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DEMOCRACY WATCH LAUNCHES FIRST EVER COURT CHALLENGE OF ETHICS COUNSELLOR POSITION, AND RULING IN PRIME MINSTER-BCE INC. CONFLICT OF INTEREST SITUATION

Monday, December 3, 2001

OTTAWA - Today, Democracy Watch held a news conference to launch its court challenge of the federal Ethics Counsellor's position and ruling under the Lobbyists' Code of Conduct (the Lobbyists' Code) that Bell Canada Enterprises Inc. (BCE Inc.) did not put Prime Minister Jean Chrétien in a conflict of interest when it gave him the gift of an invitation to participate in the Bell Canadian Open Pro-Am tournament with top professional golfer Tiger Woods (Please see Backgrounder set out below).

Democracy Watch is filing its challenge in Federal Court today. Martin Doane and Marcus Knapp of the Toronto law firm of Paliare Roland Rosenberg Rothstein LLP are representing Democracy Watch in the case. The Ethics Counsellor's ruling was issued on November 6th, in response to the request for an investigation filed by Democracy Watch on September 6th.

The Ethics Counsellor, Howard Wilson, holds two legally separate positions, both called "Ethics Counsellor". Under the Lobbyists Registration Act, the Ethics Counsellor is required to investigate where he believes there are reasonable grounds that a violation of the Lobbyists' Code has occurred. He has the full powers of a judge in his investigation, and is required to report his ruling to Parliament. However, under Conflict of Interest and Post-Employment Code for Public Office Holders (the Public Office Holders Code) the Ethics Counsellor's investigations of ministers and senior public officials can be in secret and are fully controlled by the Prime Minister. As a result, Democracy Watch's legal challenge questions whether Wilson can fairly and impartially uphold the Lobbyists' Code.

In its June 2001 report on the federal lobbying law, the House of Commons Industry Committee agreed with Democracy Watch and recommended that Wilson be replaced in his role as enforcer of the Lobbyists' Code by a new office that would report only to Parliament. On November 9th, Industry Minister Brian Tobin rejected the Industry Committee's recommendation.

"We believe the Ethics Counsellor is himself in a conflict of interest when reviewing conflict of interest situations involving lobbyists and politicians, and we expect the court will agree," said Duff Conacher, Coordinator of Democracy Watch.

The golf game gift had a value of at least $13,000 (the cost of participating in the tournament), but likely has a far greater market value because of BCE Inc. guaranteeing that the Prime Minister would play with Woods, and the valuable media coverage the event received.

Principles set out in the Lobbyists' Code require, among other things, that all lobbyists to conduct all their relations with "integrity and honesty", and Rule 8 of the Code prohibits lobbyists from undertaking any action that would put a public office holder in a conflict of interest. The Public Office Holders Code only allows such a gift if it arises in connection with the official responsibilities of the public office holder, and is normal courtesy, protocol or hospitality, and would not bring suspicion on the office holder's objectivity and impartiality, and would not compromise the integrity of the Government. Other general provisions of the Public Office Holders Code further limit the acceptance of such a gift.

BCE Inc. and its subsidiary Bell Canada alone currently have 16 lobbyists registered to lobby the federal government, 11 of whom are lobbying the federal Cabinet's Privy Council Office (PCO) among other departments or agencies.

"Whenever a corporation that is regulated by and actively lobbies the federal Cabinet gives a gift worth a lot of money to the Prime Minister, we believe the issue of a serious conflict of interest arises" said Conacher.

On August 29, 2001, in his role as Ethics Counsellor under the Public Office Holders Code, Wilson released a memo setting out his interpretation of the application of the rules in that Code concerning such invitations. However, in his memo Wilson did not even mention many of the relevant provisions in the Code, and did not mention the Lobbyists' Code at all.

On November 6, 2001, in his role as Ethics Counsellor under the Lobbyists' Code, Wilson issued his ruling, citing the judgment he had already made on August 29th, and again ignoring relevant rules in the Lobbyists' Code and the Public Office Holders Code.

