October 19 1992



October 19 1992




The Oct. 26 referendum campaign marks the beginning of a period of compressed political activity in Canada, with the approach of a federal election campaign, as many as six provincial campaigns and, possibly, three federal leadership contests. In their new book, Leaders and Lesser Mortals: Backroom Politics in Canada, authors John Laschinger and Geoffrey Stevens lay bare the campaign-trail world of motives, strategies, deals and battles fought and won. Over two decades Laschinger, 50, a Conservative, directed 11 provincial leadership campaigns and the federal campaign of Newfoundland’s John Crosbie, as well as six provincial election campaigns, mostly for the Progressive Conservatives. Veteran journalist Geoffrey Stevens, 52, has covered more than a dozen campaigns and has been a reporter and columnist for 30 years. One chapter includes extraordinary details about political fund-raising and raises important ethical questions. Excerpts:

Pierre Trudeau was a cheapskate. I went out for lunch with him and he had to borrow 25 cents for the tip.

—Retired senator John Godfrey

Jack Godfrey, the grand old bagman of the Liberal party, loves to tell the story about Pierre Trudeau borrowing the money to leave a 25-cent tip. He tells it with respect and affection. Parsimony is a virtue that the people who guard the vaults of the political back rooms come to cherish on the rare occasions that they find it in the gaudy, high-spending world of electoral politics. Politicians, of course, are spenders, not conservers. They spend to get elected. Once elected, they spend more to keep themselves in office. They spend today and worry about raising the money tomorrow. They spend on polling and television even when their bank accounts are empty and their lines of credit are stretched to the limit. Their fund raisers often feel they are on a treadmill, running harder and harder to keep from falling farther and farther behind the unquenchable financial demands of the politicians they serve.

“The way money is spent in politics would not be defended in any other institutional setting—with the possible exception of the midway at the fairground,” says Robin Sears, a former federal secretary and campaign director of the New Democratic Party. “It would certainly not be tolerated in business. I feel guilty as much as anybody. In an absolutely

Reprinted, with permission, from Leaders and Lesser Mortals: Backroom Politics in Canada, copyright © John Laschinger and Geoffrey Stevens, published by Key Porter Books.

desperate situation, somebody calls up and says, ‘We need another three minutes of TV time in Vancouver,’ and I say, ‘Fine. Do it.’

There goes $100,000.”

If anything, spending is even more difficult to police in a leadership campaign than in a general election. Senator Finlay MacDonald watched the money pour out the door during Joe Clark’s doomed, $ 1.9-million bid to retain the Tory leadership in 1983. “We never had a budget,” he recalled. “What the hell’s a budget? There’s no such thing. At any given ol point, if you say the budget’s ¿number of dollars, somebody comes in and says, ‘Just add a bit more.’ The budget’s gone, but the money goes.”

John Rae, the Montreal business executive who ran Jean Chrétien’s campaigns for the national Liberal leadership in 1984 (unsuccessful) and 1990 (successful), says the financial officers of a campaign may think they have spending under control and within budget, only to find at the end that workers have spent more than planned and that unexpected bills come in. “You try to drum it into everyone’s head,” Rae says. “Most of the people who are involved in campaigns are responsible people in dealing with money. The difficulty in politics is that you don’t control everybody. It’s impossible to control everybody.”

Jack Godfrey, now 80, believes that the person who is responsible for raising money should also control the spending—not the detailed items, but the global amounts. Back in 1957, Lester Pearson, the newly chosen federal leader, asked Godfrey to help the Ontario Liberal party by raising a campaign war chest for provincial leader John Wintermeyer. Godfrey agreed, on the condition that he also controlled the party’s expenditures. He prepared a budget for the 1959 Ontario election, only to discover that Wintermeyer had authorized an additional—and unbudgeted— $100,000 for TV commercials. Godfrey told him the party did not have the money and, unless Wintermeyer could show him where he proposed to find the $100,000, he was going to inform the advertising agency that it would not be paid.

“I said, ‘Christ, that’s crooked. We haven’t got any money. You’re going to put the thing in debt,’ ” Godfrey recalled. “I phoned the advertising agency and told them we didn’t have the money but I wasn’t going to cancel the advertising—they should just do what they thought was right. Of course, they cancelled the advertising and that got in the paper, and there was a crisis in the party. According to Wintermeyer, I

lost the election for him because then-Tory premier Leslie Frost said, ‘If the Liberals can’t run their own finances, how can they run the province’s finances?’ It was a good point.”

