05/27/2013 09:15 EDT | Updated 07/27/2013 05:12 EDT

Cochrane: Where Ottawa should look for Senate scandal remedies

He was once a prominent face of national political journalism, but now Senator Mike Duffy is the prominent face of a national political scandal.

There are still many lingering questions about secret deals to cut big cheques and closed-door committee meetings to sanitize reports. But while those specific answers may lie in Ottawa, the solutions to the larger structural problems facing the Senate can be found here in Newfoundland and Labrador.

- Read more about the Senate scandal from CBC Politics

Politics in this province hit rock bottom in 2006 with the eruption of the House of Assembly spending scandal. It broke on live provincial television when former premier Danny Williams fired his natural resources minister, Ed Byrne, during the supper hour news.

The auditor general had found massive abuse of Byrne's publicly-funded constituency allowance. It was the beginning of a scandal that would send four politicians, a top civil servant and a little-known businessman to jail for fraud, bribery, theft and breach of trust.

The scandal touched all parties. Byrne, former Liberal cabinet ministers Jim Walsh and Wally Andersen and New Democrat Randy Collins were all led out of provincial courtrooms in handcuffs to spend one last stint on the public dime — this time in a minimum security prison.

A political crime spree

For the politicians, it was a humiliating end to prominent careers in the public eye. For the rest of us, it was a revealing insight into how badly public money can be handled behind closed doors, when it is far removed from meaningful public oversight.

The origins of this scandal go back to the Brian Tobin era. The auditor general's staff was digging into MHA constituency spending when they found that former cabinet minister Paul Dicks was spending tens of thousands of dollars in public money on artwork and wine. Instead of rebuking Dicks for this highly questionable spending, the legislature responded by evicting the auditor general's staff and shutting down the audit.

The Internal Economy Commission decided to hire outside auditors to oversee MHA spending. The house of assembly ratified that move in a unanimous vote of all parties.

That decision enabled a full-blown political crime spree.

In the following years, that small cadre of MHAs embarked on a systematic fraud of the Newfoundland and Labrador government.

They bribed the legislature's financial officer, Bill Murray, to allow them to overspend. Murray would write the cheques and cook the books in return for kickbacks that fuelled a $500-a-day video lotto addiction.

Murray also had a side deal with businessman John Hand to buy an endless series of real and imaginary novelty items such as lapel pins and fridge magnets that MHAs could give to their constituents.

The fraud ran into the millions. The depth of the corruption was staggering. The outside auditors found nothing.

In the light of day

This was only exposed years later when Williams made good on an election promise to allow the auditor general back into the legislature. John Noseworthy was the deputy auditor general when the IEC initially kicked him out. When he returned as the province's top financial watchdog, Noseworthy's findings shook the legislature to its very core.

Reports of questionable expenses could not be sanitized because they were tabled in the legislature, released to the public and forwarded to the police.

But it wasn't just the blatant criminal cases that showed the problems with closed-door oversight of political spending. The Internal Economy Commission could make significant financial decisions without ever disclosing them to the public. Many of those decisions fell within the rules, but were deemed reprehensible when later revealed to the public.

One example of this abuse happened in 2004. The house of assembly's operations were running under budget, so there was some extra money to burn off at year-end. The IEC made the decision to split the money evenly among all MHAs to top up their constituency allowances. The net gain was $2,875 for every politician (though Williams and now Senator Beth Marshall refused to take the money).

In the context of the overall provincial budget, this secret MHA windfall wasn't a lot of money and it was within the rules. But it was handed out a time when the government used back-to-work legislation to impose a wage freeze on the entire public sector.

It also came on the heels of a tough budget where the government made it more expensive to die, by imposing a new fee on the issuance of a death certificate. And it was all decided behind closed doors by a secret committee of MHAs which never had to explain itself to the public.

Things have structurally changed

Seven years after the spending scandal, the house of assembly is a very different place. The secretive and unaccountable Internal Economy Commission is gone. It has been replaced by the House of Assembly Management Commission, which meets in sessions that are broadcast live on province-wide television. The financial staff is more significant and robust.

The auditor general has full and unfettered access to MHA expense claims. Financial integrity doesn't exist simply as a rhetorical device. It exists in structure and in form. At the intersection where politicians spend money for professional use this all ensures it can't be used for personal gain.

The spending scandal was an embarrassing and painful time for the legislature. But the institution has been strengthened as a result.

The leaders of the Senate and the House of Commons should consider these reforms - especially the enhanced authority of the auditor general - as they seek permanent remedies to clean up political spending in Ottawa. They don't even have to leave the national capital region to get some firsthand advice.

Conservative Senator Elizabeth Marshall sits on the Senate's Internal Economy Commission. But long before she was a Senator, a provincial cabinet minister or even an MHA, Marshall was the auditor general of Newfoundland and Labrador.

In fact, it was Marshall's staff that was auditing MHA expenses when the now defunct IEC made the decision to block her work and evict her staff.

That experience makes Marshall a valuable resource, as she has unique insight into how these scandals can start — and how they can be stopped from happening again.