How do We Man­age Wealth in Pol­i­tics?

At the heart of the con­cept of con­flict of in­ter­est, par­tic­u­larly in pol­i­tics, is the con­ven­tion that the ap­pear­ance of con­flict is to be avoided as as­sid­u­ously as ac­tual con­flict in or­der to main­tain pub­lic trust. If Fi­nance Min­is­ter Bill Morneau learned

Policy - - In This Issue - Lori Turn­bull

It is not un­com­mon for wealthy peo­ple to hold po­lit­i­cal of­fice, but Fi­nance Min­is­ter Bill Morneau is a spe­cial case. Be­fore be­com­ing the Mem­ber of Par­lia­ment for Toronto Cen­tre and fi­nance min­is­ter in the Trudeau gov­ern­ment, he was the executive chair of Morneau She­p­ell, the largest hu­man re­sources firm in the coun­try. Prior to the 2015 elec­tion, his shares in Morneau She­p­ell were val­ued at roughly $40 mil­lion, and he has other sources of in­come in ad­di­tion to that. With such enor-

mous per­sonal wealth, Morneau pro­vides a stress test for Canada’s con­flict of in­ter­est regime.

Min­is­ters come un­der the def­i­ni­tion of pub­lic of­fice hold­ers and are, there­fore, sub­ject to the terms of the Con­flict of In­ter­est Act. Broadly, the act re­quires that pub­lic of­fice hold­ers avoid con­flicts of in­ter­est and that they ar­range their per­sonal and pri­vate af­fairs in such ways that pre­vent con­flicts from oc­cur­ring. There are a num­ber of com­pli­ance mea­sures that can be used for this pur­pose, in­clud­ing dis­clo­sure, re­cusal, blind trust, and divest­ment. All pub­lic of­fice hold­ers must dis­close their as­sets, li­a­bil­i­ties, in­come and ac­tiv­i­ties within 60 days of their ap­point­ment and, through con­sul­ta­tion with the Ethics Com­mis­sioner, de­ter­mine whether other com­pli­ance mea­sures are necessary un­der the terms of the leg­is­la­tion.

In con­nec­tion with his com­pli­ance with the Con­flict of In­ter­est Act, Morneau has (at least) four prob­lems:

1. Upon be­ing ap­pointed min­is­ter of fi­nance, he did not place his as­sets in a blind trust. Out­go­ing Ethics and Con­flict of In­ter­est Com­mis­sioner Mary Daw­son has con­firmed that be­cause th­ese as­sets are held through a pri­vate hold­ing com­pany and not di­rectly con­trolled by Morneau, there was tech­ni­cally no need for a blind trust. How­ever, since be­com­ing the op­po­si­tion’s pri­mary tar­get dur­ing ques­tion pe­riod, he has taken steps to­ward set­ting up a blind trust.

2. Morneau spon­sored Bill C-27, which pro­poses changes to pri­vate pen­sions that could ben­e­fit Morneau She­p­ell, while still hold­ing shares in the com­pany. The ethics com­mis­sioner is ex­am­in­ing whether this con­sti­tutes a con­flict of in­ter­est, though the nom­i­nee to re­place Daw­son, Mario Dion, will have to de­cide whether to con­tinue the ex­am­i­na­tion.

All pub­lic of­fice hold­ers must dis­close their as­sets, li­a­bil­i­ties, in­come and ac­tiv­i­ties within 60 days of their ap­point­ment and, through con­sul­ta­tion with the Ethics Com­mis­sioner, de­ter­mine whether other com­pli­ance mea­sures are necessary un­der the terms of the leg­is­la­tion.

3. Morneau for­got to tell us about his com­pany, SCI Mas des Morneaus, which owns his French villa. This is by far the least of his prob­lems and, for what it’s worth, the ethics com­mis­sioner has al­ready fined him $200 for tardy dis­clo­sure.

4. The op­po­si­tion has, un­der the cover of par­lia­men­tary priv­i­lege, ac­cused the min­is­ter of in­sider trad­ing in con­nec­tion with the sale of some of his stocks on Novem­ber 30, 2015, just prior to a gov­ern­ment an­nounce­ment on tax changes and a sub­se­quent drop in the value of the stocks. Morneau has de­nied th­ese al­le­ga­tions and op­po­si­tion MPs have not re­peated them out­side the House, which pre­vents the min­is­ter from su­ing.

None of this casts Morneau in a pos­i­tive light, and a case like this has the ca­pac­ity to shake peo­ple’s con­fi­dence in the sys­tem. Re­ports have treated Morneau’s avoid­ance of a blind trust ar­range­ment (un­til now) as a loop­hole that, pre­sum­ably, other min­is­ters could ex­ploit too, if they had the money. The case also raises rea­son­able con­cerns about the en­force­abil­ity of the ethics rules and whether the ethics com­mis­sioner has the tools to en­sure com­pli­ance. The op­tics are not good. A $200 fine for a multi-mil­lion­aire is a joke. It makes a mock­ery of the ethics regime and does noth­ing to en­cour­age pub­lic trust in the sys­tem or the in­di­vid­u­als within it.

The issue of wealth man­age­ment in pol­i­tics fea­tures promi­nently in Amer­i­can pol­i­tics. Cam­paign fi­nance rules in the United States priv­i­lege wealthy can­di­dates; in other words, you need a lot of cash to run com­pet­i­tively.

The issue of wealth man­age­ment in pol­i­tics fea­tures promi­nently in Amer­i­can pol­i­tics. Cam­paign fi­nance rules in the United States priv­i­lege wealthy can­di­dates; in other words, you need a lot of cash to run com­pet­i­tively. The Cen­ter for Re­spon­sive Pol­i­tics re­ported in 2012 that, for the first time, more than half of 534 mem­bers of Congress had a net worth of $1 mil­lion or more. Amer­ica has more ex­pe­ri­ence with man­ag­ing the pri­vate wealth of pub­lic of­fice hold­ers.

The Amer­i­can sys­tem of gov­ern­ment is very dif­fer­ent from ours, even though we com­pare our­selves of­ten. They sep­a­rate power where we con­cen­trate it. They enu­mer­ate rules where we leave things up to con­ven­tion. The great­est fear for their con­sti­tu­tional framers was cor­rup­tion; for us, it was in­ac­tion and stale­mate. Re­gard­less of th­ese fundamental dif­fer­ences in in­sti­tu­tional de­sign and mo­ti­va­tion, the two coun­tries have ended up fac­ing the same types of prob­lems re­gard­ing the reg­u­la­tion of ethics among the po­lit­i­cal class.

Both ju­ris­dic­tions, as well as many oth­ers around the world, have made in­creas­ing at­tempts to reg­u­late and le­gal­ize po­lit­i­cal ethics so that the rules are clearer and more en­force­able.

Adam Scotti photo

Fi­nance Min­is­ter Bill Morneau speaks at a news con­fer­ence at a Toronto-area restau­rant in October 2017.

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