CANADA/COVER

MULRONEY UNDER FIRE —AGAIN

MICHAEL ROSE May 26 1986
CANADA/COVER

MULRONEY UNDER FIRE —AGAIN

MICHAEL ROSE May 26 1986

MULRONEY UNDER FIRE —AGAIN

CANADA/COVER

The pressure built through two weeks of accusations and acrimony. Day after day, the news media published details that linked the financial affairs of Sinclair Stevens’ family-owned companies with corporations conducting business with his ministry, the department of regional industrial expansion (DRIE). Day after day Parliament Hill was charged with an air of crisis as opposition MPs mounted a relentless attack on the credibility of Stevens—and on the government of Prime Minister Mulroney. Then, shortly after 11 a.m. on May 12 Stevens rose in the Commons and calmly read a brief resignation statement, typewritten on creamcolored ministerial stationery.

The controversy, Stevens said, had “seriously hampered my ability to perform my duties as minister,” and he called for the appointment of an “impartial person to conduct an investiga-

tion.” With that, the 59-year-old Stevens strode out of the House and—in what has become a ritual humiliation for departing Conservative cabinet ministers—plunged through a horde of reporters and cameramen to his waiting Oldsmobile limousine. Behind him lay the power and prestige of his ministry and a 14-year political career.

Profound: Only two days after Stevens resigned, Quebec Tory MP Robert Toupin (Terrebonne) added to the government’s problems by announcing his resignation from the Conservative caucus to sit as an independent member. In a letter addressed to Mulroney, Toupin cited

“a profound and irreconcilable difference between your government and myself.” The government received still another setback when Quebec MP Marcel Gravel, 46, was charged with 50 counts of influence peddling and abuse of public trust. Court documents allege that Gravel, who represents the east end Montreal riding of Gamelin, had obtained several thousand dollars in cash or benefits from government contractors.

Scandal: Stevens’ departure, fol-

lowing four other ministerial resignations over the previous 15 months, was severely damaging to the Mulroney government. Indeed, not since the Liberal government of Lester Pearson sustained a series of five resignations and demotions in 1965 has a cabinet been so buffeted by charges of scandal and incompetence in such a short period. For days senior government officials had insisted that the alleged conflicts of interest involved in transactions by Stevens’ wife, Noreen, were in fact legal and ethical. But the strategy failed. Liberals and New Democrats kept the issue in the public spotlight and the question of the minister’s guilt or innocence became largely irrelevant. As long as he was under attack, the gov-

ernment would be perceived as on the defensive. Abruptly, the Prime Minister’s Office shifted course. But the sudden change in tactics, and the decision to accept Stevens’ resignation, may have damaged the credibility of the Mulroney government and its most experienced ministers. Said a senior Conservative party official: “Of course it damages us. It’s not exactly a junior cabinet minister we’re talking about here.” Senior Tories, led by Deputy Prime Minister Erik Nielsen during Mulroney’s 16-day absence in Vancouver and Asia, insisted that an independent inquiry would exonerate Stevens. The Prime Minister himself, winding up his tour of Japan, China and South Korea, maintained that “Mr. Stevens will be fully vindicated and return to cabinet.” And Stevens, who relaxed last week on his 200-acre cattle farm north of Toronto, insisted in his letter of resignation that he was “determined to establish that these allegations are without foundation.” He told Maclean's, “All I want is an impartial examination of the facts.”

Flaws: Still, the Stevens affair renewed debate about the quality of advice that the Prime Minister receives on how to deal with a political crisis. It also underlined fundamental flaws in the government code of conduct that Mulroney presented in the Commons on Sept. 9,

1985. As well, it allowed the opposition to harass a government already suffering repeated blows to its image and a decline in public opinion polls. Declared New Democratic Party Leader Ed Broadbent after Stevens’ departure: “The performance of the government for the past two weeks has been totally lamentable.”

The Prime Minister, returning late Thursday to Ottawa, refused to comment on either Toupin’s defection or the Gravel case. But naming William Parker, chief justice of the trial division of the Supreme Court of Ontario, to head a formal commission of inquiry, Mulroney appeared to accept his political setback philosophically. “The only thing certain about public life is

that it will be filled with uncertainties and challenges,” he said. “My job is to deal with that as best I can. The tide goes in and the tide goes out,” he added, quoting former Newfoundland premier Joey Smallwood. And he reminded the crowd of reporters that greeted him at Canadian Forces Base Uplands: “It’s one thing to have accusations made. It’s another to have them sustained.” Indeed, despite the climate of scandal, there was no firm

evidence that Stevens had in any way breached the cabinet’s conflict-of-interest guidelines.

But the buildup of allegations against Stevens during the two weeks that the government resisted calling an inquiry, or offering any detailed defence, made the minister’s departure— even if temporary—almost inevitable. The Commons controversy began with an April 29 Globe and Mail story which detailed a $2.6-million loan arranged a year ago by Noreen Stevens from Anton Czapka, a founder and shareholder of Magna International Inc., the giant Markham, Ont., autoparts maker, which has extensive dealings with her husband’s department.

