Alberta and Great Waterways Railway scandal

The Alberta and Great Waterways Railway Scandal was a political scandal in Alberta

Alberta

Alberta is a province of Canada. It had an estimated population of 3.7 million in 2010 making it the most populous of Canada's three prairie provinces...

, Canada

Canada

Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

in 1910. It resulted in the resignation of the provincial government of Alexander Cameron Rutherford

Alexander Cameron Rutherford

Alexander Cameron Rutherford was a Canadian lawyer and politician who served as the first Premier of Alberta from 1905 to 1910. Born in Ormond, Ontario, he studied and practised law in Ottawa before moving with his family to the Northwest Territories in 1895...

over allegations of conflict of interest

Conflict of interest

A conflict of interest occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other....

in the government's involvement in the financing of the Alberta and Great Waterways Railway. The scandal was instigated by the resignation of Public Works Minister William Henry Cushing

William Henry Cushing

William Henry Cushing was a Canadian politician. Born in Ontario, he migrated west as a young adult where he started a successful lumber company and later became Alberta's first Minister of Public Works and the 11th mayor of Calgary...

from Rutherford's cabinet over disagreement with the government's railway policy, and its agreement with the Alberta and Great Waterways Railway company in particular. The Legislative Assembly of Alberta

Legislative Assembly of Alberta

The Legislative Assembly of Alberta is one of two components of the Legislature of Alberta, the other being the Queen, represented by the Lieutenant-Governor of Alberta. The Alberta legislature meets in the Alberta Legislature Building in the provincial capital, Edmonton...

soon heard revelations of government favouritism towards the company, which had received a government charter to build a railway in northern Alberta, and a failure to oversee its operations properly. These revelations brought a large portion of Rutherford's Liberal

Alberta Liberal Party

The Alberta Liberal Party is a provincial political party in Alberta, Canada. Originally founded in 1905, when the province was created, it was the dominant political party until 1921 when it was defeated. It has never been in government since that time...

caucus into revolt against his government, and he narrowly survived a sequence of attempts to topple his government. After his cabinet suffered further resignations, Rutherford placated the legislature by establishing a royal commission

Royal Commission

In Commonwealth realms and other monarchies a Royal Commission is a major ad-hoc formal public inquiry into a defined issue. They have been held in various countries such as the United Kingdom, Australia, Canada, New Zealand, and Saudi Arabia...

to investigate the affair.

Though he had bought peace within the legislature, machinations to bring Rutherford down continued outside of it. George Bulyea, the Lieutenant-Governor of Alberta, had harboured doubts about Rutherford's suitability as Premier since appointing him, and began to search for a replacement. He eventually settled on Arthur Sifton, the province's chief judge, and secured the agreement of most factions of the caucus for Sifton's ascension. Reluctantly, Rutherford agreed to resign, and Sifton took office. Shortly thereafter, the royal commission reported. While Rutherford and his allies were formally cleared of wrongdoing, the commission's majority report was critical of their actions during the crisis and before it (a separate minority report

Minority Report

"The Minority Report" is a 1956 science fiction short story by Philip K. Dick, first published in Fantastic Universe. The story is about a future society where murders are prevented through the efforts of three mutants who can see the future...

offered a more sympathetic interpretation of events).

Sifton would have trouble of his own when he introduced legislation to undo many of the Rutherford government's actions in relation to the affair. The legislation, which provided for the confiscation from the Alberta & Great Waterways company of money raised by the sale of government-guaranteed bonds, was first opposed by many Rutherford loyalists in the legislature and then successfully challenged in court by the Royal Bank of Canada

Royal Bank of Canada

The Royal Bank of Canada or RBC Financial Group is the largest financial institution in Canada, as measured by deposits, revenues, and market capitalization. The bank serves seventeen million clients and has 80,100 employees worldwide. The company corporate headquarters are located in Toronto,...

, which held much of the money on deposit. Though Sifton's government survived and would go on to win two provincial elections, the divisions in the Liberal party caused by the scandal would not fully heal for years.