The feud between Godfrey, the bagman, and Wintermeyer, the leader, spilled over into the next Ontario election, in 1963. The Liberals lost again and, when it was over, Wintermeyer threw a party in his hometown Kitchener and sent the bill—for $10,000—to Godfrey. “He wanted me to pay that bill. I said, ‘Piss on you. You lost, it’s your party, you pay for it.’ ”

Godfrey found himself in a similar confrontation with campaign director Keith Davey following the 1974 federal election, when the Liberals under Trudeau regained a majority government. There is still a note of incredulity in Godfrey’s voice—nearly 20 years later: “Keith Davey ordered a poll to find out why we had won the election. Why we’d won! You usually order them before an election. This poll was done by Martin Goldfarb—for $80,000. The bill came and I sent it back and said, ‘Keith, it’s nothing to do with me, it’s nothing to do with the party. You ordered it, you pay it.’ I just refused to pay it. Goldfarb didn’t get paid for four or five years on that one.”

Terry Yates, a General Motors dealer in Hamilton, became comptroller of the federal Tories following the 1972 election, in which Robert Stanfield’s Conservatives had come within two seats (107-109) of upsetting Trudeau’s Liberals. Tory party finances were in rough shape; Yates knew that much. He did not know how rough. Having spent far more than they raised in a frantic campaign in a desperately close election, the Conservatives were in dire straits. They were $2 million in debt—a staggering amount for a party to owe in the early 1970s—and

when another election came along in the spring of 1974, they could not afford to buy any television time. Yates and Patrick Vernon, the party’s chief fund raiser, personally guaranteed a $ 1.5-million note for the media buy. With aggressive fund-raising and tight spending controls, the Conservative party managed to regain some financial ground during the 1974 campaign, emerging from the election “only” $1 million in the red. But, crushed by the Liberals in that election, the Tories had no prospect of being able to pay off the debt in the foreseeable future.

Vernon decided the party had no alternative but to declare bankruptcy, and he and Yates secretly flew to Halifax to break Vernon’s bad news to Stanfield. “We went to lunch, and Stanfield was quite affable,” Yates recalled. “Then we went back to his house and sat in the backyard to talk about the future of the party and what was going to happen. Patrick lays the bombshell on him that the party has to declare bankruptcy. The leader, after he dropped his teeth, said surely there must be another solution. We talked about it and how much the debt was and what could be done. The decision was to make no decision, to just carry on. We felt it would not be the right thing to do, to declare bankruptcy.”

What ultimately saved the Tories from bankruptcy was the Election Expenses Act, which came into effect later in 1974. The act did four principal things. It put limits on spending by parties and candidates in general elections and byelections. It provided for the partial reimbursement from the public purse of election expenses incurred by candidates and parties. It required public disclosure of the sources of individual and corporate donations of more than $100 to parties and candidates. And it

encouraged contributions by establishing a system of tax credits for individuals giving to parties and candidates. The tax-credit provisions enabled the Conservative party to broaden its financial base, and made it possible to build an extremely successful direct-mail operation, to launch the “500 Club” for $1,000 donors and to stage more and larger fundraising dinners. On the day in 1976 that Joe Clark was elected Tory leader, John Laschinger, then the party’s national director, reported to Stanfield that the last bills outstanding from the 1974 election had finally been paid and the party would be a few dollars in the black after the leadership convention.

Although the 1974 legislation should have made it possible for any well-managed party to avoid red ink, parties are frequently not well managed and they do get into trouble, lots of it. They get into trouble especially when they find themselves abruptly falling out of power and landing in opposition. Inevitably, the inflow of funds slows from a rush to a trickle. Parties can no longer afford the high-spending habits they developed while in office.

They are forced to downsize— to reduce staff, cut back promotional activities and candidate recruitment, and even curtail expensive fund-raising operations—thereby digging themselves more deeply into the hole. Meanwhile, parties in power, unless they make themselves grossly unpopular with the cheque-writing public, have fewer problems raising money; they are able to increase spending on personnel, polling, promotional activities—and fundraising.

