While I was away, one of the more interesting stories to break was the sale of the Princess Jacqueline to Mexican interests.
The Jacqueline is, of course, the former west coast ferry Queen of Esquimalt, sold by BC Ferries in mid-2008 to a Chinese company for a reported $1.7 million. She was one of four older ferries being turfed as part of the company’s replacement program, and the sale drew much attention — and raised many eyebrows abroad — for the high price paid for the 45-year-old ferry. She contained asbestos, didn’t conform international standards and was unlikely to be usable as a passenger ferry elsewhere without considerable work. BC Ferries CEO David Hahn said after the sale that she was destined for use as a cargo ship “off the coast of China”.
At the time, I thought the price was unbelievably high. So did a number of business folks who work in the maritime industry outside of BC, some of them outside of Canada. Their emails to me in 2008 and 2009 all boiled down to the same essential question: “What the heck?”
In the words of one writer, it “smelled bad.”
But sale was made, and as near as I can tell from BC Ferries’ published accounts, the company got its money. (Anyone who knows any different is most welcome to contact me at onthewaterfrontblog@gmail.com.)
The sale price did seem to be a one-off, though. The other ferries up for sale at the time — the Queens of Tsawwassen, Saanich and Vancouver — didn’t fetch nearly that, as far as I know.
The Vancouver went to Coast Marine for use as a camp barge at Woodfibre, up Howe Sound. (And, if this Craigslist posting is legitimate, she is now for sale again for $725,000, with an advertised scrap value of $2 million. I say advertised because given the weight of the steel on her, and the value of scrap at the moment, I think the real figure is somewhere just north of $80,000. And that’s before the cost of the tow to the scrapyard.)
The Saanich, reborn as the Owen Belle, sailed off for similar use and was last spotted up for sale. Ditto the Tsawwassen.
But back to the Princess J.
She didn’t make it to China. She was stripped of some of her valuable and historic bits and moved as far as Port Alberni, where she was initially said to be holding for bad weather. Over time, it became clear that the ferry had been abandoned and that her port berthing bills were not going to be paid. The ferry sat in Alberni for two years and was finally sold this spring, under court order, for enough to cover back moorage, insurance and legal costs. Diane Ward, spokeswoman for Bluewave Marine Surveyors, which tended the abandoned vessel, was still being quoted this month as saying the ship would have been sound for service in China, but was simply not up to the ocean voyage to get her there. I can’t find any record of an explanation about why a company would pay $1.7 million for a ferry it intended to move to China without checking that the vessel could actually make the trip.
Anyway, at the beginning of the month, the Jacqueline was towed south.
And that was going to be that, I thought. The ferry would arrive in Mexico, and eventually we’d see if she was scrapped (Mexico does have steel mills on the coast near Ensenada, the announced destination) or put back into service (odder things have happened.) We’d never really know what that original sale was all about, I thought.
Then late last week, I ran across an intriguing Associated Press news article that might have connected some of the mysterious dots surrounding the Princess J, I thought. The Globe and Mail, the BBC and assorted international news outlets featured the article fairly prominently.
The story says that China’s central bank was reporting that officials have stolen as much as $120 billion US in assorted crooked deals over the past decade, and then fled the country — mainly to the United States. (The study was initially posted on the People’s Bank of China website this week but has since been removed, the story says.)
The Chinese report said most of the money disappeared between the mid-1990s and 2008 and that the deals involved “thousands of corrupt government officials” – between 16,000 and 18,000 employees of state-owned companies — who used offshore bank accounts to smuggle the funds out into Canada, the U.S., Australia and Holland through offshore bank accounts or investments “like property or collectables”. The deals were disguised as business transactions, according to the article.
So here’s a funny thought. What if BC Ferries was used unknowingly to move funds out of China? What if the buyers back in China thought they were getting one of our newer ferries and got a loan from a state bank for, oh, maybe $10 million? But only part of it was used to pay out the purchase here? Maybe by some middleman official who has since disappeared (and he appears to have, according to my sources)?
BC doesn’t have really tough money laundering laws like they do in other parts of the world. BC Ferries — maybe as a result of that, or maybe as a result of its lack of real-world, commercial maritime expertise — apparently never questioned why a company would pay so much over the value for a 45-year-old boat. We did hear a lot of crowing about the great deal, but not a word about how odd it was.
One of the more interesting emails I got from Europe suggested that if an inappropriate sale had happened there, laws are so strict that the directors of the company could be charged with profiteering under their anti-money laundering laws, and possibly face jail time. That’s of course if the purchase was made for false purposes. And we don’t know if this sale was one of those.
One person in the banking industry wrote to suggest to me that “in Europe, they would have looked at the directors and done background research into their bank accounts to make sure they didn’t profit in any way from an extremely over-the-top deal.”
“An old V-class ferry more than 45 years old was really only worth around $125,000 to $150,000 at best. Everyone thinks if they even got close to $250,000 for her, then here in Europe eyebrows would have been raised and a lot of questions asked. So for BCFS to get the $1m for her, then you really have to wonder what was going on. “
When I wrote back this weekend to that person about the article I had read on the Chinese frauds, he said: “So now we are starting to see and hear about money been ripped off from the Chinese state, and Canada being mentioned in the newspaper reports. A lot of people (here) suspect that there were problems in China, but it is a tight country to get info out of, or confirmed by. Still, we are now starting to see some info flow out of China that is confirming what a lot of people had suspected years ago.”