Background

Alberta's first years as a province were optimistic ones, and one way that this optimism manifested itself was in a desire for railroads. The public, media, and politicians were all calling for the rapid development of new lines and expansion of existing ones. Rutherford's Liberals

Alberta Liberal Party

had set up a framework that allowed almost anybody to enter the railroad business, but few firms had done so by 1909. The opposition Conservatives

Progressive Conservative Association of Alberta

The Progressive Conservative Association of Alberta is a provincial centre-right party in the Canadian province of Alberta...

called for the government's direct entry into the industry through the construction of new lines. Rutherford's government instead opted for a regime of loan guarantees: the Grand Trunk Pacific Railway

Grand Trunk Pacific Railway

The Grand Trunk Pacific Railway was a historical Canadian railway.A wholly owned subsidiary of the Grand Trunk Railway , the GTPR was constructed by GTR using loans provided by the Government of Canada. The company was formed in 1903 with a mandate to build west from Winnipeg, Manitoba to the...

and the Canadian Northern Railway

Canadian Northern Railway

The Canadian Northern Railway is a historic Canadian transcontinental railway. At its demise in 1923, when it was merged into the Canadian National Railway , the CNoR owned a main line between Quebec City and Vancouver via Ottawa, Winnipeg, and Edmonton.-Manitoba beginnings:CNoR had its start in...

had their bonds, which were to pay 4% per year over their thirty year term, guaranteed at a rate of $13,000 per mile of railway constructed. The legislature

Legislative Assembly of Alberta

had the right to increase this to $15,000. In exchange, the railways were expected to lay down their lines at a minimum rate: CN was required to build 125 miles (201.2 km) and the Grand Trunk Railway 50 miles (80.5 km) before the end of 1909.

Besides the established companies, guarantees were also offered to new companies. One company to take advantage of this was the Alberta and Great Waterways Railway, which was founded by two Kansas City

Kansas City, Missouri

Kansas City, Missouri is the largest city in the U.S. state of Missouri and is the anchor city of the Kansas City Metropolitan Area, the second largest metropolitan area in Missouri. It encompasses in parts of Jackson, Clay, Cass, and Platte counties...

bankers, William R. Clarke and Bertrand R. Clarke, and a Winnipeg

Winnipeg

Winnipeg is the capital and largest city of Manitoba, Canada, and is the primary municipality of the Winnipeg Capital Region, with more than half of Manitoba's population. It is located near the longitudinal centre of North America, at the confluence of the Red and Assiniboine Rivers .The name...

accountant, William Bain. The company proposed to build a "line from Edmonton

Edmonton

Edmonton is the capital of the Canadian province of Alberta and is the province's second-largest city. Edmonton is located on the North Saskatchewan River and is the centre of the Edmonton Capital Region, which is surrounded by the central region of the province.The city and its census...

north-easterly to a point at or near the west end of Lac la Biche, thence to a point at or near Fort McMurray." Guarantees to the so-called "A&GW" were more generous than to the established companies: $20,000 per mile for 350 miles (563.3 km) and $400,000 for its Edmonton terminal. The bonds also paid better interest (5%) over a longer term (fifty years) than for the established companies. Upon the bonds' sale, the money was to be placed in a bank account controlled by the government, and paid to the railway as the line was constructed.

The scandal

The Rutherford government had just been resoundingly re-elected in the 1909 provincial election

Alberta general election, 1909

The Alberta general election was 1909 was the second general election for the Province of Alberta, Canada. It was held on 22 March 1909 to elect members of the Legislative Assembly of Alberta....

when the new legislature first met in February 1910. There were no indications of trouble: William Clarke, A&GW President, had several months earlier announced that the line would be completed by the end of 1912, ahead of schedule. When the A&GW bonds went on sale in London

London

London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...

in November 1909, the issue was oversubscribed. The following month, the contract for ties was awarded. Everything seemed to be progressing as planned in relation to the Alberta and Great Waterways Railway when, at the beginning of the new legislative session, Liberal backbencher John R. Boyle

John R. Boyle

John Robert Boyle was a Canadian politician and jurist who served as a Member of the Legislative Assembly of Alberta, a cabinet minister in the Government of Alberta, and a judge on the Supreme Court of Alberta. Born in Ontario, he came west and eventually settled in Edmonton, where he practiced...

asked the government a series of innocuous questions about the company and the guarantees made to it. Rutherford, Minister of Railways as well as Premier, responded to the questions in writing. Before he did so, however, a rumour began to circulate that William Henry Cushing

William Henry Cushing

, Minister of Public Works, had resigned from the cabinet.

Boyle and Conservative leader R. B. Bennett

R. B. Bennett

Richard Bedford Bennett, 1st Viscount Bennett, PC, KC was a Canadian lawyer, businessman, politician, and philanthropist. He served as the 11th Prime Minister of Canada from August 7, 1930, to October 23, 1935, during the worst of the Great Depression years...

questioned Rutherford about the rumours, but the latter initially refused to make any announcement. The next day, however, the rumour was confirmed when the Premier read Cushing's letter of resignation in the legislature. Cushing gave his reasons for resigning as disagreement with the government's railway policy, which he claimed was developed without his involvement or consent. Rutherford disagreed with this claim, and expressed his regret for Cushing's resignation.

