Chapter 16

Taxpayer in the crosshairs

Our lives begin to end the day we become

silent about the things that matter.

— Martin Luther King, Jr.

My high-profile brush with the taxman should have been a minor footnote in Revenue Canada files and my career. Indeed, it was well on the way to becoming such when some hardball politics got in the way. The facts of the case are simple. In the course of an audit, it was determined that I had failed to report certain income on my annual tax returns. The amount of unreported income was $28,000, spread over four years, which translated into unpaid taxes of $5,142.

In the summer of 2010, I ran into David Vardy, an old friend whom I had briefly taught many years before when I was fulfilling my teaching practicum at a St. John’s high school. He subsequently emailed other members of that class, reminiscing about the good ol’ days and mentioning my name. A respondent’s email showed up, inadvertently, I assume, on my laptop: “Isn’t that the fella who was a rising star up in Ottawa and then he screwed it all up?”

She was right, of course. I did screw it all up. And that was certainly the near-unanimous public perception at the time. Here’s what the public didn’t know when my case was making headlines and, clearly, what the writer could not have known when she wrote that email: My screwing up was not a solo act. I had tons of unsolicited help from RevCan.

The sentiment expressed in the above-mentioned email goes to the heart of why I decided to put pen to paper and give my perspective on those long-ago events. Few people know the backstory. The following pages will, I trust, rectify that and allow the reader to draw whatever conclusions that seem appropriate.

Ham-fisted fishing expedition

Once the matter of the unreported income was brought to my attention, I offered to pay up and asked what the financial penalty would be. I had good reason to believe that would be the end of the affair. There are, after all, countless thousands of precedents in which Canadian taxpayers in circumstances identical to mine have had the matter fully resolved by remitting the relevant unpaid taxes and the assessed financial penalty.

However, the tax agency had decided that, in my case, it would not be that routine. In meeting after meeting, two investigators badgered me, alternately offering to go easy on me if I “came clean” or threatening to lower the boom if I didn’t. My problem was that I didn’t know what I was supposed to come clean about. The tag team from RevCan acted like they were on to something. In three successive sessions, they kept flashing a cheque, saying it was payable to me, but refusing to tell me the amount or who had signed it. Their messianic fervour and persistence almost convinced me. Thanks to their tactics, I have an understanding of why suspects under police interrogation sometimes confess to crimes of which they are innocent.

The more these guys waved the cheque at me, the more I racked my brain for long-forgotten misdemeanours. Surely, I told myself, a dose of wilful blindness must be shielding me from some nefariously sordid act in my past. Pocketing $50,000 for making someone disappear? Receiving a $10,000 bribe to look the other way? As hard as I tried, I came up empty. At long last, Sherlock and Watson relented and showed me the cheque. It was a donation to my Liberal Party provincial leadership campaign a full five years before. Mistakenly, the donor had written just my name on the cheque, rather than “Roger Simmons Campaign,” which, had they flipped the cheque over, was plainly stamped under the words “Deposited to the account of.”

There was no ambiguity about the amount the donor contributed: $50,000? $10,000? Not quite! The cheque was for $300! Had it been personal income, it would have yielded precious little to the RevCan coffers. Despite the persistent efforts of its investigators, RevCan had drawn a blank, and for good reason: There was no other unreported income of which they were not already aware.

Fishermen on the hook

The timing of the audit of my tax returns is central to an understanding of the issue. In 1982, RevCan launched an audit of fishermen’s incomes. The approach was brutal. The fishermen’s audits covered a five-year period. The blatant unfairness of the audit and the overly aggressive manner in which it was conducted were mind-boggling, unforgivable. Thousands of law-abiding citizens were maligned and railroaded into difficult financial predicaments. Being the MP for the electoral riding most affected, I took up their cause, in the House of Commons with questions and speeches, in the media, in meetings with and letters to the tax agency.

I suggested to RevCan, as did several other MPs and the fishermen’s union, a way to mitigate the issue without inflicting undue hardship on the affected fishermen and their families. The quantity of fuel fishermen consumed to get to and from their fishing grounds could have been easily approximated, based on type of engine and distance travelled, and a dollar value assigned. Similarly, in the absence of receipts for food and other supplies, a reasonable per diem could have been allowed. Instead, RevCan persisted in applying a much more arbitrary yardstick. It disallowed all expenses which could not be supported by receipts, saying, in effect, “We have proof of your income. Since you can’t prove you had expenses, we assume that you had none. So, pay up and shut up!”

The results were predictably horrendous. Fishermen, like so many others, are not known for their bookkeeping skills. Yet they were required to produce a paper trail for their income and for the expenses they had claimed on annual tax returns. Documenting the income was easy. Fishermen sold their daily catches to one or two buyers, and they (or RevCan) could readily obtain the necessary information from the fish buyers. Documenting claimed expenses was a more difficult and, in most cases, an impossible challenge. Many fishermen had not been diligent in saving their receipts; some didn’t even realize they needed to do so.

