climate, or for the flow of dollars back and forth out of the country. That is a normal procedure; it's a necessary procedure. Finance Ministers and leaders of government must always be aware of such conditions and such possibilities and they must also always be prepared to cooperate with the senior government on the concerns for the finances of this country and how the province can affect the financing.

I remember a few years ago, when the Government of Canada asked the Province of Quebec to hold up offerings outside the country. They were concerned with the flow of dollars. The Premier knows full well that that type of information and that type of responsibility is shared, and that type of direction is given.

Forgetting the fact of rumour, forgetting the fact that perhaps the senior government hasn't got that type of direction right now, earlier in this session the Premier made the great speech about dealing in international currencies, currencies of other countries, in respect to our borrowings, and, of course, we see now that the B.C. Hydro has borrowed in American dollars and must repay in American dollars at a time when the American dollar is strengthening, and many analysts suggest that it will strengthen further. That would be an additional premium to the people of this province, and it would add extra points or partial points to the coupon rate or the interest rate on any issue, and particularly the Hydro issue, which already had an effective rate, with the discount of possibly around 10 per cent. It is a high rate of interest for the people of this province to pay till the year 2005. That sort of interest is going to be on $150 million — that's $15 million a year. I'd like the Premier to comment whether the Government of Canada has issued any directive or advice as to borrowing outside of the country at this particular time.

HON. MR. BARRETT: I'd like to advise the House and remind them again of my earlier statement — a statement made by him — advising all Finance Ministers in Canada to borrow outside of Canada. That was official government policy just a matter of a few months ago. I made that statement in the House and I can pass that same communiqué back to you.

MR. BENNETT: It is not changed since then?

HON. MR. BARRETT: It is not changed since then.

In terms of the policy of the government on Canadian funds, the position is that we do not borrow Canadian funds offshore. All borrowings before New York and the borrowings now are on the same basis, Canadian or U.S. funds, but there are no borrowings offshore. If the statement reads "no

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borrowings in U.S. funds," then I was incorrect, because I am advised that the position has always been that we borrow in U.S. or Canadian funds. Then if we borrow offshore, we borrow in Canadian funds offshore. When I say offshore, I mean out of continental North America.

MR. BENNETT: Just further, then, could the Premier advise why they would choose to borrow in American funds rather than Canadian funds?

HON. MR. BARRETT: That is where the market is.

MR. BENNETT: Yes, but cannot loans be arranged using the currency of our country?

HON. MR. BARRETT: That is not the normal pattern, not in the U.S., and that has not been the normal pattern of the government's dealings throughout its history.

MR. BENNETT: But in light of the Premier's strong position taken earlier, did he not ask for this on behalf of British Columbia — that we deal in the currency of our country? In effecting this loan, was it made as part of the request or was it not?

HON. MR. BARRETT: No, it wasn't, but we can look at it.

MR. D.A. ANDERSON (Victoria): Mr. Chairman, I would urge the Premier, in the interests of some sort of national financial policy between federal and provincial Ministers of Finance, to say absolutely nothing about any possible discussions he could have had with the federal Minister of Finance on a subject as delicate as devaluation. I believe that a private corporation might well discuss this in a board room, but for us to discuss this publicly here is very irresponsible. We need a joint or co-ordinated financial policy of governments in the country, especially now that provincial governments spend more than the federal. I welcome efforts of the Premier to work out common policies with other governments, both provincial and the federal. I urge him not to succumb to any temptation to blow any chance of federal-provincial cooperation or even interprovincial cooperation on something of this nature.

I would like to ask a number of specific questions.

HON. MR. BARRETT: Mr. Chairman, I think it is important to make a statement. I appreciate your opening. I want to say categorically that at no time in my presence has the federal Minister of Finance discussed with me — or, to my knowledge, when I have been with other Finance Ministers — the question of devaluation. The unfortunate situation is that when someone raises it, it raises speculation that is absolutely invalid. I think it does an injustice. I am cautioning press not to go out suggesting, because someone has raised this subject, that there will be devaluation. I tell you absolutely that it has never been discussed with me. I think it is very unfortunate that it is raised in this circumstance. Had the question been worthwhile in terms of suspicion, I would have been available in the corridor or at the end of a telephone to tell you exactly what I am telling you now.

Mr. Member, your assessment is absolutely correct. I would be surprised indeed if such a subject were ever raised with the provincial Finance Ministers. If it were, it would only be on the eve of an announcement and through a special meeting or contact with us. I hope that we let the matter rest there, because it is a mistake. It alters corporate decisions just on speculation alone.

MR. D.A. ANDERSON: Apart from that, it would mean the resignation of both the federal and provincial Finance Ministers.

HON. MR. BARRETT: That's correct.

MR. D.A. ANDERSON: It is something that could be speculated on in a private corporation, but for the public bodies to speculate on it is unbelievable. We cannot do that. I just repeat what you said and back it up 100 per cent. I sure hope that this passes without comment.

I would like to ask a number of specific comments to the Premier in the light of his statement last night. These are specific questions referring to dates. Was there any opportunity to alter or...?

MR. BENNETT: New friend.

MR. D.A. ANDERSON: The Leader of the Opposition says "new friend." Well, I happen to have been in public life for some seven years in this country and I feel it is tremendously important we protect the Canadian dollar and protect our external position. I feel it is irresponsible in the extreme to start rumours from Legislatures and governments, or what might be construed from governments at careless reading of newspapers if the articles are written carelessly, about devaluation — or indeed about the amount of information that the federal Minister of Finance prior to a budget has made available to people from one end of the country to the other. This speculation is ludicrous, and it should be pointed out that this cannot continue.

I ask the Premier and Minister of Finance: with respect to dates, was there any opportunity to alter or amend the prospectus between March 13, 1975,

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and May 15, 1975?

Was there any opportunity, to his knowledge, to alter or amend that prospectus? Was it possible under the SEC regulations? If it was so possible, or if it could have been done, was any attempt made by the provincial authorities or the B.C. Hydro, the B.C. government, to make such an alteration to the prospectus? Those are my first and second questions.

My third question: did the attorneys for the underwriters specifically state that no change to the prospectus was required or no information was required unless it was audited financial information? So, questions three and four. What did the attorneys of Kuhn, Loeb indicate they wanted, and did they specifically indicate that no change was required to that prospectus in that period?

Were the attorneys of Kuhn, Loeb or the SEC specifically informed that losses rather than profits would be reflected in the audited statements? And on that question I would like the Premier to indicate whether or not perhaps he was in a position to indicate there would be losses rather than profits, or whether they were warned that there might be losses rather than profits.

There are four or five specific questions — one or two more from earlier speeches made in second reading. Mr. R.E. Swanson was and, I believe, is a director of BCR and he put in an annual report. At what stage was he aware that the engineering was not up to regular practice?

HON. MR. BARRETT: On the Dease Lake extension?

MR. D.A. ANDERSON: Yes, Dease Lake extension.

Another question, specifically with respect to the Wakeley report: I'd like to know the circumstances surrounding the instructions to Mr. Wakeley and the commissioning of this report. Statements have been made in the House that this was a report developed in a hurry — "this quick report, the hurry-up report, the save-the-Premier report."

I would like to know how much time he was given and what the deadlines put on him were, whether he protested or complained, other than the statement in his report where he indicated that a really detailed study would take six months, but whether at any time he complained or protested that the time given to him to make this report was impossibly short or would result in a superficial or possibly inaccurate report. Were any indications given by Mr. Wakeley, who unfortunately we cannot question, about the time given for his report? In other words — and there is one further quote about the Wakeley report: "It was manufactured in a hurry" — I would like that commented on.

The same is true with the Hanrahan report. Did Mr. Hanrahan indicate that he had been asked to give a report which was impossible to do in the short time available, or a report which could not possibly be substantially accurate because of short time available?

Are those perhaps questions that could be answered?

HON. MR. BARRETT: Let me start from the beginning, Mr. Member. The specific question of whether there was an opportunity to alter the prospectus between the period of March 13 and May 15 — the answer is no. The lawyers for Kuhn, Loeb work out of the firm of Sullivan and Cromwell in New York. Mr. Mestres is the lawyer who this government dealt through. Mr. Mestres was told that a review of the railway accounts was in progress and he was also informed — he was warned — that it might result in restatement of past financial positions on loss or profit. He was informed of that. His advice to Kuhn, Loeb and to us was to follow the SEC regulation — that is, file audited statements. And unless we had audited material to provide him.... They were aware, as I say, of those two things: one that there was a re-examination of auditing procedures, accounting procedures and, two, that they warned it might result in a restatement. He was aware of that.

Now the regulations of SEC is audited statement. We did not have that audited statement from Peat, Marwick complete and signed with their signature in my hands until I think it was two or three days before I brought that into the House. So the Lawyers Kuhn, Loeb knew all along.

MR. G.B. GARDOM (Vancouver–Point Grey): What did they say about explanatory notes?

HON. MR. BARRETT: That was a decision they make. The decision was related to the fact that the borrowing was for B.C. Hydro, not for B.C. Rail. At no time did they ask us, nor did they want to add any note. They were aware of what was going on, as I have said in those two statements.

I have been advised that the Department of Finance actually suggested such a note — actually suggested such a note. It was the lawyer for Kuhn and Loeb who said it was not necessary.

MR. GARDOM: Is there written verification of that?

HON. MR. BARRETT: We have the verbal opinion, as I understand.... It's all verbal.

MR. GARDOM: From the lawyer.

HON. MR. BARRETT: From the lawyer to the Deputy Minister of Finance who handled the matter

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over the phone and through a visit to New York at the time the issue was sold. I think the Deputy spent three days....

Interjection.

HON. MR. BARRETT: Okay. The Associate Deputy and the Deputy. The Deputy then went to New York, and was there for the two and a half days that the issue was on....

There was also the due diligence meeting where any question could have been asked; the Deputy was available to answer those questions.

MR. GARDOM: We should commend them for the suggestion.

HON. MR. BARRETT: I want to add some commendation of my own. I was upset last night when it was suggested across the floor that the Deputy had said other things than what I was reporting in the House. I regret that very much. I hope that that exchange across the floor from the Leader of the Opposition (Mr. Bennett) was nothing more than intemperate, because the Deputy Minister of Finance has acted throughout this whole matter in a manner that I think is exemplary. Every aspect of our responsibility has been covered because of that.

The other question was raised by the Member about Swanson's report. He asked me, as I have notes here: "At what stage was he aware that the engineering or pre-engineering on the Dease Lake extension was not satisfactory?"

MR. D.A. ANDERSON: Right.

HON. MR. BARRETT: I don't know the answer to that.

MR. D.A. ANDERSON: You could find it.

HON. MR. BARRETT: But he wasn't on the board. When he came on the board I asked him to give us a report on that engineering — that's what led to his report. In the debate mentioning Mr. Swanson's name, his reports were not discussed on the railroad extension to Dease Lake; Swanson's report dealt with the railroad before the Dease Lake extension was even authorized. So the reports quoted by the official opposition have no bearing whatsoever on the Dease Lake extension. That distinction should be made, although it may be complicated for some people.

Both Mr. Hanrahan and Mr. Wakeley were asked to give factual summary reports of what went on. I do not recall any time limit to either of them. In no way, Mr. Member, will I accept any suggestion, as made by opposition Members, that Mr. Wakeley was, in effect, told what to put in that report. That is absolutely false. No one has made that suggestion about Mr. Hanrahan's report — Mr. Hanrahan, of course, can defend himself, since he's legal counsel. But I find it a bid disturbing that last night it was suggested that Mr. Minty was told what to put in his report, and suggested that Mr.Wakeley was told what to put in his report. Those suggestions are absolutely false. I think that the House, on behalf of those people, deserves an apology.

Interjection.

MR. CHAIRMAN: Order, please. We have been following the practice of allowing Members to ask follow-up questions.

MR. D.A. ANDERSON: Mr. Chairman. I will ask one or two questions and then allow the Second Member for Point-Grey (Mr. Gardom) to speak, and then, perhaps, speak later. I wonder whether the Premier could indicate how many other directors were aware of the direction to the auditors of which he talked in his initial statement — whether there were only one or two directors involved.

The second question is: how many directors were aware of the instructions given to the auditors? If they were not generally aware of it precisely who instructed the auditors as to how they should operate?

The third question, which is linked to that, is: what led to the examination of the auditors by the Institute of Chartered Accountants? What first raised the red flag of concern in the minds of that institute? Was it the railway? Were directors of the railway questioning the auditors? How was it that they were led into the position of having their activities as auditors questioned? Was it internal, from the Department of Finance? How did the thing start off, really is the question.

Mr. Chairman, one final personal remark. I was accused of being a new friend of the Premier. Let me say that when the credit rating of the province or the country is involved, or the financial position of the country is involved, I will be friends with anyone to make sure that we protect our position from irresponsible statements.

AN HON. MEMBER: Hear, hear.

