The Wild West Buyout

Crony Capitalism Alberta Style

Controversy swirls around the Alberta Legislature this week while our Fuehrer, Herr Klein is off vacationing. Isn't that always the way it is in Alberta, shit happens and the Premier is off not available for a media scrum almost like it’s planned.

This week the shit hit the fan when it was revealed that the Dark Prince of Privatization, the Premiers old drinking buddy[1], Steve West[2] was given a golden handshake of $180,000. A buyout for having been dismissed as Klein’s Chief of Staff two days after the Election debacle which saw Alberta’s One Party State reduced to an overwhelming majority of only 61 Tories from 74.

The question that has to be asked is what the hell are the taxpayers of Alberta paying Steve West for, when he was essentially running the Tory campaign. Shouldn’t the Alberta Progressive Conservative Association INC. pay their own bills? Concerned Alberta taxpayers want to know.

Only in his post for six months he spent most of that time doing electioneering for the Party of Alberta. Dismissed unceremoniously by a haggard querulous Klein he has been replaced by another Klein drinking buddy[3] and former waiter; Rod Love[4], the man who made Klein Mayor of Calgary and Premier of Alberta. If Love is Klein’s Richealu, West was his Dr. Gobblels.

“West had earned the nickname Dr. No after pulling colour televisions out of provincial jails, chopping government jobs, launching electrical deregulation and privatizing liquor stores, vehicle registries and parks. Klein said he needed a "tough taskmaster" like West in his office. But two days after the Nov. 22 election, a news release announced that West was leaving because his work was done and he wanted to return to the private sector. Although it was painted as a voluntary move, political observers have suggested West was dumped because the Tories lost seats in the election.” Macleans

West like Love had been retried from Politics when he took the job as Chief of Staff for Klein in the spring of 2004. He replaced Peter Elzinga who had stepped down to become a paid lobbyist for Suncour which was suing the provincial government, his former employer! The cronyism of the Klein government knows no bounds. And they lie about it, with perfect aplomb.

Even this week in a story about West’s golden hand shake CBC news reported that ”West was hired as Klein's chief of staff last spring when Peter Elzinga left to donate a kidney to a friend.” How humanitarian of him.

As political observer Rich Vivone says: “how the story is spun is more important than the story being told. Nobody spins as well as these guys.” Spin is polite terminology for political lies. Like the debt and deficit lie, the lies about electrical deregulation they lie well to cover their obvious cronyism.

West had been formerly the Minister of Municipal Affairs, Minister of Resources, Minister of Transportation and Public Works and had a stint as Provincial Treasurer.

As Alberta's Minister of Municipal Affairs, Steve West, known as the dark lord of privatization, made sure everything in his prevue was for sale. He oversaw the privatization of; the provincial Liquor Board the ALCB, our provincially funded public radio and TV stations; CKUA and ACCESS TV, as well as the Public Works department which was responsible for Highway Construction and Maintenance in Alberta.

He slashed government workers jobs replacing them with contract workers; he froze wages and benefits for those lucky enough to remain. He was Klein’s unfailing hatchet man.

"It is important to contrast this to Steve West's treatment of other people," Liberal Leader Kevin Taft said. "When he was a cabinet minister, Steve West turfed 900 ALCB (the former Alberta Liquor Control Board) employees without any severance whatsoever and it did not matter how long they worked. They were gone without sympathy, without respect, without dignity."

As one writer said of West at the time:

“In the real world, privatization isn't about money, it's about principles. Alberta's own Steve West set a tough benchmark when he cost Albertans billions of dollars by selling off government-owned land during a recession simply because it was there. Today, Steve West may not be admired for his intelligence, his concern for the public purse, or God forbid, even his business sense, but he is admired for his unwavering belief in privatization.”

West and Klein used the debt and deficit hysteria of the 1990’s to create what is now known as the Klein Revolution; the privatization and outsourcing of government services, and cuts to services to the average Albertan.

In reality the provincial fiscal shortfall which caused the temporary deficit of 1993-1994 was the result of Alberta’s already low tax base for business and its royalty holiday to the oil industry. And though it did have a debt problem, as did many governments and corporations during this period, that debt will now be paid off next year due to surpluses produced by the rising cost of oil.

