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The ONW Salon: Should our conflict of interest rules be tightened? 

Susanna Kelley (Moderator): The Conflict of Interest and Ethics Office has confirmed that there are ministers other than Finance Minister Bill Morneau who are holding wealth assets indirectly through a loophole.  Should a blind trust be required practice?  We asked Richard Mahoney, Will Stewart and Tom Parkin.

 

Will Stewart:

Well, I can't see how any of my esteemed fellow commentators here can possibly respond that the ethics rules should not be tightened. In fact, the Ethics Commissioner herself has argued for the same thing for a long period of time.

To date, the Prime Minister has taken the approach that the Liberals are following the same rules as the Conservatives did when they were in power. And he is right, in some cases. The reality is that the interpretation of the ethics code, and perhaps the penalties under the code, has long been in need of some modernization.

Lets take the instance of the Minister of Finance. Not from a partisan point of view, but because this is the issue that has brought all of this to the forefront again. The Minister took advantage of what has been called by the Ethics Commissioner herself as a "loophole".

It’s a loophole that she herself argued should be closed. This loophole effectively let the minister set up an ethics screen to ensure he did not cross any line while holding millions of dollars in publicly traded stock of his family company

To me, and voters as a whole, this seems preposterous. How can this screen, which allows his personal Chief of Staff (with the Minister as the employer) to have the power to tell his boss not to do something? Similarly, another option is the minister's deputy, which, while different, I submit is a version of the same issue as with the Chief of Staff.

But this is not theoretical. We have tangible evidence that these screens didn’t work. Finance Minister Bill Morneau sponsored legislation that would make fundamental changes to pensions in Canada, which would benefit the very company he owns. In fact, he knew so well the upside to the company finances of this move that he actively lobbied the government prior to being elected to encourage the same changes to benefit his company.

This could not be a clearer example of an ethical breach, but yet it seems within the rules, despite the rule which states a Reporting Public Office Holder cannot hold anything defined as a "controlled asset" in section 20 of the Act. Controlled assets must be sold or placed in a blind trust within 120 days after the individual becomes a Reporting Public Office Holder.

And we have not even touched on the penalties yet. Morneau, if he had not been called out by the opposition and the press, could have made millions in profits from the increase in the share value since he assumed the role of Minister of Finance - effectively, he as an individual has regulatory powers over his company now as Minister. Yet the maximum penalty under the act? $500.00. Clearly this is a broken system.

 

Richard Mahoney:

Sometimes I hate to say this, but Will may have a point. I know, I know, it seems unlikely, but clearer rules also make sense. One of the challenging things about the issue around Finance Minister Morneau is that he appears to have relied on the rules, and on advice from the Commissioner, and he is still being attacked.

What most Canadians would expect from ministers who come into office with some assets is that they cooperate with the advice from, and the questions from, the Commissioner and her office. That appears to be exactly what these ministers have done. I think that the same can be said for all Members of Parliament.

Any minister who owns or controls a private corporation for the purpose of holding controlled assets has a blind trust in place. That is what the rules require. We now understand this includes other MPs and ministers, at least 21 Conservative MPs and a number of former Conservative ministers.

The problem that arises is that very few of these folks are like Finance Minister Morneau. His private sector success in building up Morneau Sheppell sets him apart. There really isn't another MP that I can think of that has had that kind of spectacular success in the business world. He is being held to a different level of scrutiny because he has more to scrutinize––he built a successful company.

So clearer rules would help. But they would not stop Conservatives and New Democrats from attacking Morneau. That is a fact of public life. Conservatives attack Morneau for using the same method used for former Conservative ministers such as current MPs Lisa Raitt and Denis Lebel. But anyone with that level of success and wealth will face the same attack from his or her opponents.

The only real solutions are disclosure and/or disposition. Morneau's case shows that disclosure does not prevent from being attacked. But it should help voters put things in perspective. Rules are important. But they won't stop political opponents from opposing.

