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Quebec Train Crash Taints Railroad CEO’s Legend Status

Photographer: David Vilder/Bloomberg

Rail World Inc. Chief Executive Officer Edward Burkhardt speaks to the media in Lac-Megantic, Quebec, Canada, on July 10, 2013. Close

Rail World Inc. Chief Executive Officer Edward Burkhardt speaks to the media in... Read More

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Photographer: David Vilder/Bloomberg

Rail World Inc. Chief Executive Officer Edward Burkhardt speaks to the media in Lac-Megantic, Quebec, Canada, on July 10, 2013.

Rail World Inc. Chief Executive Officer Edward Burkhardt has gone from railroad industry legend to Canada’s public enemy No. 1 in less than a week.

The executive, 74, once named Railroader of the Year by Railway Age magazine, has gotten death threats after a freight train operated by his Montreal, Maine & Atlantic Railways crashed in Lac-Megantic, Quebec, killing as many as 50 people. Quebec Premier Pauline Marois criticized him for taking too long to visit the accident site and Maclean’s, Canada’s largest newsmagazine, called him “the most hated man” in the town, which sits 16 kilometers (10 miles) from the Maine border.

“I don’t see how he can survive this without being tarnished or worse,” Anthony Hatch, an independent analyst based in New York who has tracked railroad companies for almost three decades, said in a telephone interview. “That would be a shame for someone who’s done a lot of good for the industry.”

The July 6 disaster, which Burkhardt has blamed on the train operator’s failure to properly set hand brakes, threatens to mar a career spent buying and building railroads from the U.S. to the U.K. to New Zealand.

“You go forward and let the chips fall where they may,” Burkhardt said in a July 9 interview at Rail World’s offices in Rosemont, Illinois, when asked whether the Lac-Megantic incident would tarnish his legacy. “If it does, so be it.”

Death Toll

About 2,000 people were forced to flee their homes after the runaway train hauling 72 cars of crude oil jumped the tracks and burst into flames, incinerating 30 buildings. The confirmed death toll was 24, Chief Inspector Michel Forget of the Surete du Quebec police said yesterday, after saying on July 10 that a total of about 50 people are “probably dead.” At 50 deaths, it would be the worst rail disaster in Canada since 1910, when a derailment in Spanish River, Ontario, killed 63 people.

Burkhardt, who is also chairman of Montreal, Maine & Atlantic Railways, paid his first visit to Lac-Megantic four days after the unmanned train rolled from an overnight parking spot into the center of town. He initially said a local fire department may have been responsible for shutting down power on the train’s lead locomotive while responding to a blaze, causing the air brakes to release.

Later, Burkhardt questioned whether the Montreal, Maine & Atlantic engineer operating the train was truthful about the number of hand brakes he’d applied.

“We think he applied some handbrakes, the question is, did he apply enough of them?” the CEO said. “He’s told us that he applied 11 handbrakes and our general feeling now is that that is not true.”

Engineer Suspended

The engineer on the train was Tom Harding of Farnham, Quebec, according to Guy Farrell, assistant to the Quebec director of the United Steelworkers Union. The union represents 75 MM&A workers. Harding has been suspended with pay, Farrell said. Calls to a Tom Harding in Farnham weren’t answered.

Farrell, speaking in an interview about Burkhardt, said that “I have no respect for a person like this who cannot take his responsibilities and tries to find a scapegoat.”

Robin Sears, a communications adviser for Earnscliffe Strategy Group in Ottawa, said Burkhardt damaged his credibility by laying blame before all the facts had come to light.

“I do not understand why he thought it was all right to freelance on his views of what he thought had happened,” Sears said in a telephone interview. “Everybody knows in a situation like this that it’s so incredibly fraught with risk because there are so many pieces of information that are unknown.”

Rail Jobs

Burkhardt’s first job on a railroad came at age 16, when he worked on a track gang, and he held other positions including brakeman and machinist’s helper before graduating from Yale University in New Haven, Connecticut in 1960, he told the Milwaukee Journal-Sentinel in October 2000.

After spending more than two decades at Chicago & North Western Transportation Co., Burkhardt formed Wisconsin Central Transportation Corp. in 1987 to buy a rail network that its owner, Soo Line Railroad, considered unprofitable in the wake of the U.S. industry’s 1980 deregulation.

He built on that experience by investing in government-run railroads that were being turned into private companies, boosting efficiency and profitability, Carl Ferenbach, an advisory partner at Berkshire Partners LLC in Boston who was a Wisconsin Central board member from 1987 to 2001, said in a telephone interview.

‘Deserves Credit’

“It’s a remarkable industry that made an amazing comeback, and Burkhardt was really at the forefront of that and he deserves credit for it,” Ferenbach said.

Wisconsin Central was part of a group that acquired New Zealand Rail Ltd. from that country’s government in 1993. It also bought freight rail operations that were being turned into private companies by the U.K. government in 1996.

Railway Age magazine recognized him with its annual award in January 1999. Six months later, he was pushed out at Wisconsin Central after 60 percent decline in the company’s stock over a 2 1/2-year period.

The same month he resigned from Wisconsin Central, Burkhardt formed Rail World. Wisconsin Central was acquired by Canadian National Railway Co. (CNR) in 2001, after Burkhardt unsuccessfully sought to regain control of the company.

Burkhardt continued to invest in national railroads their governments no longer wanted to run, joining a group that helped turn Estonian Railways private in 2001.

Divergent Views

“Ed is a living legend,” Henry Posner, CEO of Railroad Development Corp., which also invested in Estonian Railways, said in a telephone interview. “He’s had a long and industrious career.”

That’s not the way he’s being viewed in Canada. Marois, the Quebec premier, called Montreal, Maine & Atlantic’s response to the accident “reprehensible,” and the Toronto Star in a July 10 editorial said the town “deserved better” than Burkhardt’s “tardy” visit.

“It creates the question of how committed are some railroad CEOs to safety,” Frank Wilner, a former chief of staff for the U.S. Surface Transportation Board who was a spokesman for the United Transportation Union and has written six books on the railroad industry. “I just don’t understand why the CEO didn’t show up within hours. It’s his railroad.”

The accident has reduced Burkhardt’s wealth in addition to damaging his reputation. He told reporters Lac-Megantic on July 10 that he’s worth “a whole lot less than I was on Saturday,” the day of the accident. He said he waited to visit the town because he first wanted to give rescue crews time to put the fires out and deal with the disaster.

Insurance Coverage

His company may suffer financially as well, as the limits of insurance coverage probably will be tested by costs associated with the crash, Burkhardt said, without specifying how much coverage it carries. XL Group Plc (XL) is one of the insurers for Montreal, Maine & Atlantic, according to Christine Weirsky, a spokeswoman for the Dublin-based insurance company.

There will “undoubtedly” be a class-action lawsuit over the disaster, Dimitri Lascaris, who heads the securities class action group at law firm Siskinds LLP in Montreal, said in a phone interview yesterday. “You’re going to have claims from loss of business, from the families of the deceased, damage to property -- it’s substantial.”

Lascaris said his firm is looking into representing the Lac-Megantic victims in court.

Burkhardt acknowledged that his rail safety record will be in question after the Quebec crash.

“We actually had, I think, quite a reasonable safety record up until Saturday and then we blew it all,” he told reporters in Lac-Megantic. “I feel absolutely awful about this. I have never been involved in anything remotely approaching this in my life.”

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; David Scanlan at dscanlan@bloomberg.net

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