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Morneau conflict-of-interest controversy has damaged the reputation of an office meant to reassure Canadians

This is the last time a federal politician can try to hide behind the ethics commissioner.

On Thursday, Finance Minister Bill Morneau went to see Ethics Commissioner Mary Dawson because, he said, he wanted to reassure Canadians. He sought to kill off the allegation he might enrich himself in government by promising that he'd donate to charity the profits from the sale of shares in the company he once headed, Morneau Shepell.

The donation might reassure Canadians. But meeting with Ms. Dawson shouldn't. That's where the problem started.

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It was Ms. Dawson's office that said there was a loophole in the law that meant Mr. Morneau did not have to sell his shares, or put them in a blind trust. It was bad advice and Mr. Morneau made a bad decision in taking it.

Because Mr. Morneau didn't hold the Morneau Shepell shares personally, but rather through a private corporation, Ms. Dawson's office said, the Conflict of Interest Act didn't require that he automatically divest them. Mr. Morneau didn't legally own them, she reasoned, his company did. That's the way Ms. Dawson interpreted the law.

Several experts in corporate law contacted recently think she's wrong and there is no such loophole: If Morneau Shepell shares are "controlled assets" that must be divested, they said, then so is the private corporation that holds them. One, Mohamed Khimji, the David Allgood professor in Business Law at Queen's University, said Ms. Dawson's interpretation is debatable.

"You can make that argument. I don't agree with it," Prof. Khimji said. He said he'd have advised Mr. Morneau to comply with the intent.

It's not just a quibble over legal points with Ms. Dawson, herself a lawyer. Ms. Dawson wrote a report faulting a CRTC commissioner for not returning flowers and chocolates from a radio station, but the Morneau case showed a failure in enforcing the basic purpose of the conflict of interest rules. Those rules, and the ethics commissioner, are supposed to reassure Canadians. Now they can't.

Ms. Dawson is effectively the chief compliance officer for the federal conflict of interest regime. She decided, based on a narrow, debatable interpretation, that the law has a massive flaw that defeats its purpose: A public office holder can dodge the key requirement that they divest assets whose value could grow or shrink because of a government decision, just by putting the assets in a private corporation.

Yes, Ms. Dawson flagged that as a flaw in the law that should be amended, in a 2013 submission to a committee reviewing the legislation. But she didn't tell Mr. Morneau to comply with the intent of the law. And she could have.

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Her office sent Mr. Morneau a letter saying flatly that he didn't own any "controlled assets" that must automatically be divested. Again, that's at best a debatable interpretation of the letter of the law.

But the economic reality was that Mr. Morneau owned the Morneau Shepell shares, and that letter should have recommended he sell them to comply with the intent of the law. She should have insisted: The law gives her power to order an asset be divested if it creates a conflict.

It's hard to believe Mr. Morneau entered politics to enrich himself. So far, the allegations that he made decisions to boost Morneau Shepell shares seem stretched. One was that his small-business tax proposals would encourage the use of individual pension plans, or IPPs, sold by Morneau Shepell; but the company said only $265,000 of its $592-million in revenues came from IPPs. Ottawa gave a loan to Bombardier, a Morneau Shepell client, but the company says it has 20,000 clients, and no one client will have a material impact on the bottom line.

But the public isn't supposed to have to judge that. The Conflict of Interest Act is supposed to make public office holders divest assets whose value could be affected by government decisions.

Instead of telling Mr. Morneau to do that, Ms. Dawson told him to set up an ethics "screen," whereby an aide ensures he isn't involved in decisions that could create a conflict, raising all those questions. Such screens aren't in the legislation; they are something designed by Ms. Dawson's office. Worse: Mr. Morneau had to publicly declare he owned the Alberta holding company, but Ms. Dawson's office did not require that it stipulate that what it held was Morneau Shepell shares.

That's not reassuring. Ms. Dawson has been in the job a decade and she's soon to be replaced. But now no politician can expect Canadians to have confidence when they say they've done what the ethics commissioner recommends – not until everyone knows the law is clear and the ethics commissioner is clearly enforcing its intent.

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