VANCOUVER - Gordon Campbell's Liberals intentionally set up the failure of B.C. Rail in order to sell the company to a friend of the premier, a defence lawyer alleged Wednesday at a political corruption trial.

Martyn Brown, the premier's chief of staff, agreed under cross-examination that CN Rail executive David McLean was a key fundraiser for Campbell during the 1996 election campaign, but denied the other allegations.

Lawyer Kevin McCullough told Brown that his client, Bobby Virk, would be testifying that the "fix was in" for CN Rail to obtain the assets of B.C. Rail.

"I don't believe that's true," Brown replied before a B.C. Supreme Court jury in Vancouver.

McCullough then asked if the provincial government had engineered the B.C. Rail failure to gain public support for selling the railway. Campbell had campaigned against selling B.C. Rail during the 2001 election — a promise Brown said he helped devise.

"The only way that line of reasoning would make sense is if you were trying to drive the company into the ground, so that you could support a broken election promise," McCullough told Brown.

"Does that make sense to you if you were a bit more Machiavellian than you suggest you are," McCullough asked.

Brown called the allegation "absurd."

"You'd be actually running the risk of getting unelected by doing something that would be very politically challenging," Brown said.

The politically-charged allegations are unfolding at the trial of Virk and Dave Basi, former government ministerial assistants, charged with breach of trust and fraud.

The politically-appointed officials are accused of passing on government secrets around the privatization of B.C. Rail in exchange for cash, restaurant meals and a trip between April 2002 and December 2003.

Virk worked for then-transportation minister Judith Reid, while Basi worked for then-finance minister Gary Collins.

Dave Basi's cousin, Aneal, is accused of helping to launder the money in the scheme.

The public learned of the allegations in December 2003, when police were photographed coming out of the B.C. legislature with boxes of material for their investigation.

Canadian Pacific Railway, OmniTrax and Canadian National were all bidders for B.C. Rail in the public process, but CP Rail made a very public withdrawal in late 2003, calling the bidding unfair.

CN won the bid, purchasing the railway for $1 billion.

Brown testified that a fairness adviser was hired to buffer such allegations, and banking firms were brought on as advisers to watch the financial transactions.

Earlier, Brown was asked by a Crown lawyer about standards of conduct that apply to government officials. He told the jury that conflict of interest rules would prevent employees from indulging in job-related perks.

When asked if Brown authorized Dave Basi to accept cash payments from the lobby firm Pilothouse or Denver-based OmniTrax, he replied "never."

Brown told the jury that conflict of interest rules were drummed into government workers starting when the Liberal government took office in June 2001.

In his opening statement on Tuesday, Crown prosecutor Bill Berardino alleged Dave Basi and Virk gave information to the principles of Pilothouse Public Affairs concerning the sale of B.C. Rail.

Aneal Basi is accused of laundering $27,000 in cheques from Pilothouse and handing most of the cash over to Dave Basi.

Pilothouse had been acting on OmniTrax's behalf.