HON. MR. BARRETT: Mr. Member, my instructions to the board were that the mini-board with which we function was to ask for applications for auditing firms which wished to make up the responsibility of auditing after the resignation of Buttar & Chiene. I gave one instruction, and one only. In front of all the board members who were present at that meeting, that one instruction was that I want the truth. I did not care what had gone on in

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the past, but I wanted to know exactly how it took place: what was involved; how much money was involved. I wanted nothing covered. I wanted nothing buried. I wanted a professional group of auditors to tell the truth. That was their one and only instruction on this board, and there was to be no interference from them in doing their duties, as had been claimed by Mr. Minty in his report in terms of interference with the other auditors.

MR. D.A. ANDERSON: How did that interference start off? Who did it?

HON. MR. BARRETT: Mr. Member, it was started off by the resignation of Buttar & Chiene. I was asking detailed questions after the Minty report. People have asked why this took so long. I have tried to explain why it took so long. I was handed a report, in the fall of 1972, to sign as soon as we were in office. I had no reason to doubt that that report was the truth.

MR. D.A. ANDERSON: You signed it?

HON. MR. BARRETT: I signed it. It had a statement in there from an auditor saying that Canadian Transport Commission regulations had been followed. I accepted their word. I signed the report.

MR. D.A. ANDERSON: Did the secretary of the company or anybody else talk to you about that report and raise any doubts in your mind?

HON. MR. BARRETT: No one raised any doubts in my mind about that report because there was not any reason for the secretary to raise doubts because that had been the pattern up to then. However, if you will recall, I accepted the word of the auditors. There was no reason for me not to sign the report with the information that I had. The former government had always said that the books were correct. I wasn't going to go off wildly and say: "I'm not going to sign that because I don't believe the books are correct." I believed that the books were correct and I signed it.

AN HON. MEMBER: When was that?

HON. MR. BARRETT: That was in the fall of 1972.

AN HON. MEMBER: Before the end of the fiscal year?

HON. MR. BARRETT: When the report was submitted to me.... No, it wasn't the fall of 1972. It would have been the spring of 1973 — that's correct.

Then there was a question in the House. I am quite sure it was the Member for Vancouver–Point Grey (Mr. McGeer), now an independent, the first one to go independent, who asked about B.C. Rail and B.C. Hydro. I said: "Mr. Member, we will ask the comptroller-general to go in." You recall that? That's right. It was the First Member for Vancouver–Point Grey who raised doubts and questions about the statements of B.C. Rail and B.C. Hydro. Once he raised those, I immediately asked Mr. Minty, the comptroller-general, to go in. I said to the House that I would file those reports and I did.

You will recall, Mr. Member, that I filed two reports by Mr. Minty — one on B.C. Hydro, and one on B.C. Rail. Mr. Minty's report led us to development concerns about the auditing and accounting procedures of B.C. Rail.

MR. D.A. ANDERSON: Buttar & Chiene had not resigned by then?

HON. MR. BARRETT: They had not resigned by then, and we had no reason to suspect anything was wrong until we got the Minty report.

Based on Mr. Minty's recommendations, the next step, logically, was to examine what was going on in the suggestions that he made. In the process of doing that, Buttar & Chiene left.

On the occasion of their leaving, a frightful statement was made, which has not been withdrawn by the official Leader of the Opposition, that the reason for the Buttar & Chiene leaving was that they had been given orders by the government to hide losses in the B.C. Rail, and they refused to do it. A very serious allegation made by the official Leader of the Opposition, and which has not been withdrawn, has not been substantiated by the facts, and which is totally irresponsible.

To suggest that the government telling auditors what to do was the reason for their resignation, and not producing one shred of evidence for that accusation, and letting the accusation stand in light of subsequent events, is something that I hope everybody in this province seriously judges.

After Buttar & Chiene left, a charge was laid against Mr. Douglas Walker with the chartered accountants' professional association.

MR. D.A. ANDERSON: By the association?

HON. MR. BARRETT: Apparently by the association, although I do not know that absolutely. That took place last fall. As soon as that happened, we then instructed the board to find us new auditors. The new auditors were selected — Peat, Marwick — and I have filed with the House today their submission because the official Leader of the Opposition raised the Penn Central case. We have his word that it was done only...for what reason I'm

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not sure, but only for that reason — not to suggest that anything was wrong with Peat, Marwick according to him, but only for some other reason.

I agree with the Member for West Vancouver–Howe Sound (Mr. L.A. Williams) that it should not have been raised at all. Nonetheless, Peat, Marwick was given the instruction through the board to tell the truth and to do what had been said but not been done in the past, and that is to conform with the Canadian Transport Commission regulations and auditing procedures.

Mr. Member, that is really the whole crux of this long debate. Take away all the rhetoric from any Member, be he government or opposition, the matter of this case simply rests with the fact that the audited statements submitted by Buttar & Chiene were false, in that they said that the Canadian Transport Commission auditing procedures had been followed, and they were not followed, as a reason. Now the institute did not say that, but it is a fact. Peat, Marwick told us that the institute suspended Mr. Walker and suggested that he have an updating in accounting courses. That's what happens when you doctors and lawyers and accountants have your own governing bodies. The doctors have got it better. They can bury their mistakes. (Laughter.)

MR. G.S. WALLACE (Oak Bay): Withdraw!

HON. MR. BARRETT: The lawyers can put them away for a few years; the accountants have to go through this procedure. But the fact is, Mr. Member, that there was a lie in those annual reports. If anybody wants to go around speculating on who should have known about that lie....

MR. GARDOM: That's what you're doing.

HON. MR. BARRETT: Of course I'm speculating on it.

MR. GARDOM: Why don't you have a judicial inquiry?

HON. MR. BARRETT: Well, Mr. Member, we will have a court case in November, and after the court case is over there are other decisions that have to be made, including related to a judicial inquiry. There is a court case hanging over this whole matter of extensions. Every step of the way I have been cautious. I have been deliberate in double checking because I knew the volatile nature of this kind of bringing forward of information. But I tell you this, and I say it again plainly and clearly: there was absolutely no way that I was going to withhold any of this information from the Legislature of this province. For people to say that it was hypocritical to do this, "blah, blah, blah, blah, blah," I have no other option other than to bring the facts in front of this Legislature, and I'd do it again because I'll be darned if I'm going to be nailed to the wall for someone else's accounting procedure that hid losses.

Had we been the opposition and made the statements made by the official Leader of the Opposition, the old "wild man" syndrome that they used to drag out on Bob Strachan would have been smeared through every editorial page in this province. I find it interesting that I have yet to see one editorial mildly criticizing the official Leader of the Opposition for saying without substantive information or facts that we ordered Buttar & Chiene to hide losses. I tell you that had it been an NDP Leader of the Opposition that made such a charge without any facts and without backing it up, that NDP Leader of the Opposition would be castigated in editorials right across this province, but because it's a Social Credit, so-called free enterpriser, I have yet to see one single editorial castigating him for that malicious charge that has no basis in fact.

MR. P.C. ROLSTON (Dewdney): He calls that freedom.

HON. MR. BARRETT: He calls that freedom. I call it total irresponsibility, and I wonder what has gone wrong with the sensitivity or the fairness of the editorial writers.

MR. D.A. ANDERSON: When did they have any?

HON. MR. BARRETT: That's something they have to live with.

MR. D.A. ANDERSON: When did they have any to go wrong?

HON. MR. BARRETT: They have sensitivities, I am sure. They want to sleep at night. Fair is fair, but I can tell you if it had been a "socialist" leader who made that statement, his name would have been smeared throughout every editorial page in this province. Please, someone, send me a copy of the editorial saying that the Leader of the Opposition was making wild charges — Wild Bill.

You know, there was one mistake made, Mr. Speaker, about comparing his speech and his approach as being the son of W.A.C. It was not that at all; it was a reincarnation of Phil Gaglardi's style of politics in this House.

MR. CHAIRMAN: Order, please! I would ask the Hon. Premier to use the highest titles of a Member when he's referring to a Member of this House.

HON. MR. BARRETT: The official Leader of the Opposition is not acting like the son of W.A.C.; he's

[ Page 3489 ]

acting like the reincarnation in this House of Phil Gaglardi.

Now, Mr. Chairman, the question about Hanrahan and Wakeley.

Interjection.

HON. MR. BARRETT: You made your statements, Mr. Member. You go round and tell the people of this province that I ordered Buttar & Chiene to alter those books. You have a Member sitting behind you who suggested last night that I ordered Minty to write his report the way it was. That's what they said, and they haven't withdrawn it.

The First Member for West Vancouver–Point Grey (Mr. McGeer) is thinking of joining that group, with his high principles and his background of castigating that group. Would he throw himself with that den? I don't believe he'd do it. Even he hasn't got that much political ambition.

AN HON. MEMBER: Oh, I don't know. (Laughter.)

HON. MR. BARRETT: Time will tell.

AN HON. MEMBER: Did you get any sleep last night?

HON. MR. BARRETT: I had the best sleep I've had in months and I'm still waiting for the stone to fall.

MR. GARDOM: Then wake up.

HON. MR. BARRETT: Through you, Mr. Chairman, the Second Member for Vancouver–Point Grey (Mr. Gardom) is perhaps the most uneasy Member of all in terms of your future political....

MR. GARDOM: No, no.

HON. MR. BARRETT: Because if you join that group, you.... Mr. Chairman, back to the matter in front. of us, there was no restriction. I can understand the other ones, but not you.

There were no instructions to Hanrahan and Wakeley, in answer to your last question.

MR. D.A. ANDERSON: I would like to have the House welcome a distinguished visitor we have in the gallery, the Hon. Barney Danson, the federal Minister.

I'm sure he will find a close parallel in the British Columbia press editorial pages with the incredible treatment in the Ontario press of his colleague, John Munro, who turned out to be totally innocent of any of the charges made by the press. The press, of course never bothered to apologize, or I should say a number of the papers never bothered to apologize.

I'd like to go, Mr. Chairman, to one or two other questions. This morning's Daily Colonist, appropriately for June 13, talks about the SEC, U.S. Securities and Exchange Commission, requesting copies of B.C. Railway's latest financial statement after releases of information yesterday.

Now it appears to me from everything the Premier has said so far that they were fully informed all the way along, that there was new, audited material that would come to them, and they were expecting it because they were forewarned that it would be coming and they were forewarned that there would be re-examination of the financial picture of B.C. Hydro as a result of the revelations on B.C. Rail.

Dates were given in this article, and one of the statements I would like to refer to is that of the Minister of Economic Development, the Hon. Gary Lauk — I'm quoting the paper, so I use his name — on April 9.

Now it appears from what the Premier has said that the original prospectus was filed on March 13 and that on April 9, while there were already some doubts in that period the U.S. lawyers for Kuhn, Loeb, Micer, Mestres and Budd, I believe they put down here — or is it Sullivan and Cromwell? — were informed in that period in early and mid-April.

HON. MR. BARRETT: Prior to that.

MR. D.A. ANDERSON: Prior to early April or prior to mid-April?

Interjection.

MR. D.A. ANDERSON: So we have, then, the information made available to the American authorities in the States before March 13 — the prospectus was dated March 13, wasn't it?

HON. MR. BARRETT: Yes.

MR. D.A. ANDERSON: Yes. At that stage they had no knowledge and none of your government Ministers had any concrete audited knowledge or incorrect financial material.

HON. MR. BARRETT: We had the warning that we shared with them, but we had not audited material.

MR. D.A. ANDERSON: Well, the final question I leave with the Premier before yielding the floor is this. I wonder what he could find out from his deputy Minister of Finance or any other member of the railway or people involved as to when the first indication was to the American authorities and to those lawyers that there were troubles, because it appears that the dates don't completely coincide with

[ Page 3490 ]

the Daily Colonist article.

HON. MR. BARRETT: Mr. Chairman, in answer to that question I am informed that Mr. Hugh Ferguson, who is Deputy Minister of Finance, was assigned to work with Kuehn Loeb, and they were informed before the final draft of that March 13 filing with SEC was completed.

They were informed, as I already mentioned to you earlier.

MR. GARDOM: I would just like to make a couple of comments here. I was pleased to hear the remarks this morning of the Premier concerning the position taken by Mr. Bryson and the Deputy Minister of Finance, in requesting that there be explanatory note to the report of B.C. Rail as it appears in the prospectus of B.C. Hydro, which is filed with the SEC. I must say that I thoroughly concur and agree with the position that was taken by the Deputy Minister of Finance and do not agree at all with the position that was taken by the advisers of the underwriters, Messrs. Sullivan and Cromwell, if they felt it was not necessary to file those explanatory notes.

I see from the prospectus, Mr. Minister of Finance, that the validity of the bonds and the guarantee will be passed upon, for several underwriters, by Messrs. Sullivan and Cromwell in New York, who may rely, as to all matters of Canadian and provincial law, on Messrs. Macdonald and Mitchell, referring to the Attorney-General and, I assume, Mr. Mitchell, the senior solicitor of B.C. Hydro, and Messrs. Clark, Wilson & Co., which are a firm that's listed in Vancouver.