 

Tom Parkin:

In 2013 the Conflict of Interest and Ethics Commissioner told the Harper government there was a loophole in the Conflict of Interest Act. Because of the vagueness of the word “hold,” an unintended third option existed aside from an intended necessary choice between divesting or putting assets into a blind trust.

In response, Harper did nothing. Now several Liberal ministers are using the same loophole. Justin Trudeau’s response has been Harper’s response. He has refused to condemn the loophole users. He voted against a recent NDP motion to close the loophole. I don’t think any of this is going anywhere.

We’ve had Justin Trudeau’s cash-for-access scandal, which broke the rules he was charged with enforcing. We’ve had vacations on Billionaire Island, for which he is under investigation. Justin Trudeau has an ethical weakness.

Let’s also never again hear this silly Liberal talking point that Morneau (and the unnamed other loopholers) were following the recommendation of Mary Dawson—implying this is Mary Dawson’s fault. Since Dawson wanted to plug the loophole it seems rather disingenuous. Dawson gave truthful answers about the law—that’s her job. Morneau chose to use the loophole. And Trudeau chose to keep it open. So let’s move on to less fantastic claims.

Let’s refocus on what happened: the Finance Minister, while holding $20 million worth of shares in his company through a loophole, introduced Bill C-27, which will reduce pension protection but create an increase in demand for the actuarial services offered by Morneau Shepell.

But somehow to Richard, Morneau is the poor, besieged victim.

Morneau chose the loophole. Morneau chose the Bill. Morneau is hurting Canadians' pension protection. The value of his stock rose 31% since Election Day. And he's been collecting $165,000 a month in dividends.

No pity from me. Certainly none while this government continues with C-27 and won't plug the loophole.

 

Will Stewart:

Tom is right, and Richard knows it too. While Richard and the Liberals profess that the minister did everything he was supposed to do, as directed by the Ethics Commissioner, we all know from reports that this was simply not true, despite their sound bites.

The truth is that the minister's ethical screen approach failed as evidenced by the pension bill noted above. But the list of rules broken does not end there.

Ministers are required to disclose all their assets to the Ethics Commissioner. Of course Minister Morneau did not do that either. He "forgot" about that pesky villa in France and the corporation that owns it. We also know that he has many more numbered companies.

What they are, what they hold, and why there are so many still remains a mystery. We can only go on faith that they are in compliance despite the other demonstrated lapses on the ones we know of.

I will say that I do not believe that Morneau is motivated by greed, profit, or deception. I have yet to meet many people in public life who are motivated by those things at the senior level, regardless of partisanship.

But we do need to ask ourselves if we can continue to rely on proactive disclosure by the members themselves, without investigation, to ensure compliance. With a maximum penalty of $500, the temptation to forget, misrepresent, or have a failed ethical screen is just too great.

It is not a significant enough deterrent to stop willfully bad behaviour if it were to arise.

And we don't have to look far for inspiration. The Lobby Commissioner rules, set up by Harper, are the strongest in Canada, and amongst the strongest in the world. Now, anyone who knows me knows full well my frustration with the administration of the rules there, but the intent is something the government can look at.

For example, the Lobby Commissioner can find a lobbyist in breach of Code for the "appearance" of a conflict with a member, while ethics rules require an actual conflict to find guilt. Compare the $500 fine for an ethics breach to the lobbyist act penalties of $200,000 and two years in prison.

Why do we have much more significant penalties, including jail, for lobbyists but not politicians? Further, lobbyists have to proactively, publicly, disclose all communications monthly in the interest of transparency. Why should the politicians be different? If they refuse to put items into a blind trust, they should be publicly disclosed.

Clearly ethics reform is needed. But it only works if people actually disclose the entirety of their assets.

 

Richard Mahoney:

Tom proves my point with his comments. Political opponents will say the darndest of things to score points. If Trudeau broke rules by going to fundraisers, then every New Democrat politician in our lifetime that has attended a fundraiser with folks who work in business, labour or other interests put themselves in conflict too. To suggest that spending Christmas with a religious leader and lifelong family friend proves that the Prime Minister has an ethical weakness is laughable.