The push to privatize was Steve West’s ideological conviction, not because there was any fiscal need to or benefit from doing so. Even their right wing supporters have acknowledged this.

“The province has run budget surpluses every year since 1994-95 and is rapidly paying down its net debt; this year, buoyed by surging oil and gas revenues, it is expected to post a surplus of at least $5 billion. This string of budget surpluses and the related drop in its stock of outstanding public debt have given Alberta a great deal of fiscal manoeuvring room.” Fraser Institute, 2001

As provincial Treasurer in 2000, West oversaw the shifting of the tax burden from Alberta business to the average Albertan. He declared the creation of a provincial ‘flat tax’ of 10.5 % for Albertans, another ideological solution to buoy up capitalism in the province, in order to sell the huge corporate tax cuts the government was making.

That year there was a tax shortfall, which forced the government to make it an 11% flat tax, and to again cut services for Albertans while business laughed all the way to the bank.

As the right wing think tank the Fraser Institute, cheerfully reported at the time;

“by 2004 the general corporate tax rate in Alberta will be less than half of the rates levied in the other three Western provinces;

• its corporate tax rate on manufacturing and processing income will also be less than half of the comparable BC and Manitoba rates, and considerably lower than the (variable) rates charged in Saskatchewan;

• Alberta’s small business tax rate will be the lowest in the country; and,

• Alberta will continue to enjoy other important business tax advantages over BC, Saskatchewan, and Manitoba, notably in the sales tax on business inputs (Alberta does not have a sales tax), the capital tax (Alberta doesn’t impose one on non-financial enterprises, and intends to remove its capital tax on financial institutions next year), and fuel taxes.

Taxes on business in the other provinces were noticeably higher even before the unveiling of Alberta’s tax cut plan. With Alberta’s proposed reforms, the disparities in overall business tax burdens will widen dramatically— unless the other provinces respond.”

West’s most successful privatization effort benefited privately owned Trans Alta Utilities, a company where the Alberta Government has historically put to pasture its retired cabinet ministers[5]. On their behalf he convinced Klein to deregulate electricity in the province.

“Privatization in Alberta was all but dormant until Klein realized he was in danger of being exposed as the neo-liberal he really is. Everything that could be usefully privatized – liquor stores and registry offices – had been, but the ideologue Steve West was able to convince Klein that Alberta’s stable electricity industry needed to be deregulated,” wrote columnist, Hamish MacAulay at the time.

The deregulation of electricity was controversial at the time, being opposed by both public utilities like the City of Edmonton’s EPCOR and private utilities like Tory Bag Man Ron Southern’s ATCO. Even business opposed the idea of deregulation, as much as the socialist NDP did.

So far deregulation has cost Alberta consumers millions in increased costs, has not produced infrastructure expansion(5) but has allowed Trans Alta to market electricity across Canada and into the U.S. which was its purpose all along.

A Calgary CIPS forum in the fall of 2001 on how the electrical industry in Alberta has experienced significant changes in the form of deregulation "Alberta is leading Canada and many other countries in this area. Dawn Farrell, Executive Vice President, Corporate Development at TransAlta Utilities, will discuss this question, based on her extensive experiences in the industry. Dawn will discuss how TransAlta re-invented itself within the Alberta context, what strategic decisions were made and why, and how, in hindsight, all of these decisions were the right ones.[6] “

Deregulation may have been right for TransAlta but for the rest of the us, “Deregulating the electricity market cost Albertans $3 billion. Alberta started selling off its energy interests in 1998. In the aftermath of that move, prices tripled.”

So who benefited from this Wild West scheme, besides TransAlta? Ironically it wasn’t the private sector as he had hoped, but the public utilities.

“Jaccard, former chair of the B.C. Utilities Commission and an adviser to governments in Asia, Europe and South America with respect to electricity deregulation, says in his commentary on the Alberta electricity scene that from the very beginning Alberta's plans to introduce a competitive power market had problems. After all, nothing is perfect and maybe it's progress, not perfection that counts in the long run.

