Cosy Business Ties Exposed by Health Budget Turmoil

Unexpectedly, and unintentionally, a small window was opened last week on the tight coterie of business people who have been favoured with high-powered political appointments since 2001 when Gordon Campbell's B.C. Liberals won election to government.

On Wednesday, Jan. 24, Trevor Johnstone was fired as chair of the Vancouver Coastal Health Authority, a position he held "at pleasure" through a cabinet appointment. The surprising dismissal followed disclosure that the health authority -- one of five such regional health entities in the province, and the largest, with an operating budget this year of more than $1.7 billion -- is facing a $40 million deficit.

Two days later, the government was rocked by the resignation of Keith Purchase as chair of the Fraser Health Authority -- B.C.'s second largest, with a current-year budget of about $1.6 billion. Purchase, who also held his position "at pleasure" through an order-in-council, apparently was upset with the Campbell government's decision to rescind Johnstone's appointment.

Johnstone and Purchase are just two of the hundreds of British Columbians who have received political appointments from the Campbell government over the past five-and-a-half years. They were notable, however, not only for the powerful positions to which they had been named -- and the sizeable budgets they oversaw -- but also for their prominence in B.C.'s business community, and the close relationships they enjoyed with B.C. Liberal politicians and political insiders.

The big restructuring

In December 2001, about six months after Campbell's Liberals won a massive electoral majority, then-health minister Colin Hansen announced a major restructuring of health care delivery in the province. More than 50 health bodies were collapsed into five large regional health authorities, while a sixth authority was established to oversee such stand-alone entities as the B.C. Cancer Agency and the B.C. Centre for Disease Control.

Of the five new regional agencies, one was responsible for services on Vancouver Island, another for the province's North, and a third for the B.C. Interior (the Okanagan and Kootenays).

The province's populous Lower Mainland was divided between two new authorities, Vancouver Coastal (which covers Vancouver, Richmond, the North Shore, Whistler, the Sunshine Coast and isolated communities further north) and Fraser (which operates in Burnaby, New Westminster, Coquitlam, Surrey, Delta, Langley, Maple Ridge, Mission, Abbotsford, Chilliwack and Hope).

About the same time, the Campbell government passed an order-in-council appointing five chairs to head the new regional authorities. Keith Purchase was named chair of Vancouver Coastal's board of directors.

Purchase's resume

Purchase, a graduate of two New Zealand universities, worked in that country's forest industry, and from 1990 to 1994 was managing director of Tasman Pulp and Paper. He then moved to Canada as a result of a series of corporate acquisitions and mergers in B.C.'s forest sector.

Fletcher Challenge Ltd. of New Zealand -- the parent company of Tasman Pulp and Paper -- had acquired two well-known B.C. firms, Crown Forest Industries and B.C. Forest Products, in the 1980s. Later, both were merged to become a single concern, Fletcher Challenge Canada Ltd.

By the early 1990s, Fletcher Challenge Canada had decided to focus on its pulp and paper operations, and the company's forest division was spun-out as a new entity, TimberWest Forest Corp. Purchase was named TimberWest's first president and CEO.

Through the mid-1990s, Purchase oversaw TimberWest's transformation into one of Canada's early income trusts. The company's sawmills in the B.C. Interior were sold, and TimberWest Timber Trust concentrated on extracting value from its extensive forest assets on Vancouver Island. In 1998, his task completed, Purchase left the trust to join another forest company, the venerable MacMillan Bloedel, where he was the chief operating officer.

The next year, however, Mac-Blo was acquired by Weyerhaueser, the U.S. forestry giant. But before the sale, the B.C. company's two pulp and paper mills (at Port Alberni and Powell River) were spun-off into a new entity called Pacifica Papers. Purchase left MacMillan Blodel to join Pacifica's board of directors.

It was a short-lived appointment, for B.C.'s forestry sector continued to evolve. Fletcher Challenge was bought in 2000 by a Norwegian company, Norske Skog, and the New Zealand company's Canadian pulp and paper operations became Norske Skog Canada Ltd. The next year, the latter company acquired Pacifica Papers, and Purchase was named to Norske Skog Canada's board of directors.

A few months later, in December 2001, Gordon Campbell and Colin Hansen recruited him as chair of the newl created Vancouver Coastal Health Authority.

Familiar path

Trevor Johnstone was the chair of Pacifica Papers when Purchase sat on that company's board of directors. Johnstone was the managing director of Tricor Pacific Capital Inc., which had acquired an interest in Pacifica when it was spun-out by MacMillan Bloedel. In 2001, both Johnstone and Purchase joined Norske Skog Canada's board of directors after that company had bought Pacifica Papers.

The following year, Johnstone joined Purchase as a Campbell-government appointee on the board of directors for the Vancouver Coastal Health Authority.