The federal Liberals have never recovered, psychologically or financially, from losing office in 1984, the first Mulroney/John Turner election. By the end of the 1988 election campaign, they were $4 million in debt. The Ontario Conservatives, who lost power in 1985 and who went through three changes of leadership in five years, suffered even more. By the time Liberal Premier David Peterson called the September, 1990, election, the Tories owed $5 million to five banks and five trust companies. The poverty, however, was all at the top. As Laschinger assembled the Conservative election organization, he discovered to his astonishment that, although the party was destitute, its 130 riding associations were sitting on a small gold mine. Collectively, they had $2 million in their bank accounts. But, to the immense frustration of senior officials, the party never could get its hands on much of that money; it was still $4.6 million in debt in the summer of 1992.

Political financing laws, with their tax credits for contributors, make it infinitely easier than it used to be to attract money. At the same time, the new election-expense ceilings restrict the amounts parties and candidates can legally spend. In 1988, for example, the three major federal parties raised donations totalling $55.6 million, compared with their combined spending of $21.8 million (about $2 million less than the ceiling) during the two-month campaign period. They did not, however, have $33.8 million in the bank after the election. Due to a loophole in federal election law, some big-ticket items, notably polling, do not count in the calculation of the campaign spending.

In addition, revenues raised in 1988 also had to cover their operating expenses in the 10 non-campaign months of the year. Operating expenses are always high in the period leading up to an election call as parties do as much of their spending as possible before the campaign officially begins, which is when the spending limits come into effect. Often they spend more in the run-up to an election than they do in the campaign proper. When this non-campaign-period spending is added— and when allowance is made for the partial reimbursement of election expenses under the Election Expenses Act—the three big national parties had a combined deficit in 1988 of $5.5 million.

As Laschinger discovered at the provincial level during the 1990 Ontario election, the picture changes dramatically when the financial position of federal party candidates is examined. Candidates often enjoy handsome bank balances while their parties are drowning in red ink. Under the Election Expenses Act, candidates, like parties, are limited in

the amounts they may spend. In the 1988 federal election, the limit averaged $47,000 per candidate. But there is no limit on the amount that candidates may raise, or on the size of contributions they may accept. For example, a total of 1,578 candidates, including independents and representatives of minor parties, contested the 1988 federal election.

They reported election expenses of $31,341,494 plus personal expenses of $1,732,538, for a total of $33,074,032. However, thanks largely to the tax-credit regime, the candidates were able to raise $32,532,018 in contributions. In addition, they collected $13,734,568 in partial reimbursement of their election expenditures. (Under the act, any candidate who gets 15 per cent of the vote is reimbursed for 50 per cent of his or ^ her election expenses.) The § bottom line: the 1,578 candila dates had a total income of § $46,266,586 and expenses of z $33,074,032—for a surplus of I $13,192,554. That is, an aver§ age surplus per candidate of g $8,360.

The average Tory candidate had enough money left over in 1988 to cover about half of the amount he or she would be allowed to spend in the next election. In the aggregate, the candidates, with the exception of New Democrats, produced surpluses that were larger than their parties’ deficits. Or, to look at it another way, the 294 Liberal candidates came out of the election with a combined surplus of $4.1 million—enough to pay off the national party’s accumulated debt—if the party had been able to get its hands on its candidates’ surpluses. But it could not.

In politics, money is like water: it flows down much more readily than it flows up. Parties use a portion of the money they raise to subsidize campaigns at the constituency levels. Candidates, however, have a choice when it comes to their surplus funds. They may transfer them to their party’s national headquarters, never to be seen by them again. Few do that. Or they may—as the vast majority do—keep the money at home by turning it over to their constituency associations, to be used in their next nomination fight or election campaign.

It is not the way the Election Expenses Act was meant to function. It was never intended that candidates who succeed in taking in more

contributions than they require to cover their election costs should also enjoy the windfall of a reimbursement of expenses from public funds. It was never intended that candidates, raising money for a specific campaign, should be able to hoard it, tax free, for use in a future campaign. And it was never intended that the taxpayer, through the taxcredit system and the reimbursement subsidy, should be asked to underwrite the creation of constituency slush funds.

The public is not told how large these funds are. Candidates are obliged to report the amounts they raise and spend during the period of the election writ (usually just over 50 days). But successful candidates do not stop raising and spending money on election night. Many hold annual fund-raising dinners, cocktail parties, barbecues and other activities to build up their war chests. Some prominent MPs, according to informed estimates, are sitting on funds in the $400,000-$500,000 range.

