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Integrity Scorecard

By Glen McGregor

As a Conservative Party candidate in Canada's 2006 federal election, criminal lawyer Sam Goldstein was considered a long shot to become a Member of Parliament (MP). His urban electoral district in Toronto had leaned toward left-wing or centrist candidates in the previous four elections. Goldstein's opponents included a three-term incumbent MP and a popular former city councilor.

Goldstein's campaign didn't begin with much money to spend. Partway through the campaign, however, his camp was involved in a financial transaction that would pique the interest of Elections Canada, the agency that supervises the country's federal elections.

The Conservative Party's national campaign in Ottawa transferred Can$49,989 (US$47,758) into Goldstein's campaign account on December 28, 2005. The funds didn't stay there long. Six days later, all the money was transferred back to the party. The reason for the transaction was listed a broadcast advertising purchase.

As expected, Goldstein was badly defeated in the election. Still, the Conservative Party won a narrow national victory, which saw its leader, Stephen Harper, sworn in as the 22nd Prime Minister of Canada.

A campaign platform built on shaky ground

More than two years later, on a sunny Tuesday morning in April 2008, investigators from the Commissioner of Elections office made a surprise visit to Conservative headquarters in downtown Ottawa. Officials were accompanied by forensic specialists from the Royal Canadian Mounted Police (RCMP), and they had search warrants. The allegation? That the Conservative Party had broken the rules during the election that brought the party to power.

Investigators were looking into claims that the party had manipulated election finance rules by using a series of wire transfers. These transfers — allegedly coordinated by officials at Conservative headquarters — moved money between the party's national campaign and the bank accounts of 67 of its candidates, Sam Goldstein among them. Boxes of documents and computer equipment were taken during the raid.

It is ironic that Stephen Harper and the Conservative Party found themselves accused of breaking rules in an election campaign that they had won for their promises of more government integrity and ethical behavior.

The previous years under Liberal Party rule were marred by a corruption scandal that saw about Can$150 million (US$143 million) given to Liberal-friendly marketing and advertising firms, sometimes for no work. The money was supposed to be spent to raise awareness of Canada in Quebec after voters there narrowly defeated a referendum to secede from the country.

During the campaign for the 2006 elections, Harper and the Conservative Party capitalized on this scandal. Their campaign platform promised a comprehensive overhaul of government ethics. The Conservative government's first piece of legislation after the election was the Federal Accountability Act. This law included tighter rules for lobbyists, a ban on corporate and union donations to political parties, and provisions to protect whistle-blowers who expose government wrongdoing.

Your tab or mine? The in-and-out affair

Canadian law caps the amount of money a political party can spend during an election campaign. There are also separate limits for each candidate in all of the nation's 308 electoral districts.

According to Elections Canada, the Conservative Party shuttled money into candidates' campaigns. Those campaigns, like Sam Goldstein's, then turned around and moved the money back to the national party as radio and television advertising buys. In most cases, the money from the party flowed into the candidate's accounts for only a few days before it was sent back. These transfers gave the controversy its name: the "in-and-out" affair.

Using these transactions, the Conservatives appear to have passed on the cost of Can$1.3 million (US$1.2 million) in advertising expenses to its candidates. The total amount was not particularly large by campaign advertising standards. However, who claimed the cost was critical. If the advertising dollars were claimed as expenses by the national Conservative Party, it would have exceeded the Can$18.3 million (US$17.4 million) spending limit. But by having individual candidates say they spent the money, the national party would be in the clear.

Breaking the election spending cap is a serious breach of the elections law, punishable by fines or even prison terms for guilty officials.

The Conservatives said the transactions were perfectly legal and were practiced by candidates of other political parties, including the Liberals. Goldstein denied any wrongdoing. The Conservatives brought a lawsuit to the Federal Court of Canada accusing the Chief Electoral Officer of misinterpreting the law.

Elections Canada referred the "in-and-out" matter to the Commissioner of Elections, an investigative officer who probes alleged violations of the elections law and who can ultimately pass the case on to prosecutors who can press charges. It was on the election commissioner's behalf that officials raided Conservative Party headquarters.

