In and Outright Hypocrisy?

The Liberals have been trying to make gains from the so-called “In and Out scandal” in which they allege impropriety in the transfers of money from local Conservative election campaigns to the federal campaign for the purposes of funding national advertising.

Transfers of money from local to federal campaigns is of course legal as all parties do this (there is even a category for it on Elections Canada returns that all candidates, EDAs and political parties must file). Indeed, the Conservatives and the Liberals have a different tradition here: The Conservatives send their EDAs 10% of all the money the national party raises, and the Liberals tax their EDAs 40 some percent of their candidate’s Elections Canada refund. However, it is the channeling of local cash to the federal party to pay for advertising where the Liberals see red in the Tories’ blue campaign.

One of the most vocal critics of this alleged scheme has been Liberal MP Marlene Jennings of Notre-Dame-de-Grâce–Lachine. Here is a quote of hers from the House of Commons:

Mr. Speaker, the in-and-out financing scandal implicates at least six Conservative ministers, like the public safety minister and the foreign affairs minister. Their response? Dead silence.

The member for West Vancouver–Sunshine Coast–Sea to Sky Country [Blair Wilson] did the right thing. At the very first hint of any questions about his campaign he stepped aside so he could clear his name.

The independent investigation into the Conservative scheme has not been completed. Will the government demonstrate true leadership and demand resignations from its six ministers?

Let’s take a closer look at Jennings’ 2004 and 2006 Elections Canada filing:

jennings2004.jpg
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and 2006:

jennings2006.jpg
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Jennings’ 2004 election return shows a $300 expense for advertising paid to the Liberal Party of Canada and a $1500 expense for the same paid to “The Federal Liberal Agency of Canada”. The 2006 return shows a $11,206.86 expense for advertising paid to the Quebec wing of the federal Liberal Party.

The Liberals have alleged impropriety in the Conservative practice of transferring money from local campaigns to federal campaign for use by the federal campaign for “advertising”. Here, we see Jennings transferring sums of money to both the federal party and Quebec wing of the federal party for “advertising”. What sort of advertising services did the LPOC and LPOC(Q) provide for Ms. Jennings? It should be noted that Jennings also declared expenses that her campaign paid to her riding association for advertising, so what of these similar expenses paid to national HQ? Did Jennings pay the party to produce Marlene Jennings specific advertising, Quebec regional advertising or national advertising? What is the difference between each of the three if they were paid for by the official agent for Marlene Jennings?

When you look at other Quebec campaigns it appears that more than a few Quebec Liberal candidates including Stephane Dion bought about $11,000 or $4,900 of advertising from the Liberal Party of Canada in Quebec.

Is the LPOC an ad-agency or did they purchase advertising for their candidates like the Conservatives bought for their Candidates?

Of course, in my opinion, no laws have been broken here and if this shows that the Liberals were also involved in a so-called (by them) “In and Out scheme” the only things they are guilty of is hypocrisy.

Furthermore, why was this practice given a green light in the past for the Liberals by Elections Canada when it now raises questions by the federal agency. Are not all parties equal under the law?

Questions for Garth Turner

Sunday night, I broke the story that Garth Turner, Liberal MP for Halton was collecting funds from donors into a trust. As specified by Elections Canada, trusts are generally forbidden as one cannot pay out of a trust the many donations that went into a trust. Check the full story here.

Garth’s response was both predictable and unpredictable. Predictably, he alluded to some well-organized conspiracy that was out to get him and immediately claimed victim status. Unpredictably though, he acknowledged his mistake and has taken steps to significantly reconfigure how he will be collecting money in the future. However, there are significant questions that remain.

  • Since this comes on the heels of Liberal questions in the House about election spending, they have much to do to get their own campaign finances in order. This week, we’ve seen apparent campaign finance discrepancies by Bonnie Crombie (more on that soon), Blair Wilson and now Garth Turner. How can they criticize the Conservatives before they sort out their own affairs?
  • Since many cheques to Garth Turner were made out to “Garth Turner Campaign, in trust”, does this mean that he’ll have to return all of that money? All cheques should have been made out to the “Halton Federal Liberal Association”.
  • In April of this year, Garth held a fundraising event with former Liberal leadership candidate Ken Dryden. Garth wrote:

    “Tonight was also an important milestone in my local election campaign. We exceeded our fundraising goal and, in the past three weeks, have raised five times more funds than the local Conservatives did in an entire year. All those bag signs, arterials, stakes, wire frames, ties and pounders in my garage are now paid for in full. We have cash in the bank � enough to get seriously and immediately ballistic the moment the writ is dropped.”

    Ballistic or busted? Were these fundraising efforts for naught? If that campaign materials was purchased by a private account and not the one held by the Federal Liberal Riding Association, Garth cannot use these campaign materials.

  • This represents a huge oversight by Dion’s new czar of fundraising. Does this represent poor judgment on behalf of the Stephane Dion? Will Garth resign this position? What can be said of the fundraising health of the Liberal party if Garth has been directing it?
  • Garth claims that he transferred money from a business account to the Liberal Electoral Association. Last time I checked, this is not allowed. Ironically, Garth criticizes the Conservatives for transferring money between EDAs and the federal party (which is allowed). “In and Out” is it called? Or is this “Out to In”? I’ve lost track.
  • If the Liberal Electoral Association accepted money from this business account (as Garth claims) they would also seem to be in violation. Could this association become de-registered by Elections Canada?
  • Garth is right in that being an independent can be tough. Independents do not have riding associations (EDAs). They can raise money, but they cannot issue tax receipts. Garth writes:

    “When Mr. Harper threw me out of caucus, I sat as an indie for a number of months, during which people sent me money because they took pity on my soul”

    I hope these people don’t expect to get tax receipts. But really, now that Garth is a Liberal, what is the status of this money? He can’t transfer money from this “business account” (in trust) to the Liberal EDA.

