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Ethics Commissioner allowing federal Liberal Finance Minister Morneau to violate federal ethics law

Loopholes in the Act allow Trudeau, Morneau and other ministers and officials to profit from their decisions – and blind trusts are a sham as they all know what they put in their trusts, and they are allowed to choose and instruct the trustee

Democracy Watch’s court case challenges Ethics Commissioner’s “smokescreens” such as the one she set up for Morneau as illegal under the Conflict of Interest Act – also challenging Trudeau Cabinet re-appointing Ethics Commissioner last June

Loopholes must be closed to require selling investments or not taking part in any decision that directly or indirectly affects investments (as all federal public servants are required to do)

Tuesday, October 17, 2017

OTTAWA – Based on the article published yesterday in the Globe and Mail, Democracy Watch has concluded that federal Conflict of Interest and Ethics Commissioner Mary Dawson made decisions that allowed Liberal Finance Minister Bill Morneau to violate the Conflict of Interest Act by not either setting up a blind trust or selling his shares in his family’s company Morneau Shepell.

Subsection 27(1) of the Act requires Cabinet ministers, their staff, Cabinet appointees (including Deputy Ministers) and other senior government officials to either sell investments they control (such as shares in a family company) or place them in a blind trust. They are all required under subsection 26(1) to disclose a summary public statement within 120 days after they are elected that states whether they have sold or set up a blind trust for these investments, among other key details.

According to the Globe article, which quotes officials from Mr. Morneau’s office, Commissioner Dawson did not require him to set up a blind trust. According to Mr. Morneau’s February 14, 2017 public Summary Statement, he did not sell any of his investments. That means he owns investments which he controls, investments which are not in a blind trust, and that is a violation of subsection 27(1) of the Act.

Instead of requiring Minister Morneau to sell the shares or put them in a blind trust, Ethics Commissioner Dawson allowed him to set up what she calls a conflict of interest “screen” that, she claims, prevents him from taking part in discussions and decisions if he has a conflict of interest. In fact, the Ethics Commissioner’s screens are smokescreens that allow Cabinet ministers and others to take part in almost all discussions and decisions even if they have a financial interest and could profit from the decision.

Similar “screens” allow many other Cabinet ministers, ministerial staff and senior government officials to make decisions that affect their families, friends, and their own financial investments, which is why Democracy Watch has challenged the Ethics Commissioner’s smokescreens in court because they are illegal under the Act.

Democracy Watch has also filed a court case challenging the Ethics Commissioner for being in a conflict of interest because the Trudeau Cabinet’s re-appointed her last June to her third six-month interim term — so she is essentially currently serving at the pleasure of the Trudeau Cabinet.

Even if Minister Morneau put the shares in a blind trust, it would be a sham because he would still know that he owns the shares, and he is also allowed under subsection 27(4) to choose his trustee, and is allowed under subsection 27(5) to give them instructions concerning the investments in the trust.

“As she has many times in the past, Ethics Commissioner Mary Dawson has once again allowed a Cabinet minister to violate the federal ethics law,” said Duff Conacher, Co-founder of Democracy Watch. “The federal ethics law allows Finance Minister Morneau to set up a blind trust but that would be a sham because he would still know he owns the shares in Morneau Shepell, and the law also allows him to make decisions that he can profit from but to be ethical Minister Morneau must either sell the shares or not take part in any future decisions that affect the company directly or indirectly.”

“Democracy Watch believes the federal Ethics Commissioner’s so-called conflict of interest screens are illegal because they allow cabinet ministers, ministerial staff and senior government officials to avoid the clear legal requirement in the federal ethics law that says they must disclose details each time they remove themselves from any decision-making process due to their conflict of interest, and because the screens also allow them to keep secret whether they have actually removed themselves from any decision-making process,” said Conacher.

“The federal ethics law really should be called the ‘Almost Impossible to be in a Conflict of Interest Act’ because it allows the Prime Minister, Cabinet ministers, their staff and senior government officials to make decisions that affect the interests of their families, family businesses, friends and friends’ businesses, and also to profit from their own decisions,” said Conacher. “To have a democratic, ethical federal government, the law must be changed to require ministers, ministerial staff and senior government officials to avoid even the appearance of a conflict of interest, and to sell their investments that cause apparent conflicts, as all federal government employees are required to do.”

Because of a huge loophole in the Conflict of Interest Act, Cabinet ministers and other senior government officials are all allowed to participate in or make any decision that applies generally. Almost all decisions made by ministers, their staff, and appointed senior government officials (all of whom are covered by the Act) apply generally – so in fact they likely don’t have to abstain from participating in very many decision-making processes even when they have a direct conflict of interest.

Ethics Commissioner Dawson negligently refused since she was appointed in July 2007 to define the loophole — what is, and is not, a decision that applies generally? She finally did so somewhat in Minister Dominic LeBlanc’s July 2016 screen statement, writing that a general application decision is not “narrowly focused” but instead “affects the interests of a broad class of persons or entities” not just “a small group” and/or not with only one person or entity with a “dominant interest” in the matter being decided. Very unfortunately, she did not define “narrowly focused” or “small group” or “dominant interest” which means the loophole is still vague.

As well, loopholes in the Act allow ministers, their staff and appointed senior government officials to have investments in mutual funds that invest in businesses they deal with and make decisions that make the businesses money, and make themselves money. They are not required to sell these investments or put them in a so-called “blind trust” or even disclose publicly that they own them (NOTE: the loophole is in the Act’s section 20 definition of “exempt assets” that don’t have to be sold, including “(h) investments in open-ended mutual funds” that can include shares in businesses (only “controlled assets” have to be sold)). Putting an investment in a blind trust is also a charade because the public office holder still knows that they own whatever they put in the trust.

In stark contrast, all federal public servants, even those without any decision-making power, are required by Appendix B of the Treasury Board’s Policy on Conflict of Interest and Post-Employment to take “all possible steps to recognize, prevent, report, and resolve any real, apparent or potential conflicts of interest” and to sell assets that create even the appearance of a conflict of interest or make another arrangement to resolve the conflict created by the asset.

In addition to Dominic LeBlanc, the Ethics Commissioner has established either a blind trust or a conflict of interest screen for the following Cabinet ministers – all of whom are allowed to make “general application” decisions that directly affect the assets or interests listed in their trust or screen:

  1. Prime Minister Justin Trudeau – so-called “blind” trust for 7664699 Canada Inc.;
  2. Finance Minister Bill Morneau – so-called conflict of interest “screen” for Morneau Shepell Inc. or its subsidiaries, affiliates and associates;
  3. Justice Minister Jody Wilson-Raybould – so-called conflict of interest “screen” for KaLoNa Group.

along with about 45 other federal Cabinet staff, advisors and appointed senior government officials, whose screen statements can been seen here, including Mary Jean McFall, Chief of Staff for Agriculture Minister Lawrence MacAulay (see article about her “screen” here).

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Duff Conacher, Co-founder of Democracy Watch
Tel: (613) 241-5179
Cell: 416-546-3443
[email protected]

Democracy Watch’s Government Ethics Campaign