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Ex-TSB director on CN 3:45
- 44 train derailments on main tracks not reported by CN
- Whistleblower lawsuit says CN is cooking its books
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- Rail safety: Train operators breaking more rules in recent years
- Runaway train incidents ‘shocking,’ Olivia Chow says
- Runaway trains almost triple reported rate, CBC finds
A continuing CBC News investigation into rail safety has found that Canada’s largest freight carrier CN Rail did not report to authorities more than 1,800 derailments, including 44 on key rail arteries.
This came to light in 2005 when the Transportation Safety Board’s director of rail investigations says he became suspicious of a dramatic difference between CN’s accident numbers compared to other operators.
“All of a sudden there became a wide discrepancy in the [derailment] numbers [compared with CN’s competitors],” recalls Ian Naish, who left the TSB in 2009. “You say ‘Well, OK, what’s going on here?’ ”
The safety watchdog agency took an unprecedented step and issued a statutory summons in June, 2006 to CN Rail requiring it to turn over its complete safety records. The TSB found a total of 1,843 unreported derailments, including 44 main-track derailments, over a six-year period.
CN spokesman Mark Hallman told CBC News that the company’s failure stemmed from a disagreement over the types of minor accidents it must self-report to the TSB.
“At no time did CN attempt to hide or under-report accidents,” Hallman said. “Following a series of discussions, CN and the TSB reached agreement on an interpretation for reportable equipment and track damage.”
An ‘artificial’ increase: CN
The first TSB discussions on CN’s reporting took place in September 2005. Naish told CBC News he “was not happy at all with someone from industry telling me what should be reported and what should not be reported.”
The TSB sent a strongly worded letter in April, 2006, laying out the importance of including all CN accident occurrences in the national rail safety database for trend analysis to prevent major accidents.
“We need to have insights into circumstances where something has gone wrong, even if there has been no substantial damage, injury or loss of life, so that trends can be detected and appropriate safety action considered,” wrote TSB’s David Kinsman on April 20, 2006.
Ed Harris, CN’s executive vice-president of operation, responded by saying the TSB’s reporting criteria was subjective — it didn’t demand all derailments be reported, only those that “sustain damage that affects safe operation.” He encouraged the TSB to begin work revising its reporting regulations.
CN insisted it reported its derailments and collisions the same way since the early 1990s, and to re-report subject to TSB demands would lead to an increase in their accident numbers.
“This would put us in a position of having to defend to the media and public, an artificial increase in reportable accidents solely based on a perceived need and interpretation change by the TSB,” added Harris.
- MAP | 44 train derailments on main tracks not reported by CN
- Read CN’s response & TSB’s response at the bottom of this article
The summons, issued a month later, elicited numbers that even surprised Naish, who feels that all of them should have been reported in the first place.
While many of the unreported accidents were inside rail yards and were minor, some involved damaged rail cars, locomotives and track, including a 2005 derailment of a car on a main track near Fort Langley, B.C. that broke 11 rails and a damaged a switch. In 2002, seven cars derailed at a Toronto-area CN yard destroying a rail switch and damaging 110 metres of rail.
‘Numbers matter’: Chow
The TSB entered the new CN data into its internal database but never publicly revealed, nor sanctioned CN, for its years of under-reporting.
CN also came under scrutiny in the U.S. for its compliance with regulators.
In 2009, a Federal Railroad Administration inspector named Timothy McQuaid noticed an increase in mechanically-caused derailments by CN trains. He sent a team to examine cars after CN’s carmen had done their inspections, and his team found a consistent failure by CN to correctly identify and repair defects.
According to an FRA press release announcing an award McQuaid would win for his work on this file, CN dismissed the findings as “minor.”
However, McQuad did an extensive audit to prove the scope of CN’s non-compliance, which eventually led CN to acknowledge “the seriousness of its shortcomings,” said the FRA at its award ceremony. In 2010 the FRA imposed a two-year compliance agreement on CN to improve mechanical inspections, by adequately trained and resourced personnel, with a focus on safety.
Auditors at the U.S. Surface Transportation Board (STB) also called upon the railway to explain irregularities in the number of reported track delays and road blockages in the Chicago area. CN identified 14 delays, but auditors found more than 1,400 in a two-month period in 2010.
CN said it was due to different reporting interpretations. The STB decided to keep close tabs on CN for five years, and because of continued concerns with CN’s reporting, added a year.
“If there’s no consequence from hiding the truth, why wouldn’t companies continue to hide?” Olivia Chow, federal NDP transport critic told CBC News after reviewing CN’s records.
“I think we need to know, from 2007 on, to now, are there other accidents, especially derailments that Canadians need to know about,” Chow said questioning the continuing drop in all kinds of derailments in the TSB’s current data, which relies on ‘self-reporting’ by rail companies.