J. R. Boyle's resolution

On February 21, Boyle gave notice of a resolution to expropriate the rights of the A&GW and build the line directly. He asserted that the government had guaranteed to the A&GW more than was necessary, as a line of 230 miles (370.1 km), barely two thirds what had been guaranteed, was sufficient. The next day, Boyle further alleged that Deputy Attorney-General S. B. Woods had tampered with the government's files on the A&GW before Boyle and Bennett had viewed them. Attorney-General Charles Wilson Cross strongly disputed this allegation.

Debate on Boyle's resolution began February 25 in front of a full public gallery. Cushing, breaking his silence, opened debate. He explained that cabinet's original intention had been for $20,000 per mile to be the maximum guarantee, with less promised for more easily-built portions of the line. He claimed that he had taken ill at a time that this understanding was still in place, only to have Rutherford move responsibility for railways from Cushing's Public Works department to a new Railways department, headed by Rutherford himself. He recounted his discomfort with Rutherford's refusal to consult with Public Works engineers on the actual costs of constructing the line, and his relief at Rutherford's assurance that Cushing himself would be consulted. He claimed that he had not been, and that, upon seeing the agreement between the A&GW and the government, he had decided to resign. Rutherford disputed this version of events, noted that Cushing had been at all relevant cabinet meetings, and cited the report of government engineer R. W. Jones in disputing that the line could be constructed for less than $20,000 per mile.

Boyle followed, alleging that Rutherford had privately committed himself to the $20,000 figure as early as November 14, 1908, before a government engineer had even been appointed. He also accused the government of negligence in failing to verify the paid in capital

Paid in capital

Paid in capital refers to capital contributed to a corporation by investors through purchase of stock from the corporation . It includes share capital Paid in capital (Paid-in capital or Contributed capital) refers to capital contributed to a corporation by investors through purchase of stock...

of the A&GW before committing $7.4 million of government loan guarantees to it. He closed by repeating his demand that the government expropriate the company's rights and build the line itself. Cross rebutted for the government, questioning Cushing's sincerity and quoting a March 1909 speech in which the then-Minister of Public Works had defended the government's railway policy against Bennett's attacks. Cross also reminded the legislature that no money was to be paid to the A&GW until tracks were actually constructed.

On February 28 Liberal member and Cushing-ally Ezra Riley

Ezra Riley

Ezra Hounsfield Riley was a politician and rancher from Alberta, Canada.-Early life:Riley was born in 1866 in Yorkville, Ontario. He owned a large sum of land that he sold off to the City of Calgary in 1904...

proposed an amendment

Amend (motion)

-Explanation and Use:-Main Motions:Any main motion and any motion to amend may be amended. However, a motion to amend a motion to amend may not be amended, due to the overly complex parliamentary situation that would frequently result.-Secondary Motions:...

to Boyle's resolution, striking out the proposals to expropriate and substituting a statement that "the contract and agreement entered into between the Government and the Alberta and Great Waterways Railway Company are not such as to commend them to the judgment and confidence of this house". The same day, an amendment to this amendment was moved by Liberal John William Woolf

John William Woolf

John William Woolf was an American-born Canadian politician who served in the Legislative Assembly of the Northwest Territories and the Legislative Assembly of Alberta. Born in Utah to polygamous parents, he moved with them to Cardston, Alberta as a young man...

and seconded by Liberal John Alexander McDougall

John Alexander McDougall

John Alexander McDougall was a politician in Alberta, Canada, a municipal councillor and mayor in Edmonton, and a member of the Legislative Assembly of Alberta.-Early life:...

proposed redrafting the agreement along the lines proposed by A&GW President Clarke in a letter to Rutherford. This letter proposed that the A&GW should offer to the government its construction equipment and other assets in guarantee of its construction pledges.

This latter amendment was considered friendly to the government, but Rutherford was not yet in the clear. Independent

Independent (politician)

In politics, an independent or non-party politician is an individual not affiliated to any political party. Independents may hold a centrist viewpoint between those of major political parties, a viewpoint more extreme than any major party, or they may have a viewpoint based on issues that they do...