I put the question to the Hon. Premier as to whether or not it was discussed with the Attorney-General, with Mr. Mitchell or with the firm of Clark, Wilson & Co., in Vancouver as to the efficacy or validity of the statement of B.C. Railway as it did here in this prospectus, because I do not think it is correct at all to have gone in there in the form that it went in, and it certainly is not correct, in my view, to fall within the statement found on page 43, signed by the comptroller-general, that the financial statements are "all in conformity with generally accepted accounting principles applied on a consistent basis," because they are not — they're just not that.

The Deputy Minister of Finance is correct, and I think it would be a most helpful thing if we could have sort of a chronological assessment of this, prepared by the Deputy Minister of Finance, or yourself, Mr. Premier, and filed in the House. This is a matter that requires an explanatory note. That's all there is to it. There are no ifs, ands or buts about that and, as I say, I'm just delighted to hear of the wise counsel offered by the Deputy Minister of Finance. I congratulate him for that indeed.

Secondly, it's my impression that the Pacific Great Eastern — B.C. Railway as it's now known — falls within the ambit of the British Columbia Railway Act. The British Columbia Railway Act preceded it, and I gather that the B.C. Railway has to comply with the provisions of our own railway Act. Now our own railway Act lays down a number of provisions concerning accounting, concerning inquiries, concerning directors' meetings, and so forth. I would refer to section 136 of the railway Act of this province, which is chapter 329, and it says this:

"Books and Records:

"In addition to any specific provisions in this behalf in this Act contained, it is the duty of the board of directors of the company to keep, and to cause to be kept, adequate and full and complete records of the transactions at all meetings of the shareholders of the company, of the board of directors of the company, and of all transactions, matters, acts and things affecting the undertaking of the company, and the carrying on management and conservation thereof."

I'd ask the Premier whether or not that practice is being followed and has been followed.

Secondly, I'd refer the Premier to....

HON. MR. BARRETT: Sorry, Mr. Member, will you repeat that last one?

MR. GARDOM: Yes, I asked you whether or not the provisions of section 136 of the railway Act have been followed and are being followed?

Interjection.

MR. GARDOM: Yes, I just read it, but it deals with the responsibility of the board of directors and shareholders to keep adequate and complete records of all meetings and of all things affecting the undertaking of the company. I asked whether or not that procedure is being followed today and, if not, why not — and whether it was followed in the past and, if not, why not?

Also, under section 279 of the same Act, or part 42, I should say, of the same Act, under section 283, the specific powers to the Minister.... And I believe the Minister is the Minister of Transport (Hon. Mr. Strachan); that's my interpretation, and you might help me in that, too. Quite frankly, this is a statutory dog's breakfast, this railway. It's high time these private Acts were compiled and we had a revision of those as well as the public statutes in this province.

Interjection.

HON. MR. BARRETT: You won't attack them as

[ Page 3491 ]

providing awesome powers for the state, Mr. Member?

MR. GARDOM: Oh, if you provide awesome powers for the state, it's not a question of attack, it's a question of a democratic privilege if those don't come in, Mr. Premier, and it's too bad that you're bringing so many in. This is one of the great reasons why you'll not be returned to office next time around. Make no mistake of that fact.

HON. MR. BARRETT: You want to bet on that, Garde?

MR. GARDOM: Yes, how much?

HON. MR. BARRETT: I'll meet you in the corridor.

MR. GARDOM: Okay. Who'll hold the stakes?

HON. MR. BARRETT: We'll work it out.

MR. GARDOM: That's a good bet in this day and age, you know — actually a steak. (Laughter.)

Interjections.

MR. GARDOM: Well, have some neutral member of the press hold the stake. How's that?

HON. MR. BARRETT: Can you find one?

MR. GARDOM: Ummm...what about that...? (Laughter.)

Dealing with section 283 of the Railway Act, it is incumbent upon the Minister at his election to request from any officer, servant or agent of the company written statements dealing with its assets and liabilities, its stock issue, the amount and nature of consideration received for issue, the gross earnings or receipts or expenditures, the amount and nature of each and any bonus or gift, bonds that are issued, the amount and nature of consideration received by bonds, the character and extent of any liabilities outstanding, the cost of construction of the company's railway, the amount and nature of consideration of particulars of lease, generally the extent and nature of value and particulars of the property, earnings and business of the company.

Has this ever been requested from this company over the past 10 years? Have you made that request? Or are you going to say that the request for the Minty report brought that about?

I'd just like to say one word about the Minty report before sitting down. Again, criticizing the procedures that were followed in this prospectus, the Minty report was known to this government two years before this prospectus was filed. The Minty report stated to the effect that there were not generally accepted accounting principles applied on a consistent basis to B.C. Rail. The statements in the Minty report and the statements in the certificate of the comptroller-general in the prospectus are contradictory.

As I said yesterday, I'm taking no issue with Mr. Minty, whom I thoroughly respect, whatsoever. But I again emphasize that it is unfortunate, and I think indeed appalling that there were not explanatory notes furnished to this.

Before sitting down, I'm not going to reiterate what I said yesterday, but the Premier has not given any indication to this House that he's going to clean up the accountability in this province. This is the worst part of the whole thing. We have to have fair, true proper accountability so the general public will know that they're getting value — and they're getting out of something like this political heat, political smokescreen. The whole thing is rife with politics, which it should not be. This should be down to dollars and cents and the public should know whether or not they are getting value. They never ever will get value or know they're getting value in this province until such time as there is an independent check and balance and an auditor-general. Make no mistake of that fact. It is proven that it is not within the competence or responsibility of the Deputy Minister of Finance or the comptroller-general of this province to prevent the things that allegedly have occasioned in B.C. Rail from happening.

HON. MR. BARRETT: I'd just like to answer. There is no allegation about the fact, Mr. Member, that the statement was made by the former auditors: the Canadian Board of Transport Commissioners was followed in auditing. That's not an allegation. It's a fact that that statement is not true; it's not an allegation.

You talk about avoiding politics — this is hardly the place to suggest that.

HON. D.G. COCKE (Minister of Health): And hardly the guy to suggest it.

HON. MR. BARRETT: No, I'm not adding that. But on occasion this chamber has been known to be political. As a matter of fact, to be very candid about it, I can't recall a time when this place wasn't political.

When you hear those famous lines given by some people who say, "Let us put the province ahead of politics," nothing could be more political than a statement like that. It means: "Wash away all my political past — I'm swimming for the high shore if the tide doesn't catch me." It reminds one of that famous statement. Santayana says: "Those who do

[ Page 3492 ]

not learn from history are condemned to relive it." That is non-solicited advice to the people of British Columbia.

MR. CHAIRMAN: Order, please.

HON. MR. BARRETT: The second statement related to that Member's comment was: "The last refuge of a scoundrel is patriotism." I just want to remind the Member of those statements that were made: "Let's put the province ahead of personal political gain. Just because I jumped to another political party, I only do it to destroy my future, not to enhance it. I'm putting ambition ahead of the desire for office" — or vise versa.

MR. GARDOM: Oh, come on!

MR. CHAIRMAN: Order, please. Would you return to the bill?

HON. MR. BARRETT: Mr. Member, that pious presentation is just a bit much, especially in morning.

MR. GARDOM: You're suffering.

HON. MR. BARRETT: No, I am a practitioner of the political art, too. That is the Uriah Heep syndrome taken to politics — "I'm just a country boy." (Laughter.)

Now we go back to your question about section 136 of the Railway Act. Yes, Mr. Member, minutes are kept, signed and recorded by the secretary to the board of directors. The question was asked about the financial statements. I do not have a full explanation of why these were not filed before, although I have had flown over to — me copies of the financial statements for the year ended December 31, 1973, and an additional column for the 1974 financial statements, a copy of which is also enclosed in the same statement. I will find out as soon as I can why they were not put into two years instead of one. I'd like with the leave of the House to make these available to the Members, since I've just received them. These are the financial statements for the fiscal year 1973 and they also include 1974. I'm trying to determine why they were not presented separately and earlier.

With leave of the House, I'd like to present them to the House. There are copies for the three leaders and the leader of the independents. (Laughter.)

MR. GARDOM: Since the Hon. Premier....

HON. MR. BARRETT: Just a minute, Mr. Member. Would you like a five-minute recess to determine which one of you is going to receive the report?

MR. GARDOM: First of all we have to caucus, you see.

HON. MR. BARRETT: Oh, I see.

MR. BENNETT: Mr. Chairman, will the Premier be able to provide the information I also asked for: whether this was filed within the statutory limit of within six months of the end of the fiscal year?

HON. MR. BARRETT: I'm trying to determine that, Mr. Member.

MR. BENNETT: And you'll bring the information?

HON. MR. BARRETT: As soon as I get the whole story.

MR. GARDOM: Mr. Chairman, since the Hon. Premier informed the House that minutes are indeed kept, pursuant to section 136 of the Railway Act, of the board of directors' meetings and of the shareholders' meetings of B.C. Rail, is the Hon. Premier prepared to file those minutes in the House for the period 1971 to date?

HON. MR. BARRETT: I'll consider it.

MR. GARDOM: Has the Premier read those minutes?

HON. MR. BARRETT: I've read the minutes, yes.

MR. GARDOM: Of the B.C. Rail?

HON. MR. BARRETT: Of the B.C. Rail.

MR. GARDOM: Did they bear reference to the Minty report?

HON. MR. BARRETT: Since we came to office?

MR. GARDOM: Yes.

HON. MR. BARRETT: Oh, yes.

MR. GARDOM: And other matters dealing with the extensions? And the accounting procedures? And the overruns?

HON. MR. BARRETT: Okay. I'll check on it, Mr. Member.

MR. GARDOM: Well, you're not prepared to give an undertaking today that you'll file those....

HON. MR. BARRETT: No.

[ Page 3493 ]

MR. GARDOM: Why not?

HON. MR. BARRETT: Because I want to consider it.

MR. GARDOM: For what purpose? Aren't they public documents?

HON. MR. BARRETT: I want to consider it, Mr. Member. I'm not going to give you a flash answer, because I don't have a flash answer.

MR. GARDOM: Now, that's one thing you do have: flash answers. You've gone a little too far when you say you haven't got that. You've got some flash flood answers, as a matter of fact.

I do feel this matter would have been better attended in an independent, judicial inquiry. The Premier has indicated this morning that he's thinking about that. He's also indicated to us that he's awaiting the outcome of a case.

HON. MR. BARRETT: That's right.

MR. GARDOM: When's the trial date of that case?

HON. MR. BARRETT: The last advice I have was that it is this fall. But judges are very busy. They need new judges all the time, Mr. Member. (Laughter.)

MR. GARDOM: No flash answers, eh?

HON. MR. BARRETT: I've been working on that one for a long time.

MR. GARDOM: Yes, I think you have; I think you were up a little later last night than you said you were. But I do feel, Mr. Premier, that it should be incumbent upon you to make that material available to the House, and let's see just what has happened since and what has happened before.

MR. WALLACE: Mr. Chairman, I've listened to this whole long debate very carefully and I'm sure I'm like many members of the public in British Columbia: just a little confused. I sometimes think that in this chamber we manage to make life more confusing than it need be, and that probably again reverts to the point the Premier made a moment ago that we all indulge in political rhetoric.

Be that as it may, the question, I think, has been clarified to some extent but I would like to ask just one or two other small clarifications. The basic question is that the people of British Columbia are asking whether this whole matter has been revealed for the reasons the Premier quoted, or whether or not the material has been publicized for purely political reasons. That's what the public have to try to judge for themselves.

HON. MR. BARRETT: I wasn't going to sit on it, I'll tell you.

MR. WALLACE: Well, that's a very reasonable interjection, Mr. Premier, that you weren't going to sit on figures which you knew were wrong. But with the greatest respect, when we start commenting about the way it's related in the media I can look up at the gallery today and say that a certain member of the press gallery, when I agreed with that opinion, accused me of being an apologist for the Premier. So it's not easy for a Member in this House to try to remain rational and objective and fairly critical; and when he happens to agree with the other side of the House be accused of being an apologist for the Premier of this province.

HON. MR. BARRETT: Must have been an editorial writer.

MR. WALLACE: I don't take to that kind of criticism kindly. I'll say what I think needs to be said in this House and out of this House, based on the evidence as I see it before me. And if the editorials can't take cognizance of some of the points you raised regarding the false statements of the Leader of the Opposition, then of course there's little hope for professionals to go into politics.

One of the elements has been uncovered in this whole debate is the very fact that the Member for West Vancouver–Howe Sound (Mr. L.A. Williams) mentioned and which I want to emphasize in the strongest possible terms, and that is that if professional people are asked to take on public functions and act within a professional capacity and then have their motives questioned or their integrity questioned by politicians, it's as clear as day that very soon you won't find responsible people willing to take part in that function.

