Tuesday, December 5, 2000

OTTAWA - In an open letter, Democracy Watch today called on federal Ethics Counsellor Howard Wilson to investigate whether federal lobbying laws and ethics rules were violated by a meeting between Finance Department officials and representatives of Morgan Stanley Canada (Contact Democracy Watch for copy of letter to Wilson). At the same time, Democracy Watch has little confidence that the Ethics Counsellor can conduct an impartial investigation, given that he is controlled by and reports in private to the Prime Minister. As a result, when the new Attorney General of Canada is appointed Democracy Watch will also file a formal petition requesting the appointment of a special prosecutor to investigate the situation.

According to newspaper reports last week, Peter Dey, Chairman of Morgan Stanley Canada Ltd. and other representatives of Morgan Stanley met in September 2000 with Kevin Lynch, Deputy Minister of Finance and Frank Swedlove, General Director, Financial Sector Policy Branch, and other representatives of the Department of Finance. According to the 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.

After the summary memo was distributed, Lynch and Dey exchanged letters in which both denied that such statements were made about the government's approval process for bank mergers took place. Following the newspaper reports, both letters have been released to the media.

Despite the denials, which serve the interests of both Lynch and Dey, concerning statements made at the meeting Democracy Watch believes that the situation raises serious questions as to whether Dey has violated the federal Lobbyists' Code of Conduct, and the Lobbyists Registration Act, by failing to register as a lobbyist. According to an Advisory Opinion issued June 8, 1998 by the Ethics Counsellor, it seems that a chair such as Dey or a member of the Board of Directors of a company is required to register as a lobbyist under the Lobbyists Registration Act if he or she communicates with federal officials in an attempt to influence government decisions.

Former Liberal MP Barry Campbell, Chairman of APCO Canada, is currently registered to lobby the Finance Department on behalf of Morgan Stanley Canada Ltd. concerning the divestiture of the federal government's remaining stake in Petro-Canada. If, at the meeting with the Finance officials, Dey communicated either about bank mergers or the Petro-Canada issue, it seems that he is also required by law to register as a lobbyist.

The meeting also raises serious questions concerning whether Finance Department officials have violated the federal Conflict of Interest and Post-Employment Code for Public Office Holders. The Code requires certain public office holders to "perform their official duties . . . in a manner that will bear the closet public scrutiny" and prohibits them from assisting a private interest in ways that will result in preferential treatment for that private interest.

"This meeting raises serious questions about whether federal ethics and lobbying rules have been broken, said Duff Conacher, Coordinator of Democracy Watch, "and whether the Finance Department is committed to assisting private interests like the banks fulfill their merger dreams, instead of protecting the public from bank merger nightmares."

Democracy Watch believes that only an independent, impartial investigation of the issues discussed and statements made at the meeting will determine whether federal ethics and lobbying rules have been violated. For this reason, it will call for the appointment of a special prosecutor by the new Attorney General of Canada to investigate the situation.

Morgan Stanley Canada Ltd. donated $4, 393 in 1998, and $10,000 in 1997, to the Liberal Party of Canada.