  • What are the consequences of this oversight? If this gets investigated, will Garth step aside? Will Dion ask him to step aside?
  • In a past life, wasn’t Garth a finance guru? Wasn’t he Minister of National Revenue? Is this mistake oversight or a sophisticated financial operator pushing the envelope?

What is Garth Turner doing?

As Halton MP Garth Turner stands in the House of Commons and acts offended by the so-called “In and Out” scandal with which the Liberals are trying to tar the Conservatives, he may want to check his own behaviour as his own financing may be in question.

On Garth’s website, where you can donate, the following information appears:

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There are two questionable items in this information, particularly:

  • Cheques are to be made out to “Garth Turner campaign, in trust
  • Garth is promising tax receipts for donations made in this way

From Elections Canada, we learn that:

…as of June 12, 2007, as a result of changes made by s. 44(2) of the Federal Accountability Act to s. 404.2 of the Canada Elections Act, transfers of trust funds to candidates from registered parties and registered associations will be prohibited.

It seems that when an election is called, the federal accountability act prohibits the transfer of money from an electoral district association’s or party’s trust fund to a candidate. If this is so, who holds this money in trust? Is it “Garth Turner campaign” (whatever that entity is) or “Garth Turner”? If the account is to be used to elect Garth Turner, it would be useless for the EDA to hold it because of the new changes governed by the FAA. But yet, outside of an election, all funds must be donated to the EDA.

furthermore (from Elections Canada),

A contribution made from a trust fund is treated as a contribution from the trustee.

When a registered party, registered association, candidate, leadership contestant or nomination contestant receives a contribution paid out of funds held in trust, the trustee is reported as the contributor and the contribution counts towards his or her contribution limit.

Therefore, only a trustee who is an individual may make a contribution from a trust fund.

So, Garth is encouraging people to write cheques to “Garth Turner campaign, in trust”. What does this mean? As is the general understanding, and confirmed by Elections Canada, funds held in trust become the property of the trustee. Contributions from trust funds are treated as contributions from the trustee. So, if a candidate were to able to transfer money out of a trust fund to fund their campaign, the maximum they could withdraw would be the maximum contribution amount allowable by an individual (ie. the trustee) per year, which is $1,100. If Garth collects $50,000 into a trust fund from donors, it becomes the property of that trust’s trustee and subsequently, that trustee can only give $1,100. But, can money even be transferred out of a trust (with many contributors) for the purpose of an election campaign?

Trusts are dubious because of the exchanging of money through an intermediary (the trust/trustee). For example, if I wanted to give a political party $100, I couldn’t give it to my friend to donate that money for me. My friend would have to do that in his name because he is the one handing over the money. Again, the nature of trusts is that the money held in trust becomes the property of the trustee and therefore contributing from that trust becomes a donation from the trustee and not the variety of individuals who gave money to put into that trust.

But, as we read on, this becomes clearer. Elections Canada states that indirect contributions are prohibited,

An individual may not collect funds from others in a trust for the purpose of making contributions to registered parties, their associations, candidates, leadership contestants or nomination contestants. (s. 405.3 Canada Elections Act)

This is because individuals cannot make contributions from funds given to them by others for the purpose of making contributions. This rule cannot be avoided by the individual collecting funds in a trust from which to make contributions.

The Liberals have been going on and on about money transfers from parties to candidates and from candidates to parties. Money transfers of this sort happen all of the time. However, according to section 404.2(2.2) of the Elections Act, this may not occur with respect to trusts.

A transfer of funds, other than trust funds, is permitted and is not a contribution for the purposes of this Act if it is

(a) from a registered party to a candidate endorsed by the party; or

(b) from a registered association to a candidate endorsed by the party with which the association is affiliated.

and according to Elections Canada,

A registered party, registered association, candidate, leadership contestant or nomination contestant may not avoid Canada Elections Act controls by collecting contributions directly in a trust fund.

Any such contributions remain contributions. They must be accepted by the relevant agent, put into the campaign account (*** ie. during a campaign, for a candidate as recognized by a returning officer during a writ period — Stephen ***) (if received by a candidate, leadership or nomination contestant) and reported as contributions.

Outside of a campaign, donations for the purpose of eventually electing somebody must be made to the Electoral District Association.

Why is Garth collecting money from his supporters into a trust?

Who owns (and therefore controls) the money in that trust since an EDA cannot transfer money from a trust to a candidate during a campaign?

How would a candidate expect to get more than $1,100 a year out of such a trust?

If a trust is made up of pooled money from a number of people, how can money be transferred to a campaign since indirect contributions are prohibited?

If during a writ period, only a campaign can issue tax receipts and if outside of a campaign, only an EDA can issue tax receipts, how can “Garth Turner campaign” hope to give tax receipts to donors as his website claims?

How much money has Garth Turner collected in trust?

UPDATE 10/29, 11am: Garth has changed his website. It now asks cheques to be made out to “Halton Liberal Association – Garth Turner Campaign”.

garth-donations-2.jpg

Will Garth have to return all of the cheques made out to the trust fund?

How will any donor to the trust receive a tax receipt?

What if he has already cashed the cheques and the money has already accrued interest?

Why was a trust fund set up in the first place?