Of course, he offers no evidence, other than the known fact that Trudeau and his family spent some of their holidays at his place. This is why it is difficult for people to sort out what is a conflict and what is not. Conflicts will exist. It is how you deal with them and how you behave that is the test.

Let's also put to rest another canard that is floating around the debate about Bill Morneau. A blind trust would not have helped in any way in this case. To suggest otherwise is nonsense. Does anyone believe for a moment that if Bill Morneau had placed his shares in Morneau Shepell in a blind trust that Tom, Will and their respective parties would not be attacking him now? Not a chance in the world.

Transparency is important. Few objective observers would dispute that Prime Minister Trudeau himself, and the government he leads, are much more open and transparent than the Harper government that preceded them.

I am not saying that Bill Morneau is perfect, free from mistakes. What I am trying to do is answer Moderator Susanna Kelley's question: should the rules be changed? Yes, we should always update the rules. But a change in the rules, however wise, will not stop Tom and Will, or any political opponent in the future, from making allegations about a political opponent’s interests.

And those allegations, fair or unfair as they may be, will tarnish the image of the politician in question, and, usually, the general reputation and image of politicians in general. Most Canadians have a dim view of the integrity of politicians and none of this will change that for the better.

The only thing you can do to avoid that is to require politicians to dispose of their assets once they assume office, and even that might not work as the allegation will be made that the politician in question is trying to feather the nest of someone he or she sold his interest to. Such a requirement would likely deter many qualified people from entering public life. We always say we want people of accomplishment outside politics and government to run and to serve.

But rules requiring complete divestiture of assets will only further restrict and repel good people from taking the huge risk of suiting up to run for public office. That is not a new thought, but I think it is a true one.

 

Tom Parkin:

Bill C-27 is at the centre of the alleged conflict of interest. Let’s be clear about what C-27 does and where it came from.

Bill Morneau pushed for this legislation when he was head of both Morneau Shepell and the business lobby group C.D. Howe Institute. Bill Morneau’s idea is to allow employers to retroactively convert defined benefit pensions into riskier “target” plans. Bill Morneau wants to move risk from companies to employees.

The ability to retire with security is a key marker of middle class membership. Bill Morneau’s legislation knocks people out of the middle class.

The conversions Bill Morneau wants to encourage require three times more actuarial service. Quelle coincidence! Those are just the kind of services offered by Morneau Shepell. Target plans are required to have an annual actuarial report. Defined benefit plans only require one every third year. The job creators call this creating a market.

Once appointed Finance Minister, and as he held $20,000,000 worth of Morneau Shepell stock through a loophole, Bill Morneau introduced this legislation as Bill C-27—without a press release or tweet. Telling.

Bill Morneau’s C-27, Liberal inaction on Sears pensions and Liberal refusal to plug ethics loopholes show Liberals are more interested in protecting their wealth than Canadians’ savings.

Good on NDP Leader Jagmeet Singh and Guy Caron for staying focussed on C-27 and pension security. Bill C-27 must be withdrawn. And all MPs must support NDP MP Scott Duvall’s private member bill to fix bankruptcy law for Sears' workers.

Liberals (and Conservatives) who do otherwise are not only shamefully dismembering the Canadian middle class, they are badly underestimating how strongly Canadians feel that employees deserve to be treated with respect.

 

Richard Mahoney is a lawyer with deep experience in politics and governance.  He is a former senior advisor to the Rt. Hon Paul Martin, a former Campaign Chair and President of the Ontario Liberal Party. Will Stewart is Managing Principal at Navigator, served as Chief of Staff to several Ontario Ministers and often appears as a national affairs commentator.  Tom Parkin is a veteran NDP strategist, columnist and a frequent commentator on national issues. 

 

 

 

 

 

 

 

Posted date : October 31, 2017
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