Such huge funds give a sitting member the financial muscle to beat off challengers for his or her party’s nomination in the next election, and they give him or her a big head start over other parties’ candidates once the election is called. On the other hand, war chests attract pirates, as has happened in several Toronto-area ridings. Interlopers try to take over a party’s constituency association to get control of its bank account, then use the money to wrest the nomination away from the incumbent.

Jean-Marc Hamel, the retired chief electoral officer, remembers the debate when a Commons committee was conducting its clause-by-clause study of the Election Expenses Act in the early 1970s. “Jimmy Walker, a Liberal backbencher from Toronto, mentioned the tax credits. They were a Canadian invention and nobody else had ever attempted to use them this way before. Nobody had any clue as to how much money they would generate. You know, would they really bring money in? Jimmy Walker said, ‘Well, what will happen if a candidate after an election has a surplus? What is going to happen?’ Everybody laughed. Everybody said, ‘Come on, Jimmy. That’s impossible.’ Well, as it turned out, he was the only one who was right.”

The old stereotype of an impoverished candidate expending his or her life savings in the pursuit of public office is no longer applicable. Today, relatively few major-party candidates have to reach into their own pockets to finance their campaigns. The tax credit has made money easy to raise, and the reimbursement subsidy to candidates collecting 15 per cent or more of the vote has taken most of the financial risk out of running. There is something wrong with a candidate’s organization if he or she does not finish with money in the bank.

The following list shows the campaign surpluses of a selection of MPs or former MPs after the 1988 federal election. The figures reflect

amounts received and expended during the period of the election writ only. They do not include amounts raised or spent before the elections were called or after voting day—amounts that candidates and constituency associations are not required to report. The surplus is calculated by adding contributions collected to the expense reimbursement received, and subtracting from this total the candidate’s campaign and personal expenses, as reported by his official agent.

Barbara McDougall (PC) $106,219

Paul Martin (Lib.) 93,469

James Peterson (Lib.) 90,392

Michael Wilson (PC) 83,237

John Crosbie (PC) 53,543

Svend Robinson (NDP) 47,388

John Turner (Lib.) 46,450

Joe Clark (PC) $42,282

Don Mazankowski (PC) 41,400 Brian Mulroney (PC) 40,662 Lloyd Axworthy (Lib.) 37,140 Ray Hnatyshyn (PC) 29,095 Ed Broadbent (NDP) 27,119 Audrey McLaughlin (NDP) 5,599

Hamel, Canada’s leading expert on election law, is one of many who worries that money is distorting the political system. While political parties struggle to pay their bills, candidates—current and past—are sitting on small fortunes. Their fortunes are largely built on public funds, through the tax credits and the reimbursement of expenses. Yet there is no control at all over how the money is used. He says:

“We [at the chief electoral office] get a report and we see that the candidate has a $90,000-odd surplus, but, within the regulations under which we operate, because he or she obtained more than 15 per cent of the vote, they are entitled to reimbursement of half of their election expenses. So we send them a cheque for $25,000, which is a bit ridiculous. Then the money is transferred to the constituency association, which is not defined anywhere in law. We completely lose track of that money. We have no idea what use is made of it.

“People were concerned that the Election Expenses Act would give the parties too much power, that the parties would have lots of money and the candidates would still starve. It’s just the opposite. The parties are starving. Some constituency associations have pretty fat bank accounts. Their surplus could be used for all kinds of purposes because it’s pretty well the decision of whoever controls it—the constituency association, the previous candidate, the sitting MP, or one of his friends, or his wife, or whoever.”