It would be interesting if the original Chinese sale had been a false one. It be equally interesting to know if anyone — anyone at all — inside BC Ferries scratched their heads at all at the time. Or, you know, stuck their head in their desk drawer and screamed a very loud “thank you, Jesus” when the Chinese offered was tabled. And another one when the cheque cleared.
I don’t know for sure. Maybe the Jacqueline was worth the $1.7 million. Maybe she was really meant to sail for China and things went wrong. Maybe all the other ferries sold for a similar price, and my theories are crazy.
I don’t know. To quote my pals in the ‘hood where I grew up, I’m just sayin’….
Anyone with any thoughts on the topic is welcome to comment below. I love to get your emails, but a lively group discussion would be nice too. The shy folks can still feel free to email me, though. I’m always in at onthewaterfrontblog@gmail.com. Especially if you have any reliable, documented information on any of these sales….
Nice to have you back.
I think your story has a lot more truth in it than an average Hollywood blockbuster about greed and all things associated with a business.
I remember reading from the Admiralty Arrest Warrant (AV Times) that the address of the owners was in Cambodia. The last time I checked, I don’t think China has bought Cambodia yet, has it?
Didn’t Hahn say or announce that the ferry was going to some place in the far north of China, which would be away from any well known Chinese city where checks could be done on possible ferry companies, to see what type of ferries they have. I know some of the forums that follow all these things related to our ferries, voiced some surprises that they couldn’t find anything out about who bought it or where it was going. (They like to keep track of these things – like stamp collectors)
Your correct BC and Canada don’t have anything like what Europe has in the way of anti-money laundering Laws, which were forced on them after 9/11 by America. When the Coastal were been build in Germany, a lot of comments about how they got the order and BC didn’t. Some said it was unfair government support, but here again Europe leads in Anti Competitions laws and Subsides to companies from governments so they get orders. The EU takes a very hard line on this and fines countries a ton of money for infringement of it. Also been a Director of a Company in Europe carries a lot more risk of jail and criminal prosecution than anything we have in Canada. So if you find a rat in your company or a deal that isn’t how it should be, then you’re required to ask about it and report it.
As for Hahn and his crew, they maybe Kings in their little fiefdom on the West Coast of BC, but in the wider global world of maritime matters, they are just pure little novices at the best of times, and at worst, just incompetent. So for this type of deal to come off it is really pretty simple.
Ferries sent out globally prospects on the 4 ferries. Get a copy of that and take it to the Bank, along with an email from BC Ferries confirming they are to be sold. That is your starting point. Next look through the fleet and find ferry which you think might be newer. Tell the bank, you have talked to BC Ferries and they have another ferry for sale, not listed, but they want $20 Million for it. Then go back to the Bank and say, you have talked them down to $17 Million, but to secure it, you need to put down 10% of the price, hence $1.7M. The Chinese Bank inside of China wires – transfer the funds to BC Ferries account. Deal done. Of course in the mean time, you have someone local go and visit BC Ferries saying there your agent. The sales contract is drawn up and sent to a local lawyer. Everything looks above board and legal. Back in China, you have the Bank give you the remaining $15,300,000 Million, maybe made out in the name of the local lawyer. You come to BC, pay off the local person, lawyers, move the ferry to Port Alberni, pay a few months mooring fee, then disappear with the $15 Million.
Ferries should have known that it wasn’t worth anywhere near that amount of money, but then you can say who cares, just show us the money and she is yours. Any real serious buyer would send in a team of engineers to learn about the engines as a first starting point, after all if these break down, you’re in trouble. Nothing like that was done. Then you may think the ferry is worth a lot in scrap metal value. But here is another problem. There is scrap metal and there is scrap metal. Looking at the major centres that deal in ships scrap metal, India, Bangladesh, Korea, and China, and the average age of the ships are around the 25 to 30 years, which is how the base average price of the metal is decided. Here the ferry is more than 15 years older, and the older they are, they less value they hold in metal terms, so you need to work in a major discount on the base level price. Also people look at gross tons not the correct figure which is the LSW “lightship weight”. Using this figure you come to the $100,000. Any Director within BC Ferries should know this, and questions should be asked as to why a person or company want to pay more than 10 times the real value of the ferry. Under European law. All the Directors would be investigated. I think Hahn would be for the high jump.
The $120 Billion stolen – lost from China works out at $1 Billion a month, and this scam – con is only worth around $20 Million, Small change.
People with long memories will remember what happen in Russia, when Boris Yelstin was in charge, and how a number of people became super wealthy, oligarchs. Bloomberg magazine seems to think this has happen in China, but no one knows for sure. As for the $120 Billion, I think that is only the small tip of the iceberg on fraud or thief from the state.
Canada is mention I think because we took in a lot of people from HK, and they would have the “local” knowledge to pull this off and hide the funds.
One of the longest running complaints about Ferries is the lack of people in any position on the governing board with maritime experience or knowledge. I would expect to see a retired Coast Guard person, or retired Naval person there, plus during the new build, any one with actual experience in handling a $1 Billion plus new build project. It was left to amateurs within BC Ferries.
Hahn and his crew may think they have got the upper hand on the deal, and banked a lot of money, pure profit, but if Canada had the same laws as other countries around the world, then you wonder what Hahn and his crew would look like in striped clothing for doing this great deal. I also wonder what China thinks about Ferries, and would they come after Ferries for accepting the deal?
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