Edward Michener

Edward Michener was a politician from Alberta, Canada. He was born in Tintern, Ontario.Edward was acclaimed as Mayor of Red Deer, Alberta. In the 1904 Mayoral race, he held that position for 2 terms until 1906....

attacked the government for receiving only par value

Par value

Par value, in finance and accounting, means stated value or face value. From this comes the expressions at par , over par and under par ....

for the bonds when they had been sold at ten percent above par, an argument that was supported by McDougall. Though McDougall had seconded Woolf's pro-government amendment, it became apparent that his reasons for doing so were less support for the government than aversion to the province using its law-making power to extricate itself from inconvenient contracts.

Opposition to the government came to a head March 2 when Conservative leader Bennett first spoke. Bennett was renowned as one of the province's finest orators, and his five hour speech earned plaudits even from the Liberal Edmonton Bulletin

Edmonton Bulletin

The Edmonton Bulletin was a newspaper in Edmonton, Alberta published from 1880 until January 20, 1951. It was founded by Frank Oliver, a politician and future minister in the Canadian Government....

, which praised its "splendor in diction [and] the physical endurance of the orator" and called it a "high water mark for parliamentary debate in Alberta". Bennett lashed out at the government's handling of the A&GW file, accusing it of culpable negligence

Negligence

Negligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...

in failing to properly oversee the company's activities. He claimed to have been approached directly by "great financial interests" intent on preventing his participation in the debate, and homed in on the terms of the bonds' sale. He argued that the discrepancy in the sale price of the bonds and what the government had received for them meant that Clarke and his associates had realized a profit of between $200,000 and $300,000. He closed with an accusation that Cross had sent an emissary to a telephone company that wanted to install an automatic telephone system in Calgary

Calgary

Calgary is a city in the Province of Alberta, Canada. It is located in the south of the province, in an area of foothills and prairie, approximately east of the front ranges of the Canadian Rockies...

agreeing to reverse his opposition to the deal in exchange for a $12,000 contribution to the Attorney-General's campaign fund. These charges, corroborated by Cushing but hotly denied by Cross, were not related to the A&GW affair, but were designed to damage the credibility of the government's de facto house leader

House Leader

In Canada, each political party with representation in the House of Commons has a House Leader who is a front bench Member of Parliament and an expert in parliamentary procedure...

on the eve of the vote on Woolf's amendment. The government side adopted similar tactics: Agriculture Minister Duncan Marshall

Duncan Marshall

Duncan McLean Marshall was a journalist, publisher, rancher provincial level politician and Minister of Agriculture in 2 provinces and later served in the Canadian Senate representing the province of Ontario.-Early life:Marshall made his first run at federal politics running in the Muskoka riding...

accused Boyle of being motivated by bitterness over having been denied the solicitorship of the A&GW; Boyle admitted that he had applied for this position, but denied an accusation from Peace River

Peace River (provincial electoral district)

Peace River is a provincial electoral district in Alberta, Canada. The district is mandated to return a single member to the Legislative Assembly of Alberta using the first past the post method of voting...

MLA James Cornwall

James Cornwall

Lieutenant Colonel James Kennedy "Peace River Jim" Cornwall was a provincial politician from Alberta, Canada. He served as a member of the Legislative Assembly of Alberta from 1909 to 1913 sitting with the Liberal caucus in government....

that he had requested Cornwall's assistance in lobbying for the position.

The Woolf amendment came to a vote the evening of March 3. In a victory for the government, the amendment passed twenty-three votes to fifteen. In addition to Michener and the two Conservatives, the amendment was opposed by twelve of the legislature's thirty-seven Liberals, including Cushing. Charles M. O'Brien, the legislature's lone Socialist

Socialist Party of Canada

There have been two different but related political parties in Canada that called themselves the Socialist Party of Canada . The current Socialist Party is an electorally inactive and unregistered federal political party in Canada...

representative, voted on the government side.

Cabinet confusion

On March 9, Cross suddenly resigned. His resignation was quickly followed by that of Woods, his deputy. The next day William Ashbury Buchanan

William Ashbury Buchanan

William Ashbury Buchanan, was a journalist, publisher and politician based in Alberta....

, Minister without Portfolio, did the same; though he had voted on the government's side on the Woolf motion, he harboured considerable doubts about the government's railway policy. Rumours circulated that Agriculture Minister Marshall and Minister without Portfolio Prosper-Edmond Lessard

Prosper-Edmond Lessard

Prosper-Edmond Lessard was a member of the Legislative Assembly of Alberta from 1909 to 1921 sitting with the Liberal caucus in government. He also served in the Canadian Senate from 1925 to his death in 1931 sitting with the federal Liberal caucus.-Early life:Lessard was born on February 3, 1873...

had also resigned, though these proved false. Buchanan, Marshall, Lessard, and Rutherford made no comment on the situation to either the press or the legislature. Cross was more forthcoming: he said that Rutherford had told him that Cushing had been asked to re-enter cabinet and had accepted, leading Cross to conclude that in light of his public conflicts with Cushing he "could not, under the circumstances, remain a member of the Alberta government." (Woods denied that his resignation had any political motivation at all, stating instead that he had received an employment offer carrying three times his current salary.)