The most elite group in federal politics is the unofficial $100,000 Club—candidates who have raised $100,000 in contributions in a single election campaign (roughly eight weeks in duration). In the 1984 election, the club had only two members—Tories Bud Sherman, who

raised $103,783 in a losing campaign in Winnipeg, and Michael Wilson, soon to be finance minister, who took in $144,225 for his re-election bid in the Toronto suburb of Etobicoke. With fund-raising techniques becoming increasingly proficient, the club expanded to 10 members in the 1988 election:

Barbara McDougall (PC) $130,626 Larry Schneider (PC) 124,788

Gerry St. Germaine (PC) 123,427 Kim Campbell (PC) 116,488

Paul Martin (Lib.) 114,070

James Peterson (Lib.) $112,118

Gerry Merrithew (PC) 108,015

Paul Dick (PC) 105,989

Michael Wilson (PC) 105,568

John Fraser (PC) 101,770

Money loves power. Five of the 10 members of the $100,000 Club in 1988 were ministers in the Mulroney government (McDougall, St. Germaine, Merrithew, Dick and Wilson). A sixth (Campbell) would join the cabinet after the election, and a seventh (Fraser) was a former minister who had become Speaker of the Commons. Martin would shortly run for the Liberal leadership (and lose to Jean Chrétien). Peterson was no stranger to power; he is the older brother of thenOntario Premier David Peterson. Only Schneider could be considered to be a backbencher. And, of the 10, only one—St. Germaine—failed to win his seat in that 1988 election.

If three backroom managers were asked whether money wins elections, they would come up with three different answers: Yes, No, and It Depends. It Depends comes closest to the mark. A party or a candidate must have a minimum amount of money—enough to be taken seriously and to pay for the essential elements of the campaign. The minimum is, in effect, an entry fee to the contest—be it a national or provincial election, constituency-level election or a leadership convention. At the other end of the spectrum, however, more is not automatically better. Beyond a certain point, additional spending may become counterproductive.

A party can waste so much money and effort on non-essentials that it loses its focus. Candidates may actually spend themselves out of contention—as Brian Mulroney did in his flashy first campaign for the

Conservative leadership in 1976. Canadians are not comfortable with politicians who pursue a prize too ardently, especially politicians who spend more in the pursuit than the prize seems to be worth. Somewhere between Not Enough and Too Much is the Right Amount to spend. As most seasoned campaign managers see it, the Right Amount will depend on the type of race being run (national, provincial, constituency or leadership), on the state of the competition, on the mood and expectation of the electorate, on any national or provincial trends that may be occurring, and on the profile of the spender.



onspicuous spending would be out of keeping, for example, with the frugal, ordinary-folks profile that the NDP cultivates, and it would jeopardize the chances of any NDP candidate so ill-advised as to be seen spending too lavishly. Wendy Walker, a union activist and campaign organizer who is now an Ontario civil servant, remembers working for Rosemary Brown in the 1975 NDP leadership campaign (won by Ed Broadbent, with Brown second). Somehow, the candidates managed to campaign within a spending limit of $15,000.

At most stops, organizers booked a hotel room for the candidate only; his or her workers bunked with friends or paid for their own hotel rooms. Walker and three others drove in a Volkswagen from Toronto to Winnipeg, site of the convention. They were there for eight days. “We were all broke,” Walker says. “We only had a couple of hotel rooms. We took turns trying to sleep in shifts on floors and beds and chairs and stuff. Nobody slept. What I’ve never been able to figure out is how you spend $2 million or $3 million on a leadership campaign. If I had

that kind of money, I wouldn’t know what to do with it.

Hospitality is a fine line to walk in the NDP. Plush hospitality suites with lots of free stuff are not well considered.”

Leadership conventions defy any traditional cost-benefit analysis. As a general proposition, the candidate who spends the most money generally wins the leadership race. But leadership races are also generally won by the candidate who was the favorite when the race began. It is an open question whether the candidate wins because he or she has the most money to spend, or whether the candidate is able to raise the most money because he or she is favored to win.

Backroom organizers know that financial receipts are often a harbin-

ger of a candidate’s progress. The flow of donations increases when contributors sense that a campaign is gaining momentum. In 1985, for example, with his Conservatives still in power in Ontario, Bill Davis decided to retire. His industry minister, Frank Miller, was the odds-on favorite in a four-way race to succeed him. Miller’s front-runner status was reflected in his fund-raising; he collected nearly $2 million in contributions while spending “only” $1,235,815 in his leadership campaign (he won on the third ballot).

By the same token, donations slow to a trickle when supporters sense that a candidate is faltering. But one thing is clear: a leadership candidate who has little apparent chance of winning when a race begins will not improve the odds by trying to spend his or her way to victory.

Increasingly, parties are addressing the problem— financial and perceptual—of excessive spending by imposing expenditure limits on leadership campaigns, as the federal Liberals did, halfheartedly, in their 1990 race.