A win in the courts would force the federal government to replace Howard Wilson with another person in the role of enforcer of either Public Office Holders Code or the Lobbyists' Code, to eliminate the conflict caused by one person holding both positions. A win in the courts would also mean that BCE Inc. and the Prime Minister would be found to have violated federal ethics rules, and would set out standards for investigations under, and interpretations of, the ethics rules.

Democracy Watch has four other outstanding requests for investigations filed with the Ethics Counsellor concerning situations involving both a lobbyist possibly in violation of the Lobbyists' Code and a Minister or senior public officials possibly in violation of the Public Office Holders Code. The first of the four requests was filed in April 2000. To date, the Ethics Counsellor has not issued a ruling in any of those investigations.

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FOR MORE INFORMATION, CONTACT:
Duff Conacher, Coordinator
Tel: (613) 241-5179
dwatch@web.net
Democracy Watch's Government Ethics Campaign


Backgrounder
Court Challenge of Ethics Counsellor Position and
Ruling on Prime Minister-BCE Inc. Conflict of Interest

(December 3, 2001)

I. Summary
Between April 2000 and April 2001, Democracy Watch filed 6 complaints with the federal Ethics Counsellor concerning alleged violations of federal ethics rules by lobbyists in relation to politicians (See summary of the 6 complaints in section V below).

On September 6, 2001, Democracy Watch filed its 7th complaint with the Ethics Counsellor, in this case concerning the gift from BCE Inc. to the Prime Minister of a golf game with top professional golfer Tiger Woods on September 5th. On November 6, 2001, the Ethics Counsellor issued a ruling on the complaint.

Democracy Watch is launching a court challenge of the Ethics Counsellor position and November 6, 2001 ruling that no conflict of interest was created in the golf game gift situation.

Democracy Watch has filed an application in the Federal Court of Canada requesting first that the court judicially review the Ethics Counsellor's position. Democracy Watch claims that the two, legally separate Ethics Counsellor positions, one of interpreting the ethics code for politicians (the Prime Minister controls him in this position), and the other of interpreting and enforcing the ethics code for lobbyists, put the Ethics Counsellor in a conflict of interest and mean that the Ethics Counsellor cannot fairly and impartially rule on alleged conflicts of interest involving lobbyists and politicians. Democracy Watch is therefore asking the court to rule that one of the roles of the Ethics Counsellor must be given to another person.

In its June 2001 report on the federal lobbying law, the House of Commons Industry Committee recommended (for similar reasons) that the Ethics Counsellor be replaced in his role as enforcer of the ethics code for lobbyists by a new, completely separate office. In his November 9, 2001 response to the Industry Committee report, Industry Minister Brian Tobin stated that the government did not agree with the Committee's recommendation, claiming that the system has "worked well."

Secondly, Democracy Watch is requesting that the court judicially review the Ethics Counsellor's November 6th ruling in the golf game gift situation. Democracy Watch believes that the Ethics Counsellor made several errors of law in the ruling. Democracy Watch is therefore asking the court to overturn the Ethics Counsellor's ruling and find that BCE Inc. and the Prime Minister both broke federal ethics rules in the golf game gift situation.

II. The Facts of the Golf Game Gift Situation
In August 2001, Bell Canada Enterprises Inc. (BCE Inc.), through its Chairman and Chief Executive Officer Jean Monty, gave a gift to Prime Minister Jean Chrétien of an invitation to participate in the Bell Canadian Open Pro-Am tournament with top professional golfer Tiger Woods. The golf game took place on September 5, 2001. It was the first time a prime minister played in the tournament.

The gift has a value of at least $13,000 plus taxes (the fee all other amateurs reportedly paid to participate in the tournament), but likely has a far greater market value because BCE Inc. reserved a position for the Prime Minister to play with Woods (no other amateur paying the tournament entrance fee had any chance of playing with Woods). In addition, the Prime Minister received valuable media coverage of his game with Tiger Woods, coverage that linked the game to BCE's invitation. Canadian charity auctions of golf games with professional golfers have received bids of up to $40,000 for the privilege.