Cushing also made public statements and, as usual, his were not in line with Cross's. While acknowledging that Rutherford had invited him to rejoin cabinet, he claimed that the Premier had offered Cross's resignation as one of the terms for Cushing's re-entry. He further denied that he had ever accepted Rutherford's offer, both because of persisting conflict between him and the Premier and because his re-entry was unanimously opposed by his fellow dissident Liberals. Cushing went further, accusing Cross of having fabricated his claim that Rutherford had told him that Cushing had agreed to re-enter cabinet.

Rutherford held his silence until March 11, when he told the legislature that he had not accepted any resignations. He said that the only vacant cabinet post was the ministry of Public Works previously held by Cushing, and that he hoped to fill it soon. In the meantime, he intended to continue governing. While he eventually acknowledged Buchanan's resignation March 14, Cross remained in cabinet.

Further manoeuvring in the legislature

Following the passage of the Woolf motion, the government took the offensive. On March 9, Rutherford gave notice of a resolution to strike a provincial railway board, with a membership of Rutherford, Deputy Public Works Minister John Stocks, and provincial railway engineer R. W. Jones. The board would have the power to discharge any government responsibility under the Alberta Railway Act. Stocks, however, publicly repudiated the resolution, and announced that he would have nothing to do with it.

On March 11, government supporter Charles Stewart

Charles Stewart (Canadian politician)

Charles Stewart, PC was a Canadian politician who served as the third Premier of Alberta from 1917 until 1921. Born in Strabane, Ontario, in Wentworth County, Stewart was a farmer who moved west to Alberta after his farm was destroyed by a storm...

attempted to disclose a scandalous rumour about Boyle in the legislature, but was ruled out of order by Speaker

Speaker (politics)

The term speaker is a title often given to the presiding officer of a deliberative assembly, especially a legislative body. The speaker's official role is to moderate debate, make rulings on procedure, announce the results of votes, and the like. The speaker decides who may speak and has the...

Charles W. Fisher

Charles Wellington Fisher was a Canadian politician who served as the first Speaker of the Legislative Assembly of Alberta.-Biography:...

. The allegation was quickly printed in the Edmonton Bulletin instead: Boyle, who expected to be named Attorney-General in the event that Cushing formed a government, was accused of approaching Lucien Boudreau

Lucien Boudreau

Lucien Boudreau was a politician, mayor of St. Albert, Alberta, and member of the Legislative Assembly of Alberta .-Early life:...

and Robert L. Shaw

Robert L. Shaw

Robert L. Shaw was a politician from Alberta, Canada.Shaw was first elected to the Alberta Legislature in the 1909 Alberta general election. He defeated Conservative candidate J.K. Creighton in a landslide to become the first MLA for the new Stettler electoral district.Shaw would be re-elected to...

, two government supporters who were hoteliers in their extra-legislative careers, and offering them immunity from prosecution for liquor license violations in exchange for their support of the insurgency.

That same day, Riley and Boyle moved a motion of no confidence

Motion of no confidence

A motion of no confidence is a parliamentary motion whose passing would demonstrate to the head of state that the elected parliament no longer has confidence in the appointed government.-Overview:Typically, when a parliament passes a vote of no...

in the government. It was defeated by a margin of twenty to seventeen. Ominously for Rutherford, two hitherto loyal Liberals, Buchanan and Henry William McKenney

Henry William McKenney

Henry William McKenney was a politician from Alberta, Canada.-Political career:McKenney was first elected to the Legislative Assembly of Alberta in the 1905 Alberta general election in the provincial electoral district of St. Alberta...

, switched their support to the rebels. More favourably, the ill member for Macleod

Macleod (provincial electoral district)

Macleod is a former provincial electoral district that existed from 1905 to 2004 in the province of Alberta.-1905 general election:-1957 liquor plebiscite:...

, Colin Genge

Colin Genge

Colin Melville Genge was a politician, contractor and business man from Alberta, Canada.-Early life:Genge was born in Kingston Ontario in the year 1859. He moved to Fort Macleod, Alberta in 1881 and married his wife Anne May Ryan in 1884. Upon moving to Fort Macleod Genge became involved in...

