Procedure and House Affairs Committee on June 7th, 2007

[Yvon Godin, NDP, Acadie—Bathurst, NB]

Thank you.

[The Chair, Conservative, Gary Goodyear]

Merci.

We're on our second round of questions, so I'll just remind members it's five minutes this time.

Five minutes, please, Madam Redman.

[Karen Redman, Liberal, Kitchener Centre, ON]

Thank you, Mr. Stockfish.

I have to ask the question—and I think everybody does when they say your name—but do you ever get called Fishstock?

[Mike Stockfish]

Yes!

[Karen Redman, Liberal, Kitchener Centre, ON]

I keep looking at your name and think, “Now, say it right.”

I really appreciate some of the enlightenment you can bring us from Ontario with your having a track record.

Quite frankly, I have read Bill C-54, and I wonder what the government is trying to fix with this. It may be what Monsieur Godin was trying to get at a little bit. If somebody defaults on a loan and is a candidate, do the members of the riding association then become personally liable? I guess that's the hard part of it, if Bill C-54 allows riding associations to guarantee a loan.

The other issue I'd also like to cover off is floor crossing. You may or may not have had a lot of floor crossings in Ontario, but in our last election we had a Liberal candidate, Mr. Emerson, who crossed the floor to become a Conservative two weeks after the election. I see nothing in this legislation that would ever cover that eventuality. I can well appreciate that a riding executive of one party stripe would not want to be the guarantor and indeed be paying off the campaign loan debts of somebody who was no longer a member of that party.

So I guess I have a two-part question: who is liable in default, and have you covered off floor crossings at all?

[Mike Stockfish]

In terms of who's liable in default, I can repeat that if a candidate has a loan and that loan becomes the responsibility of the association because it's not repaid at the end of the campaign period—I should mention that certainly the expectation, the requirement, is that any campaign expense subsidy cheque that comes to the candidate would be used to repay any outstanding loans.

Regardless of that, if there are loans outstanding at the end, they do become the responsibility of the association. The individual officers are personally liable for those loans. I'm not sure, to be honest, whether that legally falls to those associations, whether they take on that responsibility, or whether it would become something that would be dealt with in a court of law. At our level, certainly it becomes a responsibility of the association.

That leads to your second question. Is it fair, if the person who incurred that loan and it becomes the responsibility of the association, that this individual is no longer aligned with—? I could offer you a personal opinion on it, but I don't think that's really appropriate. Whether there's legal recourse someone could take to deal with that, based on our legislation—the Election Finances Act—it would become the responsibility of the association. They may not be happy with it, but that's where it would lie.

[Karen Redman, Liberal, Kitchener Centre, ON]

One would assume it would have been the initial association for the party that the individual is a candidate for and not necessarily the existing association of the individual that then became a different party, right? It would be attached to the candidacy.

[Mike Stockfish]

Right.

[Karen Redman, Liberal, Kitchener Centre, ON]

This may not even be a fair line of questioning, given your specific area of expertise, but I have a real problem with the fact that we're going to be now putting financial institutions in the position of deciding whether or not certain individuals are a good risk as far as lending to them is concerned. For instance, if they don't pierce the requisite threshold—Say I'm the Brown Bread Party and I'm an independent or a small fringe party that may have a few candidates but never form government. I think we're putting the financial institution, then, in a position of saying whether or not this is a good financial risk and de facto saying whether or not I can exercise my right to participate in the democratic process.

I guess my other question to you would be this. Do you monitor abuses? Again, I would question what Bill C-54 is trying to fix. Does Elections Canada look at—? Do you have statistics—if you don't have them now, perhaps you could send them to us—of the number of defaults, the number of years that typically large—recognizing, again, that you have different donors and different donor levels? How long does it take most of them to pay back those loans? And again, I would agree it's probably the major parties that take up most loans.

[Mike Stockfish]

I do not have statistics with me. I can certainly try to provide to the committee where we have those statistics available. We don't track the financial activity in terms of defaulted loans. What we do on an ongoing basis is make sure that the information we're getting in those financial returns is current. So we certainly can provide statistics around how many, the size of loans, and how much was outstanding at any point in time, and give you some anecdotal evidence around the default issues. But it would only come to us if it were a compliance issue. If they became non-compliant, if that loan fell to the guarantor, that's really not our business, in terms of—We certainly want to make sure things are followed beyond that.

So it's an interesting question. Our job is to make sure that people are in compliance, and when they get out of compliance, they come back into compliance with the Election Finances Act. The relationship with their financial institution is their business. We just want to make sure there's no contravention of contribution limits, things of that nature. So it would be if it were a default on a loan and it became an ineligible contribution. That's where we would be most concerned.

[The Chair, Conservative, Gary Goodyear]

Just for clarity, though, I think Madam Redman has asked where you perhaps have statistics, you will undertake to provide them for us.

[Mike Stockfish]

Sure.

[The Chair, Conservative, Gary Goodyear]

Thank you very much.

We are on five-minute rounds. I saw Mr. Preston's hand go up first, although I did see Mr. Lukiwski's hand.

You guys can work it out, but I'm seeing Mr. Preston right now.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Thank you very much, Chair.

Mr. Stockfish, what you're saying is if it defaults from a candidate to a riding association, and an individual is guaranteed.... Let's start with an individual who is guaranteed a loan and it goes into default. You're suggesting they have two different ways of dealing with it. One is to take the default and then over a period of years take the contribution to the limit against that default, or to leave it as a loan and expect that the riding association will over time continue to make payments against that, as you said, in a reasonable attempt to repay.

So you're saying there are two different ways it could be dealt with?

[Mike Stockfish]

Yes, and we need to be clear. There's a difference between a loan defaulting and a loan being assumed, so in the event that a candidate has a liability at the end of the campaign, it's not defaulted; it would be assumed by the constituency association. So it may be that the financial institution, if that's who the loan was—

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Yes. I'm speaking more in the case of a guarantor of an individual.

[Mike Stockfish]

If a loan has a guarantor and that loan is called by the financial institution, it defaults, then the guarantor has those options.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

So under Ontario election finance law, there are two options. I'll leave the loan in place hoping the riding association comes back into money and I'll get repaid, or vice-versa.

I recognize this is a question probably more for financial institutions, but it has been my experience that not-for-profit organizations—and I guess we can count electoral districts or constituency groups to be those—for the most part require some sort of personal guarantee by the directors, on lines of credit or on establishing borrowing. Back to what Mr. Godin was asking, that would make them personally liable if they have signed a guarantee on behalf of the riding association. Does the same thing apply if the loan is not repaid and goes into default? Then those are contributions by the members who have guaranteed the loan? Do they then become contributions, or can they be taken that way, is the question?

[Mike Stockfish]

So if a—

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Five members of a riding association guarantee a loan. They would personally have to because it's not for profit—

[Mike Stockfish]

Right. The loan goes into default—

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

The loan goes into default, and those five members who have been taken to—

[Mike Stockfish]

Right. So in that situation, those five individuals would have—the association would owe them those funds, their share of that—

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

So they could do either, take it as a loss and then wait for the organization to get money.

[Mike Stockfish]

They can't waive that loan. If they waive that loan and say they don't have to be paid back, then that becomes a contribution.