More Problems With Conflict of Interest Legislation Revealed in Recent Alberta Controversy

In prior posts, I have highlighted problems with conflict of interest (or ethics) legislation regulating politicians in Canada. In particular I have commented on how legal privilege (for example cabinet confidence in the SNC Lavalin controversy) thwarts investigations. I have also highlighted the loophole in ethics rules (and their interpretation by some commissioners) that exempt political gain as an interest that may conflict with a member or Minister’s duty to serve the public interest.

A recent controversy in Alberta politics has exposed more loopholes in ethics rules. Part of that controversy was that Alberta Health Minister Shandro, who is in the process of making cut backs to health services, has personal interests in a supplementary health insurance company called Vital Partners, that could potentially gain from those cutbacks. Those personal interests are his holdings in the company (which he has placed in a blind trust of which he maintains a beneficial interest but does not control) and that his wife is co-owner of the company.

So far, it is not clear if Vital Partners stands to gain from decisions that have already been made by the Minister. Still, neither the government nor the ethics commissioner has forward to assure Albertans that proposed cuts will not benefit supplementary health providers like Vital Partners.

Nor has there been any assurance that when Mr. Shandro is put in a position where this might happen, a conflict screen is in place to disqualify him from participating in that decision.

Rather, the government has asserted that the Minister’s compliance with financial disclosure and divestment rules, including placing his own Vital Partners holdings into a blind trust, shows he is not in a conflict of interest.

It does not. Disclosure and blind trust rules stand as independent obligations under the Conflict of Interest Act and tell us nothing about whether, in fact, a Minister has acted in a conflict of interest in any particular decision that he/she has made. For example, what if a decision is to be made about delisting an AHIP insured service that is also on offer by Vital Partners? Surely that would be perceived as a conflict of interest since the Minister will benefit from the decision once he leaves politics.

Alberta’s Conflict of Interest Act, like legislation in other Canadian jurisdictions, has two rules for these types of situations. Rule 1 is that a Minister must not participate in a decision that he knows might financially benefit him, his spouse or other close connection. Rule 2 prohibits the Minister from actually using his power or influence to further such private financial interests.

There are two huge loopholes to these rules through which one could drive the proverbial truck. One is that it does not apply to decisions involving holdings put in a blind trust, as Minister Shandro has done with his interest in the company. But that still does not prevent the ethics commissioner from investigating whether a Minister’s spouse has financially benefitted.

The other loophole is that these rules do not apply to matters “of general application”. This means across the board policy decisions – such as delisting of services – are exempted from conflict of interest rules.

But even with this loophole all is not lost in the Shandro case. The federal ethics commissioner faced a very similar situation when dealing with Finance Minister Bill Morneau’s budget policy decision to change pension administration rules a couple of years back. Those rules benefited Morneau’s former company, which he had also put into a blind trust.

Like Alberta, federal conflict of interest legislation has a “general application” loophole but this did not prevent the ethics commissioner from investigating.

And while Minister Morneau was ultimately absolved, we learned from the investigation that the policy decision in question both originated from the previous Harper government and was proposed to Morneau by senior department officials. We also learned that a conflict of interest screen was in place to prevent Morneau from making decisions that would impact his former company. The investigation, as far as it went, was reassuring.

Ethics commissioners investigate troubling conflict of interest allegations even when it appears on the face there is likely no violation – like in Morneau – or even when there is absence of jurisdiction – like the second Tobbacogate investigation long after Alison Redford had exited politics. They do so because answers are needed in such cases to help maintain and build public confidence in government institutions.

Alberta Ethics commissioner Trussler should investigate Minister Shandro for potential conflict of interest for past decisions and assure us that screens are in place so that he does not participate in future decisions that could benefit Vital Partners.

The gigantic loopholes of exempting ethics review involving interests “of general application” or that involves interests placed in blind trust, are a joke. There is no rationale that suggests a Minister can not – in any given case – have their judgement influenced by personal interests in these situations. Those loopholes should be closed.