Bill Morneau’s big mis­take

The Globe and Mail (BC Edition) - - OPINION - ANDREW STARK

The Fi­nance Min­is­ter could have avoided con­tro­versy by ad­mit­ting a con­flict of in­ter­est right from the start

I n Oc­to­ber, 2003, labour min­is­ter Claudette Brad­shaw an­nounced that she had vi­o­lated fed­eral ethics rules. She had ac­cepted free air travel from the Irv­ing fam­ily of New Brunswick. As soon as it came to her at­ten­tion that do­ing so was pro­hib­ited, she took ac­tion to re­im­burse the Irv­ings and ac­knowl­edged that she had fallen afoul of the rules: “I apol­o­gize to the House,” she said, “and I apol­o­gize to all Cana­di­ans.” Then-op­po­si­tion leader Stephen Harper de­clared that “Claudette Brad­shaw did the hon­ourable thing.” The mat­ter was closed. Ev­ery­body moved on.

Fast-for­ward to 2017. Fi­nance Min­is­ter Bill Morneau now finds him­self in a con­flict-of-in­ter­est con­tro­versy be­cause of his in­tro­duc­tion of Bill C-27, a bill that would en­cour­age busi­nesses to pur­chase pen­sion-re­lated ser­vices from the few com­pa­nies in Canada that pro­vide them. One of those firms is Morneau She­p­ell, in which the min­is­ter owned about a mil­lion shares, worth around $20-mil­lion, through a hold­ing com­pany.

Like Ms. Brad­shaw, Mr. Morneau took cor­rec­tive ac­tion shortly af­ter The Globe and Mail re­ported th­ese facts. He an­nounced that he was sell­ing his Morneau She­p­ell shares and in­struct­ing a trustee to re­place them with as­sets in a blind trust, whose iden­tity the min­is­ter will not know. He also an­nounced that he will be giv­ing to char­ity any prof­its he de­rived from his Morneau She­p­ell hold­ings while in of­fice.

But what he hasn’t done, un­like Ms. Brad­shaw, is ac­knowl­edge that he was ever in a con­flict of in­ter­est. In fact, he re­peat­edly re­fuses to do so when ques­tioned by jour­nal­ists and op­po­si­tion mem­bers. And so not sur­pris­ingly, on Fri­day, the fed­eral Ethics Com­mis­sioner, Mary Daw­son, an­nounced she will be con­duct­ing an of­fi­cial ex­am­i­na­tion to an­swer just that ques­tion.

Mr. Morneau’s con­flict-of-in­ter­est is­sue is, of course, larger than Ms. Brad­shaw’s by many or­ders of mag­ni­tude. And ac­tu­ally, the po­ten­tial mag­ni­tude goes be­yond the cur­rent scope of Ms. Daw­son’s ex­am­i­na­tion. When an of­fice holder com­bines vast power to af­fect the econ­omy with sub­stan­tial pri­vate wealth, a great deal of what he does (or chooses not to do, such as al­ter the tax rules con­cern­ing fam­ily trusts) can sig­nif­i­cantly af­fect his in­ter­ests. That’s why wealthy U.S. Trea­sury De­part­ment sec­re­taries in re­cent mem­ory have placed all their hold­ings, both pub­licly traded shares and all other busi­ness as­sets, in a blind trust. And be­yond his Morneau She­p­ell shares, Mr. Morneau co-owns sev­eral other hold­ing com­pa­nies and is a ben­e­fi­ciary of a fam­ily trust.

Mr. Morneau de­nies he was in a con­flict of in­ter­est with his Morneau She­p­ell hold­ings be­cause the con­flict-of-in­ter­est law does not re­quire an of­fice­holder to place pub­licly traded shares he holds in­di­rectly, through a hold­ing com­pany, in a blind trust – even though, had he held them di­rectly, he would have had to. He says that Ms. Daw­son so in­ter­preted the law, and he was sim­ply fol­low­ing her ad­vice.

But Ms. Daw­son has also said that this par­tic­u­lar pro­vi­sion of the law is flawed. She has long been on record as hav­ing asked Par­lia­ment to amend it to in­clude shares held in­di­rectly. It would be in­ter­est­ing to know whether Ms. Daw­son ever di­rectly told Mr. Morneau what, at any rate, he might have known by look­ing at her pub­lic state­ments: that by merely com­ply­ing with the let­ter of the law, he would be tak­ing ad­van­tage of a loop­hole. In which case, his cit­ing her ad­vice as a clean bill of health would be highly in­ap­pro­pri­ate. Cana­di­ans are en­ti­tled to know, as part of her fi­nal re­port on the mat­ter, whether she ever did so tell the min­is­ter.

But the min­is­ter him­self has in ef­fect ac­knowl­edged that his Morneau She­p­ell shares did pose a con­flict of in­ter­est. His of­fice set up a screen to pre­vent him from par­tic­i­pat­ing in a nar­row range of mat­ters, pre­sum­ably hav­ing to do with di­rect con­tracts with the gov­ern­ment, that in­volved the com­pany – some­thing that would have been un­nec­es­sary if shares owned through a hold­ing com­pany can pose no con­flict of in­ter­est, as the min­is­ter main­tains.

By all ac­counts, Mr. Morneau went into gov­ern­ment out of a gen­uine de­sire to serve the pub­lic. He might feel that by ac­knowl­edg­ing that he was in a con­flict of in­ter­est he would be sug­gest­ing oth­er­wise.

But that’s not the case. The law (as Ms. Daw­son’s of­fice in­formed Mr. Morneau in a Fe­bru­ary, 2016, let­ter to him) says an of­fice­holder is in a con­flict if he merely puts him­self in a po­si­tion where he has “the op­por­tu­nity” to fur­ther his pri­vate in­ter­ests. It does so pre­cisely so that we don’t have to get into the ques­tions – unan­swer­able ones, given that it would re­quire us to look into the mind of the of­fi­cial and the com­plex work­ings of the mar­ket – as to whether those in­ter­ests ac­tu­ally did cor­rupt his judg­ment, or whether his ac­tions ac­tu­ally did ma­te­ri­ally ad­vance them. To ad­mit hav­ing been in a con­flict of in­ter­est, as Ms. Brad­shaw did, is thus not nec­es­sar­ily in­con­sis­tent with be­ing an hon­ourable pub­lic ser­vant. In fact, as Stephen Harper noted, it can be part of what it means to be an hon­ourable pub­lic ser­vant.

But to take re­me­dial ac­tion while in­sist­ing that there was noth­ing to rem­edy, as Mr. Morneau has, re­sem­bles the con­duct of cor­po­ra­tions that pay large fines in law­suits on the con­di­tion that they don’t have to ad­mit cul­pa­bil­ity. Mr. Morneau’s big­gest mis­take is that he has in­vited Ms. Daw­son to an­swer the ques­tion of whether he was in a con­flict of in­ter­est, when he could eas­ily have an­swered it him­self. Andrew Stark is a pro­fes­sor at the Univer­sity of Toronto, a for­mer pol­icy ad­viser in Brian Mul­roney’s PMO and au­thor of Con­flict of In­ter­est in Amer­i­can Pub­lic Life.

SEAN KIL­PATRICK/THE CANA­DIAN PRESS

By all ac­counts, Bill Morneau had a gen­uine de­sire to serve Cana­di­ans by en­ter­ing gov­ern­ment, and may feel that an ac­knowl­edge­ment of a con­flict of in­ter­est would sug­gest oth­er­wise.

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