Information & Ethics Committee on Feb. 13th, 2013

[The Chair, NDP, Pierre-Luc Dusseault]

Welcome to the 65th meeting of the Standing Committee on Access to Information, Privacy and Ethics. We are continuing with the statutory review of the Conflict of Interest Act.

During the first hour, we will hear from an official from the Privy Council Office, Joe Wild. Mr. Wild is the acting deputy secretary to the cabinet, Legislation and House Planning and Machinery of Government.

Mr. Wild, we are looking forward to your presentation on the statutory review of the Conflict of Interest Act. You will have 10 minutes, after which we will move on to questions and answers.

Without further ado, the floor is yours.

[Joe Wild, Acting Deputy Secretary to the Cabinet, Legislation and House Planning and Machinery of Government, Privy Council Office]

Thank you, Mr. Chair.

Thank you for inviting me to discuss with you the Conflict of Interest Act. I have some brief opening comments to make and then I will be happy to address questions.

As you know, the Conflict of Interest Act was one of the key components of the Federal Accountability Act and came into force July 9, 2007.

Prior to the introduction of the act, public office holders at the most senior levels of government—that is, ministers, ministerial staff and advisers, parliamentary secretaries, deputy ministers and governor-in-council appointees—were subject to the Conflict of Interest and Post-Employment Code for Public Office Holders.

Various versions of this code have been in place since 1985. Administered by an ethics commissioner, the code set out both the broad ethical principles and standards to which public office holders would be held to account as well as specific compliance measures they were required to take in areas such as disclosure of assets and liability divestiture, outside activities, gifts, and post-employment.

With the adoption of the Conflict of Interest Act, most of the specific conflict of interest and post-employment rules in the code were enshrined into law ensuring that public office holders were subject to a clear and consistent set of rules regardless of change in government. Some of the rules relating to divestment and use of blind trusts were also strengthened at this time. The other major innovation of the act was to provide for strengthened enforcement through the creation of the Office of the Conflict of Interest and Ethics Commissioner. The commissioner was given powers to investigate and report on alleged breaches of the rules, levy monetary penalties to encourage compliance with the act's disclosure and filing requirements, and report directly to Parliament and on how the act is being administered.

The purpose of the act is set out in section 3. It indicates the various public policy goals the act seeks to further:

(a) establish clear conflict of interest and post-employment rules for public office holders; (b) minimize the possibility of conflicts arising between the private interests and public duties of public office holders and provide for the resolution of those conflicts in the public interest should they arise; (c) provide the Conflict of Interest and Ethics Commissioner with the mandate to determine the measures necessary to avoid conflicts of interest and to determine whether a contravention of this Act has occurred; (d) encourage experienced and competent persons to seek and accept public office; and (e) facilitate interchange between the private and public sector.

As this clause makes clear, the substantive rules of the act are focused on avoiding conflicts between the official duties of public office holders and private interests.

Section 4 defines the core concept of conflict of interest for the purposes of the act. It says,

a public officer holder is in a conflict of interest when he or she exercises an official power, duty or function that provides an opportunity to further his or her private interests or those of his or her relatives or friends or to improperly further another person's private interests.

This concept provides the basis for the rules in sections 5 and 6, which set out the basic duty of public office holders to avoid conflicts of interest and to not participate in decision-making that would place them in a conflict. It also defines the scope of the rules concerning use of insider information, in section 8, and influence, in section 9.

Other rules in part 1 of the act deal with specific forms of private interests, outside employment and activities, gifts, contracts, fundraising, and travel. As is also reflected in its purpose clause, the act seeks to provide clear rules for public office holders while ensuring that these rules are not so restrictive or burdensome that they discourage experienced and competent persons from serving in public office or hinder interchange between the private and public sectors. For example, part 2 of the act includes strict divestiture rules with respect to assets that can directly or indirectly be affected by government decisions or policy and requires disclosure of a public office holder's other assets and liabilities to the commissioner. While many assets also have to be declared publicly, those for the private use of public office holders and their family members which are not of a commercial character are exempt from this requirement. Thus, through a combination of divestiture requirements, confidential and public disclosure, and exemptions, these provisions provide transparency to show that conflicts of interest are being avoided while seeking to not unduly interfere with the personal privacy and finances of public office holders.

