THE PINOCCHIO FACTOR
If Stephen Harper thought that shuffling off to South America would rid him of unwelcome questions about the Senate scandal back home, he must have been disappointed. The first question asked at his news conference in Peru, 6,000 kilometres from Ottawa, was posed by CBC journalist Terry Milewski. Predictably, the tenacious Milewski asked about the Wright/Duffy affair.
Harper insisted he knew nothing about it except what he had seen on television news, that he hadn’t been consulted in advance, and that if he had been, he would not have signed off on the arrangement. “I think we’ve been very clear that I did not know, but let me be very specific about this, I learned of this after stories appeared in the media last week speculating on the source of Mr. Duffy’s repayments. . . . Obviously I am very sorry that this has occurred. I am not only sorry, I’ve been through the range of emotions. I’m sorry, I’m frustrated, I’m extremely angry about it.”
The prime minister’s bland denials usually worked. But not this time. There were too many things that didn’t make sense. Why had he flip-flopped on Nigel Wright’s resignation? First, Wright was remaining as chief of staff; then, a few days later he was leaving. What had changed? Was it plausible that Nigel Wright—a lawyer and the PM’s chief of staff—would make a $90,000 cash payment to a sitting Conservative senator and not inform the prime minister?
In his own resignation press release, Wright himself said only that neither before nor after the Duffy transaction did he inform the prime minister of the “means” of the payment. But that was a long way from saying the PM didn’t know about the Duffy expense problem and what, if anything, he wanted done about it. A series of nagging questions trumped Harper’s standard dismissiveness. How was the deal negotiated and who was involved? Could Wright freelance such a deal, even had he wanted to, without involving others? Most unbelievable of all, how could a leader with a well-earned reputation as a micromanager know nothing about a most unusual action, undertaken by his secondin-command, that had the potential to topple the government?
While Harper clung to his talking points in Peru, the political pot was on the boil back in Canada. Government MPs were getting blowback over the Senate scandal as the Conservative base registered its anger and disapproval over Duffygate. For many Tory supporters, the skullduggery in the PMO and the abuse of expenses in the Senate were what they expected from Liberals— not from the self-declared party of law and order, transparency, and accountability. The Conservatives began to slide in the polls. Like the $16 glass of orange juice at the Savoy Hotel in London that cost Bev Oda her cabinet post, this was one of those “watercooler scandals” that got ordinary people talking.
Frustrated for years by Harper’s smothering information control, the political opposition sensed a genuine opening. Opposition leader Thomas Mulcair urged the government to disclose all documents about the transaction: “Be clear, be forthright, stop hiding out in the Andes, get back up here, tell people what actually happened.”
With Harper out of the country, Foreign Affairs Minister John Baird was left to answer questions. He officially launched the government into the cover-up phase of the Wright/Duffy scandal. Baird repeated that the prime minister knew nothing about the deal until after it was reported on television. However, he made an important addition to the narrative, claiming that there was no paper trail connected to the story. “Our understanding is there is no document,” he said, without elaborating on what that understanding was based on.
Baird said that the matter of Wright’s payment had been referred to a pair of “independent authorities,” but refused to state who they were. In fact, he was referring to federal ethics commissioner Mary Dawson, and the Senate’s own Internal Economy Committee, the very committee that had whitewashed the original Senate report on Mike Duffy’s expenses. The Harper government’s self-proclaimed tough new accountability rules for public office holders were looking pretty flimsy. A finding by the ethics commissioner carried no sanction, and the Senate was too hopelessly enmeshed in the scandal to judge any other participants. Liberal Senate leader James Cowan explained why the payment needed to be thoroughly investigated: “If money was paid that would influence a decision of a Senate committee, then that is contempt of Parliament.” Stephen Harper was the only prime minister in the Commonwealth for whom that was familiar territory.