Another forestry dweller

One of the first tasks faced by Purchase, Johnstone and the other Vancouver Coastal directors was to hire a CEO to manage the newly amalgamated health authority. Interestingly, they opted not to hire one of the many executives already working in the Vancouver Coastal organization (or its predecessors); nor did they select an individual with extensive public sector or health care experience. Instead, they hired someone whose background was in forestry.

In fact, the employment history of Vancouver Health's new CEO, Ida Goudreau, was nearly identical to that of Purchase. Like him, she had been a managing director of Tasman Pulp and Paper in New Zealand, and subsequently became president of TimberWest. Later, Goudreau also worked with Purchase and Johnstone at Norske Skog Canada.

Gary Collins, corporate director

In December 2004, B.C. Liberal finance minister Gary Collins surprised many by quitting politics. Collins was one B.C.'s most disastrous finance ministers -- under his watch, and largely because of his policies, the province's accumulated deficit skyrocketed in just four years from a few hundred million dollars to nearly $6 billion -- and his private-sector experience consisted of working in a restaurant and being a flight instructor.

Still, Purchase, Johnstone and other directors at Norske Skog Canada evidently thought that Collins would be a valuable addition to their company. In April 2005, six months after he quit politics, Collins was appointed to Norske Skog Canada's board of directors. (The company later changed its name to Catalyst Paper Corporation.)

As a corporate director, Collins is paid a retainer of $25,000 per year, with another $1,500 for each board meeting attended. He also gets $6,000 annually as a member of two board committees, plus $1,200 for every committee meeting he attends. In total, his annual Norske Skog Canada-Catalyst Paper compensation must be in the range of $40,000-$50,000.

(Collins and other company directors may take part of their salary in the company's "Deferred Share Units" rather than cash. The value of those units has declined significantly in recent years, however, and proved a bargain for Third Avenue Management, a New York investment firm, which in recent months has acquired a sizeable equity position in Catalyst.)

More forest people

Susan Yurkovich, one of Collins's dearest political pals, was also an early government appointee to the Vancouver Coastal board alongside Purchase and Johnstone. Yurkovich worked as a staffer with Brian Mulroney's Progressive Conservative government in the early 1990s before joining Canfor Corp., where she worked closely with CEO David Emerson.

Emerson and Yurkovich both left the forest company after its 2004 merger with Slocan Forest Products. Emerson won election to the House of Commons as a Liberal in Vancouver-Kingsway in 2004, and was re-elected with that party in 2006 (defecting days later to Stephen Harper's Conservative government). Yurkovich was a senior strategist with Campbell's B.C. Liberals prior to and during the 2005 general election.

According to Sean Holman's Public Eye website, Yurkovich and Mike McDonald, a former political aide to Gordon Campbell (and husband of Campbell's deputy minister, Jessica McDonald), were in the pre-election 2005-06 budget lock-up for stakeholders, registered as representatives of McDonald's firm, Rosedeer Strategies Inc. McDonald declined to answer Holman's query as to the purpose of his and Yurkovich's unusual presence in the lock-up, but others suggested that the pair's task was to ensure that stakeholders received -- and later reiterated for the news media -- the political "spin" desired by the B.C. Liberals. A few weeks later, Yurkovich was re-appointed to Vancouver Coastal's board of directors.

During the election campaign, the Vancouver Sun newspaper identified Yurkovich as a member of an inner circle of B.C. Liberal political strategists. After the election, she got another order-in-council appointment, this one extending her term on the health authority board to 2008.

More work for Yurkovich

In addition to her service on the Vancouver Coastal board, the re-elected Campbell government evidently needed Yurkovich's talents for a greater task. The B.C. Liberals were unhappy with B.C. Hydro's public-relations strategy for development of the proposed Site C dam, and decided that Yurkovich had the corporate-communication skills evidently required by the province's largest Crown corporation.

In June 2006, Yurkovich was named B.C. Hydro's senior vice-president for corporate affairs.

Promoting P3s

Yurkovich also sits on a volunteer board for the Vancouver General Hospital and UBC Hospital Foundation. Other prominent members of the foundation board include the aforementioned Ida Goudreau, and a long-time B.C. Liberal political strategist and advertising executive, Nancy Spooner.

The foundation's vice-chair is Rick Mahler, previously a senior executive with Finning International. Mahler is also the Campbell government's appointed chair of Partnerships B.C., a taxpayer-funded agency that promotes public-private partnerships (P3s).

A principle focus of Partnerships B.C. is P3s involving public health care delivery. The agency's projects include the Abbotsford Regional Hospital (now under construction), and the recently opened Gordon and Leslie Diamond Health Care Centre at Vancouver General Hospital. Last year, the Vancouver Coastal Health Authority and Partnerships B.C. issued a request for proposals for a number of "primary health care access centres" to be built throughout the region.

Cross-pollination

The cross-pollination between Gordon Campbell's B.C. Liberals and Norske Skog Canada-Catalyst Paper is not limited to Purchase, Johnstone, Goudreau and Collins.

