CANADA

A question of friendship

MICHAEL ROSE December 22 1986
CANADA

A question of friendship

MICHAEL ROSE December 22 1986

A question of friendship

CANADA

The document was buried among hundreds of federal government memos and letters tabled as evidence at the inquiry into conflict-of-interest allegations against former industry minister Sinclair Stevens. Labeled page 133 of Exhibit #205, the March, 1986, industry department memo outlined terms for a contract to be let to Chase Manhattan Bank of New York for consulting work on two proposed regional development projects in Cape Breton. Inquiry lawyers were struck by a sentence in the third paragraph. It read, “In this contract Chase will, at the minister’s request, find some work for Mr. Shay of Boston (a friend of the Prime Minister).” Commission lawyers concluded that although the reference raised questions of possible patronage, it did not fall within their mandate and they did not raise it in inquiry hearings. A senior inquiry source told Maclean’s: “We decided to close off that door, given our terms of reference, but its significance for other reasons did not escape our notice.”

Indeed, the memo raises a number of serious issues.

Among them: the involvement, if any, of Stevens or Prime Minister Brian Mulroney in the apparent attempt to find work for “Mr. Shay”; and the propriety of government officials making an explicit connection between a person’s relationship with the Prime Minister and his eligibility for government contracts.

For administrative and political reasons, the Cape Breton projects—one to modernize the ailing Sysco steel plant in Sydney, N.S., another to sell electricity generated by coal-fired plants to the northeastern United States—stalled last spring. The federal and Nova Scotia governments were unable to agree on the terms of the proposed projects, and no consulting contracts were awarded. But according to Liberal justice critic Robert Kaplan, the memo indicates that civil servants were working in an atmosphere in

which they felt they had to direct work to friends of the Prime Minister. “Reputable foreigners like the Chase Manhattan must think of Canada today the way they thought of doing business with the Marcos government,” said

Kaplan. “If you want government work, you have to take care of cronies.”

Because of an error in drafting the memo, Mulroney’s friend was misidentified as “Shay.” In fact, he is Robert E. Shea, a Boston-based entrepreneur and financial consultant who has been a friend of Mulroney’s for 30 years. Shea and his wife, Gertrude, were members

of the select group of Mulroney associates invited to a black-tie dinner at the White House during the summit meeting between the Prime Minister and President Ronald Reagan last March.

As well, Shea studied with Mulroney at St. Francis Xavier University in Antigonish, N.S., in 1955-1956, and worked closely with Mulroney on a major fundraising drive for the university that began in 1979. Shea, a 53year-old native of Watertown, Mass., sits on the board of Government Consultants International, a high-powered Ottawa lobbying firm headed by another Mulroney friend, former Newfoundland Tory premier Frank Moores. And Shea is also a director of Halifax-based National Sea Products Ltd. A company executive said that when Shea attends board meetings, “all he talks about is what a close buddy he is of the Prime Minister, and what his personal relationship with him will mean to National Sea.”

Shea’s holding company, Shea Financial Group, is involved in insurance, electric power, shipping, sea products and other ventures. He was involved in controversy two years ago when the city of Boston paid a company to which Shea was connected more than $330,000 in commissions on insurance policies obtained for city employees. At the same time, a second Shea company was advising the city on insurance matters.

In an interview with Maclean’s, Shea acknowledged that he was “very much interested” in working on the Cape Breton energy project, but he said that he was “confused” by any reference in government documents to his friendship with Mulroney. “I wouldn’t say that would be a consideration,” Shea said. “The consideration is that I have the ability to put the thing together.” To discuss the project, Shea met with Stevens in Montreal, and later met in Ottawa with an industry department official whose name he said he could not recall. And he added that

he could not remember exactly when those meetings took place. Shea also met once with Chase Manhattan officials. Said bank spokesman Fraser Seitel: “It was suggested that a meeting with Shea might be valuable.” But based on that meeting, the bank concluded that it would not be “opportune” to proceed further.

For his part, Stevens, who resigned as industry minister last May 12 to defend himself against conflict-of-interest allegations, referred all questions to John Sopinka, his lawyer, who refused to discuss the memo. But in an April 29, 1986, letter to Nova Scotia Premier John Buchanan regarding the thermal energy proposal, Stevens wrote: “I had discussed with Bob Shea his participation in the project.

Mr. Shea was quite enthusiastic with respect to involving himself.”

Mulroney’s press spokesman, Michel Gratton, said that he had made a “thorough check” with officials of the Prime Minister’s Office, and “there is no evidence whatsoever of any intervention by any official at the PMO.” However, another aide to Mulroney who did not wish to be named acknowledged: “That sort of connection gets used by people in different circumstances for a lot of different reasons.”

Indeed, the industry department official whose name appears at the bottom of the memo, assistant deputy minister John McLure, told Maclean ’s that Shea’s friendship with the Prime Minister did come up in a meeting he had with Shea last spring to discuss the government’s consulting needs on the Cape Breton/ Chase Manhattan contract. In an interview, McLure said: “It kind of came up in the conversation. You know, when people talk, they name-drop a bit, but that was the only way it ever came up.” McLure also acknowledged that Shea’s name was suggested to the industry department only after the meeting between Stevens and Shea in Montreal last March.

McLure denied that he was under any pressure to recommend Shea for consulting work. But in two interviews with Maclean's he made apparently contradictory statements about his knowledge of the memo. In the first interview, on Dec. 5, McLure freely discussed the contents of the memo and the events

surrounding it. The reference in the document to Shea’s friendship with Mulroney was, McLure said, simply “poor drafting.” McLure said in that interview, “Now, under the circumstances, it probably wouldn’t be drafted that way because it wasn’t the intention.” But six days later, in a follow-up interview, McLure said that he had located the memo in departmental files and claimed that it was a “draft” which he had never seen before. “I don’t know who drafted it,” he said. “I would never have signed something like this.” It was, he did concede “a pretty heavy memo.”

A source in the industry department who did not wish to be identified con-

firmed that Shea’s name was added to the list of potential consultants late in the selection process and said that the move caused resentment among some civil servants working on the Cape Breton project. Said the source: “The guy came out of the blue and was sort of being imposed on everybody.” He said that although there was no clear evidence that pressure had been applied from the PMO, there was a feeling among some department officials that Shea’s connection to Mulroney would be the determining factor in whether Shea was given work on the Cape Breton contract. Said the source: “It would be the exceptional bureaucrat that would say, ‘To hell with the suggestion coming from the Prime Minister’s Office, we’re going to use someone else instead.’ ”

MICHAEL ROSE in Ottawa