Infrastructure bank susceptible to ‘political interference,’ ex-banker says

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The former president of the Business Development Bank of Canada, who butted heads with Prime Minister Jean Chrétien over the "Shawinigate" affair, is warning that the government's proposed $35-billion infrastructure bank needs stronger protection from political interference.

As MPs begin consideration Monday of possible amendments to the government's budget bill that creates the infrastructure bank, François Beaudoin said changes should be made to ensure bank leadership will have enough independence to resist political pressure.

As the legislation is currently written, the infrastructure bank CEO and its board of directors can be removed at any time by cabinet. That is a weaker level of protection than currently exists in legislation related to executives of similar bodies, including the BDC, the Bank of Canada and the Canada Pension Plan Investment Board. Legislation governing those three institutions all say that executives can only be removed "with cause."

Mr. Beaudoin said he felt compelled to contact The Globe and Mail in the hope of raising concerns about the infrastructure-bank legislation before it is passed into law.

"My conclusion is the governance of the CIB as it stands is not acceptable and we should have learned from past experience," he said, adding that he is supportive of the general concept of the bank. He said MPs should amend the legislation so that executives can only be removed with cause.

"This is essential to provide a new CEO with the room to manoeuvre if ever – and I'm not saying it's going to happen – if ever there is political interference," he said.

Mr. Beaudoin led the development bank from 1993 to 1999, covering a period that included what was known as the "Shawinigate" controversy involving former prime minister Mr. Chrétien. The issue involved lobbying efforts by Mr. Chrétien to the bank in support of a loan to a businessman in the prime minister's riding that critics said would have benefited Mr. Chrétien financially.

In 2004, Mr. Beaudoin won a wrongful dismissal suit against the BDC. The presiding judge accused the BDC of waging a campaign to ruin Mr. Beaudoin's career that was marked by "ferocity, even nastiness."

The career banker currently sits on a number of corporate boards.

The BDC is a federal Crown corporation that provides loans and equity to Canadian businesses. It had a connection to what was known as the Liberal sponsorship scandal, a controversy that involved government contracts going to firms based on donations to the federal Liberals for little actual work.

Mr. Beaudoin provided testimony as part of Justice John Gomery's public inquiry into the scandal. Mr. Beaudoin testified that Mr. Chrétien's chief of staff, Jean Pelletier, suggested he should hire Jean Carle, who had been a senior Liberal aide, to a management position at the BDC. Mr. Carle was hired as the bank's executive vice-president. Mr. Beaudoin said Mr. Carle suggested the bank should use "dry-cleaning methods" in order to hide expenses such as the purchase of box seats at Montreal's Molson Centre. Mr. Beaudoin testified that he rejected the plan. He said he also accused Mr. Carle of insubordination, which he believes led to the revoking of his management authorities in 1999.

Mr. Beaudoin said his experience shows the challenges that occur when politicians and their aides want to get involved in the decisions of Crown corporations designed to be at arm's length from government. He noted that that even though his position at the BDC came with stronger protection than currently exists in the infrastructure-bank legislation, he still faced problems.

"It's not foolproof," he said.

Finance Minister Bill Morneau has expressed a general openness to amendments as his budget legislation is studied by MPs and senators. However, he has not said whether he would support any specific amendments.

"Our bill is being carefully studied by the [Finance] committee and we welcome all voices to this debate," said Mr. Morneau's spokesperson, Daniel Lauzon, in an e-mail. "It's not my place to comment on possible amendments, but we're confident our legislation is the right one for the bank, which we believe will help create jobs, and strengthen communities by getting projects built which would otherwise not get built."