A reasonable proposition

Indeed, RevCan could have taken quite a different tack. The fair approach would have been to give notice to fishermen that, effective immediately, fishermen would be expected to have on hand full documentation of expenses incurred in prosecuting the fishery. In other words, the agency could have injected a little humanity into its enforcement practices, acknowledging in the process that fishermen’s inability to document their fishery-related expenditures was not a wilful act. Alas, anyone who has been audited by RevCan will tell you that humanity is not its strong suit! Nor would this approach have swelled the public coffers as did the unconscionable onslaught visited on the fishermen. Which brings to mind an interesting question: Is the first priority of RevCan to ensure tax law compliance or to maximize revenue collection?

Did RevCan have the legal authority to take the actions it did against those fishermen? The answer is an unequivocal yes. But that cannot be the end of the matter or a justification of the harassment that was perpetrated, and the pulverizing financial pain that was inflicted on innocent people. Good democratic tradition and practice require that there must be fairness in applying the law. There was no fairness in what was done to these fishermen. The high-handedness, callousness, and perverseness of RevCan’s actions boggle the mind and have no place in a democratic society.

Cloak-and-dagger tactics

Ron Huntington144, a right-wing Conservative MP from Vancouver and, therefore, someone with whom I had little in common, ideologically speaking, was a member of the Commons’ Standing Committee on Finance, as was I. We were also fellow members of an ad hoc committee on House of Commons procedure. In the course of our committee work, including pre-budget hearings on the road and a trip to England, Ron and I developed an enduring friendship.

One afternoon in the House during the fall of 1983, Ron signalled across the floor for me to join him, which I did. He showed me a list of seventeen MPs who were then under RevCan audit. My name was on the list, of course, since by then my case had mushroomed into a very public affair. The other names on the list included Liberal government backbenchers and members of both opposition parties, Conservative and NDP. I was in good company. It is inappropriate to recite the names on that infamous list, since their audits were private matters between them and the tax agency.

Huntington pointed out that all seventeen persons on the list had at least one thing in common. All had raised concerns about the fishermen’s audit in the daily Question Period or had otherwise spoken publicly in defence of the fishermen and had taken exception to RevCan’s tactics in its conduct of the audit. It was clear to Ron and me that the tax mandarins didn’t take kindly to such meddling by mere MPs and decided to focus the minds of a bunch of zealous politicians who, in the view of the tax moguls, got too big for their boots.

Nor did RevCan draw the line at federal MPs. At least one provincial politician attracted the agency’s attention and was placed under audit. Jim Morgan is a law-abiding citizen who, like me, was simply doing his job as an elected representative. But, like me, he had committed one unforgivable transgression: He had tweaked RevCan’s nose. He had publicly voiced alarm at the “Gestapo-like tactics” employed in auditing Newfoundland fishermen145. And why not? He was, after all, a legislator with a sizable fishing constituency—and the province’s minister of Fisheries.

RevCan saved its most brazen deed for the one MP who could rain on its parade. In an outrageous instance of insubordination and kneecapping, the tax agency took direct aim at its very own minister, Bill Rompkey, whose unwarranted humiliation at the hands of his deputy is well-documented. Stephen Clarkson and Christine McCall, in the second volume of their award-winning bestseller, Trudeau and Our Times recounts that,

In retaliation for complaining against him to [Privy Council Clerk Michael] Pitfield, the deputy minister [Doug Rutherford] launched an audit of fishermen in Rompkey’s riding.146

Payback time?

In my case, there may well have been an additional agenda in play, aimed at settling a score dating back to my days in provincial politics and, specifically, my role in exposing a Public Works spending scandal and dispatching Alex Walsh to a cell in New Brunswick’s Dorchester Penitentiary for three and a half years after being convicted of fraud. Even an elementary understanding of human nature and familial loyalty would suggest that Walsh’s ignominious fate, largely at my hands, would not have been far from his close relative’s mind each time that relative, one of my two RevCan tormentors, turned his attention to my file.

But that linkage can be no more than a strong hunch. I have no direct evidence which would confirm that the relative’s persistence in advancing my file was driven by anything other than his obligation to ferret out tax abuse. Yet I couldn’t help but notice that he was light years ahead of his fellow investigator in his manic zeal to trip me up, and I do abhor the ends to which both of them went in my case. The charitable interpretation is that they were simply following orders from their superiors.

Still, it may be instructive to know just how Walsh’s relative became involved in my audit. Did he ask to be assigned to it? Or was it just the luck of the draw? If the latter, integrity and normal practice should have constrained him to recuse himself because of an obvious conflict of interest.