Stevens had placed his varied business interests in a blind trust shortly after he became a cabinet minister. But his wife, a lawyer and his longtime business partner, remained a vice-president of Cardiff Investments Inc., the troubled real estate arm of the family holding company, York Centre Corp.

Revelations: Stevens, Mulroney and Nielsen—who orchestrated the government’s resistance strategy during the Prime Minister’s Asian tour—each insisted that there had been no breach of the conflict-of-interest guidelines. But subsequent revelations in the media provided the opposition with further ammunition. Then, on May 9 The Toronto Star reported that Noreen Stevens, through Trevor Eyton, president of Brascan Ltd., approached three Toronto brokerage firms—without success—for help in raising a $5-million assistance package for York Centre Corp. The brokers were later hired by her husband’s department to do government work.

By Sunday, May 11, senior Tory strategists had concluded that the embattled minister would have to resign. Conservative insiders denied rumors last week that Mulroney had demanded Stevens’ letter of resignation-dated May 11 and released as Stevens stepped down the next day, with Mulroney’s acceptance following soon after. Still, the option of appointing an inquiry was clearly under consideration the week before the resignation. A senior Tory official had told Maclean's on Friday, May 9, that the inquiry was being actively considered. Another highly placed Conservative said that Stevens himself had agreed shortly after the controversy began that the action might become necessary if public pressure became too great. But, the source told Maclean's, “you could not do it in the first couple of days because it would look like you were running from the opposition every time something came up.”

On the decisive Sunday, May 11, Mulroney gathered his most senior advisers to assess the political damage. The unlikely setting for the meeting: the modern white-brick Chinese government villa where the Prime Minister was billeted during his visit to Peking. As reporters covering the Asian trip enjoyed their first full day off, Mulroney and Stevens “jointly agreed” during a prearranged evening phone call that a prompt resignation, along with a public inquiry, was the only viable option.

Echoes: By Monday morning, a CTV report in Korea, where Mulroney had travelled from Peking, said the resignation was imminent. Those rumors were soon echoing through official Ottawa. A crowd of reporters con-

fronted Stevens when he arrived at 9:50 a.m. at his offices on the fourth floor of Parliament’s Centre Block. Inside, behind locked doors, the minister told those staff members who did not already know that he was about to resign. At 10:30 he sent a note to House Speaker John Bosley requesting time to make a “brief personal statement” when proceedings began at 11 a.m. After his statement—applauded by some, but not all, members of the Tory caucus—Stevens’ cabinet colleagues crowded around his desk to shake hands. The minister then left for his farm. Nielsen also left immediately for a meeting with Mulroney’s deputy principal secretary, Ian Anderson, the senior PMO staffer left behind during the Prime Minister’s trip. Then, Nielsen telephoned Seoul to confirm that Stevens had resigned. Transport Minister Don Mazankowski was named acting head of Stevens’ critical department, which oversees an $850-million budget for grants to businesses across the country.

Victims: The Stevens resignation resembled four other politically embarrassing ministerial departures Mulroney has endured. The casualty list:

• Defence Minister Robert Coates. Resigned on Feb. 12, 1985, after the

Ottawa Citizen reported that he and two staff members visited a Lahr,

West Germany, striptease bar while on an official NATO tour. Mulroney first heard of what a PMO official called a “potential breach of national security” on Jan. 22, but Coates stayed in his post for 21 days.

• Fisheries Minister John Fraser. Resigned on Sept. 23, 1985, after a CBC TV the fifth estate story about his decision to overrule government inspectors and authorize the sale of about one million tins of rancid tuna. The resignation may have been hastened because Fraser publicly disagreed with Mulroney about when the Prime Minister first learned of the problem.

• Communications Minister Marcel Masse.

Resigned two days after Fraser, because of an RCMP investigation into alleged irregularities in his campaign spending for the 1984 election. The investigation cleared Masse—two campaign workers were convicted; a case against a third is pending—and he returned to his former cabinet portfolio. But Conservative party national director Gerry Lampert caused a later controversy when he, like Fraser, disagreed publicly with the Prime Minister about when Mulroney’s staff became aware of the matter.

• Minister of State for Transport Suzanne Blais-Grenier. Resigned on Dec. 31, 1985, ostensibly over a disagreement with Mulroney about a government decision to permit the sale and closure of Gulf Canada’s Montreal refinery. Blais-Grenier, however, had been criticized in the Commons earlier for her clumsy handling of her former environment portfolio—she was demoted in a shuffle the previous August—and later for two much-publicized trips to Europe which totalled $64,000 in expenses.

Even before the allegations that led to his cabinet resignation, Stevens— who remains the MP for the Torontoarea riding of York-Peel—had already been a frequent focus of controversy, both in business and in the political career that brought him to Parliament in 1972 (page 16). An aggressive businessman who made a fortune with his wife primarily through shrewd real estate dealings, Stevens raised eyebrows

in the financial community with his unsuccessful 1963 attempt to launch the Bank of Western Canada. That project ended before the bank ever opened its doors.