Naish, who now works as a consultant, believes that CN’s system of bonuses and rewards could influence the reporting of lower accident rates.
“I think the rewards system is ‘the less accidents you report, the better’,” said Naish, but that’s “not the way it should be in an optimal safety culture.”
Amin Mawani, an associate professor at York University’s Schulich School of Business, reviewed public documents detailing CN’s bonus structure.
“Senior management has clear incentives to reduce actual safety violations,” said Mawani. “In the short run, there may be some incentive to under-report safety violations with the hope that such problems can be fixed before customers and shareholders find out.”
CN, however, said its bonus system “rewards the right behaviours.”
“CN believes remuneration should take into account the achievements of safety-related objectives, so long as it is coupled with a system that protects data integrity,” wrote Hallman in an email.
Though the TSB said the company is now compliant, Naish questions whether CN today is properly reporting all accidents.
TSB spokeswoman Rox-Anne D’Aoust said the agency takes reporting requirements and the need for accurate data seriously.
D’Aoust said they will review “occurrence trends from month to month and a statistical comparison of CN data with previous years and across the industry.”
“In light of the recent public and media questions, we will take a closer look at the data to determine if there is anything unusual and whether any followup is necessary,” said D’Aoust.
Whistleblower lawsuit says CN is cooking its books – CBC News – Latest Canada, World, Entertainment and Business News
A whistleblower lawsuit in the United States is accusing CN Rail of fudging its numbers to increase executive bonuses and to make it appear to be North America’s most efficient railroad for investors.
Tim Wallender, a former CN trainmaster based at the company’s Harrison Yard in Memphis, Tenn. has filed a lawsuit under the U.S. Sarbanes-Oxley Act — which was passed into law to protect whistleblowers following the Enron scandal in the early 2000s.
CN is asking that Wallender’s claims that it routinely reported fraudulent efficiency statistics to shareholders and customers be thrown out. CN claims he repeatedly reported train movements falsely and got fired for it.
Wallender, 42, does not deny fudging the numbers but insists he was ordered to by his boss.
He alleges in his suit that his managers made large bonuses, and the company was able to promote itself as being 20 to 25 per cent more efficient than its competitors, by creating favourable statistics that “were based on a persistent and pervasive fraud.”
None of these allegations has been proven in court.
“My (general) superintendent was always talking about how he had carte blanche to do whatever he had to do to make it work in Memphis,” Wallender told CBC News in an interview in Mobile, Ala. where he’s now working for a different railroad. “He would talk about how him and [then-CN vice president] Keith Creel were so tight and how they talked every day and he had permission to do whatever he needed to do.
“What do I do? — that’s my livelihood, this job. Without it I have no insurance, no pay, no benefits, nothing. “
Wallender outlines how to misreport ‘efficiencies’
Wallender claims he and other lower-end employees were asked to tamper with “dwell time” statistics — an industry measure of how long freight trains sit in a yard — to make it appear that trains moved quickly. The crucial reporting time was 5 a.m., and if trains arrived later their dwell time clocks would not start until the next morning.
The goal, Wallender alleges, was to get trains out of the yard just before 5 a.m., or have them arrive just after, either by moving the train so it could trigger time-stamp sensors, or by adjusting the clock in the company computers.
They also reported cars were either broken or delivered to the customers — so they would be taken off the clock — when in each case they would still be in the yard, he claims in his lawsuit.
Another trick was to move a train onto a ghost or dummy track which did not get monitored on the company’s computer, he claims.
“I’m telling you everybody knew about this,” said Wallender, who originally hails from Wisconsin. “It’s a common practice. I know it happened in Chicago, Champagne, Memphis, Jackson — it happened all over the U.S.”
According to CN documents related to the case, the company did audits of the Memphis yard — three times before Wallender’s dismissal in September 2012 — and indeed found several employees were falsifying efficiency records.
“I am extremely disappointed to learn about these reporting infractions,” wrote Creel in a February 2012 letter. The letter acknowledged other reporting scams at CN, not listed above. “It cannot and will not be tolerated. We have an obligation to our customers and shareholders to continue our pursuit of ‘service excellence.'”
But Wallender says Creel’s letter was just “lip service” to the idea that the company cared about accurately reporting its efficiency ratings to the stock market.
“The allegations in this matter are unfounded and factually incorrect,” said Creel, who is no longer with CN. “I have, and always will, hold all employees to the highest ethical standards and the facts in this case will reflect that.”
Because of a December 2011 audit, Wallender was to be disciplined. He brought a tape recorder with him to the meeting with his boss, general superintendent Andrew Martin.
“I was supposed to be [suspended] for two days, lose two days’ pay, and [they were going to] put a letter in my file,” recalls Wallender.
