Alberta and Great Waterways Railway scandal

James Cornwall, a Liberal backbencher who supported Rutherford, fared somewhat worse: his personal financial involvement in the railway gave rise to "suspicious circumstances", but he too was not proven guilty of any wrongdoing.

He ultimately adopted a similar policy to Rutherford's, and the A&GW was eventually built by private interests using the money raised from provincial loan guarantees.

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.

[7] Everything seemed to be progressing as planned when, at the beginning of the new legislative session, Liberal backbencher John R. Boyle asked the government a series of innocuous questions about the company and the guarantees made to it.

In this letter, Cushing gave his reasons for resigning as disagreement with the government's railway policy, which he claimed was developed without his involvement or consent.

[20] Bennett lashed out at the government's handling of the A&GW file, accusing it of culpable negligence in failing to properly oversee the company's activities.

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 on the eve of the vote on the Woolf-McDougall amendment.

[22] The government side adopted similar tactics: Agriculture Minister Duncan Marshall 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 MLA James Cornwall that he had requested Cornwall's assistance in lobbying for it.

Buchanan, Marshall, Lessard, and Rutherford made no comment on the situation to either the press or the legislature, but 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 conflict with Cushing, he "could not, under the circumstances, remain a member of the Alberta government.

"[26] (Woods, who as a deputy minister did not sit in the legislature, denied that his resignation had any political motivation at all; he said that he had received an employment offer carrying three times his current salary.

While acknowledging that Rutherford had invited him to rejoin the cabinet, he claimed that the Premier had offered Cross's resignation as one of the terms for Cushing's re-entry.

[26] 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.

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 and Robert L. Shaw, 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.

Ominously for Rutherford, two hitherto loyal Liberals, Buchanan and Henry William McKenney, switched their support to the rebels.

[31] Rutherford gave notice of a resolution to strike this royal commission, to be composed of three judges of the provincial supreme court, March 14.

[31] After one final attempt by the rebels to defeat the government legislatively (which failed by three votes), the resolution to strike the royal commission passed the legislature unanimously the next day.

[34] The three commissioners—Justices David Lynch Scott, Horace Harvey, and Nicholas Beck[31]—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).

[35] The greatest surprise to emerge during the commission's inquiry did not come from one of the forty-six witnesses to testify, but from one who did not: A&GW President Clarke moved back to the United States, and did not return for his scheduled testimony.

As the Edmonton Journal 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?

[35] The obvious choice was Cushing, but Bulyea felt little enthusiasm for him, doubting his political acumen[35] (in this opinion he was supported by other Liberal Party luminaries, including Frank Oliver, federal Minister of the Interior and proprietor of the Bulletin).

The legal work for the incorporation had been done by the law firm of Charles Wilson Cross, Cornwall's close friend and personal solicitor.

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.

Shortly thereafter, Clarke met with members of cabinet in Calgary; Cushing asserted that he had not been present for this meeting, while Rutherford insisted that he had been.

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.

[47] 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.

[50] 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.

[56] 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.

[59] 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 pro-Sifton candidate.

[61] With the noisiest dissidents neutralized, the Liberals enjoyed a period relatively free of intra-party strife, until the Conscription Crisis of 1917 once again split the party.