Auditor General Peter Valentine has released his long-awaited report on how taxpayers - via Alberta Treasury Branches - were stuck with $418 million worth of liabilities for a shopping mall and theme park. If you have high blood pressure and are prone to heart attacks - don't read the report too closely. Mr. Valentine's analysis is a fine summary of why politicians should be kept away from 'helping' businesses in trouble. Here are some thoughts on the report.

Mistake #1:

The premier, in October 1993, should never have installed then-Economic Development Minister Ken Kowalski (now Speaker) as the government's representative in dealings between Alberta Treasury Branches, the Ghermezian brothers, and government.

Mr. Kowalski, the consummate Alberta pork-barrel politician, pushed hard to have taxpayers bail out the Ghermezians via a government loan or loan-guarantee in February 1994, arguing the economic impact of the mall's receivership would be enormous. That argument brings up...

Mistake #2:

Believing those bogus 'economic impact' reports. Compliant bureaucrats crank out such reports whenever politicians want to justify bailing out private business. Question: Would it really have mattered to your average Gap shopper whether a bank in New York or Toronto owned West Edmonton Mall after 1994

Apparently, it didn't matter before 1994, as non-Alberta banks then held most of the mall's debt.

Mistake #3:

Mr. Valentine points out that the Agenda and Priorities Committee - made up of government MLAs - "formed a conclusion about the economic impact of a WEM bankruptcy on the Province with incomplete analysis and support."

Those incomplete conclusions in February 1994 were based on data provided by Mr. Kowalski's department. Next time, such estimates should come with more salt.

Reality check: The mall wasn't going anywhere. What were non-Alberta banks going to do Pack up West Edmonton Mall and place it in Times Square It was not in their interest to shut it down.

You can't get your loans re-paid if your asset isn't producing revenue. As the various banks with WEM loans tried to turf the Ghermezians (though one proposal had them staying around as managers) the real political debate was about leaving the Ghermezians - Albertans - in charge. That led to-

Mistake #4:

Premier Klein's February memo that discussed not finalizing a deal with outside-Alberta lenders. In retrospect, the premier argues, probably correctly, he was in a catch-22, damned if he wrote a memo trying to find an 'Alberta solution', or cursed by Edmontonians for not 'caring.' (Mr. Premier: See Mistake #2.) But that mistake led to:

Mistake #5:

Petty provincialism over economic sense.

Regular banks had tougher terms that made the Ghermezians choke on their wheaties. It stands to reason that anything ATB did (i.e. - the eventual October 1994 refinancing deal) that pleased West Edmonton Mall's owners was a comparatively good deal, as the Auditor General's report now indicates.

And it was a good deal - for the Ghermezians. Taxpayers are out $152 million in loan losses, guarantee losses, and other losses to the end of 1998, thanks to ATB's involvement with West Edmonton Mall. $132 million of that has occurred since 1994.

Does that matter Yes. When ATB is eventually sold, it will fetch $152 million less than it otherwise would, similar to how a damaged fender would drop the value of your car.

Summary:

The premier's desire not to micro-manage his ministers is admirable and mostly positive, but slack on this occasion. And Mr. Kowalski's desire to get a made-in-Alberta deal was, to put it mildly, unfortunate.

Mr. Kowalski's pathetic plea for the government to bail out the Ghermezians was over the top when the chance of any real economic damage- for reasons already pointed out - was minimal at worst.

Regardless of the outcome of the unproven bribery charges against former ATB president Mr. Leahy, had the original March 1994 Gentra deal had not been delayed - thanks in part to concerns about not finalizing deals with non-Albertans - ATB might never have had a chance to sign such a rotten deal.

The Auditor General concluded there was no direct political interference that caused the October 1994 refinancing deal between ATB and West Edmonton Mall. There is no direct link between the desire of Mr. Klein to explore an Alberta solution, or Mr. Kowalski's zealousness to broker a made-in-Alberta deal, and the eventual bad deal for ATB, which will cost taxpayers a significant equity loss unless the courts reverse it.

The premier owes Albertans an apology for putting Ken Kowalski in charge of that ATB-WEM file. But more than anyone, Ken Kowalski owes Albertans an apology and possibly his seat for pushing hard for a made-in-Alberta deal, even though the one later signed by ATB was not the one the over-zealous minister originally aimed for.

Mr. Kowalski also owes Albertans his Speaker's Chair. The Legislature is the highest elected body in our province. He cannot preside over an assembly in which he will be - legitimately - one of the main targets for this mess.