In 1976 Stevens ran for the Tory party leadership on a strong free enterprise platform. After a seventhplace finish in a field of 11 on the first ballot—while Mulroney was still in the running—Stevens threw his support to Joe Clark and was appointed Treasury Board president in Clark’s short-lived 1979 government. In the 1983 Conservative leadership contest Stevens became one of the first MPs to support Mulroney. The new leader named Stevens external affairs critic in opposition and then awarded him the regional industrial expansion portfolio after the 1984 Tory election landslide.

Intense: Observers said last week that Mulroney’s intense loyalty to those who supported him on the way to the Prime Minister’s job may help explain his apparent reluctance to confront the conflict-of-interest allegations against Stevens sooner than he did. Stevens was also said by insiders to command great power in Conservative economic policymaking. Declared one veteran Tory MP who is also an old friend: “His opinion was sought and heeded. If he is out for good, it will be a big loss to that cabinet.”

Still, as long ago as last December some knowledgeable insiders began predicting that Stevens would be

moved out of the industry portfolio to make room for a Quebecer, most likely Masse or Secretary of State Benoit Bouchard, in a cabinet shuffle that is expected next month. Other sources said that Stevens had also upset some prime ministerial advisers because his intense personal style was beginning to blind him to potential political dangers. Said one Ottawa consultant with strong Tory ties: “He crusades horribly for his pet projects and you never

really know where he is going to head next.”

The list of grievances against Stevens included his controversial announcement-made at the height of the Quebec election campaign late last fall—of an auto assembly factory to be built at Bromont, Que., by the South Korean company Hyundai Auto Canada Inc. The timing of the November announcement was widely perceived as favoring the Parti Québécois government and hurting the provincial Liberals, who eventually won the Dec. 2 election. Other Korean connections led to questions about Stevens’ private business affairs. Earlier this year there were reports that

the Hanil Bank Canada, whose parent company is 40-per-cent owned by the Hyundai industrial conglomerate, had provided $3.6 million in loans to Stevens’ holding company in 1983. Opposition MPs charged that a ministerial decision by Stevens this winter to let Hyundai abandon a 1983 buy-Canadian commitment—valued at about $300 million a year—may have been influenced by the fact that Hyundai is a major shareholder of the Hanil Bank.

Retreating to his farm near Aurora, Ont., 30 km north of Toronto, Stevens, who underwent heart bypasss surgery last October, was in sufficiently good spirits last week to amble down to the locked gate of his farm, wearing a yellow windbreaker and a blue wool cap, and chat amicably about what he called his “predicament.” He told Maclean's: “I’m fine. When you are in public life, you expect surprises to happen.” Still, Stevens’ riding association president, Remo Cigagna, said that the strain of the recent controversy had taken a heavy toll on Mrs. Stevens. De| dared Cigagna: “Sine

“ can take it, but she has I gone virtually into hids ing. She is taking it

much harder than he is and that is a real tragedy.”

Reaction to the resignation last week among Tory caucus members was, for the most part, one of relief. Said a veteran Tory MP: “There’s no doubt a lot of people were getting a lot of flack from their constituents about this thing.” But insiders said that a number of MPs felt Mulroney had mishandled the affair by not insisting on Stevens’ resignation immediately after the charges were raised. And a senior Mulroney aide told Maclean's that the example of Marcel Masse—who, by stepping down immediately, avoided the withering opposition attacks endured by Stevens for two weeks—was a major topic at the May 11 damage assessment meeting in Peking.

Trust: Opposition MPs charged that Mulroney had agreed to the inquiry only because public pressure was becoming intolerable and not because he saw anything wrong with Stevens ’ behavior. Said Liberal Leader John Turner: “It is just another item in the series of events which shakes the people’s confidence and trust in the Prime Minister.” And both opposition parties, arguing that Parliament and not the judiciary should have been responsible, claimed that Mulroney had prejudged the outcome of any independent inquiry by saying that he was certain that Stevens would be cleared.

But during Friday morning’s Question Period in the Commons, a visibly fatigued Mulroney insisted that the Parker commission would have full leeway to explore all aspects of the controversy. For his part, Mr. Justice Parker said last week that he would have subpoena power to call witnesses and would conduct the inquiry in public. “It’s like a trial,” the judge said. “You’re searching for facts, for the truth, and they’re open to the public.”

Storm: Mulroney’s advisers were clearly hoping that the resignation and the decision to call an inquiry would quell the storm over the Stevens affair before Mulroney returned to the Commons this week. But the controversy had already blunted the positive effects of Mulroney’s Asian tour, and senior Conservatives conceded that the mood among party officials around the country was not good. With the government rocked by its fifth ministerial scandal and the latest Gallup poll ¡ showing the Conservatives with the support of just 37 per cent of voters, compared with 40 for the Liberals and 21 for the NDP, a greater worry for officials was whether the government , could re-establish its credibility among Canadians before the next election.

MICHAEL ROSE

SHERRI AIKENHEAD

PAUL GESSELL