CBC has obtained a copy of the recording in which Martin can be heard saying: “I’m suspending you for two days, but I’m suspending you for two days to put you on your off days… I have to draft this letter. I’m going to give you a copy of this letter. I ain’t gonna never send it” to human resources.
“He never told me to stop,” said Wallender, echoing arguments in his lawsuit. “He just said ‘Don’t be so perfect on the report next time.'”
A complaint against Martin from another railway worker in the summer of 2012 led to the investigation that led, Wallender claims, to his demise at CN.
Wallender handed over emails of the instructions he had received to fudge CN’s numbers, and his audiotape of his discussion with Martin, to CN’s human resources investigator.
He recalls telling the investigator: “I’m done lying. If I get fired for this, which I expect to do, at least I can walk away with my head up, that I got fired for telling the truth.”
He was fired the following month, CN claims, for continuing to fudge the numbers. After his dismissal, he pointed out to his bosses how others were continuing to fudge the numbers, and his access to CN’s computers was cut off.
Wallender’s lawyer, Bill McMahon of the Chicago law firm Hoey & Farina, said Martin got a slap on the wrist after the review, “and continues to be employed at CN. The only person who got terminated, who lost his job, is the man who came forward with the concrete irrefutable evidence of the statistical manipulations of efficiency ratings in the Harrison yard.”
CN told CBC News yesterday, in a three-page email from spokesman Mark Hallman, that CN “collects data to make informed business and operational decisions. The notion that CN would condone any misreporting in that context is untenable.”
CN ignored many of the CBC’s requests, including a question about why their computer software is so easily manipulated to change data, but they did say that through their auditing process CN has found “only a limited number of reporting issues which did not affect the integrity of the data that the Company has reported to the rest of the rail industry.”
Although it boasts of its dwell time and train speed on its website and heralded a five-percent drop in dwell time in this week’s third quarter report to the market, CN says its “operating metrics such as yard dwell are performance indicators that are not included in any part of CN’s audited financial reports that are sent to shareholders and securities regulators.”
Hallman added that the Montreal-based company’s “decision to terminate Mr. Wallender was fully warranted given his history of misreporting, management’s repeated admonishments for such misreporting, and Mr. Wallender’s brazen disregard and continued misreporting of data even after he was ordered to cease such practices. Mr. Wallender’s termination illustrates the seriousness of CN’s approach to insure data integrity.”
Former CN employees back Wallender claims
However, two former employees of the Memphis yard have come forward to CBC to back up some of Wallender’s claims.
Toby Lehman, a former CN yardmaster in Memphis, put in the aforementioned complaint about Martin because he and others were constantly being harassed to falsely report the efficiency statistics of the yard, such as by inputting false arrival and departure times. When nothing was done for three months, he sent a complaint further up the chain of command, and an investigation commenced that, he believes, led to Wallender’s dismissal.
“I apologized to Tim — he was just backing me up with his evidence,” said Lehman, who has since left CN for another company. “Even after Tim got fired,” the manipulation of the train’s arrival and departure times continued, said Lehman.
A former clerk at the Memphis yard, Sara Welch Wood, also jumped to Wallender’s defence, saying employees shouldn’t be made to choose between their jobs and doing the right thing.
She remembers the fear that went through the office if employees didn’t find a way to make cars disappear so they wouldn’t be on the 5 a.m. report.
“There were a lot of different times that I didn’t want to deal with the hassle of getting chewed out,” recalls Wood, 30, who is now a nursing student. “At 4:45 those cars were miraculously gone. There were several times I’d show them at a different yard,” though they were still at Harrison in Memphis, she said.
“I felt bad because I knew I was lying about it. So you’re in between making your supervisors happy and lying. That was one of the reasons it was such a stressful job. It never feels good to lie.”
In his lawsuit, Wallender alleges that “Creel — whose compensation substantially depends on a high price for Canadian National’s shares — protected Martin from discipline, gave a green light for Martin’s misconduct, and gave Martin carte blanche to continue the misconduct that protected and increased the value of his stock options.
Martin, who remains the general superintendent of the Harrison Yard, did not respond to messages.
Wallender’s lawyer, McMahon, said the victim in this case is just not Wallender, who suffered the indignity of being fired, losing his income and his health insurance for himself and his daughter who is suffering from a chronic illness, but all employees of CN.
McMahon said that what the U.S. has learned from the Madoff, Enron and Worldcom scandals is that the “real victims that we know from this type of corporate malfeasance are the employees, their families and the people that rely upon these corporations to accurately and professionally manage their businesses in order to provide a job.”
Wallender got a job with another railroad in the southern U.S. where he is happy to accurately report figures on the company’s efficiency, but he wishes CN well. “There are a lot of good people there. The problem I had with all the cheating is you can’t fix anything unless you know it’s broken.
“And by us hiding everything, nobody knows it’s broken.”
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