In media reports, the Prime Minister said about his game with Woods that "it was a privilege to play with him" (The Globe and Mail, Thursday, September 6, 2001, p. A2) and "It was a great personal experience" (The Ottawa Sun, Thursday, September 6, 2001, p. 3) and "In this case, I have no doubt he is much better than I and I'll have the privilege to watch him and chat with him and play with him. And that's great." (GolfWeb on the Internet, Wednesday, September 5, 2001 (http://www.golfweb.com).

BCE Inc. and its subsidiaries are extensively regulated by the federal government.

At the time of the game, BCE Inc. and one of its subsidiaries, Bell Canada, together had 16 lobbyists registered under the federal Lobbyists Registration Act to lobby the federal government, 11 of whom were lobbying the federal Cabinet's Privy Council Office (PCO) among other departments or agencies.

III. The Ethics Counsellor's Actions on the Golf Game Gift
On August 29, 2001, the federal Ethics Counsellor, Howard Wilson made public his interpretation of the application of the Conflict of Interest and Post-Employment Code for Public Office Holders (the Public Office Holders Code) to the golf game.

On November 6, 2001, the Ethics Counsellor issued his ruling on the golf game gift under the Lobbyists Code of Conduct (the Lobbyists' Code) in response to a request for an investigation and ruling filed by Democracy Watch on September 6, 2001.

1. Interpretation of the Application the Public Office Holders Code
On August 29, 2001, the Ethics Counsellor posted on his office website his interpretation of the application of the Public Office Holders Code to the golf game gift (at: (http://strategis.ic.gc.ca/SSG/oe01187e.html).

The Ethics Counsellor first acknowledged that under section 20 of the Public Office Holders Code, "Gifts, hospitality or other benefits . . . that could influence public office holders in their judgment and performance of official duties and responsibilities shall be declined."

However, the Ethics Counsellor then claimed that under subsection 21(2) of the Code, gifts:

The Ethics Counsellor then cited the 1996 opinion issued by the Ontario Integrity Commissioner under the Ontario Members' Integrity Act concerning Bell Canada's gift that year to Ontario's Deputy Premier of an invitation to participate, and payment of the $3,300 participation fee, for the Canadian Open Pro-Am tournament of which Bell Canada was the principal sponsor.

The Ontario Integrity Commissioner was of the opinion that the gift did not violate the rules in the Members' Integrity Act because the Deputy Premier participated in the event as the "official representative of the citizens of Ontario" and clause 6(2)(b) of the Act permits gift or personal benefit that are "received as an incident of the protocol, customs or social obligations that normally accompany the responsibilities of office."

Based on this reasoning, the Ethics Counsellor's viewed the Prime Minister accepting BCE Inc.'s gift and playing the golf game with Tiger Woods as "falling within [his] official duties as a representative of the Government of Canada and, therefore, acceptable under the [federal Public Office Holders] Code."

The Ethics Counsellor did not mention the federal Lobbyists' Code in his August 29th opinion concerning the applicability of the Public Office Holders Code to the golf game gift.

2. Ruling under the Lobbyists' Code of Conduct
On November 6, 2001, the Ethics Counsellor issued his ruling under the Lobbyists' Code in response to a request for an investigation and ruling filed by Democracy Watch on September 6, 2001.

In his ruling, the Ethics Counsellor mentioned his August 29, 2001 interpretation of the applicability of Public Office Holders Code.

He then noted that Democracy Watch had filed its complaint based on Rule 8 of the Lobbyists' Code, which states:

The Ethics Counsellor ignored the fact that Democracy Watch had also filed its complaint based on one of the principles in the Lobbyists' Code which requires lobbyists to "conduct with integrity and honesty all relations with public office holders . . ."

The Ethics Counsellor then ruled as follows:

IV. Issues of the Court Challenge

1. The Ethics Counsellor Holds Two, Legally Separate Positions (both called "Ethics Counsellor") that are in Conflict and Create Bias

A. Position 1: Administrator and Compliance Advisor under the Public Office Holders Code
In June 16, 1994, the Conflict of Interest and Post-Employment Code for Public Office Holders (the Public Office Holders Code - which covers Ministers, ministerial staff, and other senior government employees and does not have the force of a statute) was re-introduced with amendments by Prime Minister Jean Chrétien.

