VANCOUVER– BC Rail documents disclosed to the defence lawyers in Basi-Virk case suggest Liberal insider Patrick Kinsella was "working both sides of the street" in the BC Rail sale, which was threatened with going off the rails in 2004.

Defence lawyer Kevin McCullough read out in court Thursday a series of emails between BC Rail executives and others that suggested the $1-billion privatization sale of BC Rail, announced by the government in November 2003, was going "off track" in early 2004.

"In May and June and July of 2004, this deal was coming apart," the lawyer told B.C. Supreme Court Justice Elizabeth Bennett.

"This is five months after the deal has been signed...and you've got CN on the verge of backing out and who do they go to? Patrick Kinsella," McCullough said.

He said the documents show that Kinsella was being paid by CN as a political advisor at the same time he was being paid as a $6,000 a month lobbyist for BC Rail.

McCullough said an email dated Nov. 9, 2004 was sent from Cheryl Yaremko, BC Rail's Chief Financial Officer, to Kevin Mahoney, then vice-president of BC Rail, asking: "Do you know who Progressive Holdings is?"

At the time, McCullough explained, the company was doing a financial analysis of payments before an audit.

He said Mahoney sent a reply email to Yaremko: "Progressive Holdings is Patrick Kinsella...a lobbyist and Liberal backroom guy."

He made the comments during a defence "third party records" application, which seeks additional government documents.

New Democrat MLA Leonard Krog, who attended the Basi-Virk pre-trial proceedings, said outside court Thursday: "The premier's right hand, political advisor and old friend Patrick Kinsella is there working both sides of the streets."

He added:"These are post-sale emails, which confirm what we've already heard about this deal from various sources and has already been discussed in court," Krog added.

Defence lawyer Michael Bolton said outside court that the defence still seeks more documents about Kinsella's role in the BC Rail sale.

"What we have right now indicates to us that Mr. Kinsella appears to have been a very pivotal person in the entire BC Rail transaction, and we have very, very, little documentation of what he was doing." he explained to reporters.

"There is material referred to in court today that indicates he was engaged in some work for BC Rail and doing work at the same time for CN."

Bolton said the defence theory has always been that the accused "were doing the bidding of political masters" by assisting in the sale of BC Rail.

Earlier in court, McCullough said the documents already disclosed support the defence position "that BC Rail was a politically charged deal and the fix was in."

He added: "The government promised they weren't going to sell it in 2001 and then went ahead and sold it. The appearance was they were selling it for maximum dollar."

In reality, McCullough said, the government had a $3-billion deficit and the BC Rail sale was needed to balance the budget before the 2005 election.

Before the government announced the sale in late 2004, the lawyer said, two bidders for BC Rail had dropped out, believing the government favoured CN Rail as the successful bidder.

A U.S. bidder, OmniTrax, had privately threatened to drop out but was offered a "consolation prize" if they stayed in, the lawyer said.

He suggested the consolation prize was the Roberts Bank port subdivision line and that the two accused government aides, Dave Basi and Bob Virk, were trying to keep OmniTrax from dropping out of the bidding for BC Rail "on instruction from their political masters."

McCullough said the government announced in March 2004 that the sale of the port subdivision rail line was being cancelled because it may have been compromised by leaks of information.

"By and large, the allegation around the accused is that they were leaking things," he told the judge, "because that is how government controls the agenda. That is, it was the plan."

But he questioned why the government cancelled the sale of the port subdivision line but not the sale of the rest of BC Rail's freight division.

"If one is poisoned, then the other is poisoned," he said.

McCullough read out in court a number of emails to support the defence theory.

One was an email dated July 7, 2004, from Kevin Mahoney, vice-president of BC Rail, to Chris Trumpy and Yvette Wells, with the subject line "Palmer," that asked: "Where does Palmer get his stuff?"

The lawyer explained that it was a reference to a recent column about BC Rail written by Vaughn Palmer of The Vancouver Sun.

Trumpy replied in an email: "What is your phone number now" and Mahoney sent a reply email giving his phone number.

Two former government aides, Dave Basi and Bob Virk, are accused of accepting a benefit, fraud and breach of trust related to the controversial sale of BC Rail in 2003.

A third former government aide, Basi's cousin, Aneal Basi, is accused of money-laundering.

At the time, Dave Basi was a senior assistant to finance minister Gary Collins and Virk was an assistant to transportation minister Judith Reid. Aneal Basi worked in government communications.

The trio was charged after police raided offices in the legislature on Dec. 28, 2003.

Dave Basi also has been ordered to stand trial at the end for breach of trust in connection with the removal of Sooke farmland from the Agricultural Land Reserve.

Basi is accused of accepting $50,000 from developers to get the land removed from the ALR.

The police probe also resulted in charges against Tony Young and Jim Duncan of Sunriver Estates, also known as Shamrock Hills Development Corp, which planned to build 700 homes with prices of up to $400,000.

That matter is in B.C. Supreme Court in Vancouver at 2 p.m. today to set a Victoria trial date.

nhall@vancouversun.com