Thursday, October 17, 2002

OTTAWA - Today, one day before the Liberal Party of Canada executive meets to set guidelines for the Liberal leadership race, Democracy Watch filed an open letter with Ethics Counsellor Howard Wilson requesting that he issue a public ruling about whether lobbyists who donated to Cabinet ministers in secret broke ethics rules for lobbyists (Please see letter set out below).

On July 11th under guidelines introduced by Prime Minister Chrétien on June 11th, Cabinet ministers Sheila Copps, John Manley and Allan Rock disclosed donations they had received to their Liberal party leadership campaign funds. At the time, the Ethics Counsellor stated publicly that he had required each of the ministers to return some donations because the source and size of the donation created a conflict for the minister. Wilson stated that each minister had been required to return less than $50,000 total.

However, the Ethics Counsellor did not make public the identities of the donors. Industry Minister Allan Rock disclosed that he had returned a $25,000 donation from BCE Inc., which is registered to lobby Industry Canada. Democracy Watch suspects that all of the donations come from lobbyists which lobby each minister. As a result, Democracy Watch believes that the lobbyists involved violated the Lobbyists' Code of Conduct. The Ethics Counsellor, in his legal position as enforcer of the Lobbyists' Code, is required by the Lobbyists Registration Act to issue a public ruling about his investigations of the activities of lobbyists.

"By not disclosing the size of donations and identities of the donors to the Cabinet ministers party leadership campaign funds, and not ruling on whether the the donors and the ministers broke ethics rules, the Ethics Counsellor is continuing his well-practised habit of failing to uphold his legal duties," said Duff Conacher, Coordinator of Democracy Watch.

"Amazingly, while requiring Cabinet ministers to return some donations because the donations put Cabinet ministers in a conflict of interest, the Ethics Counsellor at the same time failed to find that anyone broke any conflict of interest rules," said Conacher.

Democracy Watch is filing the complaint with federal Ethics Counsellor Howard Wilson despite the fact that it believes that Wilson is biased in his legal position as enforcer of the Lobbyists' Code of Conduct because Wilson also holds the separate legal position of compliance officer for the Public Office Holders Code (a position completely controlled by the Prime Minister). Democracy Watch filed an application in Federal Court last December challenging a past ruling of the Ethics Counsellor and the legality of Wilson holding both positions. The case is proceeding through the Federal Court.

Rule 8 of the Lobbyists' Code of Conduct states that: "Lobbyists shall not place public office holders in a conflict of interest by proposing or undertaking any action that would constitute an improper influence on a public office holder". Among other rules, part I, sub-section 3(1) of the Conflict of Interest and Post-Employment Code for Public Office Holders (the Public Office Holders Code) states that public office holders "shall arrange their private affairs in a manner that will prevent real, potential or apparent conflicts of interest from arising . . ."

As a result of these rules, Democracy Watch believes that federal ministers cannot accept donations from anyone who lobbies the federal government (especially donations from lobbyists who lobby their departments), nor can federally registered lobbyists make such donations.

"These secret donations from lobbyists reveal the need for a law covering for party leadership races," said Aaron Freeman, Board member of Democracy Watch. "This law must cover all parties, and be independently and effectively enforced, with high penalties for violations."

At its meeting in Montreal this weekend, the Liberal Party executive may finally establish democratic and ethical rules for its party leadership race, but no one should believe that these rules will be enforced. Democracy Watch called on Prime Minister Chrétien to follow up on his June promise by introducing and ensuring the passage of a leadership race law including the following measures:

• full disclosure of all donations above $100, and the identities of donors, every 3 months and before a party votes for a leader (similar to the U.S.);
• a ban on donations from corporations, unions and other organizations;
• a limit of $1,000 on donations from individuals; and
• enforcement by Elections Canada.

PLEASE NOTE: Democracy Watch is filing these complaints without prejudice to the application it filed on December 3, 2001 in the Federal Court of Canada challenging, among other things the Ethics Counsellor's lack of independence that, Democracy Watch believes, means that the Ethics Counsellor cannot fairly or impartially uphold the Lobbyists' Code of Conduct.