Just as the prime minister’s comments about Nigel Wright began to change, the Conservative Party’s characterization of Mike Duffy also evolved. Five days after Duffy was praised for his “leadership” in the Senate expenses scandal by government house leader Peter Van Loan, the PMO issued a statement saying that taxpayers should not be on the hook for improper housing expenses. It was as if they sensed that more bad news was on the way. They were right. On May 21, 2013, veteran investigative reporter Tim Naumetz reported in the Hill Times that Senator Duffy was part of a series of 2011 campaign stops by high-profile party members to boost the electability of local candidates. The tour was organized by the Conservative Party’s national campaign headquarters. One of the reporter’s sources was a Nova Scotia MP who had shared the bill with others for Duffy’s expenses.
The next day the Toronto Star advanced the story. The newspaper reported that not only was Duffy billing Conservative campaigns in Nova Scotia during the 2011 election, he was also receiving his Senate allowance as if he were in Ottawa. All told, Senator Duffy helped out in seven ridings during the trip, including Scott Armstrong’s in Truro and David Morse’s in Kentville, Nova Scotia. The senator had a policy advisor travelling with him on the campaign trip organized by Conservative national party headquarters.
Nigel Wright’s worst fear—that the failure to contain the Duffy expense scandal would lead to “the Chinese water torture of new facts in the public domain that the PM does not want”— was coming to pass. It turned out that Senator Duffy had also campaigned for Sandy Lee in Yellowknife. Unspecified hotel costs in the GTA with Stephen Harper, and flights from Ottawa to Toronto to Yellowknife and back to Ottawa, were charged directly to the Conservative Party. Taxis in Toronto were listed on April 5 and April 7, 2011, as expenses. The Deloitte audit indicated Duffy was outside Ottawa on Senate business on those days.
According to Elections Canada, Duffy billed the campaigns of Joe Oliver, Wladyslaw Lizon, Gin Siow, and John Carmichael for $169.45 each for flights between Ottawa and Toronto, taxis, and a night at the Yorkdale Holiday Inn for an April 27–28 tour. The Deloitte review, meanwhile, said he was outside Ottawa on Senate business. Duffy’s invoice stipulated that the total cost of $1,355 would be split between eight ridings he visited. Only four candidates named Duffy as a supplier in their Elections Canada returns. All told, Duffy campaigned with seventeen Conservative candidates during the writ period, claiming Senate per diems for some days he was actually campaigning.
Once again, media stories prompted the Senate to take another look at Senator Duffy’s expense claims. The agony continued for the government house leader in the Senate. Marjory LeBreton was caught between an unhappy PMO and the media in hot pursuit. On May 22, 2013, LeBreton gave a lengthy speech during a debate in the Senate on proposed rule changes as part of the government’s response to the audits. She was aggrieved that the Senate was facing this “crisis” because it had voluntarily flung open the door that revealed what was going on inside. Instead of getting credit for being candid, the Senate was being pilloried in “hypedup media stories.” Having blamed the media, LeBreton resorted to the tried-and-true line of a politician at bay. “We are not perfect,” she insisted, “but we have conducted ourselves in an appropriate and honourable way.”
Knowing that the Senate’s Internal Economy Committee was reviewing his expenses again, Senator Duffy broke his silence on the payment he had received from Nigel Wright. Stressing that he had done nothing wrong, he expressed confidence that his fellow senators would conclude, as Deloitte already had, that his actions did not merit criticism. He welcomed a “full and open inquiry,” and said, “I think Canadians have a right to know all the facts and I’m quite prepared, in the right place and time, to give them the whole story.”
Despite the bravado, the walls were beginning to close in on Mike Duffy. On May 28, 2013, the Senate’s full Board of Internal Economy held an extraordinary meeting under the glare of TV lights. The senators announced that they had completed a reexamination of Senator Duffy’s per-diem expenses and had come to a grave decision. The fact that the Conservatives held a majority in the Senate made what was about to happen next even more spectacular. In light of what Senator Duffy’s peers saw as a pattern of false expense claims, his case was being referred to the RCMP. It was another reversal for LeBreton. Early in the controversy, she had said that the Duffy affair was not a police matter. In a little more than a month, LeBreton would resign as government house leader in the Senate, amid little doubt that the PMO had given her a hearty push.
