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Morneau's Scandal Reveals Bigger Unethical Knots That Need To Be Untied

The only way to prevent conflicts is to require cabinet ministers and top government officials to sell their investments.

11/29/2017 17:56 EST | Updated 11/30/2017 12:25 EST
Adrian Wyld/The Canadian Press
Minister of Finance Bill Morneau responds to a question during Question Period in the House of Commons, Wednesday, Nov. 29, 2017 in Ottawa.

In all the spin about Finance Minister Bill Morneau's conflicts of interest scandal, what are the real problems, and how can the unethical knots that the scandal reveals be untied to ensure ethical government decision-making in the future?

Most everyone, including international standard-setters like the UN and the OECD, the Supreme Court of Canada in its rulings, and experts worldwide, say that in order to have a democratic good government, it is key to ensure that politicians and government officials are prohibited from making decisions and spending money helping themselves, their relatives and their friends, or protecting their investments or properties.

Why? Because while a politician or official may claim that they are ethical and made a decision to help the public, no one can tell whether that is true. Despite the claims of 1-800 TV psychics, no one can do a Vulcan mind-meld to determine the actual reasons why anyone makes a decision.

That means having laws, like Canada's federal ethics law, that prohibit public-office holders from even taking part in discussions or decisions where they could help themselves, their relatives or friends. But what lines should that prohibition draw?

Usually, ethics laws prohibit cabinet ministers and top government officials from having a direct conflict of interest of owning a business or investments in businesses, as Canada's federal ethics law does.

However, ethics commissioner Mary Dawson interpreted the law in a legally incorrect way to create a loophole, and has allowed Minister Morneau and other cabinet ministers to own investments and other assets indirectly. Democracy Watch has filed a court case challenging the ethics commissioner's decision.

These people are already paid a salary in the top five per cent — they don't need to make more money while in office, especially by making decisions that help themselves instead of helping as many Canadians as possible.

Canada's ethics law also allows ministers and top officials to own mutual-fund investments as so-called "exempt assets" without even disclosing them publicly, and to put other assets and investments in a so-called "blind trust." These investments should be prohibited, and (as the Parker Commission recommended in 1987) blind trusts should be abolished because ministers and officials can easily know what they own, especially since they choose their own trustee.

The only way to prevent these conflicts is to require cabinet ministers and top government officials to sell their investments (as the Parker Commission also recommended in 1987). They can take the money from selling them and buy term deposits or government bonds that pay a set interest rate until they leave office.

These people are already paid a salary in the top five per cent — they don't need to make more money while in office, especially by making decisions that help themselves instead of helping as many Canadians as possible.

If a minister or top official owns some asset or investment which is not possible to sell, they should be required to disclose it publicly (as the Parker Commission also recommended).

What about businesses or investments owned by the relatives or friends of cabinet ministers and top officials? Canada's ethics law requires their spouses and dependent children to disclose their investments only to the ethics commissioner — they are not required to sell anything. Spouses should be required to disclose their investments publicly (as the Parker Commission also recommended), as should all children whether or not they live at home.

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To avoid disrupting the lives of other relatives and friends of a person who enters politics or government, another approach is usually used to prevent conflicts with their interests. The minister or official is prohibited from taking part in discussions or decisions that affect their own interests, and the interests of their relatives or friends, directly or indirectly.

Political ethics laws across Canada don't do this, however. They all have a huge loophole that actually allows all politicians, their staff, and top government officials to profit from their own decisions, as long as their decision affects not only their own private interest but also the private interests of many others. This loophole must be closed — they must be prohibited from participating in any decision if they have even the appearance of a conflict of interest.

The federal ethics commissioner has made things even worse by creating so-called ethics "screens" that hide whether ministers and officials ever step aside because of a conflict of interest. The federal ethics law requires disclosure every time they step aside and so Democracy Watch believes the screens are illegal "smokescreens" and is challenging them in court.

In contrast to the rules for federal ministers and top government officials, even federal government employees with little decision-making power are prohibited from having interests that are affected by "government actions in which they participate" and from taking part in decisions when they have even the appearance of a conflict of interest.

The rules in the government employees' code should be put into the federal ethics law.

What about enforcement? The first problem is that the federal ethics commissioner is chosen by the cabinet, with opposition-party leaders only consulted on the choice. Politicians choosing their own watchdog is a bad idea. Instead, a fully independent commission should be established to search for a short list of candidates for all watchdog positions (including judges). The cabinet should then have to choose from the commission's short list.

Fred Chartrand/The Canadian Press
Ethics Commissioner Mary Dawson prepares to appear at Commons committee, on Parliament Hill in Ottawa, Tuesday June 10, 2014.

In fact, the federal ethics commissioner is currently on her third six-month contract with the Trudeau cabinet, essentially serving at the cabinet's pleasure. Democracy Watch believes this contract is illegal and undermines the independence of commissioner, and is challenging it in court.

The ethics commissioner must also be required to investigate and rule publicly on all complaints (currently the commissioner is allowed to ignore complaints from the public), and required to conduct audits to ensure everyone is following the rules (which she currently fails to do).

If someone believes the ethics commissioner's ruling on a complaint has ignored facts or the law, they must be allowed to challenge the ruling in court (which is currently prohibited in almost all cases).

Finally, there are currently no penalties for violating the federal ethics law, one of the key laws that protects our democracy, other than a maximum $500 fine for failing to file accurate documents with the commissioner. Mandatory high fines of at least one year's salary should be the penalty for all violations.

Overall, a federal cabinet minister or top government official has less chance of getting caught, and will pay a smaller penalty, for violating their ethics law than you will for parking illegally.

It's long past time for federal political parties to close the unethical loopholes, and ensure a fully independent, fully empowered, accountable and strong ethics commissioner is appointed to enforce the rules, and to penalize all violators. Canadians deserve no less, especially from the Trudeau Liberal government that promised real change, and open and honest government.

Duff Conacher is co-founder of Democracy Watch, Canada's leading democratic reform organization, and a part-time professor of law and politics at the University of Ottawa.

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