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How Gordon Campbell's Policies Made a Rich Friend Far Richer

Longtime Campbell ally David McLean chairs CN Rail and owns a film studio. BC Liberal decisions helped those firms reap hundreds of millions of dollars.

Richard Warnica 9 May

Richard Warnica is a free-lance journalist and former senior editor at The Tyee.

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Editor’s corrections: In the original version of this story, a sentence should have read: the total combined value of McLean’s CN stocks and options, NOT ALL OF which he has acquired since the BC Rail sale, has increased by more than 3.9 million in the last 28 months and over $5 million since May 2000.

Also: In the original version of this story we incorrectly referred to CN's 2004 fourth quarter revenues as earnings. This story has been updated and corrected on May 10.

British Columbia is booming. At least it is if you’re David McLean. Of all the British Columbians who’ve prospered under the Liberals' New Era, McLean might be the top of the list.

The various business interests of the long time Gordon Campbell supporter and fundraiser have benefited, to the tune of hundreds of millions of dollars, from Liberal policies over the last four years.

McLean’s Vancouver Film Studios booked $200 million in new business for this year alone when the government increased the film industry tax credit in January. And the value of McLean’s substantial shares in CN Rail, where he serves as Chairman of the Board, has increased by millions of dollars since the private company bought BC Rail from the government in 2003.

McLean is the chairman and CEO of the McLean Group, a family owned collection of real estate, film and television companies centered in Vancouver. The 66-year-old business mogul has also been a major catalyst in the political career of Gordon Campbell.

Helped Campbell become BC Lib leader

In 1993, Mclean was part of a group lobbying the former Vancouver mayor to run for the leadership of the BC Liberal Party. And three years later, he organized the fundraising for the Liberal election campaign.

McLean also gave generously of his accord. Last year he had a finger in $20,000 of donations to the Liberals. His name was on the $14,000 plus donation from CN (where he serves on the donations committee) and his Vancouver Film Studios gave $2,000. McLean, his wife and his two sons, all of whom serve as senior executives for the McLean Group each gave identical $1,000 gifts.

In 2002, the year before BC Rail sale, McLean’s name was on a $36,075 donation from CN Rail to the Liberals.

Among the many holdings of the McLean Group is Vancouver Film Studios, a sprawling complex just minutes from downtown at Boundary and Grandview.

With 13 sound stages, a helipad and a full scale model 737 complete with cockpit, first and business classes, Vancouver Film Studios is the largest film complex in North America outside of Los Angeles.

Relying on the low Canadian dollar, competitive BC tax credits and a $20 million loan from the NDP, the studio expanded in 1999 to accommodate major features like I Robot and X Men II, and TV Shows like Dark Angel and Smallville.

Tax credit boosts bookings

Rick Thorpe, the Liberal revenue minister, was the opposition critic for small business when the NDP gave out the loan in 1999. “Why does the government have to be involved,” Thorpe asked The Province about the deal. “Why isn’t the private sector doing it itself?”

But Thorpe had no harsh words when his own government sweetened the tax incentive pie earlier this year, a subsidy worth millions to VFS.

By upgrading the provincial film tax credit in February’s budget, the government allowed foreign and domestic companies to write off a large percentage of the wages they pay BC workers, according to Robert Wong, the manager of the income tax credit program with B.C. Film.

The Vancouver Film Studios “would not benefit directly,” from the increase in the credits according to Wong. But they do make it “cheaper to come to Vancouver,” which makes all of B.C., including Vancouver Film Studios, more attractive to foreign production.

And it worked. The studio saw a “dramatic increase in bookings” immediately after the credit was announced, according to Kim Alexander, Vancouver Film Studios’ marketing coordinator.

Alexander told The Tyee that the studio confirmed a major foreign production, worth $120 million and some smaller productions worth about $80 million as a direct result of the tax credit.

With an extra $200 million in business booked into his studios for the coming year, it’s good to be David McLean.

CN Rail shares rocket

The film tax credit isn’t the only Liberal policy that McLean profited from. The bearded former chair of the University of British Columbia is also Chairman of the Board of CN Rail, the company that bought BC Rail from the provincial government in 2003. As of March of this year, McLean owned more than 61,000 shares in the company and had an option on 45,000 more.

The value of those shares has skyrocketed over the last two and half years. The stock traded as high as $77 a share last month, up from a low of under $40 in September 2002. That means that the total combined value of McLean’s CN stocks and options, not all of which he has acquired since the BC Rail sale, has increased by more than 3.9 million in the last 28 months and over $5 million since May 2000.

As a rule, CN doesn’t comment on stock performance according to Mark Halman, a company spokesman. But an obvious reason for the spike is a big increase in earnings. CN’s revenues have ballooned in the last five years. Last year alone, the company recorded their highest ever annual net income.

The BC Rail buy played a small, but significant role in that success. Along with the purchase of Great Lakes Transportation, buying BC Rail added $145 million to CN’s fourth quarter 2004 revenues, according to a company press release.

CN stock part of compensation

Rising stock prices have meant more profit for David McLean. Because in addition to the stock he already owns, part of McLean’s compensation as chair is stocks. Last year the company gave him 7,200 company shares in addition to $113,000 in cash for chairing the board of governors.

BC Rail is only a small piece of the CN pie. Buying up the railroad certainly doesn’t account for all of the railway giant’s recent fortune. Still, it has played a role. And it’s odd that, though the sale was one of the most controversial political actions of the Liberal tenure, no one ever brought up the fact that the chairman of the board of the company behind the deal is a long time donor and fundraiser to the Premier.

There is no evidence that McLean used his access to influence the deal. And as far as CN is concerned, he had nothing to do with it. Nor did he receive any kind of special compensation when the deal went through, according to Halman. Halman also stressed that CN saw increases in earning long before the two new rails were brought on line.

For that matter, it’s not even clear whether Campbell and McLean ever spoke about BC Rail. Officials with the Campbell campaign didn’t get back to The Tyee with an answer and McLean didn’t return three calls to his McLean Group office for comment on this article.

Unanswered question

When Joy MacPhail was NDP leader, during a debate in the Legislature in 2003, she did ask Campbell whether he and McLean had met about the BC Rail deal.

“Since the Premier has been Premier, has he met with [then CN CEO] Paul Tellier and/or David McLean where they discussed the sale of B.C. Rail?” McPhail asked.

“I can't recall,” Campbell answered, “but if the member opposite would like me to discover when I've met with either of those gentlemen, I'm glad to do that.”

Campbell never did answer the question, according to Clay Suddaby the director of communications and research for the NDP campaign, and it remains unanswered to this day.

But regardless of whether the two met about BC Rail, the fact remains that McLean, a friend and fundraiser to the Premier, is at the head of the company involved in a deal highly controversial from the day it was inked right through the current election campaign – a deal that CN is proud to say they’ve done very well from.

With film tax credits helping pour money into Vancouver Film Studios and CN Rail enjoying record profits, this decade has certainly been golden so far for David McLean. Add to that the extra money lining the multi-millionaire’s pockets from the 25 percent Liberal tax cut of 2001 and you can only imagine that another four years of Liberals in Victoria would suit McLean very well.

Richard Warnica is on staff of The Tyee.  [Tyee]

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