The Morning Brief – 07.22.20

By Bruce Carson

NATIONAL ISSUES

Day 2 of the House of Commons Finance Committee Meetings dealing with WE Charity and agreement with Government of Canada

What did we learn?

Which issues remain unresolved?

Will these issues be resolved through the Committee process?

In three hours of hearings yesterday, the members of the House Finance Committee met first with the Clerk of the Privy Council, Ian Shugart and then with a panel composed of a labour lawyer, an expert on governance and the President of the largest public service union, the Public Service Alliance of Canada.

As is usually the case hearings such as these, they produce some interesting testimony, various opinions, divergent views and some surprises, and yesterday was no exception.

The question that confronts opposition MPs at this stage is whether they are getting close to finding out what happened and why, when a contribution agreement worth more than $900 million, with over $40 million in administration fees was awarded to WE Charity with close ties to Prime Minister Trudeau and Finance Minister Morneau?

Perhaps the most effective way to tackle the various matters raised is to deal with them as they arose.

Due Diligence

This was the first matter raised as questioning of Mr. Shugart began. It dealt with due diligence carried out by the public service regarding the contribution agreement and WE Charity which was going to administer the agreement.

For Shugart due diligence meant inquiring into the ability of the WE Charity to fulfil the terms of the agreement. Perhaps because the charity was going to be paid over $40 million to administer the contract those carrying out the due diligence exercise did not scratch the surface of the charity’s financial situation. If they had they would have found an organization in turmoil, having breached a bank covenant and with some members of its board of directors having resigned and replaced.

WE itself issued a release recently saying that it was carrying out a review of its governance structures and how the various arms of WE relate to each other.

None of this was revealed in the due diligence exercise and those carrying it out determined that WE had the capability of dealing with the contract and this morphed into WE being the only entity capable of carrying out the contract, a conclusion disputed by the head of PSAC.

Conflict of Interest and Trudeau and Morneau’s involvement in developing the Agreement

This was one of the more bizarre moments in yesterday’s meeting as Shugart claimed that every situation is unique and in this situation conflict of interest was not raised. He said there was “no particular provision for raising conflict of interest.”

Shugart added that he was aware of Trudeau’s involvement with the charity, referring to it as “well known.” He did not know about Morneau’s ties to WE. He said it did not cross his mind that anything had to be disclosed.

He said “I do not see a way that the prime minister or the finance minister responsible for public funds could not have been involved in the policy development and in the expenditure of finances on this scale.” This led to the discussion as to whether in Shugart’s mind there is a sliding scale of when conflicts should be disclosed. Contracts for smaller amounts would be treated differently than contracts for large amounts of money. And for contracts for large amounts it is actually crucial that Trudeau and Morneau be involved regardless of potential conflicts.

Shugart added that he makes no comment on the prime minister’s non-recusal. And he said he makes no judgement about the finance minister’s comments in that regard either.

Prime Minister’s Involvement –Cabinet Meetings

Shugart was unequivocal that the prime minister did not have any interaction with WE Charity in relation to this program.

However the prime minister was briefed before the cabinet meeting and at least on one previous occasion.

There were two cabinet meetings on the WE agreement, the first being with the cabinet COVID-19 committee and then with cabinet itself.

Mid-April Meeting

This was a meeting referred to by Minister Chagger in her appearance before the committee and it involved Michelle Kovarevi from Finance and Ms. Wernick. The question asked yesterday of Shugart was whether anyone from PCO attended the meeting and he didn’t think so but would check.

This may be the meeting where Kovarevi raised with Wernick and possibly with others that WE would be the organization that could deliver the student service grant program.

This needs to be pursued.

Discussions with the PMO

PCO held briefings with the prime minister on May 21 and perhaps earlier. Shugart says he did not personally discuss this contract with the prime minister but the prime minister was briefed on the suitability of a third party to deliver the proposal.

Cabinet Document

The Memorandum to Cabinet was signed by Minister Chagger as the proposal for WE to do the work came from her public servants.

Leading to this there had been discussions with Finance, Employment and Social Development, the Finance Minister’s office and PMO.

Part of these discussions dealt with the potential for a competitive process but it was determined that WE Charity was the only appropriate vehicle.

Ethics Commissioner

Shugart stated that he will cooperate with the Ethics Commissioner “within the bounds of my responsibility as Secretary to the Cabinet.” He was not pressed on what limitations his qualifier placed on the limits of his cooperation.

PSAC

Chris Aylward, national president of the Public Service Alliance of Canada made it quite clear that if the public service had been called upon to administer the student service grant program it could have done the work and saved the government over $40 million in administration fees.

There was no doubt in his mind that the public service could deliver on this agreement. He also made the point that he believed that the program was “seriously flawed.”

He said he has never received an explanation as to why the public service was excluded from delivering the agreement. He disputes any allegation that the public service lacked capacity.

Legal Issues

Joshua Mandryk, a labour lawyer with Goldblatt Partners was quite critical of the program arguing that it could expose participants to exploitation. He pointed out that the rate of pay was less than minimum wage and the program seems at odds with the government’s pronouncements to stop exploitation. He suggested that the program become part of the student summer jobs program.

Governance Issues

Daniel Lapointe, President of OSBL Consulting said that the program was breaking the true meaning of volunteerism, linking it with wages. Delivering such a program through a third party outside the public service could mean that standards for privacy, bilingualism and transparency no longer apply. There was also a concern that young Canadians could be exploited.

Outstanding Issues

One of the critical issues remains unresolved; the fact that on April 22 shortly after the program was announced by the prime minister, a complete proposal to administer and implement the program was delivered to Ms. Wernick by WE Charity. How could this occur without some degree of insider knowledge and what or who was at the origin of that knowledge?

While Shugart was clear that Trudeau had no advance discussions with WE, he can only recount what he knows, nothing more.

While Finance Minister Morneau will be at the Finance Committee this afternoon, the committee really does need to hear from the Kielbergur brothers next Tuesday and from the prime minister to find the answer to the matter raised by NDP MP Peter Julien “we don’t know who is driving this?”

The view of the application of conflict of interest as described by the Clerk has to be tested. Surely there is not a sliding scale for the application of the conflict rules depending on the size of the contract.

Members should dig into the mid-April meeting between Wernick and Kovarevi as that may be the time when WE Charity carrying out this agreement was first raised; if so, why WE Charity and not the public service? Was it at this meeting that the design of the program took shape in a form so that only WE could deliver it?

Did someone in a minister’s office or the PMO limit the due diligence search to exclude a dive into the financial issues plaguing WE?

Shugart was quite clear that all documents and correspondence would be turned over to the committee; members will have to ensure that this happens as the answer to many questions including the involvement of Trudeau and Morneau in the agreement and design of the program may be found in these documents and correspondence between Chagger’s office, PMO, PCO and Morneau’s office.

To Come


Today
  • CPI numbers for June to be released
  • House Finance Committee meets this afternoon with Finance Minister Morneau as a witness
July 23
  • House Government Operations Committee meets
  • FMM by teleconference
July 28
  • House Finance Committee Meeting with Kielburger brothers as witnesses
July 28-29
  • U.S. Fed meets
July 31
  • GDP numbers for May to be released