The RCMP had already been looking into the circumstances of the Deloitte audit. Their additional involvement in the matter of Duffy’s expenses did not go unnoticed in the PMO. Although Stephen Harper had kept the information to himself since the story broke, the PMO announced on May 31, 2013, that the prime minister had in fact discussed expenses with the embattled senator after the February 13, 2013, Conservative caucus.
Code-named Project Amble, the examination of Senator Duffy’s financial affairs began with the RCMP picking up records from Elections Canada without a warrant on June 5 and 13 for twelve Conservatives Duffy had helped during the 2011 election. The list included Gerald Keddy, Greg Kerr, and Joe Oliver, but did not appear to include Julian Fantino. During the same period, the RCMP made a second request for documents from the Senate. The Mounties were trying to determine if Duffy had in fact claimed Senate per diems while campaigning for the Conservative Party in Atlantic Canada, the GTA, and the Northwest Territories, as various newspapers had reported.
That Mike Duffy was a key Conservative fundraiser was beyond question. Citing a series of emails, journalist Leslie MacKinnon posted a CBC piece on May 31, 2013, that showed Duffy had been discussing an expanded role in the party within months of being appointed to the Senate. He was the star speaker at fundraisers and Conservative riding associations across the country. People loved his folksy, funny style, described as “Hilarious, engaging and delightfully risqué.” “Did you hear the one about Michael Ignatieff doing the work of three people—Curly, Larry and Moe,” offered a gleeful Duffy.
Partisan crowds in towns such as Lacombe, Alberta, loved him, and small-town newspapers that relied on government ads eagerly quoted his speeches. Everyone wanted to put his star power to work, and that included Stephen Harper. In June 2009, Duffy had hosted a $100,000 campaign-style town-hall event featuring the prime minister and his Economic Action Plan in Cambridge, Ontario. The CBC obtained a July 2009 email exchange between Duffy and an unnamed party insider. Just six months after his appointment, Duffy was looking for ways for the party to pay his expenses and fees for what he called his “expanded role in the party.”
According to a July 27, 2009, email from Duffy, the newly minted senator planned to speak with Irving Gerstein at the Senate golf tournament banquet that evening. Apparently Duffy had already suggested to the party bagman that he be named a minister without portfolio so he could get staff, a car, and more resources to assist in his travelling fundraising show. In the email, Duffy reported, “He [Gerstein] laughed and said he didn’t think THAT was within the realm of the Cons fund. So my question is: what do I demand?” Duffy answers his own question “(That the Cons fund hire my private company, and I use that cash to hire additional staff to assist with these gigs?).” He asks should he have a meeting with Marjory, or “Should I request a one-on-one with Stephen?” A few hours later, Duffy’s obviously well-connected correspondent replies,
I would keep the discussion with Irving. Expanding it at this time would attract too much attention. Any money, staff, resources paid for by the fund should be done by the fund. Keep it out of your company and office budget or it will hurt you down the road. If he can set up a travel budget for you at the fund and support a staffer, fantastic. What you really need now is travel paid by them so you don’t get in trouble or run out of points. Have a billing acct, [name deletion] knows to book certain trips to them and not you etc. Don’t take a credit card, just expense them.
Asked to comment on the story, party spokesperson Fred DeLorey replied, “Any events Mr. Duffy participated in on behalf of the party would have been paid for by the party. The party does not pay Mr. Duffy compensation.” After hearing the story, MP Michelle Rempel told Evan Solomon, the host of CBC TV’s Power & Politics, “The prime minister himself has expressed deep regret for appointing Mike Duffy.”