That observation will, unfortunately, be of little solace to the hundreds of industrial, commercial and business power consumers who warned then-energy minister Mike Cardinal and his predecessor, Steve West, the energy minister/godfather of deregulation, that the government's plan to move to a competitive market on Jan. 1, 2001 was problematic. Electricity consumers, after all, are the ones footing the electricity bill and in those areas of Canada where low electricity rates have historically been used to attract and stimulate large industry, their fears are real.

As Jaccard points out, there were signs of impending problems with Alberta's deregulation as early as August 2000, when the government's much-touted power auction raised a mere $1 billion instead of the $3 billion to $4 billion that had been projected by industry observers.

In addition, the auction attracted only a handful of bidders, with the result that two Alberta-based, municipally owned utilities, Epcor and Enmax, were able to capture the bulk of the generation available after a number of higher-profile American energy traders dropped out of the process.

Almost one-third of the available generation did not attract bids (although a good portion sold at a second auction, adding a further $1 billion to the pool of funds available to Albertans) and an important chunk of the province's power remains inexplicably under government control to this day.

Of greater interest -- for both taxpayers and ratepayers -- is Jaccard's pricing analysis that shows most purchasers of generation (Epcor and Enmax among them) paid so little at the auction that they will most likely pay off their initial investment in just one year.

That will leave those companies free to "earn substantial profits for the remaining life of the power purchase agreements, some of which last for close to 20 years", he claims.

That suggests the government -- in its eagerness to proceed with deregulation -- sold off generation too cheaply.

Enmax, for instance, is expected to report net profits of some $250 million for the last year -- compared to $44 million in 2000.

"When distribution and other costs are added to the wholesale prices and the rebate, Alberta's net residential rates for 2001 were about 12 cents per kilowatt hour, giving the province the dubious distinction of jumping from one of the lowest to the highest electricity rates in the country," Jaccard says.” The Electricity Forum

So why are we paying Mr. West, Dr No, Dr. Death, anything since his privatization schemes have cost Alberta public sector workers their jobs and Alberta consumers millions in extra electrical costs?

“A spokesperson in Klein's office said West had been working in the lucrative private sector when he came to work for the premier.”

While Klein was away he left his cabinet Ministers to fend off the press. An obviously embarrassed Iris Evans said; "This was a contractual obligation and as such they paid it out. Do I think that settlement is significant? Yes, it is significant. But I'm not necessarily saying it is out of line with what you would get in the private sector."

Once he was out of government he became a paid insider lobbyist for business interests in the province including the Hotel Owners Association, of Alberta. Again the cronyism of this government and its ex cabinet ministers knows no limits. How does being a lobbyist/consultant to the Government qualify as a private sector job, though it is obviously lucrative.

And after his return to his recent position in the government he negotiated his own contract and pay out! Nice work if you can get it. Remember this is the guy that broke union contracts and fired staff with NO severance packages.

And when we are talking about the private sector, what exactly are we referring to here, a job a MacDonalds, probably not. Even in the private sector the payouts to top executives are limited to what they would be earning. Since Dr. West didn’t earn Albertans anything, the question is why are WE paying him instead of the Tory Party which hired him?

Cronyism Abounds in the Klein Reichstadt

Prior to the provincial election last fall you could practically hear the crash and fall of the office chairs as Tory cabinet ministers rushed out of their offices to collect huge severance packages.

As the NDP pointed out during the election on their Platinum Handshake web site:

“Energy Minister Murray Smith is not just responsible for your power bills doubling – he was indeed the architect of the energy deregulation disaster.

But now, Smith is grazing the greener pastures of plum patronage on your dime. Smith is in line for a sweet gig at Alberta’s spankin’-new Washington trade office. He’s retiring from politics, so will receive about $350,000 in severance just for quitting his job. In addition, he’ll be appointed the head Washington trade office with a cool $450,000 salary, living allowance, and benefits package.

The irony is that Murray Smith shut down a bunch of trade offices in 1995, when he was Economic Development Minister. The reason? The offices had become places where Tory cronies died and went to patronage heaven, and had become a symbol of the wastefulness of Premier Don Getty’s Tory government.”

