The bagmen

Are lax federal election fundraising rules letting corporations call the shots with governments?

By: Bruce Livesey
Originally published by eye Weekly in Toronto (www.eye.net)

  Ben Hutzel is not a household name, but if Jean Chrétien's Liberals sweep back into power on Nov. 27, the prime minister can thank Hutzel more than anyone else. The fast-talking Toronto lawyer is the party's chief fundraiser, the man who ensures that corporate Canada gives the Liberals millions of dollars to spend at election time.
  Asked whether those donations come with strings attached, Hutzel says, "No one ties their contribution, as far as I am aware, to specific requests that things be done a certain way." Nevertheless, the role of political fundraisers is controversial - fundraising scandals have plagued both the Chrétien and Mulroney governments - and in the lexicon of politics, Hutzel is a bagman, with all that the label infers.
 

"Old schoolmates" pay millions to cronies to curry favour with parties in power

  Because running for office is exorbitantly expensive, fundraisers are critical to the political process. In this election alone, the parties will raise - and spend - more than $40 million. Finding that sort of cash means getting to know a lot of rich people, and fundraisers are usually lawyers, lobbyists or businesspeople whose value lies in the breadth of their Rolodexes and connections to the establishment. "Quite often you know these people because you're dealing with them on business transactions," explains Hutzel, a mergers and acquisitions lawyer with the Bay Street law firm Bennett Jones. "Socially, in a variety of ways, they are old schoolmates."
  Other parties have fundraisers with similar ties - the Canadian Alliance's is Peter White, an executive with Conrad Black's Hollinger Inc., for instance, while the Conservatives' is Irving Gerstein, former chair of Peoples Jewellers and a director of Canada Post. The NDP and Bloc Québécois, by contrast, don't move in such rarefied circles.
  But is all this money-raising a truly transparent and benign endeavour? Critics point to enormous loopholes in Canada's election laws that allow money to be donated to parties secretly. Foreign-owned Canadian-based companies can also make contributions - raising fears that they are garnering political leverage. And many feel corporate donors are only generous because they want tax breaks, subsidies, government contracts and friendly policies. Meanwhile, fundraising scandals and the perception of improprieties persist.

GOLD-PLATE SPECIAL

  How do the federal parties raise money? Direct-mail solicitation is one way; another is asking powerful friends to write cheques. Jeff Lyons, a prominent Tory fundraiser, once said he hits up people like Hal Jackman (Ontario's former lieutenant-governor), Doug Bassett (CEO of Baton Broadcasting) and Ted Rogers (CEO of Rogers Communications) for cash.
  But the biggest source of money, according to Hutzel, is the fundraising dinners, held throughout the year in cities with robust business communities. Parties sell seats at these shindigs for steep prices. For example, next month's annual Prime Minister's Confederation Dinner at the Westin Harbour Castle costs $600 a plate. "The prime minister is a very important fundraising attraction," notes Hutzel.
 

Corporate donations through riding campaigns amounts to a multimillion-dollar loophole

  The amount of cash raised at these dinners is impressive. Last month, the Alliance held a jam-packed fundraising dinner at the Metro Convention Centre with Stockwell Day. Tables were priced as high as $25,000, and a total of $1.7 million was raised. Many of Bay Street's elite were in attendance, including executives from the tobacco industry.
  During an election, the parties can spend up to $12.2 million apiece. In the 1997 federal election, 1,672 candidates received 121,160 donations totalling $38.6 million, of which 37 per cent came from individuals, 23 per cent from business, 19 per cent from party coffers and the rest from riding associations. But the parties must raise cash year-round. The Liberals raised a total of $14.6 million last year, compared to $6.4 million by the NDP, $6.2 million by the Canadian Alliance/Reform Party, $5.1 million by the Tories and $1.3 million by the Bloc.
  These totals are misleading, however, because of loopholes in the Elections Act. For one thing, money given to riding associations or individual MPs between elections doesn't have to be reported to Elections Canada. Aaron Freeman, a Straight Goods columnist and board member of Democracy Watch, an Ottawa-based non-partisan citizens' advocacy group, says this means enormous sums of cash are likely unaccounted for. "We are talking about a multimillion-dollar loophole," he claims.
  Furthermore, there's no limit on the amount each donor can give, and parties can raise as much as they want during and between elections - which appalls York University political scientist Robert MacDermid. "No limit on contributions is an invitation for the rich to influence government," he says. "Politically, everyone is equal, but if you have a society that is economically unequal and people who are wealthy can purchase political power, democracy is a dream that's not going to happen. The fact that there's no limit is disgraceful."
  The drawbacks of the loophole that allows foreign-owned, Canadian-based companies to make political donations were recently exposed by the "Sidewinder" controversy. In the early '90s, Brian McAdam, a Canadian foreign service official posted in Hong Kong, became alarmed at the number of organized crime syndicate "triad" members immigrating to Canada. At the same time, prominent Hong Kong-based tycoons - some thought to have ties to the triads - were investing heavily in Canada, as well as forging bonds with China's Communist government. McAdam concluded that the triads were establishing roots in Canada, while the Chinese government was hoping to use the tycoons to gather economic and technological intelligence.
  McAdam convinced the RCMP and CSIS to investigate, and in 1997 they produced a secret 29-page report entitled "Sidewinder," a copy of which eye has obtained. The report says the Chinese government and triads are trying to maximize their presence in Canada by buying into or setting up Canadian companies. "It is estimated that 200 Canadian companies have passed into Chinese influence or ownership since the early 1980s through the triads, tycoons or China national companies," it states.
  These companies include high-tech, real estate and hotel firms, as well as parts of one chartered bank and three large Bay Street brokerage houses (one of which Jean Chrétien worked for before he became Liberal leader in 1990). The report says the Chinese government may have used its relationships with the Hong Kong tycoons to gather important economic information about Canada, as well as wield political influence here.
  "These 'corporate' figures have become an influential presence on the political and economic landscapes of Toronto and Vancouver and at the provincial and federal levels," says the report. "The triads, the tycoons and the ChS [Chinese Intelligence Service] have learned that a quick way to gain influence is to provide finance to the main political parties."
  These Chinese-owned Canadian companies donate tens of thousands of dollars to the Liberals and Tories every year, and the Sidewinder report worries that the Chinese government is developing the potential to influence Canada's political scene. "China remains one of the greatest threats to Canada's national security," it concludes.
  Sidewinder was considered so sensitive, however, that it's believed to have been shelved. CSIS even went to the extent of destroying much of the material it was based on. "I think it was aborted because of political pressure from the PM's office," says McAdam, now retired and living in Ottawa.
  But a copy of the original report was leaked to the press earlier this year. Since then, CSIS and the Liberals have dismissed its contents as unsubstantiated or paranoid conspiracies. Still, at least two American experts on the triads say its conclusions support their findings.
  McAdam admits there's little evidence linking Chinese-owned companies with intelligence-gathering or triad activity. But he feels the whole matter requires more investigation, adding, "Anyone who looks at the problem has to be concerned about what's going on."