The brash move angered Conservative MPs, who alleged that Elections Canada was biased, even though it was supposed to be a neutral agency.

But more questions were arising about the Conservative Party's ethical conduct after a biography of a former MP hit bookstores.

A dying man's recollections

Shortly before his death from skin cancer in 2005, Chuck Cadman, an independent MP, cast a crucial vote in Parliament to keep the governing Liberal Party's minority government in power. His one vote could have brought Parliament down and forced a new election, with the possibility of a new ruling party.

In a posthumously published biography, Cadman's wife says her ailing husband had been offended by a Conservative Party strategist's offer before the critical vote. She says Cadman told her, sometime later, that Conservatives had privately approached him with an offer of a Can$1 million (US$955,292) life insurance policy in exchange for his help bringing down the government.

If the story in the biography is true, other political parties said, the offer of life insurance to a terminally ill man was an attempt to bribe an elected official into changing his vote.

Conservatives denied there had been any life insurance offer made. They pointed to recorded television interviews conducted with Cadman before his death in which he said he'd been offered no enticements to change his vote. An RCMP investigation found there was no evidence to support the bribery charges.

The Conservatives brought a libel lawsuit against the Liberal Party for alleging their leader, Stephen Harper, knew about Cadman's bribe offer.

Airbus or ethics bust?

While the Conservatives attempted to manage their own ethics eruptions, the conduct of a past prime minister with ties to the Conservative Party came under renewed scrutiny in 2007.

For several years, the Canadian government had been trying to extradite former arms dealer and lobbyist Karlheinz Schreiber to Germany, where he faced charges of bribery, fraud and tax evasion.

In 1995, Schreiber emerged as a key figure in an investigation into the national airline's (Air Canada) purchase of 34 Airbus passenger jets during the 1980s. Of particular interest was Schreiber's relationship with Canadian politicians, including that with former Prime Minister Brian Mulroney, leader of the Progressive Conservative Party of Canada, which later amalgamated into the current Conservative Party.

In 1995, two years after leaving office, Mulroney filed a libel suit against the Liberal government that succeeded him. Mulroney claimed his reputation had been damaged by a letter sent by Canadian Department of Justice officials to Swiss authorities seeking banking information. The letter said Mulroney was being investigated for allegations that he had taken bribes for the Airbus purchase. The Liberal government eventually apologized and paid Mulroney Can$2.1 million (US$2 million) in compensation.

With his extradition looming in 2007, Schreiber went public with new allegations about his past relationship with Mulroney. Schreiber claimed he had paid the former prime minister Can$300,000 (US$286,443) in cash for Mulroney's help selling light-armored vehicles made by a German company.

Mulroney appeared before a parliamentary committee in 2007. He admitted he had taken cash from Schreiber but only after leaving office. It was, Mulroney said, "the second-biggest mistake of my life," second only to agreeing to be introduced to Schreiber in the first place. Mulroney insisted the transactions were entirely legal and unrelated to the purchase of Airbus jets. Mulroney said that Schreiber had paid him Can$225,000 (US$215,341) as compensation for promoting the armored cars with world leaders, including Russian President Boris Yeltsin and French President François Mitterrand.

Although some observers considered Mulroney's explanation exculpatory, by the time he testified, Prime Minister Harper had already commissioned a public inquiry to look into Mulroney's dealings with Schreiber. Hearings were scheduled to begin in the fall of 2008. The government agreed to let Schreiber stay until to give testimony.

Canada's ethical reputation

The defamation lawsuit over the Cadman affair remains unresolved, and lawyers continue to argue the sometimes arcane complexities of relevant elections law in the civil lawsuit over the "in-and-out" transactions.

Meanwhile, Canadian officials who executed search warrants at Conservative Party headquarters continue their probe into the financing of the 2006 election campaign. The investigation could clear the Conservatives of any wrongdoing, or it could result in charges. The final legacy will be Canada's long-standing reputation as a country with free and fair elections.