Mr. Smith was not alone, as an Edmonton Journal Editorial pointed out, he was joined by:

“Cabinet ministers Stan Woloshyn, Halvar Jonson and Pat Nelson are all in line for a "transition allowance" of about $500,000 after announcing they won't be running in the next provincial election. Lorne Taylor will receive about $375,000.”

And Premier Klein will get a big fat pay out of half a million dollars when he leaves.

“While a premier's-office spokeswoman says the severance payments are intended to compensate MLAs in lieu of a pension, the government already contributes to an MLA's retirement savings by paying him or her half the maximum allowable RRSP contribution ($7,750 this year) to put into a retirement fund -- money that does not have to be matched by the member. An MLA like Jonson, elected before 1989, also receives pension benefits under the old plan eliminated by Klein in 1993.

The premier made the changes just before the 1993 election, in response to widespread voter concerns about generous pensions and practices such as double dipping, in which former Alberta cabinet ministers drew pension benefits while still sitting as MLAs. The bill effectively ended the formal pension plan for MLAs elected after 1989.

During the subsequent election, Klein told disgruntled voters that 35 MLAs, including himself, would receive "no pension whatsoever." Yet all these MLAs receive an RRSP allowance each year and a severance payout upon retirement. Klein will be eligible for a severance package of more than $500,000 if he retires before the next election.”

Total cost for taxpayers for rats jumping ship $5 million. Let’s remember this is the same government that fired workers and gave them no severance. Something Herr Klein should remember when he gives his pal $180,000 after firing him.

But in Alberta it’s the workers who get the goose, while those giving the goose get the golden egg.

KLEIN AIDE CONDEMNED FOR $180K SEVERANCE

Lorraine Turchansky

Canadian Press

Wednesday, February 16, 2005

EDMONTON (CP) - The man who once presided over the firing of hundreds of Alberta civil servants was condemned Wednesday as a hypocrite for taking a $180,000 severance package after six months of work in the premier's office.

Steve West, who was a cabinet minister in the days of massive cost-cutting by the Conservatives in the 1990s, returned as Premier Ralph Klein's chief of staff in February 2004.

West had earned the nickname Dr. No after pulling colour televisions out of provincial jails, chopping government jobs, launching electrical deregulation and privatizing liquor stores, vehicle registries and parks. Klein said he needed a "tough taskmaster" like West in his office.

But two days after the Nov. 22 election, a news release announced that West was leaving because his work was done and he wanted to return to the private sector.

Although it was painted as a voluntary move, political observers have suggested West was dumped because the Tories lost seats in the election.

"Steve West boasted of terminating hundreds and in some cases thousands of employees, many of whom never got any severance," fumed Liberal Opposition Leader Kevin Taft. "It's just outrageous. It's completely morally bankrupt."

Taft called on West to refuse to take the money on ethical grounds.

West was not available for comment.

NDP Leader Brian Mason called the payout "hypocritical in the extreme."

He suggested that if West is so fond of working in the private sector, he should take a severance package in line with that sector. Most corporate managers, he noted, get a month's pay for each year worked, so that would put West's buyout at two weeks.

Instead, his severance totalled more than his annual salary, which is believed to be in the range of $113,000-$152,000.

Klein is on vacation and was not available for comment. Deputy premier Shirley McClellan said she wasn't prepared to talk about the West contract because it was none of her business.

Taft recently fired his own chief of staff, which is also a taxpayer-funded position. That severance was still being negotiated, "but it's well within what you would expect normally," he said, possibly a month or two's pay.

Dan MacLennan, who heads the union that represents Alberta government employees, said he didn't blame West personally for seeking the best possible deal for himself. In fact, he said he wished his negotiators could get those kinds of deals.

"We're bargaining with the government today and there's not a lot of money for change right now, so when the members see $180,000 for someone, they'd like to know how that bargaining worked compared to ours," said MacLennan.

© The Canadian Press 200

WEST DEFENDS HIS PACKAGE

Broadcast News

Thursday, February 17, 2005

EDMONTON -- A former chief of staff for Alberta Premier Ralph Klein is defending his large severance package.