MR. CHAIRMAN: Order, please! The Hon. Member for Oak Bay has the floor.

AN HON. MEMBER: Shame on you!

MR. CHAIRMAN: Order! I'd ask the Premier and the Member for Langley (Mr. McClelland) to be quiet, while the Hon. Member for Oak Bay speaks.

MR. WALLACE: During this debate we have had many accusations thrown across the floor about individual professionals, who are not politicians, who are asked to take upon the function within their own professional realm of expertise and experience. Regardless of which government it is today, yesterday or tomorrow, I think it is unfortunate and

[ Page 3494 ]

undesirable if that kind of person in a professional capacity has to ponder before he takes on the job that if the report shows something which has political disadvantages to either side of the House, he will then be accused of having submitted the report under pressures. We can perhaps hope that if this debate has revealed nothing else, it has revealed....

AN HON. MEMBER: I hear doctors bury their mistakes.

MR. WALLACE: Yes, doctors sometimes bury their mistakes, Mr. Member. I don't think that was any revelation of history when the Premier said that.

HON. MR. BARRETT: I was quoting someone else.

MR. WALLACE: I would like to think that, contrary to burying clerical mistakes in books, doctors, if they have to bury their mistakes, never do it with wilful intent, as was done in this case.

Mr. Chairman, to return to the specific content, I am just trying to reflect the comments that I hear among the community who don't know all the intricacies of a balance sheet or all the procedures that are followed when one gets into these realms of high international finance. The man in the street wants an unequivocal answer to one question in the light of the last day or two. And it's the answer I want personally.

The Premier has said that in New York on March 13, the underwriters were made aware that a review was underway of the financing of the BCR, and that the facts and figures previously used in previous annual financial reports were probably inaccurate. What I am being asked and what I hear is that there had been a great deal of government investigation going on. The Premier has stated that in the House.

The implication has been made to me by members of the media that the BCR report of — whatever date you introduced it in the House, a week ago I think — June 6 was purposely held back so that the financial....

Interjection.

MR. WALLACE: Now just let me finish the question because all I am trying to point out is that this is what I am being asked. This is the comment I hear, and let's clear it up right on the floor of this House.

The implication is that the Premier knew a great deal more than he says he knew on March 13, but he purposely — and I am paraphrasing the public comments I hear — delayed the tabling of the BCR report on June 6 so that he could have the financial arrangements for borrowing completed in New York at an earlier date.

I am not making that accusation, but I want the Minister of Finance to tell the House, and tell us in some detail, why that is not true.

While the exact figures may not have been known until June 6, the feeling exists among many minds and among people in the street that by March 13, and certainly by May, when the borrowing was completed, the Premier knew a great deal more than just a general outline that something had been wrong in the accounting over preceding years. So I just want to ask these one or two specific questions.

Between March and May, when the borrowing was arranged, were any approximate ballpark figures — if I can use that colloquialism — mentioned to the people in New York? In other words, we now know that the figure quoted by the Premier as misrepresentation in the auditing is something on the order of $62 million. In negotiations for the loan in New York, were any approximate figures mentioned? At any time, did the Minister, his Deputy or Associate Deputy give the people in New York some percentage approximation of by what degree they were out of line in the figures?

The other question, of course, has been partially cleared up. The public are the persons who ask me: "Why did the Minister submit figures, knowing they were wrong?" The Minister has stated that he had made that fact known to the people in New York, that the figures were wrong, but he was not yet in a position to give the accurate figures. This is the answer today, but I would like to know if any approximate statement of the percentage amount by which the previous books were inaccurate was given.

The suspicion seems to linger that the Minister of Finance knew more than he said he knew during the negotiations in New York, even although he was given the assurance that he made the underwriters aware of the fact that the previous audited statements of the B.C. Railway were not in fact what they had presented as being, and that certain accounting procedures which the auditors said had been used were not in fact used. We know that. But the last degree to which the Premier could clarify this whole issue would be to answer that question I've asked about whether any approximate figures or any percentage of error was discussed during the arrangements to borrow money.

I just want to add that I think the idea of a judicial inquiry, while it is obviously not appropriate when there is such a large litigation case awaiting trial.... But I do think that it might establish two or three of the very important points that have been raised — first of all, to establish the facts by a neutral body beyond all doubt, once and for all; secondly, to clear beyond all doubt the professionalism and the integrity of the various professional people who were involved and, thirdly, to demonstrate without any question

[ Page 3495 ]

the fact that in the future the railroad should be run by managers and efficient professionals in that field, completely free from the kind of political interference which has obviously gone on in the past.

For these three very fundamental reasons, a judicial inquiry, or some kind of official neutral inquiry, I think, would be most appropriate, even if it has to follow the termination of the court case. I wonder if the Minister could tell the House if he has decided, at least in principle, that there should be an inquiry, and whether or not he has any more specific information to give me in relation to the specific questions I've asked.

HON. MR. BARRETT; Mr. Member, no decision will be made on a judicial inquiry until all that litigation is over. It would be totally inappropriate, in our opinion, to have such an inquiry while that massive court case is pending.

Interjection.

HON. MR. BARRETT: No, we have not decided one way or another. What I said is that we are considering it. But certainly no decision will be made until that case is over.

Now on the question you raised, Mr. Member, I was urging the auditors and the chief financial officers of the railway to get that final report done and get it in here as quick as they could. I was under pressure in this House...asking where the report was, and I kept on saying that they've got work to do and I kept on telling them to get on with it and get busy as quickly as they could. I was promised the report earlier, at the end of May, and then it didn't come until the very first day of June.

Now if anyone is suggesting that there was any attempt on my part, deliberate or otherwise, to keep the audited statement away from the people in New York, that is absolutely false. I think that if anyone's going around saying that, that's being very malicious. I repeat again — and I didn't answer that part of the Member for Point Grey's question — that also on the team handling the SEC information that was filed by Kuhn, Loeb were the solicitors for B.C. Hydro as well, Mr. Wilson and Mr. Mitchell. So they were there with Mr. Ferguson as well. We told, through the Department of Finance, the lawyers for Kuhn, Loeb that there was a review underway of accounting procedures, and we warned them that that review might result in a restatement of past financial statements. We were asked if we had any audited statements to file and we said no. There was no discussion on percentages, ballpark figures or anything else. That fully meets every requirement of the SEC. But they were aware that the auditing procedures were being looked at and they were warned. They were also given the further advice from the Deputy Minister that they should consider putting in an explanatory note. The decision was made by Kuhn, Loeb that that was not necessary, since there were no audited statements. At no time did anyone discuss ballpark figures with them.

The Minister of Economic Development (Hon. Mr. Lauk) made a statement in this House that in his opinion a scandal of monumental proportions was on the edge — in April. He was a member of the board, and he made that statement because we were aware by that time, since February, that the Board of Transport Commission regulations had not been followed by Mr. Walker, because it was in mid-February that Walker had been suspended. But we had no ballpark figures.

MR. WALLACE: Well, I just wanted to follow up, since the Premier raised one of the elements in the situation which has given rise to doubts. It was the very statement by the Minister of Economic Development (Hon. Mr. Lauk), perhaps an intemperate one, but a statement that the problem was of monumental proportions. When somebody uses a phrase like that, it suggests some massive situation which suggests that at least he knew in ballpark figures what kind of sums of money were involved.

I am not holding you, the Minister of Finance, responsible for what some other Minister says. But the man in the street reads the newspapers, he reads that phraseology, and if the Minister of Economic Development uses a phrase like that which suggests that it is an enormous sum of money involved and then we hear that the Premier or his office of his Deputy in discussing the situation in New York gave no outline of the approximate dimension of the problem or the percentage sum of money involved, no wonder there is confusion in the public mind.

I would just be reassured, and I am sure the House would be, to know that the statement by the Minister of Economic Development really was not accurate in relation to the amount of knowledge he had. Or did he have more specific knowledge about how much money was involved which he did not impart to the Premier? These are some of the questions that people are asking. I think they are legitimate questions.

HON. MR. BARRETT: Mr. Member, in my frame of reference, I think it is a monumental scandal that audited statements were submitted with false claims in them. That is not necessarily related to figures. There was a false statement in the audited report saying that they followed the Board of Transport Commission. That describes a scandal of monumental proportions, in my opinion. We were aware of that only when that confirmation came on February 18. For the other Member to day, "Well, you didn't hurry enough, you didn't hurry enough" for

[ Page 3496 ]

goodness' sakes, there was no way that I was going to go running around saying that this is wrong and this is wrong and this is wrong, unless I came into this House and documented every step of the way.

I've got a lot of scars in politics and most of the scars come from making statements that can't be backed up with facts. The only way to correct those scars is to apologize or else they become open wounds and then you carry them as open wounds. But, Mr. Member, having checked over my scars, I decided that when I came and reported there was no way I wasn't going to tell the story. Those editorials that said those things — that's nonsense. There is no way that I was going to carry the can for this mess. No way! It wasn't my mess. I've got enough problems without carrying someone else's load in this business.

So I decided that when I came in here I was going to have every single step documented, not thinking for one minute, Mr. Member, that the professionals who document it would be attacked as a defence. That is a new low by the official opposition. The Member for West Vancouver–Howe Sound (Mr. L.A. Williams) in raising that fact about Peat, Marwick was right on. If the official opposition wants to take the position of attacking the messenger rather than the message and in effect smearing professional people, there will be a question of whether or not professional people will take such jobs.

Mr. Member, having had all the documented evidence, I came to the House as soon as possible. We got the audited statement, I think, two days before the Friday when I presented that material. It is all there. It is all a matter of record. Nothing can wash away the fact that those annual reports did not reflect a true picture of that railway. It is a fact that I did not order Buttar & Chiene or anyone else to hide losses, thus leading to their resignation. Everything that I presented in this House has been documented, including our contact with the lawyers for Kuhn, Loeb. I am thankful that all angles and approaches have been nailed down by our own Department of Finance, and it is all there on the record.

MR. BENNETT: Mr. Chairman, I think the Premier is in some error in some of the statements he has attributed to people and some of the statements and questions that have been made inside this House. I would like to deal starting with yesterday and the Premier's dramatic offer to resign if he was wrong over charges that they had violated the SEC. If he had been in the House in the morning when the matter was brought up for debate, where we had hoped to have a debate that would ask for a judicial inquiry, no suggestion was made of it being in violation of the SEC. In contrast, it was said: here is a situation; it has been identified as some in which we have one financial statement as part of a prospectus in New York, a prospectus which has been signed to accurately reflect the credit of the Province of British Columbia as it pertains to the request for money for Hydro, as it pertains to the province and other Crown corporations which have the government's guarantee, and a different statement which was read and brought in the Legislature in June, just a few weeks later.

[Mr. Liden in the chair.]

At no time, either in the motion I introduced in the afternoon or in my statements, was it ever suggested that we were in violation of the SEC. What I said relates to British Columbia's financial reputation in the market, both with the underwriters and the SEC, and the resultant publicity. The information I received in phoning the underwriters and the SEC from my office....

I would like to run through some of the conversations we had, why we were concerned and why I think there should be an independent judicial inquiry that doesn't have to wait on a court case but would have authority to go into both the Finance department and the B.C. Railway to ascertain when certain events took place.

I'd also like to point out that in — the Premier brought it up — an exchange across the House concerning what I had said earlier in the day to reporters and anyone else...and there was a privileged conversation with the Deputy Minister, out of courtesy, which was never going to be a part of this debate until the Premier introduced it — whether on his information I had used his information to make a charge against the Premier.

Here is what I said: "I have personal information that the Minister of Finance of this province knew that a rewrite of the financial statement was going on at the same time that he authorized the statement to New York." That is the point I am making.

The point is that this report, the direction for rewriting, restating, depreciation in the B.C. Railway had to eventually be directed by the president and directors of the railway. In asking for a restatement of depreciation, they, in effect, were saying, on the basis of their Minty report and the basis of a recommendation, that it is their opinion that the type of depreciation they wish to show on this railway will take items out of capitalization and transfer them to expenses. This will change the profit picture as it has been shown from 1957 on and as it will show in the future in B.C. Rail. They were changing the historical depreciation factor. That is what they were doing.

They knew that whether they had the final figures or not, indeed, the financial statements would show a different result than the financial statements that were contained in the prospectus that was filed in New York. They knew that when they gave the instructions to the auditors; the Premier knew that when he gave the instructions to the auditor. I'm glad

[ Page 3497 ]

he confirms that. He knew the statement would be different and that it would change.

The Premier also controlled two events: the Premier controlled when that prospectus would be issued, and the Premier also controlled the date at which the amended restated financial statements would be presented in this House — the rewritten financial statements, rewritten because the directors have decided to use another depreciation factor. Both of those events could be timetabled and controlled by the Premier.

