Party of One (52 page)

Deloitte, which has received over $135 million in major contracts since the Conservatives came to power, was mindful of its international reputation. On June 18, 2013, New York governor Andrew Cuomo had announced that his administration had reached an agreement with Deloitte that would see the auditing firm make a $10-million payment to the state of New York and agree to a one-year voluntary suspension from consulting work at financial institutions regulated by the state.
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The firm would also agree to implement reforms designed to address conflicts of interest. In the US, Deloitte LLP consultants had hidden from regulators money-laundering details about Standard Chartered Bank’s
transactions with Iranian clients. The New York State superintendent of financial services said, “At times, the consulting industry has been infected by an ‘I’ll scratch your back if you scratch mine’ culture and a stunning lack of independence. Today, we are taking an important step in helping ensure that consultants are independent voices—rather than beholden to the large institutions that pay their fees.”

In April 2014, Deloitte was ordered by the court to pay $84.8 million in damages to Livent creditors. Justice Arthur Gans of the Ontario Superior Court ruled that as auditors of Livent, Deloitte failed to detect fraud at the company, even though there were plenty of warning signs that something wrong was going on by the end of August 1997: “The red flags were certainly aflutter by that time.” Had Deloitte detected the fraud, the firm could have refused to sign Livent’s improper financial statements, which were in turn used to solicit funds from investors.
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Just when it seemed that the Harper government’s credibility couldn’t sink any lower, the PMO was caught in another false assertion. Since May, the office had insisted to the RCMP that the emails of the prime minister’s legal advisor, Benjamin Perrin, had been erased. Those emails were crucial to understanding how deeply others were involved in the Wright/Duffy affair. CTV ran an anonymously sourced story that Perrin was involved in the negotiations between the PMO and Senator Duffy’s lawyer that eventually led to the secret payment. Perrin called the story false and subsequently hired a lawyer. The RCMP wanted access to Perrin’s emails to confirm or deny the report that the PM’s lawyer may even have drafted a memorandum of understanding between the PMO and Duffy. In May 2013, the PMO explained to lead RCMP investigator Corporal Greg Horton that it was policy to delete emails of staff who left the office. Since Perrin had left the office in April, his emails no longer existed.

Fortunately the RCMP kept asking for them. The PMO, as it turned out, was wrong on both counts. It was not policy to delete all the emails of departing staff members, only the “casual communications” or transitional ones. Perrin’s emails were available.
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Privy Council Office rules require that information with “business value” that accounts for the activities of government be kept. The PCO took responsibility for misinforming the prime minister about Perrin’s emails, which had been retained because of an unrelated pending court case. (It was possibly the privacy breach of 583,000 students when an external hard drive went missing at Employment and Social Development Canada.)

Liberal deputy leader Ralph Goodale wasn’t buying the explanation and asked a question no one on the other side could answer. “Who ordered the retention of Perrin’s files? Who had custody of them? Has that person been unconscious for the last six months?” The prime minister burned what was left of his credibility—it was not a bonfire.

According to documents released in June 2014 to Tim Naumetz of the
Hill Times
under the Access to Information Act, Perrin actually left his job in the PMO on March 27, 2013, the day after Wright’s payment to Duffy. Perrin had a crucial role in the negotiations. After the PCO found the emails on November 29, 2013, RCMP commissioner Robert Paulson was informed within two hours. Harper’s national security advisor Stephen Rigby was emailed first about the newly found Perrin documents. Other than the emails in Corporal Greg Horton’s November 2013 court affidavit, Perrin’s emails have not been made public. A source close to the investigation told me that Mike Duffy has a cache of over eight hundred emails involving Perrin.

During the federal by-elections, on November 25, 2013, Stephen Harper was in Winnipeg at the opening of an expressway,
and was asked by a reporter if either he or the PMO approved Irving Gerstein contacting Deloitte about the ongoing Duffy audit. “No,” he said, despite the fact that the whole country now knew that Nigel Wright had done exactly that. His director of communications later scrambled to once again “clarify” what the PM had said: “He had no knowledge of Gerstein’s efforts to contact Deloitte or that he had been asked to do it.” The leader who knew nothing continued to know nothing—evidence or no evidence.