The premier's office confirmed earlier this week that Steve West was paid $180,000 more than his annual salary -- after working only six months.

West says the money was equivalent to one year's salary, plus a payout of his benefits.

He says what he received was less than half of what he was making in the private sector over the past four years.

West received $119,000 four years ago when he retired as a member of the Alberta legislature.

He's also entitled to a member's pension of more than $27,000 a year, which he's not yet collecting.

The NDP has said the province should take its cue from the private sector when it comes to paying severance to managers.

The going rate for corporations is one month's pay for a year worked.

Watchdog says former minister's image as a 'tax warrior' is tarnished

By PABLO FERNANDEZ, CALGARY SUN

The lucrative severance package given Steve West for six months of work tarnishes a reputation he built as a "tax warrior," said a spokesman for the Canadian Taxpayers Federation yesterday. West, a former provincial government minister, was given $180,000 in severance after serving -- for only six months -- as Premier Ralph Klein's chief of staff.

Federation spokesman David MacLean called it ironic that a politician who did so much to hold the public service accountable and to cut government spending, ended up as a bureaucrat who took home "an obscene" amount of cash for very little work.

"He was so tough on spending and expected so much from government and bureaucrats and now he himself is on the receiving end of a huge lump of taxpayer money," said MacLean.

"He led the charge and gained a reputation as a friend of taxpayers ... this tarnishes that reputation."

West's approach was considered the epitome of conservatism during Klein's early years as premier and is responsible for the privatization of liquor stores and registries in the province.

West's severance package shows just how far the Klein government has strayed from its promise to be a fiscally-conservative administration, said MacLean.

"This government has drifted far from what got them there in the first place -- fiscal conservatism and respect for taxpayers' dollars," said MacLean.

Alberta Liberal Leader Kevin Taft demanded West give the money back.

Taft said that under West's watch, transportation and utilities workers, as well as Alberta Liquor Control Board employees, were let go in the 1990s without one dollar in severance.

Earlier in the week, the government justified their actions by saying the severance package was likely part of a contract signed to lure West from the private sector to public office.

But with the number of bright people in Alberta willing and qualified to do the job, and considering the typically short career spans of chiefs of staff, a severance package of that magnitude is never prudent, said MacLean.

West did not return calls.

Alberta's Klein appoints new 24-member cabinet

Wed. Nov. 24 2004 Canadian Press

EDMONTON — Alberta Premier Ralph Klein went back to the future Wednesday, snaring former adviser and friend Rod Love to be his chief of staff for his final term.

The premier announced the move as he rolled out a new 24-member cabinet that brings together a mix of old and new faces.

Love, who was Klein's closest adviser for nearly two decades and ran his campaigns for mayor, Tory leader and premier, replaces Steve West, who is heading back to the private sector.

Love left Klein's office in 1998 to begin a private consulting business. He also did a short stint as chief of staff for former Canadian Alliance leader Stockwell Day.

Before Monday's Alberta election, he mused that his years with Klein had been special.

"I had a great run with him -- 19 years,'' he said. "Everything I have got in this world I owe to him.''

The Tories won the Monday vote, capturing 61 seats in the 83-seat legislature. But the victory party was subdued as opposition members reclaimed a number of Tory seats in Edmonton and even won in Klein's hometown of Calgary.

Klein said West served him well in a transition period after Love's successor, Peter Elzinga, stepped down last April.

"I am very pleased to welcome Rod back to my staff,'' he said. "With a new mandate for our government and a very important social agenda ahead for Alberta, having Rod as my chief of staff will bring proven experience to my office team.''