In considering how this balance has been set in the act, it is worth noting that some of its provisions, in particular, confidential disclosure of assets and the gift provisions, affect the privacy and financial interests of family members of public office holders as well.

In her submissions to you, the commissioner has suggested that the balance that the act currently sets with respect to divestment may be more restrictive than what is actually necessary to avoid real conflicts of interest.

A similar balancing of goals and interests is seen in the administration and enforcement provisions found in part 4 of the act. The commissioner is mandated under sections 44 and 45 to investigate and report on alleged breaches either in response to a parliamentarian or on her own initiative.

At the same time, section 46 requires that a public officer holder be afforded the opportunity to present his views before a report that could impugn his reputation is made public, reflecting a basic principle of procedural fairness.

A similar protection is provided with respect to the levying of administrative monetary penalties, and confidentiality requirements seek to avoid unfair or premature damage to reputations that may result during investigations into unproven allegations.

Finally, I would like to note that the Conflict of Interest Act is just one component of a broader regime of public sector ethics and accountability.

This broader regime includes “Accountable Government: A Guide for Ministers and Ministers of State” , which sets out the Prime Minister's expectations for his ministry.

Annex A of “Accountable Government” sets out broad ethical standards of behaviour for all public office holders, which goes beyond the requirements of the Conflict of Interest Act. Like the act, compliance with these guidelines is a term and condition of each public officer holder's appointment. “Accountable Government” also contains guidelines for political activities of non-partisan public office holders as well as particular rules for ministers with respect to fundraising and lobbyists.

The Lobbying Act contains an additional five-year post-employment prohibition on lobbying for many of the same public office holders who are subject to the Conflict of Interest Act, including ministers, parliamentary secretaries, ministerial staff, and deputy heads. The post-employment provisions in the two acts overlap with respect to what activity is covered, the relevant time periods, and the public office holders to whom they apply. They are not fully aligned, however, and are administered by different commissioners.

The Public Servants Disclosure Protection Act provides a regime for the disclosure and investigation of wrongdoing by public servants, administered by the Public Sector Integrity Commissioner or PSIC. Where a disclosure deals with a matter covered under the Conflict of Interest Act, the PSIC refers the case to the Conflict of Interest and Ethics Commissioner, who must investigate and report on the matter.

Commissioner Dawson has made some recommendations for providing her office with more discretion to deal with these referrals, and we look forward to receiving the committee's views on these.

Under the Public Servants Disclosure Protection Act, the Treasury Board has adopted a code of conduct that applies to all public sector organizations, and individual organizations have adopted their own specific codes as well. These codes form part of the terms and conditions of employment of every public servant. Public servants in the core public administration are also subject to conflict of interest and post-employment rules that have been established by the Treasury Board through policy.

That concludes my opening remarks, and I am happy to address any questions.

[The Chair, NDP, Pierre-Luc Dusseault]

Thank you for your statement.

Now we'll go right into questions and answers.

Mr. Angus, go ahead for seven minutes.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you, Mr. Wild, for coming.

It's been an interesting discussion so far, as we are trying to get a real sense of how the Conflict of Interest Act plays out and how to view its various components.

Am I correct that you're at the Privy Council Office?

[Joe Wild]

Yes, that's correct.

[Charlie Angus, NDP, Timmins—James Bay, ON]

What role does the Privy Council take in dealing with potential issues of conflict of interest, education of the cabinet, or education of parliamentary secretaries? Is there a role to play?

[Joe Wild]

The Privy Council Office has a couple of roles that it plays. We are the primary public service advisers to the Prime Minister, so we provide advice to the Prime Minister on the standards of conduct or the policy in the actual Conflict of Interest Act. We are the ones who provide the public service with advice on how the act is operating, whether or not there are improvements to be made to the act, and whether or not we think the act is covering the things that it ought to cover.

We also provide advice to the Prime Minister on accountable government and the particular parts of accountable government that deal with restrictions on the political activities of Governor in Council appointees. We look after that regime in the sense of providing advice to Governor in Council appointees—whether they're ministers or the heads of government agencies or crown corporations—on what their obligations are.