When the NDP chose Audrey McLaughlin to succeed Ed Broadbent in 1989, each candidate was limited to $150,000— or $50,000 less than Nova Scotia Tories set for their provincial leadership campaign two years later. When the Ontario Liberals chose Lyn McLeod as their new leader in 1992, the spending limit was $250,000.

Spending limits help level the playing field, but they are an imperfect remedy.

In most instances, the limits apply only to certain types of expenditure while exempting other types. A candidate’s “personal” expenses, including all travel costs, are frequently exempted from the limit. When the Ontario Tories elected Michael Harris in 1990, the limit was ostensibly $500,000. It did not apply, however, to salaries paid to campaign organizers and workers, nor to money spent on polling.

Spending limits established by parties are utterly unenforceable. No party, after the last leadership poster has been taken down and the last balloon burst, is going to turn its candidates’ financial reports over to forensic accountants to make sure that no one understated his or her expenses. No party is going to strip its new leader of his or her position because the candidate unknowingly (or knowingly) overspent. Brian Mulroney refused to file the required financial report following his first attempt to win the Conservative leadership in 1976, the only candidate who failed to file. It never occurred to the party to try to prevent him from running again in 1983.

The Royal Commission on Electoral Reform and Party Financing, reporting in 1992, recommended bringing national party-leadership campaigns under the same general regime that applies to general elections. Reports would have to be filed—including a preliminary report from each candidate the day before the convention votes. The tax-credit system would be used. Candi-

dates would be required to disclose the size and source of all contributions of $250 or more.

And individual leadership contestants would not be allowed to spend more than 15 per cent of the amount that their party had been permitted to spend in the most recent election. The problem of enforcement, however, would remain. There is no way that parties can compel candidates to submit reports that account for every cent of their spending, even if they go over the limit. And when a convention is over, a party is preoccupied with healing the wounds opened during the leadership campaign. The last thing it wants to do is to open new wounds by imposing sanctions on candidates who have exceeded the limit.

In fairness, it is impossible for candidates and their managers to maintain iron control over spending in the frenzy of a leadership race, particularly in convention week. John Rae gives a small illustration from the 1984 Chrétien campaign. “A poll came out which showed that Mr. Chrétien was more popular in the country than Mr. Turner. It was a significant poll, and we had a choice to make. The vote was on Saturday and the poll came out on the Friday, the day before. What do you do? You get it printed for all delegates. And that was $1,000 or so, I forget the figure. Those are things that you do.”

Legislated controls on political financing address perceptions as much as they address real problems. But it is important that the public view the political process as being open, fair and honest. A legal requirement to disclose the source and size of contributions helps to dispel the perception that large corporations or wealthy individuals are able to influence politicians and governments through their financial donations.

In practice, if vested interests want to influence the political process, there are more effective ways to do it than through campaign contributions. A big-businessman who wants special consideration for his company will gain more influence by, say, lending a vacation home to a party leader or creating a job for a cabinet minister’s spouse or dropout son than he will by making a $50,000 campaign donation. And limits on campaign spending will not seriously deter parties or candidates. They simply spend heavily before the election writ is issued, then scale down during the campaign period.

In Canada, there is no obvious correlation between money spent and

electoral success. “You can’t buy an election because you’re limited to the kinds of times you can buy on radio and television,” says veteran Tory strategist Paul Curley. “If you want to buy an election, it’s pretty hard to do. You can spend what you want in terms of written materials, but do they have any impact? A lot less than electronic communications.”

Examination of spending and voting patterns in 30 federal swing ridings in Ontario suggests that as long as the principal candidates have enough funds to be competitive, a few thousand extra dollars will make little or no difference. The 30 ridings are ones in which the spread between the winner and the second-place finisher in the 1984 election was 10 per cent or less of the vote cast. Money was no advantage—only 11 of the 30 contests were won by the candidate who spent the most. It was the same story in the same seats in the 1988 election—only 10 of the 30 went to the biggest spender. Thirteen of these 30 swing ridings changed hands in 1988, but only one went to the biggest spender.

Money is important in politics in Canada. It buys the polling and the television time. It is the grease that keeps the machine running smoothly. But it is not the only thing that makes the political world go round. That is as it should be in a democracy. □