After the Wright/Duffy affair blew up, Harper may have regretted the Duffy appointment, but he was certainly happy with it when the former television personality was on hand to help win coveted Toronto seats. On November 16, 2010, Duffy hosted a successful town hall for the Vaughan by-election that sent Julian Fantino to Ottawa. The call went out to 40,000 homes and 15,000 people stayed on the line. The event, organized by Andrew Harris of Picea Partners, was closed to the media. Harris had been the manager of direct voter contact for the Conservative Party of Canada from May 2006 to November 2008.
But there was mystery attached to the event. Although a media release said Duffy was on hand in Mr. Fantino’s office to facilitate the meeting, Duffy denied it: “I wasn’t in Vaughan, I can’t remember where I was but I was at the end of a phone, as was Mr. Fantino. I wasn’t paid, nor did I incur expenses. I know nothing about the Elections Canada Act and reporting.”
If he wasn’t paid for the Vaughan town hall and if he incurred no expenses, he certainly did so in other ridings. In September 2009, Duffy emailed the executive director of the Conservative Party, Dan Hilton, and asked about billing procedures: “Dan: Shud [sic] I send you a one-page note re fees and expenses?” Duffy requested a staffer be assigned to him to help answer emails from supporters sent in response to a party email appeal, “before people get pissed off that we haven’t responded.” The emails were from Conservative VIPs and others who expected to hear from the party directly. “The Old Duff” sent out personalized video messages from the Conservative Party. He called the recipients by their first names and invited them to fill out a survey.
Duffy had asked people to write to him about suggestions for the party, and he was concerned that he was the mere front man for an enterprise controlled by others. In an email to Dan Hilton on September 28, 2009, he laid out his fears: “If my name is out front, then I want to be part of the decision making process. If it goes bad, I’m the one our members will blame.” Hilton replied, “I have arranged to set funds aside where it makes sense and I have discussed this with Jenni Byrne. She should be the primary person on our end to square up the appropriateness of visits etc and she can review the schedule from your assistant to see if their ridings are of influence in the area.”
Duffy was addressing university clubs, riding associations, and fundraisers since, as a minority government, the party was in permanent campaign mode. The question was whether this was Senate business or party business or funny business. Duffy’s friends would later be quoted telling the National Post that “political appearances on the Senate tab were not only tolerated, they were expected by the Prime Minister.”
While the PMO, Duffy’s lawyers, and the Senate leadership had been cobbling together a deal to repay Duffy’s “improper” housing allowance and expenses, the RCMP had been quietly looking into the Deloitte audit since March 2013. One of the things that caught their eye was a series of payments made by Senator Duffy to a company called Maple Ridge Media Inc. Maple Ridge was paid out of Senator Duffy’s office budget at the rate of $200 per hour. The payments began in March 2009, and by 2013 amounted to a total of $64,916.50.
The billing seemed straightforward enough from the paperwork. For example, Duffy submitted an invoice to the Senate for $10,500 for “Consulting/editorial Services—research, writing & revisions for Heritage Project.” In November 2010, Duffy submitted a contract for Maple Ridge that he requested be backdated to April. After being informed that backdating was not permitted by the Senate human resources officer, Senator Duffy resubmitted the $12,000 contract, plus tax, in December. There was only one problem: the man behind Maple Ridge, Gerald Donohue, had no experience as a media consultant. Donohue had spent most of his working life as a television technician, and ended his career in human resources. He had first met the TV star in 1989 while Duffy was hosting a public affairs show, Sunday Edition, broadcast out of CJOH in Ottawa. The RCMP decided to interview the man on the senator’s payroll to find out exactly what Maple Ridge had done to earn its money.
They were in for a surprise. Although Donohue refused to give a sworn statement, he told the RCMP that he did not personally receive any money from the senator and that “he never funneled any of the money back to Duffy.” Donohue’s wife and son were officers of Maple Ridge, but he told police that they “had nothing to do with the work done for Senator Duffy.” (Both declined to be interviewed by the RCMP.) It was a conundrum. If Donohue’s family was not involved in working for the senator, and Donohue never received any money or remitted any to Duffy, where did the nearly $65,000 go? The Donohues decided to consult a lawyer, and the RCMP went away from the interview believing that little or no work had been done by Maple Ridge, a conclusion they noted in their report. Their next stop was to scoop the bank records to follow the money trail.