PLEASE ALSO NOTE: Democracy Watch filed a complaint on April 13, 2000 with the Ethics Counsellor under the Lobbyists Code of Conduct about a lobbyist, Barry Campbell, organizing a fundraiser for a minister Campbell was registered to lobby, Secretary of State Jim Peterson. The Ethics Counsellor has neglected to rule on this complaint despite Democracy Watch's repeated requests for a ruling and the passing of over two years. Democracy Watch also has 6 other outstanding complaints filed with the Ethics Counsellor, 3 of which were filed more than 2 years ago, 2 of which were filed more than 1 year ago, and 1 which was filed 4 months ago. For more information about these complaints, please review the news releases from March 2000 to July 2002 on Democracy Watch's Government Ethics Campaign webpage.

Howard Wilson
Ethics Counsellor
66 Slater St., 22nd Floor
Ottawa, Canada
K1A 0C9
Fax: (613) 995-7308

October 17, 2002

Dear Mr. Wilson:

Democracy Watch is filing this letter to request that you, in your legal position as enforcer of the federal Lobbyists' Code of Conduct (the Lobbyists' Code), investigate situations that Democracy Watch believes raise serious questions concerning violations of the federal Lobbyists' Code.

Democracy Watch believes that you personally are biased in fulfilling the role of enforcing the Lobbyists' Code because you also hold the separate legal position of compliance officer for the Conflict of Interest and Post-Employment Code for Public Office Holders (the Public Office Holders Code), a position completely controlled by the Prime Minister. As a result of the Prime Minister's control of you in this position, Democracy Watch believes that you personally cannot fairly and impartially uphold the Lobbyists' Code. As you know, Democracy Watch has filed an application in Federal Court challenging, among other things, the legality of you holding both these positions.

However, Democracy Watch is still filing this letter without prejudice to that court application because it believes that, if you are replaced by another person in the legal position of enforcer of the Lobbyists' Code, the position has sufficient independence and powers to fairly and impartially uphold the Lobbyists' Code as set out in sections 10.1 to 10.5 of the federal Lobbyists Registration Act, CHAPTER L-12.4 (R.S., 1985, c. 44 (4th Supp.)) (the Act).

As you know, the Lobbyists' Code covers all lobbyists required to register under the Act. In June and early July 2002 you, in one or both of your two legal positions described above (you did not make it clear at the time), required Cabinet ministers Sheila Copps, John Manley, and Allan Rock to return donations they had received to their leadership campaign funds. You refused to disclose the sources and amounts of the donations, but according to media reports you claimed that the total returned by each minister was less than $50,000.

According to the Ottawa Citizen, you stated on July 11th (the date the ministers disclosed donations they had received) that your reason for requiring each minister to return some of the donations was as follows: "I was concerned that the minister was going to have to stand back on files that were just so important to their ministerial responsibilities that it would represent a serious impairment of the minister's abilities to carry out his or her responsibilities." You also made it clear that the donations were from sources which lobby the ministers, and that therefore the donations created the conflict that would require a minister "to have to stand back on files". The one returned donation which was made public, a $25,000 donation from BCE Inc. to Industry Minister Allan Rock, clearly fits within the standard you articulated, as BCE Inc. is registered to lobby Industry Canada.

Principles set out in the Lobbyists' Code require that all lobbyists follow "not only the letter but the spirit" of the Lobbyists' Code and all relevant laws, including the registration requirements of the Lobbyists Registration Act, and that lobbyists conduct all their relations with " integrity and honesty" and "observe the highest professional and ethical standards."

In addition, Rule 8 of the Lobbyists' Code states the following: "8. Improper influence Lobbyists shall not place public office holders in a conflict of interest by proposing or undertaking any action that would constitute an improper influence on a public office holder."

The Act defines public office holders as including all members of the House of Commons and the Senate (subsection 2(1)).

