Ethics watchdog says other Trudeau ministers using same loophole as Morneau

Ethics Commissioner Mary Dawson speaks to reporters after appearing as a witness at a commons committee on Parliament Hill, in Ottawa on Tuesday, October 17, 2017. (Sean Kilpatrick/THE CANADIAN PRESS)

A number of other Trudeau cabinet ministers are in the same situation as Finance Minister Bill Morneau and have managed to retain control of assets they would be required to divest if this wealth wasn’t being held indirectly through a holding company or similar mechanism.

Conflict of Interest and Ethics Commissioner Mary Dawson’s office declines to identify the ministers, citing confidentiality rules, but confirms that a handful hold these assets indirectly and therefore aren’t required to sell them or place them beyond reach.

The office would only say “fewer than five cabinet ministers currently hold controlled assets indirectly.

“This means that under the Conflict of Interest Act, they are not required to divest.”

For subscribers: Clark: Morneau conflict-of-interest controversy has damaged the reputation of an office meant to reassure Canadians

When asked whether the Prime Minister’s Office believes these ministers should divest these assets, PMO spokesperson Cameron Ahmad responded, “We expect all Members of Parliament to work with the Commissioner and structure their affairs according to her guidance.”

Controlled assets in federal ethics law are those whose value could be directly or indirectly affected by decisions taken by the government, including publicly traded stocks, stock options and bonds.

Conflict-of-interest law in Canada requires cabinet ministers to divest assets such as publicly traded shares by selling them in an arms-length transaction or putting them in a blind trust beyond reach until they leave office.

The exception, according to the Ethics Commissioner’s office, is if these shares or similar assets are held indirectly through a holding company or similar mechanism.

Six cabinet ministers, including the Prime Minister, have set up blind trusts to comply with conflict-of-interest law and another six cabinet ministers have sold publicly traded shares, according to a Globe and Mail review of filings with the federal Ethics Commissioner's office.

One of the cabinet ministers, John McCallum, has since resigned to represent Canada as ambassador to China. Another, MaryAnn Mihychuk, left cabinet in a January, 2017, shuffle.

Other ministers who have set up blind trusts include: Agriculture Minister Lawrence MacAulay, Crown-Indigenous Relations and Northern Affairs Minister Carolyn Bennett and Treasury Board President Scott Brison.

Those cabinet members who have divested of publicly traded securities by selling them include: Foreign Affairs Minister Chrystia Freeland, Social Development Minister Jean-Yves Duclos, Transport Minister Marc Garneau, Environment Minister Catherine McKenna, Minister of Sport and Persons with Disabilities Kent Hehr and Defence Minister Harjit Sajjan.

Mr. Morneau retained a sizable portion of shares of Morneau Shepell until he came under criticism for retaining a stake even as he ran a department with power to affect the fortunes of the major human-resources and pension-management firm.

Mr. Morneau recently reversed course and vowed to sell his one million shares in the family firm, after The Globe and Mail reported that he had kept control over his personal wealth during his two years in office rather than establishing a blind trust as Prime Minister Justin Trudeau has done with his assets. The minister is now putting all his remaining assets into a blind trust – a vehicle that places his wealth beyond his reach while in office.

He also promised to donate to charity more than $5-million earned on shares he holds in his family’s human-resources and pension-planning company since he was elected in 2015.

Deputy Conservative leader Lisa Raitt called on Mr. Trudeau to identify ministers who are holding assets through holding companies rather than being forced to divest them.

“Let’s clear the air so we can understand what these ministers were holding so we can judge from their past actions what kind of decisions that they took,” Ms. Raitt said.

NDP ethics critic Nathan Cullen said the Prime Minister has an obligation to Canadians to reveal the names of the ministers whose assets are indirectly held in a private corporation.

“If they don’t come clean, then every move and all the decisions – not just the Finance Minister – but of Mr. Trudeau’s cabinet, will be suspect. Are they using the same loophole that Mr. Morneau did to be in an indirect but direct conflict of interest?” he said.

The Finance Minister is still under a cloud of controversy because Ms. Dawson has said she has concerns over his sponsorship of Bill C-27, a bill that will benefit major players in the human-resources and pension-management industry including Morneau Shepell.

Mr. Morneau told CBC Radio’s The House last week that he never recused himself from decisions regarding Bill C-27.

“Well, on that aspect because it has general application to the entire country, of course not,” he said.

Mr. Cullen put a motion before Parliament last week that would have closed the loophole that allowed Mr. Morneau to retain close control over a significant stake in his family company.

The motion – defeated by Liberal MPs on Tuesday – called for the immediate closing of “loopholes in the Conflict of Interest Act as recommended by the Conflict of Interest and Ethics Commissioner, in order to prevent a Minister of the Crown from personally benefiting from their position or creating the perception thereof.”

Ms. Dawson has previously asked Ottawa to change the law to eliminate this loophole. She made recommendations during the Harper government’s time in power and the Conservatives failed to make her suggested change.

The Trudeau government has declined to commit to closing this loophole despite pressure from opposition parties.

But Mr. Morneau’s ethical troubles are not over. Ms. Dawson said in a letter to Mr. Cullen that she is looking into whether Mr. Morneau was in a conflict of interest when he sponsored Bill C-27, legislation that opposition parties say could be expected to benefit Morneau Shepell.

Bill C-27 would enable federally regulated businesses to create “target benefit” pension plans that lower the monetary liability for employers by shifting risk to employees. The proposed law would require actuarial valuations every year for these type of plans, which could also mean more work for firms such as Morneau Shepell.

Mr. Cullen said the Prime Minister should order the Finance Minister to withdraw the legislation. The bill was introduced without any press release and no advance notice to unions, pension-plan members or retirees, and no public consultation.

“This bill has got to be dead. If they bring this back to the floor, they are saying not only do they accept conflict of interest but they encourage it,” Mr. Cullen said. “He advocated for this in private life for financial gain by saying Morneau Shepell should do more of these [targeted pensions] and he enters public life and he has the power to introduce the legislation.”