Indeed, by his own admission, the Walsh relative saw recusal as an option he was prepared to exercise, should circumstances warrant it. As part of the probe into my tax file, he travelled to Corner Brook to solicit information from my brother Dave. It was only when they met that the investigator realized that here was the same Dave Simmons with whom he had played hockey as members of a team twenty years earlier. Which prompted him to say, “If I had known Roger was your brother, I could have recused myself.”

It is a bit of a stretch, to put it mildly, to believe that, while he mused aloud about his long-ago acquaintance with my sibling as potential grounds for recusal, he saw no such ramification in my role in Alex Walsh’s fraud conviction. Did the investigator lack the judgment required to recognize so blatant a conflict of interest? Or did he know full well that there was a gigantic conflict of interest and chose to ignore it in order to pursue a vendetta against me? The other possibility, diabolical as it is, is that he was assigned my file because of his conflict of interest.

The events I have recounted happened over thirty years ago. The harshest indictment of today’s CRA147 is that only its name has changed. The decades-old Gestapo mindset which Jim Morgan fingered is alive and well. CRA’s public pulverizing of a British Columbia businessman, initiated with a routine 1996 audit, continued unabated for twenty years. The shocking case of Irvin LeRoux is a TV-documentary-in-waiting. His ordeal may have finally ended in 2016, when the BC Supreme Court ruled that CRA was culpable.148

As recently as October 2017, there was public evidence that the tax agency continues to act as a law unto itself. It announced that employee discounts would be treated as taxable income. The move would have significant tax implications for employees and would saddle employers with new administrative responsibilities. Not surprisingly, the CRA announcement precipitated anti-government protests across the country. In fact, the government was unaware of CRA’s action. Not even the agency’s own minister, Diane Lebouthillier, was in the know. To its credit, the government immediately nixed the scheme.

Selective leniency

So, the question remains: How did my failure to report income amounting to $28,000, surely a miniscule matter in the context of other RevCan files, become such a big deal? The manner in which the agency handled my case takes on added significance when viewed through the prism of other actions it took at the time and subsequently, for example:

Mulroney informed the agency of the unreported income in 1999152. That was more than five years after he had received the initial $75,000 payment. The sequence of events and the nature of the payments were both acknowledged by Mulroney in his testimony before a House of Commons parliamentary committee in 2007:

“In August 1999, Mr. Schreiber was arrested. . . . This stunning new development put in serious doubt my relationship with him. I thought the best way to deal with this situation was to declare the entire amount as income, although I had only used it for expenses—absorbing the expenses myself and compensating myself for the fees to which I was entitled. Accordingly, I then instructed my advisors to contact the income tax authorities and to ensure that the full amount received in this private transaction was declared by me as income and all applicable taxes paid.”153

If Mulroney’s failure to report more than $200,000 for several years could be viewed by RevCan as an oversight, surely it is not unreasonable to suggest that my unreported income of $28,000 should have been treated in a similar manner.

Further, as noted above, Mulroney got a heavily discounted repayment rate by going “cap in hand to Revenue Canada. . . . It was a bargain to die for—at least to anyone who has neglected to declare sizable amounts of income.”154 The fifty per cent discount, pursuant to a windfall provision that was only available to Quebec taxpayers, was “routine” at the time, according to RevCan spokesperson Christine Sauvé155.

From the above, it can be concluded that RevCan’s treatment of me was driven by something other than standard procedure, precedent, or the leniency it was selectively extending to others. Clearly, ulterior motives were in play, which, I submit, were tied to my active advocacy on behalf of the audited fishermen. I also believe that my role in exposing a fraud artist when I was in provincial politics may have been a driving factor in the investigation.

The two RevCan investigators, my accountant, and I met for what would be the final time on June 20, 1983, in my Parliament Hill office. They informed us that I would be required to pay the taxes attracted by the unreported income plus a financial penalty for failing to report the income, and that would be the end of the matter. Imagine my relief on hearing that! My relief would be short-lived.

144 A lieutenant commander in the Royal Canadian Navy during World War II, Member of Parliament (1974–84), Minister of State for Small Business and Industry in Prime Minister Clark’s administration, 1979–80

145 Globe and Mail, March 13, 1984. Morgan also told a task force on Revenue Canada activities that the agency had leaked his income tax information to the press.

146 Trudeau and Our Times: The Heroic Delusion, Vol. 2, Stephen Clarkson and Christina McCall, Toronto: McClelland & Stewart, 1994, p. 493

147 Canada Revenue Agency

148 Global News, Justin McElroy, January 9, 2016

149 Iron Man, Lawrence Martin, Toronto: Penguin, 2003, p. 419

150 No Holds Barred, John Crosbie, Toronto: McClelland & Stewart, 1997, p. 158

151 Maclean’s, June 8, 2009

152 Globe and Mail, December 13, 2007

153 House of Commons’ Information and Ethics Committee, December 13, 2007

154 Maclean’s, June 8, 2009

155 Ibid