Morneau not the naif he makes out

The deeper Bill Morneau digs himself into the hole he is now in, the more one understands how he got there. Either the minister is genuinely unaware of the basic requirements of public office, or he imagines his audience to be. Either way, it does not fill one with confidence.

To hear the minister tell it, he entered public life, after a career in private business, as a kind of wideeyed innocent. Uncertain whether he could continue to hold tens of millions of dollars worth of stock in a firm for which, as Minister of Finance, he would have direct regulatory responsibility — the family pension management business, Morneau Shepell — and unguided by the plain sense of the relevant statute (the federal Conflict of Interest Act provides but two options in such situations: sell the stocks, or place them in a blind trust) he instead relied, he says, upon the advice of the federal Ethics Commissioner, Mary Dawson.

Mind you, he did not seem so bewildered at the time. On Nov. 4, 2015, he told the CBC he “expected” all his assets would go into a blind trust. That they in fact did so was what the company itself was given to understand, and that was what was generally believed and commonly said — certainly the minister did nothing to discourage it — until this week, when it was reported that in fact he had done no such thing. In subsequent days it emerged that the ethics commissioner had not, in fact, advised him against putting his holdings in a blind trust, but had merely advised him that he did not have to.

And why was that? Because he had taken the trouble to stuff them inside a numbered company, itself held by another numbered company. Since the shares were not held “directly” by him, but only “indirectly” by a company he controlled, that apparently let him off the hook: the commissioner instead suggested that he set up a “conflict of interest screen,” requiring him to abstain from any involvement in matters related to Morneau Shepell.

Had the issue not come to light, that is presumably where they would still be: it was only in response to the current controversy that the minister reluctantly agreed to divest himself of his remaining holdings in the company, and to place the rest of his assets in a blind trust.

So the minister was not such a naif as he makes out. The complex network of numbered companies in which his wealth is secreted is evidence enough of that. That the ethics commissioner was content to let him do the minimum necessary to remain in technical compliance with the law does not lessen his own responsibility for making that choice.

Still, had that been the extent of it — minister takes advantage of loophole, misleads the public, but eventually does what he should have done two years before — that would perhaps be that. It’s what happened in the interim that has landed him in such hot water. For, knowing he was still in possession of his Morneau Shepell shares, the minister introduced legislation that would almost certainly benefit the company, and therefore himself.

Bill C-27 would allow federally regulated employers to provide their workers with so-called “target benefit” pension plans, a product of which Morneau Shepell happens to be a leading provider. As executive chairman of the company, Morneau had himself called for just such a change. Now here he was, as minister, writing it into law. Did he at least recuse himself from discussing the legislation? Asked directly in Parliament, Morneau did not answer.

How on earth the minister — or the ethics commissioner — thought this was appropriate is one of the many questions raised by this affair. Can he have imagined that he had lived up to the commonplace ethical obligation, spelled out in his ministerial mandate letter, to arrange his affairs in a manner that bears “the closest public scrutiny … an obligation that is not fully discharged by simply acting within the law”?

One consequence must surely be to tighten up the gaps in federal conflict of interest legislation: not only with regard to the “direct” vs. “indirect” loophole, but even so far as it allows such large and singular holdings to be held in a blind trust. As many others have noted, there is nothing “blind” about it: there cannot be any doubt as to what is in the trust. Better by far to require divestment in such cases, with blind trusts or full disclosure for the rest.

But again: the issue here is not what the law allows, but what the minister did. At the very least, it shows a critical lack of judgment. Worse have been the minister’s responses to criticism of his conduct. Beyond his attempt to pin the blame on the ethics commissioner, there is a consistent thread of annoyance that people are even making an issue of it: it’s a “distraction,” he complains, as if it were nobody’s business but his own what assets he held. Sorry, no: if it’s privacy you want, don’t go into public life.

Morneau was already under fire over the government’s proposed changes to the taxation of small businesses. The controversy was partly his doing — the changes were poorly designed and poorly defended. The revelation that he has engaged in exactly the kind of sharp practices that the measures are designed to curb — only with more lawyers and a higher net worth — would have shaken that confidence enough.

But after these latest developments, it must be asked of what remaining use he is to the government — a question that may perhaps occur to the prime minister.