One of the amendments to the Public Office Holders Code was subsection 5(1) which created a new position called "Ethics Counsellor". Howard Wilson was appointed by the Prime Minister as the first Ethics Counsellor.

In this Ethics Counsellor position, the mandate is to administer and apply the compliance measures of the Code.

The Ethics Counsellor reports in private to the Prime Minister and Cabinet in this role, and the Prime Minister has final decision-making power concerning violations of the Public Office Holders Code (under section 24 the Code) if a public office holder disagrees with Wilson's determination. The Prime Minister also has sole power to determine the penalty for violating the Code (under section 25 of the Code).

B. Position 2: Investigator and Decision-maker under the Lobbyists' Code
Following changes to the federal Lobbyists Registration Act in 1995, Howard Wilson was appointed to a position also called "Ethics Counsellor" through Order in Council (P.C. 1996-266, February 26, 1996). The position was created by the new section 10.1 of the Act.

In this Ethics Counsellor position, Wilson was first mandated (under section 10.2 of the Act) to draft, consult with stakeholders, and then finalize a Lobbyists' Code of Conduct (the Lobbyists' Code), which was completed in March 1997. The Lobbyists' Code is not a statutory instrument, but all lobbyists registered under the Act are required to comply with the Code.

Under section 10.4 of the Act, the Ethics Counsellor is empowered to be the investigator and inquiry holder for alleged violations of the Lobbyists' Code, and has the full powers of a court to conduct investigations. The Ethics Counsellor is required under section 10.5 of the Act to report the findings, conclusions and reasons for his conclusions of his investigations to the Registrar General of Canada, who then tables the report in Parliament.

C. The Conflict Between the Two Positions Creates Structural Bias
In order to find, in his position as Ethics Counsellor for lobbyists, that BCE Inc. broke Rule 8 of the Lobbyists' Code and put the Prime Minister in a conflict of interest when it gave the Prime Minister the gift of the golf game, the Ethics Counsellor must find that the Prime Minister is in a conflict of interest.

However, the Ethics Counsellor, in his position as Ethics Counsellor for public office holders, is effectively controlled by the Prime Minister when making the determination about whether the Prime Minister is in a conflict of interest.

As a result, Democracy Watch believes that the structure of the Ethics Counsellor's two positions mean that he lacks independence and is therefore biased and cannot rule fairly and impartially on conflict of interest situations involving lobbyists and public office holders.

Democracy Watch believes that decision-makers such as the Ethics Counsellor in his position under the Lobbyists Registration Act are required by law to be independent and free of bias.

D. The Ethics Counsellor Prejudged, and Therefore Biased, His Ruling under the Lobbyists Code
On August 29, 2001, the Ethics Counsellor posted on his office website his interpretation of the application of the Public Office Holders Code to the golf game gift.

In his November 6, 2001 ruling on the golf game gift in his position as Ethics Counsellor under the Lobbyists Registration Act, the Ethics Counsellor cited his August 29th interpretation as the main reason for his conclusion that BCE Inc. had not violated Rule 8 of the Lobbyists' Code.

Democracy Watch believes that decision-makers such as the Ethics Counsellor in his position under the Lobbyists Registration Act are required by law not to prejudge their rulings in any way because such prejudgment creates bias. Democracy Watch believes that the Ethics Counsellor violated this legal principle by relying on his August 29th interpretation in his November 6th ruling.

2. Errors of Law

A. The Ethics Counsellor Ignored Existing Ethics Rules
Concerning the golf game gift, the Ethics Counsellor claimed that "The critical condition here is that the gift or benefit must be connected to the official responsibilities of the public office holder."

In fact, the critical conditions in the Public Office Holders Code for accepting such gifts are far more numerous, but the Ethics Counsellor did not even mention, let alone interpret and apply, the other conditions in the Code.