Brian Kenning, previously managing director with Brookfield Asset Management (formerly known as Brascan Corporation), was appointed by the Campbell government to the board of directors for B.C. Rail in 2001.

He was named to Catalyst's board last year.

Another Campbell-government appointee to B.C. Rail's board is Robert Phillips, a former MacMillan Bloedel executive. (He earlier had been the Crown corporation's president and CEO.) Phillips sits on a number of corporate boards, including that of a Richmond-based income trust, Tree Island Wire Income Fund.

Keith Purchase and Trevor Johnstone, the two former health authority chairs, also sit on Tree Island's board.

John McLernon is the Campbell government's appointee as chair of B.C. Rail. He and Kenning also sit on the board of Hot House Growers Income Fund, an income trust headquartered in Delta.

Friends in 'dialogue'

In the fall of 2005, Barry Forbes decided to step down as chair of Fraser Health. The Campbell government asked Keith Purchase, then the chair of Vancouver Coastal, to shift over and take on the same role at Fraser. He accepted the new appointment.

"It is so important for the two authorities with the greatest population to work together, to learn from one another and to engage in constant dialogue," Purchase said in a statement issued by Fraser Health after his appointment.

That dialogue was to be made easier when the Campbell government decided to promote Trevor Johnstone -- Purchase's friend, and colleague on the boards of Catalyst Paper, Tree Island Industries, and Vancouver Coastal -- as his successor at the health authority.

Look who's replacing Purchase

Last week, after Johnstone's dismissal and Purchase's resignation, the Campbell quickly named Gordon Barefoot to succeed Purchase as chair of the Fraser Health Authority.

Barefoot is well known to political watchers in British Columbia. In the summer of 2001, immediately after Gordon Campbell's B.C. Liberals won election to government, Barefoot -- then a senior executive with B.C. Gas, later renamed Terasen Gas -- was asked to head up a fiscal review panel to conduct "an independent review of the province's fiscal situation."

The appointment was puzzling insofar as the province's auditor general was then wrapping up the books for the just-completed 2000-01 fiscal year; would not Barefoot merely be duplicating his work?

Well, no. Whereas the independent auditor general reported a then-record Consolidated Revenue Fund surplus of $1.6 billion, the Barefoot commission devised a set of numbers that showed a humongous deficit of more than $5 billion would be magically appearing a few years after the defeated New Democrats left office.

And so, instead of admitting that they had inherited a giant surplus from the previous NDP government, Gordon Campbell and his B.C. Liberals were able to claim -- thanks to the Barefoot report -- that their predecessors had left a gargantuan shortfall.

A couple of years later, the Campbell government quietly removed a statutory provision that required the head office of B.C. Gas-Terasen to be located in the province. The company soon was bought by Texas-based Kinder Morgan, and B.C. Gas-Terasen shareholders -- including board members and company officers -- were handsomely rewarded.

After completing his fiscal review for the B.C. Liberals, Barefoot was appointed to the board of Vancouver Community College. Later, following Terasen's sale to Kinder Morgan, he was named to the Fraser Health Authority's board of directors.

Juice and gas

There are many connections -- too many to mention them all -- between Gordon Campbell's B.C. Liberals and B.C. Gas-Terasen. For example, Larry Bell sat on the utility's board at the same time he was appointed chair and CEO of B.C. Hydro. Stephen Bellringer, a former B.C. Gas president, now sits on B.C. Hydro's board.

Ida Goudreau, the forestry executive with close ties to Purchase and Johnstone and their choice as Vancouver Coastal's CEO, somehow found time to sit on Terasen's board before it was sold to Kinder Morgan.

Thomas Chambers had a seat on the Terasen board alongside Goudreau; he now sits on the Catalyst Paper board with Purchase, Johnstone, Collins and Kenning.

And by the way...

In addition to serving as chair of the Fraser Health Authority, Barefoot also sits on the board of directors for Nventa Biopharmaceuticals Corporation, formerly Stressgen Biotechnologies. The company has developed a therapeutic vaccine for HPV, a sexually transmitted virus.

One of his fellow directors at Nventa-Stressgen is Margot Northey, who also has a Campbell government appointment to the board of B.C. Transmission Corp. Another political appointee on the Transmission board is Bev Park, CFO at TimberWest, where she used to work with Purchase, Johnstone and Goudreau.

How big a rift?

The foregoing is far from an exhaustive review of the close ties that bind Gordon Campbell's B.C. Liberal government and the province's business community; suffice to say that those ties are broad and deep.

And so one has to wonder about the lingering damage to that relationship as a consequence of the government's sudden decision to fire Johnstone, and Purchase's precipitous resignation in support of his colleague. Is the injury going to be quickly healed, or will it fester long into the future? Stay tuned.

Related Tyee stories:

• Carole Taylor's False Alarm
• Biz to BCLibs: Thanks a Billion!
• Alberta's Posse in BC