COYNE ON THE MORNEAU MESS.

Where there’s smoke, there’s fire, as the folk saying has it. Unless the smoke is just people blowing smoke.

The opposition parties have invested a solid week in the proposition that Finance Minister Bill Morneau, by selling 680,000 shares in his family firm Morneau Shepell on Nov. 30, 2015, followed by a ways and means motion in the Commons a week later signalling an increase in taxes was coming, did something wrong. Quite what that something is they have been too shy to say, at least outside the House.

So let’s try to figure out what they mean in their absence. Was it, first, wrong of him to sell the shares? No. It is exactly what he should have done as a minister of the Crown. Indeed, the complaint until now has been that he should have divested all of his shares on taking office and not, as we later learned, kept about half of them hidden inside a numbered company. But what is right in the whole cannot be wrong in the part.

Was it, then, wrong of him to raise taxes on the wealthy? From a policy perspective maybe, but ethically? Of course not. The Liberals ran and won on precisely that promise: it was perhaps the most prominent plank in their platform. Again, the knock on the Liberals until now has been about the promises they did not keep.

So the opposition parties’ complaint must be that although there was nothing wrong with each on its own, there was something wrong with the two together: that it is the timing that is suspicious, the one following so closely after the other. The suspicion, though they do not quite say it, is that Morneau was trading on inside information.

Let’s unbundle this. The election was Oct. 19, 2015; the cabinet was sworn in Nov. 4. The “suspicious” sale of shares took place less than four weeks later. Perhaps it could have been done sooner, but it couldn’t have been done much sooner. And even if it had it would have been vulnerable to the same suspicion: that Morneau was selling the shares in anticipation of the ways and means motion.

The motion was introduced in the first week the House sat after the election. It could not have been done sooner and it could not have been done much later since its purpose was to announce the tax increase would take effect on Jan. 1, 2016. So there isn’t a lot of wiggle room on either date: the sale of Morneau’s shares or the ways and means motion. They were almost bound to be close together.

Certainly no one could have been surprised by the announcement, either of the fact of the tax increase or its timing. Not only had the Liberals told the country for months of their plan to raise taxes on the wealthy, but they had been quite explicit in advance that they intended to bring it in by the new year. On the Liberals’ first day in office, then- house leader Dominic LeBlanc told reporters the tax pledge was the government’s highest priority. “The prime minister,” he said, “has made it very clear to us that it is his hope and his intention that the tax measures will be in place for Jan. 1.”

There’s little doubt that the prospect of a tax increase in the new year would have moved many investors to sell their shares before then, so as to realize any capital gains at the lower rate then prevailing. So far as they did, share prices generally might have been lower than they otherwise would have been for a time.

But the suggestion that there was some particular significance to Nov. 30 or that Morneau realized some special advantage as a result rests on a number of shaky assumptions.

First, it assumes that the parliamentary motion and not any previous government statement would have caused investors to dump their shares en masse. Maybe. But, as my colleague John Ivison has noted, the fact that the motion was introduced while the markets were still open suggests the Department of Finance did not expect it to be a market mover.

Second, it assumes the decline in share prices on that day, including Morneau Shepell’s, was in fact a result of the motion and not of other economic factors. But that is far from established: stocks fell on the New York exchange that day as well.

Third, it assumes that by selling his shares before then, Morneau avoided a loss that would otherwise have resulted. But the decline in Morneau Shepell’s share price, while sharp, was short-lived: by January they were back to where they were on the date the motion was introduced. They are now about 50 per cent higher — if anything, by selling when he did, Morneau cut himself out of a sizable gain.

The only way for Morneau to have suffered a loss by selling his shares then, even assuming the motion had anything to do with it, would be if he had sold them in the days immediately after the motion. Was he somehow obliged to pick that exact window? In fact, he did sell another tranche totalling 320,000 shares on Dec. 17, further weakening the case that he was seeking to profit from inside knowledge.

None of this absolves Morneau of responsibility for the rest of the broader mess he is now in: for not divesting all his shares, for leaving people to think he had, for sponsoring legislation that would potentially benefit Morneau Shepell and not recusing himself when he did. And certainly he has greatly contributed to the opposition parties’ efforts by his unwillingness to answer simple questions, such as whether he in fact sold his shares on the date in question.

But as to the substance, while it is the minister’s obligation, as the prime minister’s mandate letter to him states, to arrange his private affairs in a way that meets the closest scrutiny, it is not clear what he could have done differently in the present case; still less that he did anything wrong.