Morneau only has him­self to blame

Min­is­ter should have re­vealed mil­lions went to char­ity

Montreal Gazette - - NP - JOHN IVISON Com­ment

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 midDe­cem­ber, 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.

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