I am talking about an ethical and responsible position that the Premier could have withheld. I state that he should have withheld that prospectus from being presented in New York knowing that he was going to propose and present to this Legislature a different, amended and a rewritten financial statement. He knew it. He had the final authority as the fiscal agent for this province — the president of the Treasury, the Premier and Minister of Finance — as to the timing of this prospectus. He could have presented it in May; he could have held it till June. If he'd held it till June and put in the new financial statement, there would be no question, no question that the Premier, who had control of these two events.... But he didn't.

He has said in this House that he knew that there would be a restatement of values, and that the financial statement in that prospectus would not be the same as the financial statement presented in this Legislature just a few weeks later. It was his responsibility, I maintain, and his failure to meet that responsibility to hold up the issuing of the prospectus.

When this was first brought to our attention, we phoned Kuhn, Loeb and we phoned the SEC. When we phoned the SEC, we talked to a Mr. William Malloy, Jr., of the Securities & Exchange Commission, Washington, D.C. Mr. Malloy, Jr. is responsible for 800 companies of which B.C. Hydro is one, which have filed prospectuses with the Securities & Exchange Commission. My office outlined to Mr. Malloy the discrepancy between the statements on BCR in the May 22 prospectus and the annual report of the BCR tabled June 6. He advised that he was not aware of the matter, but that he would be most interested to receive immediately the information available to us. On his request, that information has been forwarded airmail, special delivery.

He also stated that he was not aware of any effort to change or amend the prospectus, but that he would have to check the files to confirm the information. He also stated that he was not aware of any communication from the B.C. government or from B.C. Hydro, but would check the files. He also stated that he is not aware of any investigation by the Securities & Exchange Commission but that he will have to check the files.

Interjection.

MR. BENNETT: He identified him as Mr. William Malloy, Jr., who is responsible for the 800 companies of which the Hydro is one. He is responsible; he has the responsibility for Hydro.

Interjection.

MR. BENNETT: He was the one after inquiries that they referred us to in our call to the Securities & Exchange Commission. I'll repeat again exactly what they said.

Mr. William Malloy, Jr. of the Securities & Exchange Commission, Washington, D.C. Mr. Malloy Jr. is responsible for the 800 companies of which B.C. Hydro is one, who have filed prospectuses with the Securities & Exchange Commission.

Now these are the answers that Mr. Malloy gave to us, and he is going to contact us further. We're concerned over the promise. We also telephoned Kuhn, Loeb, who are the managers of the consortium floating the $150 million Hydro loan, and we spoke to a Mr. Peck. Mr. Peck could not tell us when his firm was contacted by the provincial government, except to say that it was after June 6. That's what Mr. Peck said. That was the day the statements were tabled. He stated further that his company was experiencing some embarrassment because they were the last persons to find out about this matter. He, too, would check further and report back. As a general comment he stated that even if there is a discrepancy established between BCR finances contained in the prospectus and those tabled in the House, the question or materiality of the offering would not be affected. But he was concerned....

Interjection.

MR. BENNETT: Yes, the materiality in terms of the offering would not be affected. That's why at no time did we ever say that you would be in contravention of the SEC. That is why we called for an inquiry, because the answer we get is one of ethical financial responsibility from both the SEC and from Kuhn, Loeb, and from the others who say they weren't advised in writing. No letter is there....

Interjection.

MR. BENNETT: At no time would we attempt to do the selective reporting of the telephone calls or statements, and that is why we give the full statement from Kuhn, Loeb. What he did say was this: that his company was the last to know, that they were embarrassed, and that indeed British Columbia's financial reputation was undergoing some concern. But that's just his statement. The SEC, as I read out,

[ Page 3498 ]

was a little stronger and we'll hear back from them, because they're the ones that are concerned with the filing.

What we have, then, is this: concern from the SEC that they hadn't been advised; a statement from Kuhn, Loeb that no written statement of qualification was written to them; concern that the issue would go ahead when the statement was being restated and that, upon questioning, it could have and, in their opinion, should have been held up.

This is a question for the Premier in assessing his responsibility in presenting the financial statements and the financial position of this province fairly in the international money markets. It's not a question of procedure and the procedure of filing a prospectus taking a long time; it's a question, knowing that he had directed the financial statement and the depreciation to restate the financial statement of BCR, that he had the authority to hold up the prospectus. That has been the whole question of whether he has acted well, whether he's acted responsibly, whether he's acted ethically.

The whole reason for asking for a judicial inquiry was not that we were willing to prejudge the ethics, but to arrive at a solution and an answer and a timetable that would deal with when the Premier knew that the figures would be substantially changed on the amended rewritten statement that he filed in the House, and why he didn't — if he knew that in advance of the filing of this prospectus — withhold the prospectus to allow the amended statement, the rewritten statement, to be a part of that prospectus.

That's a very, very serious question. It's not a question of legality; it's a question of what is right and how the province should be presented in the major financial market, which the Premier indicated we will be using more and more....

HON. MR. BARRETT: Did I tell Buttar & Chiene to fix the books — cover losses?

MR. BENNETT: No, and I'll go further than that.

HON. MR. BARRETT: Did I tell Buttar & Chiene to fix the books?

MR. BENNETT: Here we have a statement from Mr. Peck of Kuhn, Loeb, who says that his company was experiencing embarrassment, and they were the last persons to find out about the matter. We have a more serious statement from the SEC who say they weren't advised.

HON. MR. BARRETT: Did I tell Buttar & Chiene to fix the books?

MR. BENNETT: Mr. Malloy, Jr. made some very clear statements as to what he knew or what he didn't know as a member of the SEC responsible for this underwrite.

Now with regard to the depreciation factor, the fact of restating depreciation, the question of Buttar & Chiene and Mr. Walker, who has been well mentioned in this House, I think it should be stated clearly that the year in question is the year 1972.

The Premier, earlier today, until I questioned him, said that he was handed a report in the fall of 1972. Then when it was pointed out that the fiscal year hadn't even ended yet, he amended that quickly to the spring of 1973. He wasn't in office just a few months then; he'd been in office for a substantial time and was the president of the railway.

Now what we're saying is this: there was no question, no reason to question Buttar & Chiene until such a report as Minty's had suggested that they were doing an incomplete audit. The year that he was reprimanded for was the year 1972. It didn't suggest any year previous. It suggested, specifically, the year 1972 when the new president and board of directors were there.

[Mr. G.H. Anderson in the chair.]

Also it is stated that the Province of British Columbia is not bound to follow the procedures that Mr. Walker stated he used in auditing the railway. It is discretionary upon the management of that company to state and stay with a procedure for depreciation in accounting. As long as it is consistent, then that method of accounting can be accepted. It's like depreciation in a business — say it's between Eaton's and Woodward's, they may arrive at a different depreciation formula, and both would argue that they're right. But to the tax department, as long as they are consistent, eventually the depreciation factor comes back into what would normally be called profit.

What they're talking about here is a restatement of depreciation that, in the opinion of the new directors of the railway, would more adequately reflect the position they wish to present — and it can be argued. It's argued by the former people who built the railway, the former general manager, Joe Broadbent.

Studies by the research and development department would show that as a relationship to revenue on depreciation, they ran on the same theory and to the same percentage as the CPR. It was also stated in one of the reports which I read the other night, and which were commissioned by the BCR, that they did in fact claim depreciation in the same manner as the Canadian Pacific Railway.

Now the B.C. Railway has a particular difference: it's a resource railway, and as such was built on a different principle. It was built with a different way of exploring into the north, which is building a minimal road that would be upgraded when freight

[ Page 3499 ]

and the development of resources would require it, That way the railway would deal with cash and flow, and the adjustments that are always made to roadbeds and roadbeds are never depreciated in railways could take place as it settled or was rerouted as changes were made.

The railway was built and directed by Mr. Broadbent for many years with great success. Now we have reason to be alarmed at costs. Certainly we're alarmed at costs. All of us are alarmed at losses in government corporations. All of us are alarmed that whether you use the former method of depreciation or the new, politically rewritten depreciation method. B.C. Railway has had its most excessive operating losses — nothing to do with capital construction — in the last two years under the management and direction of the present president and the present board of directors. The most dramatic losses and profit-loss related to expenditures, related to revenue that this railway, for the first time, is over 100 per cent of revenue with its expenses in the year 1974. The first time. Now even the CNR has only gone over the 100 per cent figure once. Yet here we have losses accelerating in the last two years. Certainly we've got to be concerned.

But the question isn't just one of accounting procedures and one of depreciation; it's one of accountability and management. And there are a lot of concerns we have about the management of that railway.

Last winter when the Premier was in China there was a very serious strike on the BCR and I commissioned three of the MLAs that were concerned with the interior, that represented communities, to do a survey of the line, to talk to the men in the union, to talk to the communities involved and the resource suppliers who normally shipped on the railway. They came back with a report that was shocking. It was one that the railway was riddled with strife, that there was a lack of morale, and that the high morale that was mentioned in the reports that were filed in this Legislature and read many times in debate no longer was there on the B.C. Railway. Well, no wonder, with this type of absentee management during the most crucial time the railway has trouble. No wonder it has these extreme operating losses.

The fact that we have the confusion of two financial reports, one of which is part of a prospectus, is just indicative of the lack of control of what's really going on on the railway. The fact that I still can't find out if the report for 1973 was printed as it should have been by statute, and the fact that this report should have been available for detailed discussion during the estimates of the Premier and president of the railway, or whoever will take responsibility in this Legislature and in fact is just brought in now, in a hurry, for us to analyse the figures make it very difficult for the opposition to assess both expenditures for wages, expenditures from supply and expenditures as they should be scrutinized.

One of the key reports...and I just look in quickly, and that's why on Monday and Tuesday and Wednesday when we're still in this committee debate, and we have had the weekend to study this report and these expenditures we would like to question some of them. One of them that comes immediately to mind is one payment here under "Schedule of Payments to Corporations and Individuals for Supplies and Services Rendered" to a Robert E. Swanson. I'd like to know if there's any conflict with a director of the railway also selling a service to the railway through his company, because he's already been paid as a director under a separate classification. Is there a rule prohibiting directors of the railway from selling services or materials to the railway? Are the directors prohibited? I'd like to just find out what this $766.80 to R.E. Swanson, under "Schedule of Payments to Corporations and Individuals for Supplies and Services Rendered" is about, and whether there is such a policy — the policy of how the government and how the directors, and what standards they work to on the railway. But it's difficult to pick out an isolated instance like this when we just get the report now.

Of more serious concern is whether that report was printed as required within the six-month period after the end of the financial year, after the financial statement. This is what was done in 1972 and all the years previously. It gave the scrutiny of the oppositions that they could get into the detailed spending of the railway. There's many, many different things concerning the operation and management of the railway — the way they raise money, the fiscal responsibility, the controls, the restatement of depreciation. Are directors allowed to sell services to the railway? Are they allowed to deal with the railway and do business with the railway? Is that a misprint? Is it an error for the year 1973?

The Premier also stated that he would be filing the expenses for 1974 as part of this report, but I can't see it in here. I see just the figures for 1973, and I don't see the detailed spending for 1974 as he suggested when he tabled the document. It's just for 1973.

So we'd be interested in that, and we'd be interested if he is going to table the expenditures for 1974 so we can do even more work and research over the weekend in assessing the payments and detailed costs of running the railway. That's a lot of what will go to make up the losses. The depreciation factor is not the major expense. The major expense appears to be supply and wages, and the dramatic increase in costs of operating the railway between 1973 and 1974 will probably prove most enlightening as to

[ Page 3500 ]

where the money is going and what the cost of running this railway is.

When we're talking about a bill that's going to authorize extension of this railway into the north of this province, certainly the detailed operating costs, forgetting the political discussion that's taken place about bond issues and about depreciation, are of very real importance to continuing operating, whether it's with a political president, or whether it's with, as the Premier stated and has been recommended by one of the reports, that we remove the railway from political management. We should be concerned in this Legislature with these bills as to how this railway is operating, to what cost, whether there is any effective cost control, and we should see if such items as I mentioned are allowable or against the rules laid down by the railway. The Premier said he was bringing in the 1974 figures too; they certainly weren't in the report I got, so I would like to see them. There is just the 1973 figures.

We're also concerned in this bill, when we're extending to the north, about the loading factor on which this is predicated, and that's on the minerals and the expansion of the lumber industry is not taking place and the particular loading factor that we talked about the other day and the fact that some mines alone would establish 48 cars a day are not taking place, whether the Premier can assure us that some of these projects will be revived, whether the climate will be such that we can expect a loading, because there is no sense for the railway to continue to build if it is going to sit idle with no freight. These are all factors that have to be discussed in a bill asking for an increase in borrowing for both operating and capital for the railway of such magnitude. The amount of the borrowing, how the money will be borrowed, the interest rates — all of this is very important and I would like some answers.

HON. MR. BARRETT: Mr. Chairman, the Member stated that he had been in touch with Mr. Peck and Kuhn, Loeb, and he said that it did not break SEC rules, and even if it did, it was not material.

HON. MR. BENNETT: No. It did not materially affect the statement.

