Ethical conflicts over guidelines

MARY JANIGAN,HILARY MACKENZIE September 1 1986

Ethical conflicts over guidelines

MARY JANIGAN,HILARY MACKENZIE September 1 1986

Ethical conflicts over guidelines

The revelation raised serious ethical questions. It was obtained from witnesses appearing last week at the inquiry into conflict-of-interest allegations against former industry minister Sinclair Stevens by commission counsel David Scott. The Ottawa lawyer determined that on Oct. 29, 1984, Toronto investment dealer James Davies wrote to Trevor Eyton, president of Brascan Ltd., proposing to refinance York Centre Corp., a troubled member of Stevens’s business empire. Davies, a corporate vice-president at Richardson Greenshields of Canada Ltd., said in his letter that he had contacted Eyton “at the suggestion of the Honorable Sinclair Stevens.” One day later Stevens named Eyton to the board of the Canada Development Investment Corp., which was overseeing the sale of Crown corporations.

Stevens has insisted that he did not know about the approach to Eyton, who flatly turned down Davies’s proposal. And Davies denied that Stevens had asked him to write the letter. But as York Centre president Ted Rowe conceded last week, “There could be an appearance of conflict [of interest].” That concern has emerged as one of the most embarrassing problems facing governments across the nation this summer. To the embarrassment of the federal Tories, Scott has directed a devastating investigation into conflictof-interest charges against Stevens. The former minister resigned from cabinet last May after it was disclosed that his wife, Noreen, had obtained a $2.6-million loan last year from Toronto businessman Anton Czapka, co-

founder of a firm that received millions of dollars in grants from Stevens’s ministry. The inquiry report by Ontario High Court Judge William Parker is expected this fall—and senior Conservative sources said last week that Ottawa will toughen its conflictof-interest guidelines in the wake of Parker’s recommendations.

Prime Minister Brian Mulroney re-

fused to comment directly on whether he will change the conflict rules and he declined to discuss the Stevens case. But he expressed dissatisfaction with the present system. He told Maclean’s late

last week, “Under the existing mechanism it is easy for people to make allegations, and innocent people find themselves forced to defend themselves against unsubstantiated charges.”

The Tories’ embarrassment is shared by provincial governments of every political affiliation. In Ontario Liberal Premier David Peterson lost two ministers last June over separate allegations of conflict of interest. While legislative committees investigate allegations against former northern affairs and mines minister René Fontaine and former management board chairman Elinor Caplan, Peterson has asked former lieutenant-governor John Black Aird to review the province’s conflict guidelines.

In Manitoba, an embarrassed New Democratic government under Premier Howard Pawley is awaiting a report by former Manitoba chief justice Samuel Freedman on conflict charges against former energy and mines minister Wilson Parasiuk. And in British Columbia, Social Credit Premier William Vander Zalm, who succeeded William Bennett on Aug. 6, has to decide whether to retain ownership of his $7million fantasy theme park near Vancouver. The park is the subject of a rezoning application. The conflict-ofinterest issue, said one prominent Ontario Liberal last week, “is one of the most serious problems facing governments today.”

Governments have sought solutions to the problem for years. In 1973 thenprime minister Pierre Trudeau issued federal guidelines based “on the honor system, not the audit system.” In Sep-

tember, 1985, Mulroney tightened the rules, requiring ministers to submit a confidential report of assets to the assistant deputy registrar general, a public servant who reports to the Prime Minister. To comply with the guidelines, ministers must simply declare holdings in firms that do not have contracts with the federal government or trade shares publicly. But they have to put into a blind trust—or sell—assets whose value could be affected by government decisions. Mulroney said in a letter accompanying the guidelines that, while they did not cover spouses or dependent children, ministers had “an individual responsibility” to prevent conflicts resulting from relatives’ activities.

The Stevens affair has underscored three major areas where those guidelines are weak. As Mulroney’s advisers noted last week, the Prime Minister is held responsible for his ministers’ actions—but he has no sure method for verifying their disclosures. The appointment of an ethics counsellor to rule on possible conflicts and to recommend appropriate action may provide a solution. But anyone reviewing conflict guidelines will also have to consider whether a blind trust—in which a trustee manages the assets or holdings—is adequate protection against conflict allegations. Stevens’s holdings were in a blind trust when his wife negotiated the loan.

The sensitive issue of spouses’ activities will also likely be addressed in any review. Last week Toronto industrialist Czapka insisted that he did not know that Noreen Stevens was the wife of Sinclair Stevens when he borrowed $2.6 million from the Bank of Nova Scotia and loaned it to her. The loan was in the form of a five-year mortgage against six properties owned by the Stevens’s firms. Paul Martin Jr., co-ordinator of the search for Liberal party candidates in Quebec, said that the experience of Noreen Stevens is discouraging women from entering politics. “Many women are hesitant out of a fear that their husband’s career might suffer, because he would have to restrict his business activities,” said Martin.

Insiders said last week that Aird will likely recommend full public disclosure before an independent ethics counsellor. And federal Conservative MP Patrick Boyer, executive director of a federal 1983-84 task force on conflict of interest, adds that Ottawa should adopt that policy. Said Boyer last week: “It is an idea whose time will come.”

-MARY JANIGAN with HILARY MACKENZIE and MICHAEL ROSE in Ottawa, BRUCE WALLACE in Montreal, JANE O’HARA in Vancouver and SUE CALHOUN in Halifax