Alberta shifts entire $1.5 billion cost of new power lines onto consumers

EDMONTON (CP) -- Alberta consumers are on the hook to pay the entire $1.5-billion cost of building new power lines, the province's energy minister confirmed Friday.
Greg Melchin said the province rejected a 2002 Energy and Utilities Board ruling that consumers and generators should each pay half the cost of new transmission lines.
The move has outraged consumer groups and the opposition, who say electricity customers are getting a raw deal.
But Melchin defended the decision by his predecessor, Murray Smith, to overrule the EUB.
"It wouldn't be in Albertans' interests to see the generators lose money year after year, or else we'll have no generation, we'll have no electricity at all," said the minister.
The gravity of this policy decision only became clear last month, when a report by the Alberta Electric System Operator pegged the total cost of upgrading the province's power lines at $1.5 billion.
The Consumers Association of Canada said this will mean added charges on power bills for Alberta consumers once construction of the new power lines begins.
"In many respects the generators want all of the juice and none of the pulp," said Jim Wachowich, who speaks on Alberta electricity issues for the Consumers Association.
Premier Ralph Klein had said previously that he did not support the idea of consumers paying the entire cost of new power lines.
But premier's office spokesman Jerry Bellikka said the policy shift was done for transparency.
If generators had to pay for half the cost of new power lines, they would simply pass the cost on to consumers' on the power bills anyway, said Bellikka.
But Wachowich said there's no guarantee that power generators would have had the opportunity to pass on the costs.
"If a generator went out of business or was forced to sell power cheaper than it had forecast, then consumers would not see these costs on their bill," he said.
Opposition Liberal energy critic Hugh MacDonald says Albertans are already paying some of the highest power bills in Canada and this will drive costs even higher.
"Electricity consumers in this province have been sold down the river by their government and they're going to have another add-on to their bill," said MacDonald. "This is flawed ideology."
Energy Department spokeswoman Donna McColl said when consumers start paying the cost of the new power lines in five years, the average power bill will increase by about $2 per month.
But MacDonald said department estimates have been inaccurate in the past. He pointed out Albertans were promised lower power rates under industry deregulation, but instead saw their electricity bills soar.
"How can you rely on the government's word? We have seen bills go higher and the credibility of this government on electricity deregulation go lower. They should tell us what the true costs are."

---

[1] “Alberta, however, has a precedent. In 1992, when Gettywas Premier, Solicitor General Steve West embarrassedthe Conservative government by being involved in an altercationin a bar. It was personal, in public, and involvedliquor. When the Legislature opened some weeks later, West swore that he would not touch liquor again as long as he held public office. “ Rich Vivone

[2] “Ashley Geddes, a colleague at The Edmonton Journal, had to wait a year to get a story in print in the early '90s about cabinet minister Steve West's shenanigans in local bars. References to West's sometime drinking buddy of the day, Klein, were removed.” Mark Lisac

[3] Klein’s drinking habits have a long public history.

The stories of Klein and alcohol are endless. He drank openly as Mayor of Calgary in the 1980s. He made the St. Louis Hotel in Calgary a national institution. He drinks with reporters. When he decided to contest the Conservative Party leadership in 1992, he was asked about the drinking. His response: a guy can change. He didn’t.

[4] Love’s batting average on creating right wing party leaders is high. He also worked to get Stockwell Day elected leader of the Federal Alliance Party, ok Day was a screw up but hey that’s not Love’s fault. He went on to organize Stephen Harpers coronation as both Alliance Leader and then Leader of the newly merged Alliance/PC party.

[5] LOUIS D. HYNDMAN

Director since 1986 and resident of Edmonton, AB. He is a senior partner of the law firm Field LLP. Mr. Hyndman is a director of Canadian Urban Ltd., Clarke Inc., EllisDon Inc., Enbridge Inc., Melcor Developments Ltd. and Meloche Monnex Inc. He held several ministerial appointments before serving as Provincial Treasurer of Alberta from 1979 to 1986. Mr. Hyndman is a member of the Order of Canada and a trustee of the Alberta Heritage Foundation for Medical Research.

[6] DAWN FARRELL began her career at TransAlta in 1985 as a Forecast Analyst. Over the last 15 years, she has held a number of positions including Supervisor of Forecasting and Market Research, Vice President ofBusiness Development, and Executive Vice President, Independent Power Projects. Currently Executive VicePresident Corporate Development, Dawn is responsible for identifying and developing opportunities in newtechnologies, eCommerce, and Mergers and Acquisition activities. Outside of TransAlta, Dawn is a Director forMount Royal College Board of Governance, Vice Chair of the Mount Royal College Foundation, and a Member of the Calgary Foundation Investment Committee.

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