HON. MR. BARRETT: Did not materially affect the statement. Did you get that down? Materiality in terms of offer would not be affected. I never thought that I would have to sit here this morning and hear him defend the government's position!

MR. BENNETT: I'm not defending it.

HON. MR. BARRETT: You are so, Mr. Member. You don't even know what you are saying half the time. You had a phone call to Mr. Peck, and Peck tells you that it would not materially affect the submission. That is the point that we were told all along, and you are trying to tell us the same point as an attack on us! Yesterday you were running around like the wild man you are, making outrageous statements, making outrageous claims, attacking the government, and now you are coming and backing up on thin ice. You have fallen in over your head! You are gasping for air! You are floundering around like a limp seal!

Then he makes a long speech about: "You've got to examine the north, the south, the east, and the west, the sky, and the earth, and the waters." But he still does not address himself to the statements that he made on November 18 on Buttar & Chiene. I quote again: "They resigned because they weren't prepared to change the auditing procedures because of the mounting losses that the railway wished to hide this year." He made a charge in this House that Buttar & Chiene had been ordered by this government to hide losses. He has never proved that statement! He has never submitted one shred of evidence! And he doesn't even have the feeling in his gut that it is necessary to apologize for such a wild charge!

Do you still hold the position, Mr. Member, that Buttar & Chiene resigned because they weren't prepared to change it? Do you still hold that position?

Interjection.

HON. MR. BARRETT: Do you still hold the position that Buttar & Chiene were ordered by me to hide losses?

MR. BENNETT: You're the Premier of this province and you are responsible for....

HON. MR. BARRETT: Ohhhhh! I am the Premier of the province and I am responsible for my statements. You are Her Majesty's Leader of the Loyal Opposition and you are responsible for your statements. You have got your mouth open as wide as you can because you don't want to hear these words. These words are from your own mouth. You said: "They resigned because they weren't prepared to change the auditing procedures because of the mounting losses that the railway wished to hide this year." That is what he said. He said this government and I as president of the railroad had ordered Buttar & Chiene to cook the books. That is what he said. It is on the record. He doesn't have the decency to stand up and apologize for that statement...

AN HON. MEMBER: Shame!

HON. MR. BARRETT: ...but he comes in this

[ Page 3501 ]

House and skates all over, trying to cover up his own inadequacies. How many people come in this House, make mistakes, and get up and say: "Look, I made a mistake — I'm sorry"? A lot of people have. But you have not withdrawn this statement, Mr. Member. It stands to condemn you and every minute that goes by in which you don't correct it — and you haven't corrected it since November 18 — means that you are prepared to say anything that comes to your mind!

Further, in his statement that went on about his interpretation of accounting of this and everything else, the words were uttered from his mouth and they will show in Hansard that the government — he just said it a few minutes ago — had the audit politically rewritten. That is what he said. He is accusing Peat, Marwick of politically rewriting the audited statement.

MR. BENNETT: You gave the direction to rewrite it.

HON. MR. BARRETT: Mr. Chairman, after denying that they were attacking Peat, Marwick, he now admits that that is what he said, that it was politically rewritten. You are suggesting that Peat, Marwick took political instruction from me and the board of governors, just as you accused me of giving political instruction to Buttar & Chiene.

MR. BENNETT: They take instruction from the president of the railroad.

HON. MR. BARRETT: The words you used were "politically rewritten." You are saying that Buttar & Chiene politically rewrote the audits to suit political purposes. That is what you said.

Interjections.

HON. MR. BARRETT: Mr. Member, don't try to fudge your words within 15 minutes, weasel your words in 15 minutes. Peat, Marwick — no, it is Buttar & Chiene first, then Peat, Marwick. He said on November 18 that Buttar & Chiene resigned because they weren't prepared to change the auditing procedures because of the mounting losses the railroad would have this year.

In effect, he was accusing me of ordering Buttar & Chiene to cook the books. Then he wasn't satisfied with that. Within 15 minutes he said in this House that the audits were politically rewritten. I don't mind attacks on me, but after the statements by the Member for West Vancouver–Howe Sound (Mr. L.A. Williams) and after the statements by myself, he still comes in this House and accuses, in effect, Peat, Marwick of taking political instructions from this government — subject for another editorial.

Interjections.

HON. MR. BARRETT: Subject for another editorial — that's two they owe. Had it been a socialist Leader of the Opposition who had said that, the wires would be burning right now — "Irresponsible Wildman At It Again." Wild Bill's done it twice today. Do you want to bet whether it's going to show up in the editorial pages? Hang on in the galleries; buy all the papers you can. It ain't gonna show up.

Interjection.

HON. MR. BARRETT: Oh, it's doomed not to appear. (Laughter.) How can you sit there and say these things over and over and over again and then get up a few minutes later and say: "That's not what I meant. What I meant was da-da-da-da-da-da-da." You said that they were politically written. You're suggesting that I'm misinterpreting your statements, like the Sun misinterpreted your statements about Eric Kierans. Well, I know how you feel about The Vancouver Sun, you know. But "politically rewritten"?

Interjection.

HON. MR. BARRETT: Ohhh, don't you cry and whine over there. If you're going to be Wild Bill, stick with that role. But you're crying and whining and moaning over there instead of having the decency to stand up in this place...

Interjection.

HON. MR. BARRETT: ...the decency to stand up in this House and say: "I was wrong in making that charge against the government. There is no evidence that Buttar & Chiene were ordered to hide losses. I am wrong in saying that Peat, Marwick was instructed politically and that the audit was politically rewritten." Stand up and say that they were not politically rewritten and that you deny your statements.

MR. BENNETT: The Premier gets hysterical and tries to put his own interpretation. The more excited he gets as his government crumbles, his voice gets higher and higher. Let me say once more that you are the president of the railway and you are political. The people that are directors of that railway that you have appointed that are Ministers are political. It was your direction to the auditors — it was under your instructions — that they change the accounting procedures. That means they got political direction; it would be politically rewritten. That's what I said and that's what I say now. Accountants take

[ Page 3502 ]

instructions....

AN HON. MEMBER: What about Buttar & Chiene?

MR. BENNETT: I am not attacking Peat, Marwick.

SOME HON. MEMBERS: Oh, oh!

Interjections.

MR. CHAIRMAN: Order, please.

MR. BENNETT: The Premier is....

HON. MR. BARRETT: He's not attacking Peat, Marwick!

MR. BENNETT: The Premier of the province, in an attempt to skirt all around and cover up the fumble of his Economic Development Minister (Hon. Mr. Lauk) with his intemperate statements, will try to place any interpretation on any statement in this debate he wants. But it still comes down to this: the president of the railway and the directors who are cabinet Ministers are political. It was their decision as directors, because the directors are the ones who might authorize and ask for and direct any accounting change.

The procedure hasn't changed since 1957 or whatever the date was — 1956 or 1957. It is a major change to restate depreciation.

HON. MR. BARRETT: Because they found out it was false.

MR. BENNETT: The Premier says that the depreciation was false. That's exactly where the Premier has made a mis-statement again in this House. The Premier has made a mis-statement in this House by saying that the depreciation was false.

AN HON. MEMBER: No, he said the statement of the auditors was false.

MR. BENNETT: He has said that the.... No, he said the depreciation was false. He said the depreciation was false, and that is not correct.

What was false in the charges in 1972 against Mr. Walker was that he did not do a thorough and comprehensive audit, as he signed on the statement. At no time was there any illegality ever suggested there or in reports that the manner in taking depreciation was illegal or wrong. It's a matter for the management of the day in the procedure that is set up to stay consistently with the same depreciation factor or accounting procedures, and they did.

Whether Mr. Walker in 1972 did a thorough enough audit has nothing to do.... I'm shocked that the Premier said that that statement was made that the depreciation was wrong.

HON. MR. BARRETT: Ohhhhhh!

MR. BENNETT: Let the record show that the Premier has made a statement that is not correct.

HON. MR. BARRETT: Did you say that I ordered Buttar & Chiene to hide losses?

MR. BENNETT: The Premier has made a statement that is not correct.

[Mr. Dent in the chair.]

SOME HON. MEMBERS: Oh, oh!

MR. BENNETT: Depreciation is a matter of setting a formula for any business, whether it's a railway or anything else. Depreciation and accounting principles that are legal and acceptable are always open to interpretation and change. But when he said that the depreciation was wrong, he is making a charge that cannot be substantiated in those reports.

He wishes to show items of expenditure that were taken as capitalization — because of the history of the way this resource railroad was developed and to the type of standards it was constructed — on a ferry of revenue to capital expenditure. Don't let the public be fooled when he makes that inaccurate statement, that false statement because he's implying dishonesty, and that's not true. It goes with the irresponsible statements he made about chicanery and everything else. That statement and the depreciation factors, as being in the same accounting practices for many years on that railway, because he wishes to change them, do not say that they were crooked or false, because that's not true.

It's a matter of accounting opinion and procedure, and because he wishes to show in expenses items that were, preliminary to that, shown as capital costs because of the accounting procedure set up and because this railway was unique. Don't let the public be fooled because that's the type of impression he tried to leave when he presented this statement to the Legislature a week ago.

You know, he would have them believe there were criminal charges. In fact, I can remember one time that one of the Ministers said something about fraud. Somebody said that, yet it wasn't pointed out. What they want to say is because of a recommendation that they want, and which they re-wrote in their way, they want the railway to show as expense some of the items that before then were shown as capital costs. They want to change the depreciation factor, the

[ Page 3503 ]

amount of depreciation, and rather than the 10 per cent figure, 10 per cent formula that was used and was in line with the ratio to revenue that is used by the CPR and was used by the B.C. Railway, they wish to restate the depreciation in a different way.

Interjection.

MR. BENNETT: And they've made it retroactive; they've rewritten the financial history. Be that as it may, but don't ever try and present to the public of this province that there was fraud. Don't ever try to say, without proof, that there was something illegal. Don't leave that impression. That's completely irresponsible.

That's like allowing the financial statement to go forward as part of the prospectus when you know you're amending it, and you have the power to hold it up for another month so it will not be in conflict with the figures you're presenting at home. One set of figures in New York to get money; another set of figures in B.C. to get votes for the NDP.

But don't, don't, don't try and leave the sort of impression that there was fraud. Don't try and make that type of allegation, or leave that impression, in the way you choose to play with words. Don't continue in the way you choose to play with words. Don't continue to try and put words and impressions and your interpretation on other statements because, when I say that the procedure was politically rewritten, it was because the direction came from the political officers of that railway who are the political people in this House, people who twist and turn and put their own interpretation on every event for political benefit, or to try to achieve some political benefit.

I hope the Premier.... It says right in the financial statement: "Management has concluded...." It doesn't say the auditors concluded, it says that management has concluded that the financial statement...and it goes on to talk about the change as a management decision. The management is Dave Barrett, Premier, president of the railway. The management who gave that direction was the Minister of Labour (Hon. Mr. King) who was relieved of his duties as a director because, apparently, during the strike last winter, just before Christmas when the railway was in dire straits, and the Premier and president of the railway was holidaying somewhere, he as Minister of Labour, and as a director, had a very difficult time figuring which hat he had to wear in resolving that dispute.

Interjections.

MR. BENNETT: We've got to be concerned with the types of attitude, and that the Premier doesn't continue, as he has in the past, to try to put words in people's mouths.

Here we have management-directed change: management directed the accounting procedure change; management directed the restatement of profit and loss; management directed that we would effect the depreciation formula. Because they did this, the president of the railway, the Premier of the province, the Finance Minister of B.C., knew when he authorized that prospectus in New York — and it is he who has the power to authorize or withdraw — he knew that statement contained in that prospectus would be in variance with the statement that he would present in this House in June.

He had an obligation to withhold that prospectus until the new financial statement could be incorporated in it as a true reflection of his opinion of the new directors of the railway, of what the statements and the financial history of the BCR.... They have chosen to rewrite it; they have chosen to restate it. They should have chosen to wait one month more on that prospectus to let New York know what they thought of the railway, and what they thought its financial position was.

There's only one person who is accountable and responsible for the simultaneous presentation of these two documents that are given — that is, the president of the railway, the Premier and Minister of Finance, who happen to be the same gentleman.

It is true that in New York the underwriter and member of that firm was embarrassed. The SEC did not know. There was no written document they knew of that suggested that the statement was being rewritten, not only for this year but for past years. There was no written statement that went along with that prospectus to the SEC, and that is why the SEC asked us to send a copy.

I would have been remiss if I hadn't read all of the statement that was given to us about the material change, We're talking about the responsibility of a Premier who should have withheld the issuance of that prospectus, knowing the statement he was going to present to the Legislature. Yet he didn't do it, and we don't know why. There are a hundred different reasons why he might have done it, but we don't know why.

