Democracy Watch files court case challenging Ethics Commissioner’s ruling that Morneau didn't need to sell his family company shares

OTTAWA - Today, Democracy Watch released details about the lawsuit it filed last Thursday in the Federal Court of Appeal challenging the Ethics Commissioner's decision that Finance Minister Bill Morneau did not need to sell the shares he owned in his family’s company, Morneau Shepell Inc.

“As she has many times in the past, Ethics Commissioner Mary Dawson once again allowed a Cabinet minister to violate the federal ethics law, and so as it has many times in the past, Democracy Watch is once again challenging the Ethics Commissioner in court,” said Duff Conacher, Co-founder of Democracy Watch. “All of these court cases would be unnecessary if the Ethics Commissioner would just do her job and enforce federal ethics rules properly and effectively.”

Subsection 27(1) of the Conflict of Interest Act requires ministers, their staff, Cabinet appointees (including Deputy Ministers) and other senior government officials to either sell investments they control (such as shares in a family company) or place them in a blind trust, and the section 20 definition of "controlled assets" is clearly broad enough to cover the investment scheme that Morneau set up to hide his Morneau Shepell shares.

Instead of requiring Minister Morneau to sell the shares or put them in a blind trust, Ethics Commissioner Dawson allowed him to set up what she calls a conflict of interest “screen” that, she claims, prevents him from taking part in discussions and decisions if he has a conflict of interest. In fact, the Ethics Commissioner’s screens are smokescreens that allow Cabinet ministers and others to take part in almost all discussions and decisions even if they have a financial interest and could profit from the decision.

Similar “screens” allow many other Cabinet ministers, ministerial staff and senior government officials to make decisions that affect their families, friends, and their own financial investments, which is why Democracy Watch has challenged the Ethics Commissioner’s smokescreens in court because they are illegal under the Act.

Democracy Watch has also filed a court case challenging the Ethics Commissioner for being in a conflict of interest because the Trudeau Cabinet's re-appointed her last June to her third six-month interim term -- so she is essentially currently serving at the pleasure of the Trudeau Cabinet.

Democracy Watch will also soon file another lawsuit against Ethics Commissioner Mary Dawson because she has refused to recuse herself from investigating complaints filed by Democracy Watch and the NDP MP Nathan Cullen and Conservative MP Pierre Poilievre. The Ethics Commissioner is biased in making future decisions given that she advised Minister Morneau that selling his shares was not required, and established a conflict of interest “screen” for him that she believes works, and is essentially serving at the pleasure of the Trudeau Cabinet.

Background on the lawsuit filed last Thursday

On November 4, 2015, the day he was appointed as Minister of Finance, Minister Morneau told CBC TV: “I suspect all my assets will go into a blind trust” and “I’ve already communicated with the Ethics Commissioner in that regard.” At the time, his assets included 4.7 percent of the stocks of Morneau Shepell Inc., valued at more than $30 million.

On February 2, 2016, the Commissioner provided a letter to Minister Morneau that claimed that he did “not personally hold any assets that are considered controlled under the Act” but that, given Morneau owned millions of dollars of shares in Morneau Shepell Inc., “the Commissioner is of the opinion that the best measure of compliance would be to establish a conflict of interest screen which would be made public.”

The letter was confidential and neither Minister Morneau nor the Commissioner disclosed what exactly Minister Morneau did with the stocks he owned of Morneau Shepell Inc., and specifically neither disclosed whether the Commissioner had required him to sell the stocks or put them in a blind trust, until October 17, 2017. On that day, the Ethics Commissioner told media in general terms that she had advised Minister Morneau that he “wasn’t required” to set up a blind trust when he was appointed as Minister of Finance.

On October 19, 2017, Minister Morneau disclosed to the media the Commissioner’s February 2, 2016 Decision letter.

Appointment Process and Ethics Rules Must be Strengthened

More than 10,000 Canadians have signed a petition supporting Democracy Watch call for federal parties to work together to change the appointment process for the Ethics Commissioner, and all officers of Parliament and judicial and watchdog positions, to make it actually merit-based and independent from Cabinet, and to prohibit reappointments.

Minister Morneau’s new blind trust for his other holding company assets will, like all blind trusts, be a sham because he will still know that he owns the investments that he puts in the trust, and he is also allowed under subsection 27(4) to choose his trustee, and is allowed under subsection 27(5) to give them instructions concerning the investments in the trust.

"Loopholes in the federal ethics law allow Finance Minister Morneau to continue to make decisions that affect his family's company and his investments, so to actually be ethical he must not take part in any future decisions that affect the company or the investments directly or indirectly,” said Duff Conacher, Co-founder of Democracy Watch. “Minister Morneau's blind trust will be a sham, as all blind trusts are, because he will know what investments he puts in the trust, will choose the trustee, and can give general instructions to the trustee about the investments.”

"Prime Minister Trudeau and all other Cabinet ministers and senior government officials, should be required to sell their investments in any company and buy term deposits or Canadian governments’ bonds until they leave office. If they are not required to do this, they must be required not to take part in decisions that directly or indirectly their investments," said Conacher.

Democracy Watch has called repeatedly since 2007 for these huge loopholes in the Conflict of Interest Actto be closed. “It really should be called the ‘Almost Impossible to be in a Conflict of Interest Act,’” said Conacher.

- 30 -

FOR MORE INFORMATION, CONTACT:

Duff Conacher, Co-founder of Democracy Watch

and Chairperson of the Government Ethics Coalition

Tel: (613) 241-5179

Cell: 416-546-3443

info@democracywatch.ca