The Public Office Holders' Code requires ministers and others covered by the Code to adhere to the following rules (NOTE: "Every public office holder" (including, Democracy Watch believes, all members of the House of Commons and the Senate) is required to conform with the principles set out under Part I, section 3 of the Code, while only specific public office holders (defined in section 4 of the Code) are required to adhere to the other rules contained in the Code):

• under Part I, sub-section 3(1), "to uphold the highest ethical standards so that public confidence and trust in the integrity, objectivity and impartiality of government are conserved and maintained."
• under Part I, sub-section 3(2), "to perform their official duties ... in a manner that will bear the closest public scrutiny, an obligation that is not fully discharged by simply acting within the law."
• under Part I, sub-section 3(5), "to arrange their private affairs in a manner that will prevent real, potential or apparent conflicts of interest from arising but if such a conflict does arise between the private interests of a public office holder and the office duties and responsibilities of that public office holder, the conflict shall be resolved in favour of the public interest."
• under Part II, subsection 23(1), to "take care to avoid being placed or the appearance of being placed under an obligation to any person or organization, or the representative of a person or organization, that might profit from special consideration on the part of the office holder."

Democracy Watch believes that a reasonable interpretation and application of these rules in the Lobbyists' Code and the Public Office Holders Code, along with a reasonable interpretation of the common law standard for finding that a public office holder is in a "conflict of interest", would result in the conclusion that any lobbyist who makes a donation in secret to any minister, especially a minister the lobbyist lobbies, would be violating Rule 8 of the Lobbyists' Code.

By requiring ministers to return some donations, you clearly indicated that you agreed with this interpretation of federal ethics rules for public office holders and lobbyists.

As a result, Democracy Watch believes that you have failed to uphold your legal duty to report to Parliament the findings of your investigations into the donations to the Cabinet ministers, and in that report to make public the identities of the lobbyists who, by making these donations, violated Rule 8 of the Lobbyists' Code.

In your legal position as Ethics Counsellor enforcing the Lobbyists' Code, you are required under the Lobbyists Registration Act to investigate if you have a reasonable belief that a violation of the Lobbyists' Code has occurred. You have the full powers of a judge in your investigation (including the power to subpoena witnesses and compel evidence), and you are required to report your ruling to Parliament (via the Registrar General of Canada).

You may claim that you required the ministers to return the donations in your legal position as compliance officer of the Public Office Holders' Code. If this is your claim, Democracy Watch requests that you make it clear in a written statement that you were acting in this legal position. If you claim that you were acting in this legal position, Democracy Watch requests that you now, in your legal position as enforcer of the Lobbyists' Code, use your full powers under the Lobbyists Registration Act to investigate the donations made to ministers, to determine if any of lobbyists who made donations have violated Rule 8 of the Lobbyists' Code, and to report your rulings on these lobbyists publicly to Parliament, as you are legally required to do.

In addition, Democracy Watch requests that you review and publicly rule, as you are required to do in your legal position as enforcer of the Lobbyists' Code, on whether the some of the donations from lobbyists you allowed the Cabinet ministers to keep are also a violation by the lobbyist of Rule 8 of the Lobbyists' Code. For example, Canderel Corp. donated $5,000 to Allan Rock and employs a consultant lobbyist, Jacques Bouchard, who has been registered to lobby Industry Canada since May 24, 2000. Torys LLP donated $25,000 to John Manley and one of Torys LLP partners, James Welkoff, has been registered to lobby the Department of Finance on behalf of Manulife Financial Corporation since March 4, 2002. Sheila Copps received donations of $2,478 from Telus, $2,000 from Global Public Affairs, $1,000 from Isabel Metcalfe, and $1,000 from the Strategies Group, and all of these entities either lobby Canadian Heritage or employ people registered to lobby the department.

According to media reports, you stated on July 11th that "One has to balance this, and these sums were so very modest that I didn't think a credible case could be made for asking the minister to withdraw from those files or return those small contributions." Democracy Watch disagrees with the "balance" you claim to have established, and believes that you have failed to uphold your legal duties because you have not issued a clear ruling, from either of your two legal positions, as to how ethics rules apply to donations of such amounts from lobbyists or entities directly connected to a lobbyist. As a result, Democracy Watch requests a clear, public ruling under the Lobbyists' Code.

We look forward to your resolving this matter by upholding your legal duties under the Lobbyists Registration Act, and await your reply.

Sincerely,
Duff Conacher, Coordinator
On behalf of the Board of Directors of Democracy Watch