Was this another one of his honest mistakes? Was it a mistake? That's the question we have to ask in this House. The Premier still hasn't told me. I hope when he gets up he will be able to tell me again whether the financial statements were, under the Acts of this Legislature, presented and printed within the six-month period after the end of the fiscal year 1973. Will he be able to tell me, as he suggested when he tabled this document and sent it over, whether we will get the list of 1974 expenditures? They are not in here — just the 1973 detailed expenditures. This weekend a lot of us would like to study it, so that

[ Page 3504 ]

when we take our place in this debate again in committee, we will be able to ask some very pointed questions about individual expenses that affect the high operating costs of this railway, an operating cost that has gone out of relationship to the revenues it achieved in the years 1974 and 1973. The fact that operating is higher now than revenue is a very serious consideration and consequence to the future of the BCR.

Now all railways have experienced some difficulty in North America. But, as I say, only one railway that I can find has ever gone over the 100 per cent operating over expenditures in recent years. That was one year with the CNR when they went to 103 per cent. But no matter what financial accounting procedure you use — the new one the president and directors have had brought in for the railway or the old one that was there for many years — we are still in excess of expenditures over revenue. And that gives us concern for the operating costs of this railway in the future.

This Premier, who is presenting this bill, is the president of the railway, and we would like to know about the operating costs. We would also like to know about such items as what the Premier as president of the railway has laid down as a condition of directors — whether the directors, at the time of being directors of the railway, can do business with the railway both corporately or individually and make charges to the railway while they are a director.

I would like to have some comment on that.

HON. MR. BARRETT: Mr. Speaker, we've had a 10-minute explanation of what he meant when he said "politically rewritten."

Interjection.

HON. MR. BARRETT: Oh, 25 minutes? I listened very closely. Let us review his interpretation of what he meant by "politically rewritten."

He said he was not attacking Peat, Marwick. Let us accept that position. What he was saying is that the president of the railroad, the Minister of Finance and Premier, ordered the auditors to behave in a certain way. Therefore it was politically rewritten.

I'm not a lawyer, but I think if we follow through logically what he says on the basis of statement of fact, we are going to come to some interesting conclusions. He said "politically rewritten" means that the board of directors, the president, the Minister of Finance and the Premier politically ordered the auditors to do a certain thing — although he is not attacking Peat, Marwick. I must put this caveat...that's a lawyer's word.

Does that mean to say that in his opinion auditing firms will do anything they are told? Or do they have no professional responsibilities at all? I leave that question for you to answer.

Let us assume that his thesis is correct, that the Premier, the Minister of Finance, the president of the railroad ordered the accountants to politically rewrite the audited statement. What he forgets is that there is someone else who was the Premier, the Minister of Finance and the president of the railroad other than myself, and that someone else in that troika in one person — that's like a three-cornered hat — was none other than W.A.C. Bennett. Evidence has been presented to this House that Buttar & Chiene was making false statements and signing their name to their false statements, and instead of Buttar & Chiene having been criticized by the chartered institutions, W.A.C. Bennett should be hauled into court on his definition of political interference with the railroad.

I'm not a lawyer, but his thesis is...

MR. BENNETT: Thank goodness for justice.

HON. MR. BARRETT: ...that the president, the Minister of Finance and the Premier politically motivated the audit.

MR. BENNETT: No. Changed the accounting procedure.

HON. MR. BARRETT: Changed the accounting procedure. Yes, yes, yes. Qualify it all you want. You're so far out in cold water now all we get is "Blub, blub, blub." What you're saying is that in the one case in which it has been proven that the auditor made false statement, the Board of Transport Commissioners' regulation was not followed. In that one case, who was the Premier, the Minister of Finance and the president of the railroad? W.A.C. Bennett. So by his definition he condemns W.A.C. Bennett as cooking the books and ordering Buttar & Chiene to cook the books.

Now who is going to tell daddy about this? Who is going to phone him up and say: "Your kid just blew it in the House and is now blaming you for Buttar & Chiene's mistakes"? It has been a bad day. It has been a bad day. I have never said that daddy cooked the books — the kid did. Wild Bill blew it again, all in an attempt to avoid coming up front and saying: "No, I do not believe that any auditing firm would deliberately take orders to politically rewrite books."

MR. CHAIRMAN: Order, please. Before the Hon. Premier continues, I would ask him to address Hon. Members by their title rather than nicknames and so on.

HON. MR. BARRETT: Yes, sir.

HON. G.R. LEA (Minister of Highways): Who were you referring to?

[ Page 3505 ]

HON. MR. BARRETT: Mr. Chairman, I was referring to the official Leader of the Opposition. There may be a change. The leader of the official opposition. The official leader. When those three independent hatchet men get through with him, he'll wonder what hit him.

HON. MR. LEA: David can testify to that.

HON. MR. BARRETT: Yes, look what they did to young David. It took three of them to become Goliath and he got them all with one stone. (Laughter.) I'll loan you another one.

He said that the report was politically rewritten. He is saying that his father, the former Premier, politically instructed Buttar & Chiene, and he is saying that I did that to Peat, Marwick. Now I don't mind being accused, but he can't prove that. What he is really saying is that a firm like Peat, Marwick would allow itself to be told what to do politically. That is what he is saying.

Peat, Marwick has not been convicted of anything. Buttar & Chiene's accountant has been suspended. He has been found guilty of something, but Peat, Marwick has been found guilty of nothing. He was found guilty of not providing proper accounting procedures on the railroad.

MR. BENNETT: Read it exactly.

HON. MR. BARRETT: Mr. Member, you say that it was politically rewritten.

MR. BENNETT: Read what it says. What does it say?

HON' MR. BARRETT: I'll read that. Let's go to some exact words.

MR. BENNETT: Read what it says.

HON. MR. BARRETT: You bet.

MR. BENNETT: I'll go and get what it says.

HON. MR. BARRETT: No, sit right there. I've got more coming to you.

MR. BENNETT: Well, you're not saying it correctly.

HON. MR. BARRETT: Just wait, wait — whoa! Hold it!

"The panel having found unanimously that the said member, Douglas Mackenzie Walker, violated rule 21 of the code of ethics..." —because your daddy told him to? — "...and rules of professional conduct as alleged in paragraphs 1 and 2 of the statement of complaint by reporting on and associating himself, or on behalf of the firm of Buttar & Chiene, with the financial statement and the auditor's report thereon for the British Columbia Railway for the year ended in December 31, 1972, when he had failed to obtain sufficient information to warrant the expression of unqualified opinions expressed thereon and therein, and that said member has been incompetent in professional matters within the meaning of the bylaw...."

Has Peat, Marwick been accused of this? No. And yet that Member said that Peat, Marwick politically rewrote the audited statement. I don't think he learned a thing. Now we come back, and I come back to it again, only this time I do it quietly, with caution, so that the Member will hear every word, so that he will have an opportunity of reconsidering his position. He stated, and I quote, that Buttar & Chiene resigned "'Because they weren't prepared to change the auditing procedures because of the mounting losses that the railway wished to hide this year." He was saying that I ordered Buttar & Chiene to hide losses or that the board of governors was hiding losses and that Buttar & Chiene refused to hide the losses and that is why they resigned. That is what your statement says: "They resigned because they weren't prepared to change the audited procedures because of the mounting losses that the railway wished to hide this year." You're saying that railway wished to hide losses. That's what you said. Now why don't you just get up and say you have no proof to back up that statement? Why don't you get up in this House and say you were wrong in making this accusation?

MR. BENNETT: You're really wrong.

HON. MR. BARRETT: I am really wrong, he says, in reading his statement. You're a lawyer over there, Mr. Member. I'll read the statement to you and you let the House know, free of charge, what it means to you. Mr. Lawyer, through you, Mr. Chairman, the statement says: "They, (Buttar & Chiene) resigned because they weren't prepared to change the auditing procedures because of the mounting losses that the railway wished to hide this year." The Hon. Leader of the Official Opposition, the Member for South Okanagan, in effect said in that statement that I alone, or I in concert with the directors of the B.C. Railway, ordered Buttar & Chiene to hide losses in the railway. That's the way I understand it. I think a lawyer would understand it that way. That's what he said.

That is an absolutely false statement, a wild charge made without any facts to back it up, an accusation that I or the board of directors were attempting to deliberately order Buttar & Chiene to cook the

[ Page 3506 ]

books, and in actual fact, Walker of Buttar & Chiene is suspended. We have yet to hear from the official Leader of the Opposition a statement saying that he was incorrect in leveling that charge.

Why don't you just get up and say you made a mistake? It's all right. Everybody makes mistakes now and then. We won't tell the world. Just get up and say: "You know Big Dave, I was wrong." I'll look at you and I'll smile benevolently and I'll say: "Don't worry about it, kid, we all make mistakes."

MR. BENNETT: I want to respond.

MR. CHAIRMAN: Order, this exchange has been going on for some time and I think we should have a chance to other Members.

HON. MR. BARRETT: Well, maybe he wants to apologize.

MR. D.A. ANDERSON: Well, I won't take the full time, but I do have a number of questions. I indicated earlier I had direct questions to the Premier, and I have a few more if it's permissible to put some of them.

The first question refers to the Minty report. I would like to ask the Premier about this improper instruction to the auditor by a director, namely, Mr. Gunderson. Now I wonder if he could give us further information on that improper instruction. I mention this, because from what has been said a few moments ago, it is implied that all instructions to auditors are political, regardless of whether the auditors are to go in there and find out what they can and just bring back a straightforward report. I mention it because every single auditor in this province is under a cloud at the present time, because if auditors are accused of accepting political direction simply because they take commissions from politicians or from governments, then clearly all auditors who take a commission from a businessman are similarly cooking the books to suit the businessman who gives them their commission.

HON. MR. BARRETT: Maybe that's what he's used to.

MR. D.A. ANDERSON: Well, I don't know whether that's what he did before, but if that's the practice of auditors, or if that's what auditors are accused of — if no matter whom they take the commission from, they are automatically writing the report to suit the person — it means the rest of us who are neither government Ministers or business can put no faith whatsoever in any audited statement of any company in British Columbia.

HON. MR. BARRETT: Cover up the books, gang.

MR. D.A. ANDERSON: I just wonder whether they charge that because a commission is accepted therefore the auditors turn around and ignore all principle, quite apart from any professional ethics, but ignore any personal principles and come up with cooked books to suit the person who gave them that commission.... Nobody said that, and yet that's the implication in saying that it's a political report, it's a political audit, because it was given by a politician.

The Premier has stated in reply to a question of mine this morning that the auditors were given an entirely free hand.

HON. MR. BARRETT: That's correct.

MR. D.A. ANDERSON: He states again that is correct. I accept his word on this and I accept that previously, previous governments of this province did the same thing with most auditors — in fact all auditors, except in the one case that we know about, Buttar & Chiene — where Gunderson apparently issued instructions. Now if it is the case that every auditor and any audit done in that period for any government by any auditing firm was done to cook the books to suit the government, we're into a very, very different realm indeed. I think the entire profession of auditors.... I wonder about the auditors in Kelowna. I wonder how they feel today, knowing full well that if any of them work for various companies, they are accused of having cooked the books to suit those companies — because that's the accusation.

HON. MR. BARRETT: He doesn't even realize what he's saying.

MR. D.A. ANDERSON: Professional groups such as auditors should be protected from irresponsibility of this nature.

HON. MR. BARRETT: Absolutely.

MR. D.A. ANDERSON: Mr. Speaker, the question is: information on Gunderson interfering with Buttar & Chiene. When did it occur? What happened? What further information supports the Minty report that was not in that Minty report?

The second specific question deals with page 144 and 143 of the Premier's statement.

Interjections.

MR. CHAIRMAN: Order, please! Order! Order! Would the Hon. Member continue, please?

MR. D.A., ANDERSON: In the Premier's statement, page 144-3 in the Legislature on Friday, June 6. He talks about forest surveys in the area in

[ Page 3507 ]

which the railway extension went. And he made some remarkable charges, charges which the Minister of Lands, Forests and Water Resources (Hon. R.A. Williams) supported in his interjections which are recorded in draft Hansard.

The Premier states that there simply was not enough wood in that area and furthermore that the previous administration's directors of BCR did not ascertain from the forestry department the factual information dealing with the forest resources of the area. Incredibly serious allegations. It was supported, as I said, by the Hon. R.A. Williams who was quoted as saying: "Didn't even ask them." The Premier went on to say that there was an alternative, that they could have received that information and simply refused to take cognizance of the facts — "deliberately ignore the facts" are the words he used. I wonder if the Premier can give us more information on that, because the Premier's statement is just hard to take on the face of it. What requests went to the forestry department, what requests went to the Minister of Lands, Forests and Water Resources asking for information on that?

Mr. Chairman, I would like also to have further information from the Premier dealing with the centre-line survey. Statements were made in this House by two Members that the survey generally followed the Wenner-Gren proposals, so I went back and picked up some of the clippings on Wenner-Gren.