All of the other conditions limit the acceptance of gifts even if the gift arises in connection with the official responsibilities of the public office holder. These conditions are set out in the Codeand only allow such gifts if they:

In addition, acceptance of such gifts is limited by many other general provisions of the Public Office Holders Code. Again, the Ethics Counsellor did not even mention, let alone interpret or apply, these provisions. The other general provisions in the Code which Democracy Watch believes apply to the golf game gift require public office holders to meet the following conditions:

Also, the Ethics Counsellor ignored one of the principles of the Lobbyists' Code cited by Democracy Watch in its September 6th letter, namely the principle that requires lobbyists to "conduct with integrity and honesty all relations with public office holders . . ." The Ethics Counsellor also ignored the principle set out in the Code that states:

In addition, the Ethics Counsellor ignored many past Canadian court rulings which have interpreted the meaning of the words "conflict of interest" and, in doing so, have established ethics rules that apply to the golf game gift situation.

Democracy Watch believes that decision-makers such as the Ethics Counsellor in his position under the Lobbyists Registration Act are required by law to acknowledge and apply all relevant rules when making rulings. Democracy Watch therefore believes that the Ethics Counsellor made an error of law when he ignored existing ethics rules in his November 6th ruling.

B. The Ethics Counsellor Incorrectly Interpreted Existing Ethics Rules
Even if the Ethics Counsellor was correct in ignoring many existing ethics rules in his ruling, Democracy Watch believes that the golf game gift violated one of the rules the Ethics Counsellor did cite in his ruling, namely the rule under section 20 of the Public Office Holders Code which states that: "Gifts, hospitality or other benefits . . . that could influence public office holders in their judgment and performance of official duties and responsibilities shall be declined." Democracy Watch believes that the golf game gift could influence the Prime Minister's judgment and performance of official duties and responsibilities. Therefore, Democracy Watch believes that the Ethics Counsellor incorrectly interpreted this ethics rule.

In addition, Democracy Watch believes that the reliance by the Ethics Counsellor on the 1996 ruling by the Ontario Integrity Commissioner on a similar golf game gift situation was an error of law because the Commissioner was interpreting a completely different set of rules that contain a completely different, and much more restricted, list of conditions under which such a gift may be accepted. As a result, Democracy Watch believes that the Commissioner's 1996 ruling did not set any relevant precedent for the Ethics Counsellor's November 6, 2001 ruling (as an aside, Democracy Watch also believes that the Ontario Integrity Commissioner incorrectly interpreted the Ontario rules in his 1996 ruling).

Finally, Democracy Watch believes that the other existing ethics rules ignored by the Ethics Counsellor in his ruling make it even more clear that BCE Inc., in giving the Prime Minister the gift of the golf game, undertook an action that constitutes an improper influence on the Prime Minister and placed the Prime Minister in a conflict of interest, thereby violating Rule 8 of the Lobbyists' Code.

C. The Ethics Counsellor Interpreted Existing Ethics Rules Inconsistently
In contrast to his ruling on the Prime Minister-BCE golf game situation, the federal Ethics Counsellor was of the opinion that Cabinet ministers taking part in a pro-am at the women's du Maurier Classic in summer 2000 did not comply with the Public Office Holders Code.

Although this opinion has never been made public, according to a media report the Ethics Counsellor commented on his summer 2000 ruling stating that "It [taking part in the pro-am] could not have been claimed to have been related to their official functions. In my view it didn't fall within the language of the code" (Globe and Mail, Thursday, August 25, 2001, p. A4).

Democracy Watch believes that decision-makers such as the Ethics Counsellor in his position under the Lobbyists Registration Act are required by law to interpret rules consistently. Democracy Watch therefore believes that the Ethics Counsellor made an error of law when he interpreted ethics rules differently for the Prime Minister than for other Cabinet ministers.

3. Violation of section 2(e) of federal Bill of Rights
Section 2(e) of the federal Bill of Rights restricts federal laws from infringing the right to a fair hearing in accordance with the principles of fundamental justice.

The appointment by the Governor-in-Council (the federal Cabinet) under section 10.1 of the Lobbyists Registration Act as Ethics Counsellor of the same individual who was appointed Ethics Counsellor under the Public Office Holders Code deprives complainants under the Act of a fair hearing in accordance with the principles of fundamental justice: the Ethics Counsellor in those two roles is subject to a disabling conflict of interest and lack of independence which raises an appearance of bias.