[Charlie Angus, NDP, Timmins—James Bay, ON]

I'm sorry, I don't have much time, but I really want to get a sense of how this works, whether it's proactive or reactive. We do get issues. A minister gets into trouble over the years. Is that when you step in, or is there an ongoing education process in place? For example, a minister would know that he or she is not supposed to write letters to independent tribunals. They would need to know the rules. Do you explain the rules to them, or do you go in afterwards and explain what went wrong?

[Joe Wild]

Our role is not to specifically, directly educate ministers with respect to their obligations under the Conflict of Interest Act. That's the role of the Conflict of Interest and Ethics Commissioner. She has the responsibility of doing whatever education she feels is appropriate under the act. Our job is to advise the Prime Minister on whether or not, from a public service perspective, the system is working, whether or not there are things that need to be adjusted in the system. It's to provide that public policy advice.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Okay.

It seems odd to me that we don't have an ability at cabinet to have people trained. People do make mistakes. It's not that everyone who gets caught doing something wrong has a malicious intent. Sometimes they don't know the rules. It seems odd that it's the Ethics Commissioner who has to step in, that this wasn't done in advance. So the police have to come to the scene of the crime and then tell you how to drive the car properly.

I know when Mr. Christian Paradis was found guilty of breaking the Conflict of Interest Act the Prime Minister said that it was an “education process”. So the education process doesn't happen at cabinet, it happens through the Ethics Commissioner and through these findings?

[Joe Wild]

My understanding is that Commissioner Dawson does meet with those folks who are public office holders under the act. She has to work through their asset disclosure and those kinds of things with them when they are first appointed. An element of education comes with that process.

In terms of whether or not my office provides an orientation or an education to ministers about this act or about the stuff that's in accountable government, we generally don't do that.

[Charlie Angus, NDP, Timmins—James Bay, ON]

So, again, we have an issue like an ethical screen. There were allegations that Mr. Nigel Wright was being lobbied by Barrick on three different occasions, I think. He is the godfather of Anthony Munk's son. Anthony is on Barrick's board of directors with his father Peter Munk who is the founder and board chairman of Barrick Gold. Peter Munk said that Nigel Wright was one of the few people that he trusted completely. So an ethical screen is set up that's supposed to separate Mr. Wright and his personal and potential financial interests from being lobbied, yet he is lobbied. So that screen is not set up through anything with Privy Council; you'd come in after the fact to explain what the problem was. The Ethics Commissioner is supposed to set this up, and then just assume people will do it?

[Joe Wild]

We assisted in the establishment of the ethical wall that was set up with regard to Mr. Nigel Wright, and a portion of that wall is the responsibility of the Privy Council Office to administer. That's mainly the portion that would relate to any of the material that comes through us that's going for cabinet discussion, to ensure it is properly flagged, if it's subject to the wall, and that it is not transmitted or communicated or discussed with Mr. Wright in accordance with the provisions of the wall.

So we have a responsibility to do that, and we do. The rest of the administration of that wall is vested in the deputy chief of staff in the Prime Minister's office. Ms. McNamara has responsibility for ensuring the wall is respected on their side.

[Charlie Angus, NDP, Timmins—James Bay, ON]

She's deputy chief, so she's below Nigel Wright, but her responsibility would be maintaining his ethical wall?

[Joe Wild]

She is responsible for ensuring that material is also caught on their side and is not shared with Mr. Wright and for reporting any potential breaches or issues with respect to the wall to the Conflict of Interest and Ethics Commissioner.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Okay, thank you very much.

[The Chair, NDP, Pierre-Luc Dusseault]

Mr. Carmichael, you have the floor for seven minutes.

[John Carmichael, Conservative, Don Valley West, ON]

Thank you, Chair.

And thank you, Mr. Wild, for appearing today.

We've received quite a litany of recommendations from the Commissioner and from some of the witnesses that we've had before us. I'd like to get your feedback on one of the items that appears fairly contentious.

The Commissioner has recommended that the gift disclosure threshold be lowered from $200 to approximately $30. I wonder if you could provide your thoughts on that one specifically.

[Joe Wild]

I think that, in looking at that particular recommendation, the committee may want to consider the value at which gifts can raise concerns about perceived influence on a public office holder and therefore warrant triggering the public disclosure requirements of the act.