, was rumoured to be recovering from his illness and soon on his way to Edmonton, where he was expected to support the government (in fact, Genge would die without ever taking his seat). The government was also encouraged by the motion of dissident George P. Smith

George P. Smith

George Peter Smith was a politician and former Minister of the Crown from Alberta, Canada.-Political career:Smith first ran for election to the Alberta Legislature in the 1909 Alberta general election winning the new Camrose district with a comfortable plurality.Smith was re-elected in a landslide...

to strike a non-political commission to supervise the construction of the A&GW, since it corresponded closely to its own plan to appoint a royal commission

Royal Commission

.

Rutherford gave notice of a resolution to strike this royal commission, to be composed of three judges of the provincial supreme court, March 14. After one final attempt by the rebels to obtain the legislative defeat of the government (defeated once more by three votes), it passed the legislature unanimously the next day. The Alberta and Great Waterways Railway scandal was, for the time being, out of the legislature's hands.

The commission's inquiry

The commission first met in Edmonton March 29. The three commissioners—Justices David Lynch Scott

David Lynch Scott

David Lynch Scott was a Canadian militia officer, lawyer, and judge. He served as mayor of Orangeville, Ontario from 1878 to 1880 and mayor of Regina, Saskatchewan from 1884 to 1885.-Early life:...

, Horace Harvey

Horace Harvey

Horace Harvey was a lawyer, jurist, and a Chief Justice of Alberta, Canada.-Early and Family Life:...

, and Nicholas Beck

Nicholas Beck

Nicholas Du Bois Dominic Beck was a lawyer and jurist in Alberta, Canada.-Early life:Beck was born in Cobourg, Ontario on May 4, 1857 to Reverend J.W.R. and Georgina Beck....

—were joined by counsel for the insurgents (including Bennett himself), Cross, Rutherford, the A&GW, and Cornwall (who had been accused of using his involvement with the Athabasca Railway for personal benefit during the scandal). The evidence they heard was reported in great detail by Alberta's press, to the initial interest of the public. Before long, however, the details grew tedious, and the public became less engaged.

The greatest bombshell to emerge during the commission's inquiry did not come from one of the forty-six witnesses it heard from, but from one that it did not: A&GW President Clarke vanished back to the United States before he was expected to testify. While this disappearance did not prove the government's guilt, in the mind of the press it did prove Clarke's. As the Edmonton Journal

Edmonton Journal

The Edmonton Journal is a daily newspaper in Edmonton, Alberta. It is part of the Postmedia Network.-History:The Journal was founded in 1903 by three local businessmen — John Macpherson, Arthur Moore and J.W. Cunningham — as a rival to Alberta's first newspaper, the 23-year-old...

put it, the only question left to answer was "were the members of the government simple innocents whom Clarke worked through their credulity or were they in on it with him?"

George Bulyea's machinations

Though it was George Bulyea, Alberta's first lieutenant-governor, who had invited Rutherford to form the province's first government in 1905, the Premier never fully had Bulyea's confidence. Bulyea preferred several other candidates to Rutherford, including Peter Talbot

Peter Talbot (politician)

Peter Talbot was a Canadian parliamentarian.Born in Eramosa, Canada West , he moved to Fort Macleod, Alberta, in 1890 to teach school. In 1892, he moved to Lacombe, Alberta, to homestead and raise cattle.In 1902 he was elected to the Legislative Assembly of Northwest Territories and served until...

, but when these proved unwilling he acquiesced with Rutherford, the choice of Alberta Liberals. Now, with Rutherford reeling, Bulyea saw his initial doubts validated and began to search around for potential successors.

The obvious choice was Cushing, but Bulyea felt little enthusiasm for him, doubting his political acumen (in this opinion he was supported by other party luminaries, including Frank Oliver, federal Minister of the Interior and proprieter of the Bulletin). He continued to prefer Talbot, but found that the Liberal caucus, which favoured Cushing, would not accept Talbot. Oliver was also a possibility, but he had no interest in leaving Ottawa.

Talbot suggested Arthur Sifton, the province's chief justice. Sifton was a Liberal, but as a judge he was remote from political mudslinging. However, he had been offered the office of Premier in 1905, when it had seemed more desirable than it did now; would he have any interest? The question was answered May 26, when the legislature reconvened. Bulyea entered the house and announced that he had accepted the Rutherford's resignation and that he had asked Sifton to form a government. Sifton had accepted.