This is the Victoria Times of February 14th, 1957. It talks about the letter of intent, giving away one-tenth of the Province of British Columbia to foreign interests in which Canadian companies would be barred. There's a little tag headline down here which is of interest. The headline is "Gunderson Defends Role in Huge Northern Project." Subheading: "He forgot to tell Premier about personal tie-in." Peter McMurray wrote the story, saying:

" Einar Gunderson said today he 'can't see why' he shouldn't act at the same time as executive vice-president of the government-owned PGE and director of the Swedish firm planning a mammoth industrial empire in northern B.C."

He was one of three directors and he saw no conflict of interests. Yet suddenly out of the past comes the ghost of Wenner-Gren, back out of the mouths of two of the official opposition, including their leader, as a justification for the railway extension that was put through.

"The Wenner-Gren proposal was to be a revolutionary monorail, cars run on a broad, single wheel which rest in a beam-like track mounted on pillars. Speeds of up to 200 miles an hour are possible. No expensive roadbed is required. No roadbed is required. And grades of up to 20 per cent can be taken in their stride."

Did the previous administration simply accept the technical limitations of the monorail and apply it to the railroad? Is that why we had all those derailments — because we had grades up to 20 per cent and the whole roadbed was based on no expensive roadbed? I want to know exactly how much use was made of the Wenner-Gren engineering studies in the development of that northern extension, because the engineering reports that the Premier referred us to stated specifically that engineering work was not done. The investigations of my own office to the companies who were involved in construction of that northern extension, and are still involved in the construction of that northern railroad, indicated — and I'm quoting them roughly but quoting them accurately — "Millions could have been saved had the engineering work been done."

SOME HON. MEMBERS: Hear, hear!

MR. D.A. ANDERSON: That was the statement, as even now after the last few days.

So I want to know whether these Wenner-Gren proposals for a monorail at 200 miles an hour at 30 feet above the ground were the basis of the bad engineering. Because they could be! Maybe they simply applied the wrong technical considerations to the right roadbed, or the right technical considerations to the wrong roadbed. Maybe that was done. But for two Members to revive the Wenner-Gren proposals, in particular the involvement of Einar Gunderson, struck me as incredibly strange.

Interjection.

HON. MR. BARRETT: You're not responsible for your actions; now keep quiet.

MR. D.A. ANDERSON: Another question to the Premier. It has been stated that the Premier had an obligation to withhold the prospectus. Now I wonder whether the Premier could support or reject the statement quoted by Mr. Peck of Kuhn, Loeb.

Mr. Peck, by the way, has been contacted, and he says that he was called by "an assistant" of Bill Bennett who wanted to know exactly when the company had become aware of the change in financial information. Peck told him that the people who had handled this debenture issue were out of the country, and he didn't know much about it.

HON. MR. BARRETT: Oh, oh! Are you saying that the Leader of the Opposition didn't give full information to this House?

MR. D.A. ANDERSON: I'm not saying a thing; I'm just telling you what Mr. Peck said.

[ Page 3508 ]

HON. MR. BARRETT: Oh, well, I am saying it then. (Laughter.) Oh, what a scandalous story! This whole morning has been injuring me.

MR. D.A. ANDERSON: If you'll just allow me to go on, Mr. Premier, and quit interrupting....

Interjections.

MR. D.A. ANDERSON: The information about the new audit figures was new to Mr. Peck, but he was not surprised since he was not directly involved. He did not say the firm was embarrassed, and denies it. Peck denies that Kuhn, Loeb was embarrassed by the so-called revelations in the front page of the Victoria Colonist of this morning. That's Peck.

Malloy, who by the way should have been identified earlier, is the branch chief for the division of corporate finance of SEC. Sorry, I must finish off on Peck.

Peck stated, according to the Leader of the Opposition that "the materiality of terms of offer would not be affected." Was the Premier informed by the lawyers of that fact — that whether or not the information about B.C. Rail was accurate, whether or not there were new audited figures to come, the B.C. Hydro prospectus was not materially affected by the BCR figures? Was he told that at any stage, or was he told anything else? Was he told that errors in B.C. Rail accounting would not affect a B.C. Hydro prospectus?

HON. MR. BARRETT: Who, me?

MR. D.A. ANDERSON: You — that's right, Mr. Premier. Were you informed by those American lawyers that because the companies were not one and the same, you didn't have to withdraw that prospectus, which even Mr. Peck, quoted by the Leader of the Opposition, a said: "The materiality of terms of offer would not be affected"?

Mr. Chairman, I'm going to give the Premier time to reply. But I would like to simply state that my request for a royal commission or a judicial inquiry, which I made when I first spoke in this House on this matter, is still valid. I've looked at it in the terms of the lawsuit presently in the courts between Mr. Broadbent, the BCR and the Alberta contractors.

I must ask at this time, Mr. Chairman, that my remarks be amended so that that judicial inquiry or royal commission follow the termination of that lawsuit. For them to run concurrently, I have been informed, would be improper and would prejudice the case. Therefore I would once more urge the Premier to have a royal commission, call before it man who could see nothing improper in being a director of Wenner-Gren and at the same time a director of the railroad, the man who was collecting funds for Social Credit at the same time as being a director of the BCR, and ask him precisely his role. I think it's important that this be brought out if he claims to be as innocent as he says he is — or if he is as innocent as he claims to be. But certainly this should not prejudice the lawsuit, and I ask that any royal commission be delayed.

With respect to....

HON. MR. BARRETT: Be delayed?

MR. D.A. ANDERSON: Delayed until after the lawsuit — the royal commission inquiry or judicial inquiry should be delayed.

With respect to Malloy, the branch chief of the division of corporate finance of SEC, and is responsible for 800 companies, we are informed. As there are 240-odd working days in a year, I feel that it's quite likely he is unaware. This is the information we've got — he's not up on all activities of-all companies, and in particular, not up on all details of companies whose financial position are reported in the prospectuses of other companies.

HON. MR. BARRETT: Right on.

MR. D.A. ANDERSON: More information will be forthcoming on Malloy as these phone calls keep coming through.

I would like to remind the House about Peck. Peck stated categorically that the company was not embarrassed. He denies that that is the company's attitude toward this matter.

HON. MR. BARRETT: Are you saying that the Leader of the Opposition gave a false statement to this House, quoting Mr. Peck?

MR. D.A. ANDERSON: I am simply reporting a conversation between a person employed in my office and Mr. Peck of Kuhn, Loeb.

HON. MR. BARRETT: We'd better have a House committee look at this.

MR. D.A. ANDERSON: I think that perhaps the Victoria Colonist might like to phone around after putting in that great headline: "U.S. Agency Asks for BCR Facts After Bennett Tip."

This is my final question: in the last 24 hours, has any request come to the Premier's office, either as Minister of Finance or as Premier or as president of the railroad, asking for further information from New York or from Washington, D.C., from the SEC, from Kuhn, Loeb or any lawyers related to this whole matter? Has there been further correspondence and requests for information from these American sources? That's my final question.

[ Page 3509 ]

I would like to end by saying that yesterday the Premier made a very serious statement. He stated he would resign.

HON. MR. BARRETT: That's correct.

MR. D.A. ANDERSON: "If there is any proof whatsoever that we did not obey the rules, I will resign my seat," he said. "We did comply with SEC regulations."

HON. MR. BARRETT: Right.

MR. D.A. ANDERSON: Now I want the Premier to indicate to this House whether any communication with these American principles has occurred in the last 24 hours which would in any way indicate that he has, indeed, breached SEC regulations.

HON. MR. BARRETT: Mr. Member, I went on further to say, as I recall — I don't have the exact words in front of me — that if the charge proved incorrect, I would, on making that challenge, hope that the official Leader of the Opposition would resign his seat.

MR. D.A. ANDERSON: Obviously he should.

HON. MR. BARRETT: Obviously he should. I agree with you.

Interjections.

HON. MR. BARRETT: I've been in the House since 10 o'clock. I arrived at the buildings at 8. I've not been to my office since 8 o'clock this morning. To this very moment I have not received a word from my office that anyone from the SEC or from Kuhn, Loeb, or any other financier in New York, has asked for further information about this. I do not know Mr. Peck, whom you referred to. I am shocked, through you, Mr. Chairman, Sir, to hear you say that Mr. Peck said to you that he was not embarrassed and that he's not to be quoted that he said he was embarrassed. We have the official Leader of the Opposition...

MR. D.A. ANDERSON: The firm was not embarrassed.

HON. MR. BARRETT: ...saying that Mr. Peck said the firm was embarrassed. Now one of you Members is not telling us the correct version. Some enterprising newspaper may phone Mr. Peck.

MR. D.A. ANDERSON: Don't count on it.

HON. MR. BARRETT: Don't count on it? Oh. The old days of aggressive journalism may still come to pass. Someone will burst into the press gallery and say: "Stop the presses. I've got the story that'll bust city hall wide open." (Laughter.)

MR. D.A. ANDERSON: The editor would fire him.

HON. MR. BARRETT: Or maybe break the coconut on the official Leader of the Opposition.

MR. D.A. ANDERSON: The editor would fire the person who did that.

HON. MR. BARRETT: How can you come into this House and say that Peck said that his firm was not embarrassed when the official Leader of the Opposition said that Peck said they were embarrassed? He's the same man who said that Buttar & Chiene resigned because they weren't prepared to change the auditing procedures because of the money losses the railroad wished to hide this year. And everybody knows that he doesn't make mistakes.

So here we have the Leader of the Liberal Party making phone calls, checking up on the word of the official Leader of the Opposition.

AN HON. MEMBER: He didn't make the phone calls, someone else did!

HON. MR. BARRETT: Someone else made the phone call for him. Someone else made the phone call for him, checking up on the Leader of the Opposition, and I say to that Member: good for you! You're beginning to learn. (Laughter.)

Now I want to conclude by saying that it's obvious that the official opposition wishes to stall this particular vote. The leader stated in his earlier remarks that when we are debating this in committee on Tuesday and Wednesday of next week they have more questions. They want to go over the figures.

I want to advise the House that, unfortunately, I will not be here for the debate, and I will have to ascertain what Minister will be available for that period of time if the opposition is indicating that they wish to go until Wednesday of next week.

I wish to advise the House, as I had the Whip advise the official opposition yesterday, that the borrowing power of the B.C. Railway has been exhausted, that they are in need of further funds for the existing construction commitments and to pay existing bills. If the House is not in a position to pass the bill, then, of course, the House will have to make a decision in my absence about some attempt at interim supply to the railway — legally. I leave that in the hands of the House Leader, and that is the statement of the matter as to where it stands at this point.

I do not want the contractors to start laying off

[ Page 3510 ]

people, or any small businesses to go without being paid. That's a fair statement; they should be aware of it.

Now in terms of the other questions, and quite seriously. Mr. Member, you've raised some very very valid points. It's a matter of great disappointment to me that the debate has taken the course where broadcast from this House will be the impression, as held by the Leader of the Opposition, that accounting firms are malleable to their employer. I think that's unfortunate.

I think that it should be said, and I will say it, that as far as this government is concerned, we agree completely with the independent Member for West Vancouver–Howe Sound (Mr. L.A. Williams), and I agree completely with the leader of the Liberal Party. It is our desire in government, regardless of party, to hire the most competent professional firms that are available to give us advise or audited statements, or whatever role they may take on behalf of any government. So I want to completely disassociate myself with the innuendoes and impressions left by the official Leader of the Opposition in that regard.

The House resumed; Mr. Speaker in the chair.

MR. CHAIRMAN: Mr. Speaker, the committee reports progress and asks leave to sit again.

Leave granted.

MR. D.A. ANDERSON: Just to prevent any doubts, I ask leave to file a handwritten piece of yellow paper with information given to me about a conversation between Mr. Peck of Kuhn, Loeb and a gentleman working in my office.

Leave granted.

MR. BENNETT: On a point of clarification on Mr. Peck. I wish to clarify statements that were attributed to me. I had no opportunity in the debate, and apparently information....

MR. SPEAKER: I think the Hon. Member is out of order. At any time during that debate....

MR. BENNETT: I wish to advise that I will be....

[Mr. Speaker rises.]

MR. SPEAKER: Order, please. Please have some regard for the rules. I'm trying to explain the rules to the Hon. Member.

During the debate, during any debate, but not later, if someone contradicts you or makes a statement that is an allegation that you say is not correct in regard to your words, you are entitled at that time to stand and correct the matter, but you don't do it at a later time after the debate is finished.

[Mr. Speaker resumes his seat.]

MR. R.H. McCLELLAND (Langley): A point of order. Mr. Speaker, on the same point of order, the comments were made by the Premier who was on his feet and who immediately adjourned the debate. This is the first opportunity that the Leader of the Opposition has had to make his point of order.

Interjections.

MR. SPEAKER: The problem is that that was in committee. It was in committee. We are now in the House, and I don't see how I can very well do that without leave of the House. I'm prepared to ask leave of the House. Shall leave be granted?

Leave not granted.

Hon. Mrs. Dailly moves adjournment of the House.

Motion approved.

The House adjourned at 1 p.m.