Unaware of this element in the Duffy case, the Senate had been reduced to desperate measures. The expenses scandal was not only not going away, it was getting worse. The NDP were calling for the abolition of the unelected Upper Chamber, and from the prime minister’s point of view, it seemed like a good time to start that debate—anything to change the channel from corruption in his own office. Attacking the Senate had never been better politics.
In full panic that the institution itself was in danger, the Senate acted. On June 6, 2013, the leadership agreed to have federal auditor general Michael Ferguson do a “comprehensive audit” of Senate spending—including that of individual senators. It was one way to restore public faith in the probity of the Senate. Although Sheila Fraser had prised open the books of the Senate in 2011, shortly before she retired, her audit had not included senators’ expense accounts. The Senate had decided to conduct its own random audits instead, and inadvertently got the expense scandal rolling, to the chagrin of the PMO.
Michael Ferguson’s audit was the real deal, right down to powers of subpoena. The audit could include physical inspections of primary and secondary residences, and even interviews with neighbours to see if senators really lived in their designated residences. Numbered letters were sent to each senator. Consent letters had to be mailed back to the AG’s office. Secrecy would be maintained by forbidding reproduction and distribution of the documents.
The formal motion to bring in Michael Ferguson was moved by Senator Marjory LeBreton: “That the Senate invite the auditor general of Canada to conduct a comprehensive audit of Senate expenses, including senators’ expenses.” It was an ironic turn of events. The Senate had initially wanted to deal with “a few bad apples” in its midst to avoid the very thing they were now proposing: a universal audit of all members. Under LeBreton’s doomed leadership, the Senate was no longer master in its own house.
The Senate, the PMO, and the Conservative Party of Canada were now firmly tangled in the net of Duffygate. On June 7, 2013, the Conservative Party responded to a story by the CBC’s Greg Weston. Weston’s report said that there was a secret Conservative fund in the PMO controlled by one person, Nigel Wright. Weston quoted unnamed sources who told him that at times the fund had contained up to a million dollars. The political air in Ottawa was electric with the possibility that the secret fund—beyond the reach of Elections Canada and the auditor general—was in some way connected to Wright’s $90,000 gift to Senator Duffy. “No Conservative Party funds were used to repay Mike Duffy’s inappropriate expenses,” party spokesperson Fred DeLorey claimed. “No taxpayer funds were used. Nigel Wright was not reimbursed by anyone.”
After PMO spokesperson Andrew MacDougall, Fred DeLorey, and a variety of anonymous sources had all but confirmed the existence of the PMO fund, the Conservative Party tried to backtrack. It now called Weston’s story about a “secret fund” false. But its contradictory attempts to deny the existence of the fund, in effect, confirmed the story. Finally, Chris Alexander, the parliamentary secretary to the minister of national defence, told CBC Radio’s The House on June 8, 2013, that “No one [was] denying” the existence of the fund. Although parties must reveal all donations to Elections Canada, political parties are under no obligation to account for how they spend their party funds between elections.
The pressure was beginning to take its toll. On June 11, 2013, Senator David Tkachuk stepped down as chair of the powerful Internal Economy Committee. He announced that he was being treated for bladder cancer: “It’s really important I have no stress and I give it all the opportunity to succeed, because if I don’t succeed, the consequences aren’t that good.” In passing, the outgoing chair acknowledged that he found it personally difficult to read the emails he was receiving from ordinary Canadians angered by the Senate scandal.
Tkachuk’s empty seat on the committee was still warm when Canadians learned that it was not merely a scandal they were watching unfold in some of the highest offices in the land, but quite possibly a crime.