For decades, the unelected Senate had been master in its own house, a rich pasture for party loyalists and more than a few Canadians of note. Now the anachronistic institution that costs Canadians $95 million a year was under the microscope of independent auditors, the RCMP, and the auditor general’s office. The results to date were disturbing. With all the revelations of corruption, and the fatal decision not to call principal witnesses to get to the bottom of the rot, the senators themselves guaranteed one thing: change was coming.

It exploded onto the political landscape on January 29, 2014. In a dramatic move that thrilled, angered, and befuddled, Liberal leader Justin Trudeau cut loose all Liberal senators from the parliamentary caucus. Henceforth, all senators who had been appointed as Liberals would sit as independents. Critics immediately speculated that Trudeau was trying to get in front of possibly damaging findings from the investigation of federal auditor general Michael Ferguson. According to the polls, most Canadians liked the idea, including voices from the West who saw Trudeau’s decision as a practical way to change the reformproof and unelected institution without starting a constitutional war.

Six days after Trudeau’s bombshell, the serpentine chain of events in the Senate expenses scandal snaked its way to a destination that had been inevitable from the moment investigators put a searchlight on an institution unaccustomed to outside scrutiny.
On Tuesday, February 4, at just after 11 a.m., RCMP assistant commissioner Gilles Michaud announced that Senator Patrick Brazeau and retired senator Mac Harb were each being charged with one count of breach of trust and one count of fraud under sections 122 and 380 of the Criminal Code.

In May 2013, Stephen Harper had called the Wright/Duffy affair a “distraction” involving two men. Nine months later, the Conservative Party hierarchy, the PMO, and the Conservative leadership in the Senate had been decimated. The executive director of the party, Dan Hilton, gone. The prime minister’s chief of staff, Nigel Wright, gone and under criminal investigation. Four senior PMO staffers, including the prime minister’s legal counsel, his director of issues management and his manager of public affairs—all gone.

On the Senate side, the government house leader in the Senate, Marjory LeBreton—gone. Gone too was LeBreton’s policy advisor, Chris Montgomery, one of the few people who wouldn’t go along with the PMO’s intervention in the Senate audit or reports about Duffy’s expenses. Gone was the chair of the Internal Economy Committee, Senator David Tkachuk, as was fellow committee member Senator Carolyn Stewart Olsen. Senators Duffy and Wallin—gone. Senator Brazeau—gone and facing multiple charges. Three other Conservative senators, including Hugh Segal, resigned from the Senate. The only two people who retained their positions who played intimate roles in the Wright/Duffy affair were Senator Irving Gerstein, chair of the Conservative Party Fund, and Arthur Hamilton, lawyer for the Conservative Party of Canada. In April 2014, the RCMP ended its investigation of Nigel Wright, saying the evidence “does not support” criminal charges against him. No explanation was given. The federal opposition sent a letter to RCMP commissioner Bob Paulson on April 24, 2014, asking several important questions,
including who made the decision not to charge Wright. NDP MP Charlie Angus wondered how the act of writing a secret personal payment to a sitting senator didn’t contravene the law: “If Mr. Wright’s actions did not cross this line, the average Canadian is justifiably left wondering where exactly the legal and ethical line is in Ottawa today.” In June 2014, Onex CEO Gerald Schwartz told Bloomberg News that Nigel Wright would be returning to Onex, posted to their London office.

The decision not to charge Wright was announced almost five months after the Perrin emails mysteriously appeared. In his November 2013 affidavit, Corporal Horton had attested that he believed Wright did, “without the consent in writing of the head of the branch of that government,” pay a reward or confer an advantage to Mr. Duffy. If the Perrin emails, or other documents that surface, contain written proof that the prime minister had consented to the deal, according to the law Nigel Wright has not committed an offence under the Criminal Code.

Mike Duffy was charged with thirty-one counts relating to fraud and breach of trust on July 17, 2014, and a press conference was called by the RCMP to lay out the charges. No questions were allowed from the media, “out of respect for the court process.” This was Stephen Harper’s Ottawa. Included in the charges was that Duffy “did for his benefit and without the consent in writing of the head of the branch of government of which he is an official, accept an advantage from Nigel Wright.”