Democracy Watch therefore will request that the court remove the Ethics Counsellor from his position under the Act and order the Governor-in-Council to appoint a different person as the Ethics Counsellor under the Act.

V. Other Complaints Filed by Democracy Watch
In addition to the complaint concerning the golf game gift, Democracy Watch has filed 6 other complaints concerning lobbyists placing public office holders in a conflict of interest with the Ethics Counsellor in his position under the Lobbyists Registration Act.

Although the complaints date back to April 13, 2000, the Ethics Counsellor has only issued rulings in 2 of the 6 complaints (as noted below, rulings have been issued for complaints #4 and #6 below).

The complaints are summarized below (please note, Democracy Watch has also filed 2 other ethics complaints not summarized below, one dating back to March 20, 2000, and is still awaiting rulings from the Ethics Counsellor concerning those complaints):

  1. A letter dated April 13, 2000 called for an investigation into whether lobbyist and former Liberal MP Barry Campbell violated the Lobbyists' Code of Conduct, and whether junior finance minister Jim Peterson violated the Public Office Holders Code, when Campbell organized a fundraising event in September 1999 that raised about $70,000 for Peterson (at the time, Campbell represented 10 corporations that were lobbying the Department of Finance); the letter also called for an investigation of whether other similar events have occurred for other ministers.
  2. A letter dated September 25, 2000 called for an investigation into whether then-Industry Minister John Manley and senior public office holders at Industry Canada violated ethics rules by having Industry Canada join and participate in BIOTECanada, the registered lobbying association for biotechnology companies, and whether BIOTECanada violated the Lobbyists' Code by allowing the participation.
  3. A letter dated November 9, 2000 called for an investigation into the Liberals' Transitional Jobs Fund (TJF) grant approval process in Quebec, which involved ministers, Liberal party officials and party members and raises serious questions about whether the ministers and others involved have broken the Public Office Holders Code and the Lobbyists' Code.
  4. A letter dated December 5, 2000 calling for an investigation into a September 2000 meeting between Kevin Lynch, Deputy Minister of Finance and other Department of Finance officials and Peter Dey, Chairman of Morgan Stanley Canada Ltd. and other representatives of Morgan Stanley Canada. According to newspaper reports, a summary memo of the meeting prepared by Dey and distributed to the Morgan Stanley's clients, including Canada's big banks, reported among other things that Lynch had stated at the meeting that the government was willing to "work with the banks" to ensure proposed bank mergers are approved. (NOTE: In January 2001, the Ethics Counsellor ruled that neither Lynch nor Dey had violated ethics or lobbying rules).
  5. A letter dated March 27, 2001 called for an investigation into René Fugère, who was investigated last year by the RCMP for failing to register as a lobbyist. The RCMP dropped the investigation even though clear evidence exists that Fugère was paid by various clients to communicate with public office holders in an attempt to influence the awarding of federal grants, conditions under which the lobbying law clearly requires a person to register as a lobbyist. Given that Fugère is an unpaid aide to Prime Minister Jean Chrétien, and that the Prime Minister's office was involved in at least one of the same grant decisions, Democracy Watch also believes that Fugère's lobbying activities put the Prime Minister in a conflict of interest.
  6. A letter dated March 27, 2001 called for an investigation into Matthew Johnston who, while serving as Executive Assistant to Canadian Alliance MP Rajim Jaffer, also served as Executive Director of the lobby group, the Canadian Property Rights Research Institute (CanPRRI). Among other lobbying activities, Johnston signed two letters on behalf of CanPRRI to federal officials concerning two different laws. It seemed clear that Johnston was required to register as a lobbyist, but he did not. Also, given his position in Jaffer's office, and the fact that Jaffer publicly endorsed CanPRRI's positions on two issues, Democracy Watch believes that Johnston's activities put Jaffer in a conflict of interest. (NOTE: In August 2001, Wilson ruled that Johnston activities did not cross the threshhold requiring registration as a lobbyist, and therefore the Lobbyists' Code did not apply to his activities).