The arrangement had nearly fallen apart at the last moment: MLAs loyal to Cross indicated on May 25 that they would accept Sifton only if Cross remained the Attorney-General, which Sifton refused. It appeared for a time that Rutherford would not resign; after sleeping on it, Bulyea decided the morning of May 26 that he was in a position to force the Premier's hand, but it proved unnecessary.

The commission's report

The commission reported to the legislature November 10, 1910. Its findings were split into two reports: a majority report from Justices Scott and Harvey, and a minority report from Justice Beck.

The majority report traced the origins of the A&GW scandal to 1905, when a number of Albertans, including James Cornwall, were federally incorporated as the Athabasca Railway Company, chartered to construct a railway from Edmonton to Fort McMurray. The legal work for the incorporation had been done by the law firm of Charles Wilson Cross, Cornwall's close friend and personal solicitor. In October 1906 Cornwall sold the ARC's charter to a syndicate of Winnipegers for $2,500 and a one-sixth share in the syndicate. The syndicate costed out the construction of the railway, and found that cost per mile would be $13,700 from Edmonton to Lac la Biche, and one thousand dollars more from Lac la Biche to Fort McMurray. It decided to undertake the venture if it could get a loan guarantee of $13,000 per mile from the Alberta government.

At the end of 1906, syndicate members visited Alberta, where Cornwall introduced them to members of the cabinet. Negotiations between the syndicate and the government continued for several years. During this time, new construction estimates prepared by the syndicate placed the cost of the railway at between eighteen and twenty thousand dollars per mile. February 2, 1907, Cornwall entered into an agreement with the syndicate whereby he would receive $544,000 in stock in the resulting railway company if he could secure the necessary loan guarantees; this amount was later changed to $100,000.

At the beginning of 1908, Clarke appeared on the scene, and eventually acquired the syndicate's full interest in the railway, including a purchase of Cornwall's interest for $14,500 (of an agreed-upon $25,000). Shortly thereafter, Clarke secured a meeting with members of cabinet in Calgary; Cushing asserted that he had not been present for this meeting, while Rutherford insisted that he had been. While no formal guarantee was made at this meeting, Clarke left it confident that he would receive the necessary loan guarantee, and proceeded with construction plans. He obtained new cost estimates for the railroad of $27,000 per mile, though Clarke's engineer confidentially advised him that it could be built for half this amount. By November 14, 1908, the cabinet, led by Rutherford and Cross, had agreed to the $20,000 per mile guarantee. The majority report was critical of Rutherford and Cross for this, and also for setting the bonds' interest rate at 5 percent rather than 4 percent. The stated reason for this was that the proposed railroad was a difficult and expensive railroad to build, crossing hundreds of miles of wilderness; in response, the report pointed out that the provincial guarantee of $20,000 per mile eliminated any need for a higher interest rate to lure investors.

The majority report also took a dim view of the exemptions from the province's railway legislation that were built into the legislation chartering the A&GW: unlike the province's other railways, the A&GW was not required to have directors resident in Alberta and was exempt from the requirement that railway companies not commence business until 25% of its capital was subscribed and 10% paid up. The A&GW was held to a figure of less than 1% for both, and even this requirement was met in an unusual manner: Clarke brought his personal account into overdraft

Overdraft

An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero. In this situation the account is said to be "overdrawn". If there is a prior agreement with the account provider for an overdraft, and the amount overdrawn is within the authorized overdraft...

to issue a $50,000 cheque to the company, thereby allowing the latter to meet its capital requirements and commence operations. The company then authorized a payment of the same amount to Clarke on account of expenses incurred by him on behalf of the company; he, of course, used this payment to clear his overdraft.

The majority declined to find Rutherford and Cross guilty of any wrongdoing beyond poor judgment, though its findings were hardly flattering: "As there is room for doubt that the inference of personal interest is the only reasonable inference to be drawn from the circumstances related, and in view of the positive denial, it can only be said that, in the opinion of your commissioners, the evidence does not warrant the finding that there was or is any personal interest on the part of Dr. Rutherford or Mr. Cross". Its findings with regards to Cornwall were similar: his receipt of $14,500 and his expectation of $10,500 more constituted "suspicious circumstances", but these "point to no definite conclusion; and he has denied that he received any other benefit, or was interested in any other way in the enterprise, and it must be held that the evidence does not establish the contrary."

