Morneau only has himself to blame
Minister should have revealed millions went to charity
Bill Morneau believes it’s important Canadians have confidence in their government, but has been loath to release information that would have helped convince them of his own probity — including the revelation that two years ago, when he sold off nearly one million shares in Morneau Shepell, he donated $4.5 million to a charitable foundation.
The finance minister has refused to provide many details of his personal finances, allowing the opposition parties to fill the vacuum with accusations and innuendo. But documents viewed by the National Post suggest the conflict-of-interest allegations levelled against Morneau are more imagined than real — and that he could have allayed suspicions that he profited from the introduction of pension legislation by revealing more of his financial details.
When Morneau was elected to the House of Commons in October 2015, he held just over 2 million shares in his former company, Morneau Shepell. He had recently said he still held about one million shares in the company, but would not offer any information about when he sold the other million shares, or at what price.
It allowed his political opponents to suggest that he profited when he introduced bill C-27, which instituted pension changes for which Morneau had advocated when he was an executive for the company, and which briefly increased Morneau Shepell’s share price.
However, the Post has viewed documentation that shows Morneau sold the other million shares in mid-December, 2015. He liquidated 320,000 shares on December 17 at a price of $14.26 per share, and donated the proceeds of $4,487,088 to the Toronto Foundation, a registered charity that pools philanthropic dollars. (The foundation used the donation to help Covenant House, a charity for homeless youth; the AIDS committee of Toronto; the Children’s Book Bank; and after-school programs in the city’s Regent Park neighbourhood.)
A further 680,000 shares were sold at $15 a share for proceeds of $10,183,000, money on which he would have paid capital gains taxes.
The finance minister has said he will divest the more than one million shares he still holds in Morneau Shepell, donating any profits made since he has been in office to charity. Since Morneau Shepell’s share price has risen 26 per cent in that period, the proceeds are likely to top $5 million.
Add in an estimated $3 million in capital gains tax due on shares that have nearly doubled in value in the last 10 years and it is hard to see how Morneau “profited” from his position, as Conservative leader Andrew Scheer alleged in the House of Commons.
In fact by the end of it all, Morneau will have given away or paid in tax almost half the value of his Morneau Shepell holdings when he entered politics.
That’s not how the story has played out in public — something for which Morneau has only got himself to blame.
Even the ethics commissioner, who gave him the dubious advice not to place his assets in a blind trust in the first place, appears to be having her doubts. Mary Dawson wrote to NDP MP Nathan Cullen saying his inquiry into the finance minister’s behaviour on bill C-27 “leaves me with concern in relation to Mr. Morneau’s involvement.”
The whole guddle is a result of rules that are as clear as mud, enforced by an official who, in the immortal words of Homer Simpson, is required to be Judge Judy and Executioner: adviser, investigator and arbiter.
As a major shareholder in a large pension company, Morneau was allowed to sponsor legislation that could change the marketplace. (For its part, Morneau Shepell says bill C-27 is not expected to have a “material impact” on the company.)
Dawson recommended that Morneau set up a conflict-of-interest “screen,” rather than putting his assets in a blind trust.
But he was able to involve himself with the pension bill because the legislation was deemed “generally applicable” — that is, it involved all pension companies, not just Morneau Shepell. It was only when his former company was identified specifically that officials flagged a potential conflict of interest and he was asked to step out of meetings. Canadians were none the wiser, despite the act requiring recusals to be made public, because it was deemed to have fallen within the parameters of the screen.
As former House of Commons law clerk Rob Walsh, tweeted in response to the ensuing mess: “Morneau may be a well-intentioned and honest man but he’s a dimwit when it comes to his private life and conflict of interest.”
As Walsh pointed out, legal compliance is not enough when dealing with ethical issues in politics.
Morneau compounded his own agony by dodging questions about the complicated use of numbered companies, suggesting he did not have to defend his personal financial choices to journalists as long as he told the ethics commissioner.
Yet she looks an increasingly forlorn figure — undermined by grey areas in the law and her own advice that the conflict-of-interest screen was sufficient to protect the public interest.
It’s a rare thing to look south of the border for good governance but U.S. federal legislation requires senior public office holders to sell their stocks and buy treasury bonds to avoid conflicts of interest. In return, they are allowed to defer paying capital gains tax, in order to ease the sting of being forced to suddenly sell investments.
That seems a reasonable compromise between the virtual free for all we have now and an effective deterrent to rich people entering politics.
Morneau looks intent on weathering the storm — and proactive disclosure will help. But if he is forced from office, his downfall will have been his pride, not his avarice.