One thing I would note is that the act does require disclosure to the commissioner if there is a series of small gifts from a single donor that add up to $200. So it's not just a single $200 gift that triggers that, it is if there is a multitude of small gifts given by a single donor to a single public office holder; that can trigger it. And that threshold, when it was established, when the act was passed as part of the Federal Accountability Act, I mean, was intended to be a meaningful threshold in the sense that it was felt that at that point, the public might view a gift being given in that amount or more as potentially being given for nefarious purposes as opposed to a lower value gift. There was a real attempt to figure out the right threshold to communicate to the public around that.

The other thing I would note is that the act doesn't strictly place a requirement only on public office holders to disclose gifts. That disclosure requirement also attaches to the spouses, common-law partners, and independent children of public office holders on gift disclosure. So that is one of the provisions of the act that isn't specific to the public office holder. In some ways, it is more invasive in the sense that it also applies to their immediate family.

For example, if you had a spouse of a public office holder with a career outside the public sector, if that spouse were to attend a business lunch, as might be the norm in that particular industry, and that business lunch was paid for by the client or the person who they're having lunch with and that lunch was over $35, that spouse would then have to disclose the fact that occurred and put that on the registry. I think that's something the committee may want to really think about. When you think about the level of disclosure around gifts, at least the way it's currently crafted in the act, this isn't strictly an obligation of the public office holder. It does extend to family members. That's just something the committee may want to consider.

[John Carmichael, Conservative, Don Valley West, ON]

That's an interesting point. I wasn't actually aware of that.

I had concern from an administrative perspective that in lowering the threshold, do you actually bulk up on the administrative demand on the staffing at the commissioner's office? But at this point, we have a bit of feedback on that.

The commissioner also recommended that the administrative monetary penalties be extended to breaches of the substantive provisions of the act. I wonder if you could tell us the implications of this, and do you in fact agree with this recommendation?

[Joe Wild]

Again, there are some things that the committee may want to consider as it examines that particular recommendation. The way the administrative monetary penalty regime is set up now, it's there to ensure that public office holders disclose and file their public declarations on time. It's not there for the actual substantive breaches of the act. And again, there were reasons why that line was drawn at the time when the government first introduced the legislation.

There are a couple of issues that the committee may want to think about, and I think some of these have been raised by other witnesses. One is whether or not a nominal monetary penalty is an appropriate response to a substantive breach of the act, particularly if that substantive breach is of a serious nature.

The way the act is intended to work is that you can call it a name-and-shame kind of regime. If there is a serious breach, the idea is that the commissioner reports that publicly. That results in reputational damage, and ultimately I think the main consideration for the government around this has to do with the role of the Prime Minister and his political accountability for the conduct of the ministry as well as those appointees for whom he is responsible.

I think it's important to bear in mind that under the Westminster system of government, when you look back at the trigger for the emergence of a role of a Prime Minister, it was very much wresting from the king the actual appointment of the ministry. This is at the heart of the role of a Prime Minister: to be the one who determines the makeup of a cabinet and basically to hire and fire ministers. And the act is trying to draw a line to ensure that it respects that Westminster feature, that it is ultimately up to the Prime Minister to determine whether or not a breach of the act is sufficient to warrant removal of an individual from office or some other form of remedial action such as a public apology or whatever it might be.

[John Carmichael, Conservative, Don Valley West, ON]

You mention a nominal monetary penalty; I don't know that the commissioner's intent is nominal. Number one, I think it's substantive, and number two, do you agree that it, in fact, is the right direction to be taking this or not?

[Joe Wild]

As you can tell, I am being a bit careful about “agree” or “not agree” because it's a bit difficult as a public servant to come in and say what I think is right or wrong in terms of a policy direction. What I can say is, that would substantively change the nature of the act and the balance that the act is trying to achieve, which I think is reflective of a Westminster form of government.

I don't think it is something that should be done lightly. I think one has to fully consider what it means to have a commissioner imposing sanctions on political actors where there is a system of political accountability that ultimately rests on the shoulders of the Prime Minister for the conduct of those individuals.

[The Chair, NDP, Pierre-Luc Dusseault]

Thank you for your answer.

[John Carmichael, Conservative, Don Valley West, ON]

Thank you very much.