Duffy’s lawyer, Donald Bayne, issued a statement that began with how difficult the last sixteen months had been for Mike and Heather Duffy, financially, emotionally, and for the senator himself, healthwise.
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Bayne was confident that when the full story was told, supported by many forms of evidence, “it will be clear that Senator Duffy is innocent of any criminal wrong-doing.” In his prepared statement, Bayne also said, “I am sure that I am not
the only Canadian who will now wonder openly, how what was not a crime or bribe when Nigel Wright paid it on his own initiative, became however mysteriously, a crime or bribe when received by Senator Duffy.”

The prime minister might yet find himself in a place where you get to tell your story only once and under oath—should Senator Mike Duffy make good on his promise to call Stephen Harper as a witness for the defence. Harper’s office was already ahead of the curve on that possibility. His director of communications, Jason MacDonald, said the prime minister does not intend to testify because he has no useful information to offer. MacDonald also said, “We have assisted the RCMP throughout their investigation, and congratulate them on the progress they have made. . . . Those who break the rules must suffer the consequences. The conduct described in the numerous charges against Mr. Duffy is disgraceful. As this is now a criminal matter before the courts we have nothing further to add.”
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Duffy is scheduled to appear in court on September 16, 2014, the day after MPs return to the House from the summer recess. And that means parliamentary privilege for the prime minister— just in case someone dares to issue a subpoena.

seventeen

PARLIAMENT ON THE BRINK

S
heila Fraser has a quality of dependability about her, of solidity—she seems like a person who would always show up with the heart medication on time, take care of the phone bill, remember to let the cat in.

It could be her roots. The eldest of six children, five girls and a boy, Fraser grew up on a farm in Dundee, Quebec. Life on a dairy farm includes a lot of chores, few of them optional. In those circumstances, it might be thought that getting an education would have been difficult for the future auditor general of Canada. In fact, just the opposite was true. The Frasers, who had worked the land for generations, valued education. Fraser’s parents, Ken and Lily, both had high school diplomas. Her father had always wanted to be a lawyer, and he satisfied his unrealized professional desires by entering politics, serving as a member of the Quebec legislature from 1966 to 1976. Meanwhile, the five Fraser daughters benefitted from the duties of their lone male sibling, Ken. It was the men
in the family who were expected to stay on the land, freeing the Fraser women to pursue higher education.

One of Fraser’s aunts, Doris Fraser, earned a doctorate from McGill University, setting the example for Sheila and her siblings. All six, including her farming brother, became professionals—three accountants, two doctors, and a lawyer. Fraser’s path to McGill began in a three-room rural schoolhouse, Dundee Consolidated, and passed through Huntington High. She decided to take mathematics in university, but it ended badly. Fraser contracted mononucleosis as a sophomore and failed her second year. She was “devastated.” On the advice of her family physician, Dr. Kenneth Cameron, she decided to try accounting. “The normal path then for a woman was a teacher or a nurse. Being an accountant and a woman was a very rare thing,” she told me. “While other kids were demonstrating against the war in Vietnam, I was learning to be an accountant.”

Today people talk about the glass ceiling restraining female executives. When Fraser was looking for a job after McGill, the problem was the front door. Women were simply not hired for what was considered to be a man’s profession. Fraser made a strategic adjustment. When applying for interviews, she began leaving out her first name and gender. “So when I walked into the room, you could see the shocked expressions.” The one firm that wasn’t averse to taking on female accountants was Clarkson Gordon, later Ernst & Young. When Fraser sat down at her desk in the firm’s Montreal offices, she wasn’t quite sure what she was getting herself into: the 150-person operation was overwhelmingly staffed by males. She became the first woman on the company’s audit team.

Things worked out well for both parties. Fraser joined the firm in 1972, and was promoted to manager four years later. Five years after that, she became a partner, only the second woman in the country to hold that position in a major accounting firm. Another
first awaited her in 1983. Fraser was the first female partner in the accounting business in Canada, the United States, and the United Kingdom to have a child. The professionals who were accustomed to toting up beans now had to take babies into account. The worldwide maternity policy for the accounting industry was kickstarted by the woman whose work would later run the Liberals out of office in the notorious Quebec sponsorship scandal.