SHIFTING TO THE RIGHT?

  Who does give money to political parties, and what influence does it ultimately have? Overall, individuals give the most, but two-thirds of the money the Liberals raised last year - $8.6 million - came from the corporate sector. Among the party's top contributors were the Bank of Nova Scotia ($119,619), CanWest Global Communications ($87,173), Bombardier ($63,481), the Royal Bank of Canada ($61,565) and RBC Dominion Securities ($54,033). In fact, the financial industry is the biggest donor to all parties, with the Big Five banks and their brokerage houses donating $1.2 million to the Liberals alone in 1997.
  The Conservative party has always been successful in raising money from corporations, but now the Canadian Alliance is going to Bay Street seeking big cheques. Former Reform Party leader Preston Manning chided the business community at an Empire Club dinner in Toronto last year for not giving his party enough money in light of its pro-business policies. Since then, corporate donations to the Alliance have shot up.
  What impact on policy does this money have? "Corporate funding shifts the whole political spectrum to the right," maintains MacDermid. "[The business community] will fund parties favourable to it, and right now we have three of those."
  Freeman argues that the impact of corporate donations is to obtain access and goodwill to politicians. "Whether you're talking about the banks, pharmaceutical companies or defence companies, the major donors have the greatest stake in government decisions," he says. Earlier this year, Tory MP Jean Dube released a list of 70 companies in Liberal ridings that had donated a total of $150,000 to the party in 1997 and '98 - and received $27 million in federal job-creation grants.
  Hutzel disagrees, saying the money simply assists the political process and doesn't buy access or influence. Moreover, he says it's "absolute nonsense" that corporate donors skew the party's principles toward the business sector. "It's very unusual to think there's any impact to making contributions," he asserts, pointing out that many corporations and banks contribute to all parties. And the Liberals point to the Chrétien government's refusal to allow the big banks to merge two years ago as evidence of their incorruptibility.
  Still, enough fundraising scandals crop up to suggest that it's not all clean as soap. For instance, Liberal fundraiser Pierre Corbeil was charged in 1997 with influence peddling. Corbeil raised money in the region where Jean Chrétien's riding lies. Using a highly placed source in the federal government, he would find out which Quebec companies were in line for federal job-creation grants and contact them on behalf of the Liberal Party, suggesting they'd better donate or else. Corbeil was eventually fined $34,500 and sentenced to community service.
  Other fundraising scandals have plagued the Liberals as well. Last year, questions arose about the Transitional Job Fund, a $300-million job-creation program. Companies in Chrétien's riding donated $74,317 to the Liberals and received millions of dollars, as did a number of companies in the Montreal riding of Liberal MP Yvon Charbonneau, which had given more than $40,000 to the party in 1997 and '98. These scandals are still being investigated, but were raised by opposition leaders in one of last week's televised leadership debates.
  Of course, given the size of the federal government - and the fact that so many companies donate - it's difficult to determine the exact connection between donations and grants.
  Often it's just the perception of impropriety. Take what happened earlier this year, when Democracy Watch revealed that former Liberal MP Barry Campbell had arranged a fundraiser for Jim Peterson, secretary of state (international financial institutions) with the finance department. Campbell has lobbied the finance department on behalf of many clients, including the Royal Bank of Canada. He's also one of Peterson's closest friends.
  The dinner - held last year, with invitations going out on Campbell's letterhead - raised $70,000. "This type of fundraising event highlights the loopholes that corrupt Canada's political finance system," insisted Freeman last April.
  Peterson says there was no impropriety involved, however, and that they specifically did not solicit funds from any banks or financial institutions - or Campbell's clients. Any money inadvertently received from the banks was returned. Peterson says he asked Campbell as a friend to help out when his campaign chair couldn't attend the night of the dinner, and believes the donation system is transparent enough to ensure abuses don't occur. "It's pretty tough to imagine dealing with anyone who has no dealings with the federal government at all," he says.
  In the end, however, all we are relying on is the honesty of our politicians. "I've had people offer a me a great deal of money," relates Peterson, "and refused it because I didn't know them or was concerned they were trying to purchase political influence."
  Whether all politicians resist such temptations, though, is another question.

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