Justice Beck's minority report was more sympathetic to all three men. Beck declared himself perfectly satisfied that Cushing, despite his protestations to the contrary, had been aware of all details of the negotiations. While acknowledging that "in some instances the wisdom of their course may be doubtful", he accepted Rutherford's and Cross's explanations for their actions and labelled the accusations against them "disproved". He felt similarly about Cornwall, concluding that once he was using his position to advocate for the construction of the A&GW, he was free of any pecuniary interest

Conflict of interest

A conflict of interest occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other....

in it.

Long-term effects

Sifton was selected Premier in an effort to restore party unity, and his first cabinet reflected that. There were three ministers in addition to Sifton. Charles R. Mitchell

Charles R. Mitchell

Charles Richmond Mitchell was a Canadian lawyer, judge, cabinet minister and former Leader of the Official Opposition in the Legislative Assembly of Alberta.-Early life:...

had been, like Sifton, a judge during the scandal, and was therefore unattached to either side. Duncan Marshall had been a Rutherford cabinet minister, but not one identified strongly with its railway policy. Archibald J. McLean

Archibald J. McLean

Archibald J. McLean was a politician from Alberta, Canada.McLean was first elected to the Legislative Assembly of Alberta in the 1909 Alberta general election as an Independent Liberal...

had voted with the rebels, but not been a leader among them. The cabinet included members of both factions, but none of those who inspired such strong opinions as to be extremely divisive.

In late 1910, the new government introduced legislation to revoke the A&GW's charter and confiscate the proceeds from the sale of bonds, which were still held by the province. In introducing the bill, Sifton made no commitment as to what would be done with the funds once confiscated. Many northern MLAs, including Cornwall and Cross, suspected that the Premier's plans for the money did not include construction of a northern railway, and opposed the bill on that basis. Clarke re-surfaced in Winnipeg to deny Sifton's charge that the A&GW had defaulted on any of its obligations, and Conservative leader Bennett opposed out of stated respect for private property: "Clarke I despise but Clarke I am bound to respect because this province gave him a right by charter and if I know the United States I do not think it will allow this province to take his property 'without due process of law."

The government won the vote 25 to 14. Once the legislation was signed into law by Bulyea, the government immediately wrote cheques drawing on the bond money. The Royal

Royal Bank of Canada

, Dominion

Toronto-Dominion Bank

The Toronto-Dominion Bank , is the second-largest bank in Canada by market capitalization and based on assets. It is also the sixth largest bank in North America. Commonly known as TD and operating as TD Bank Group, the bank was created in 1955 through the merger of the Bank of Toronto and the...

, and Union

Union Bank of Halifax

The Union Bank of Halifax was granted a charter by the government of Canada in 1856 and established its head office at the corner of Hollis and Prince Streets in the port city of Halifax, Nova Scotia....

banks, where the funds were deposited, refused payment. The government sued, and the provincial supreme court ruled in its favour in 1912. The Royal Bank subsequently requested that the federal government use its power of disallowance to invalidate the legislation and appealed the supreme court's decision to the British privy council, at the time Canada's highest court of appeal. While the federal government declined to act, in 1913 the privy council found that the provincial legislature did not have the authority to confiscate money that had been raised from investors from outside of the province.

In its objective of papering over Liberal divisions, Sifton's succession was only partially successful. Rutherford himself became increasingly distant from the party, and sought re-election in the next election

Alberta general election, 1913

The Alberta general election of 1913 was the third general election for the Province of Alberta, Canada. The writ was dropped on 25 March 1913 and election day was held 17 April 1913 to elect members of the Legislative Assembly of Alberta. Elections in two northern districts took place on 30 July...

as an independent Liberal, not supportive of Sifton's government. In fact, he offered to campaign for the Conservatives across the province if they would agree not to run a candidate against him in his own riding; the Conservatives declined his offer, and Rutherford was defeated. He would go on to campaign for the Conservatives in the 1921 election

Alberta general election, 1921

The Alberta general election of 1921 was the fifth general election for the Province of Alberta, Canada. It was held on July 18, 1921 to elect members to the 5th Alberta Legislative Assembly....

. On the other side, Ezra Riley, a leader of the insurgency, resigned his seat in protest of Cushing's exclusion from the new administration; he was defeated in the ensuing by-election by a Sifton candidate. It is possible that supporters of Cross would have taken a similar tack, but Sifton brought him back into cabinet before the next election. With the noisiest dissidents neutralized, the Liberals enjoyed a period relatively free of intra-party strife, until the Conscription Crisis of 1917

Conscription Crisis of 1917

The Conscription Crisis of 1917 was a political and military crisis in Canada during World War I.-Background:...

once again split the party.

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