Government official held secret meetings, gave advice to pro-tax haven lobby group
Leaked documents from the IFC Forum, a lobby group funded by 11 of the world’s biggest offshore law firms, reveal unreported meetings with senior Canadian
|Report an Error|
Share via Email
2013 was a bad year for tax havens.
In April, the International Consortium of Investigative Journalists (ICIJ) released its first global exposé detailing secret offshore bank accounts of hundreds of wealthy elites. Only months later, then-U.K. prime minister David Cameron announced he would force shell companies to divulge their real owners.
It was a one-two punch: bad press and a threat to the secrecy tax havens rely on.
Enter the IFC Forum, a lobby group funded by 11 of the world’s biggest offshore law firms, whose business relies on the secret flows of cash through what they call “international financial centres” or IFCs. The group went on a PR offensive, meeting with government officials from a half-dozen countries, pitching stories to the Financial Times and appearing on the BBC World Service to extol the virtues of tax havens.
And they got a little help from a senior civil servant in Ottawa.
Documents from the Paradise Papers leak, obtained by German newspaper Süddeutsche Zeitung and shared with the ICIJ, the Star and CBC/Radio-Canada, reveal secret meetings between representatives of IFC Forum and senior Canadian bureaucrats, one of whom offered strategic advice on how to promote their pro-tax haven agenda.
While then-prime minister Stephen Harper was telling the world that Canada supported the global effort to impose transparency on offshore tax havens, Duane McMullen, the director general of the Trade Commissioner Service at Global Affairs Canada, was advising the tax havens on how to fight back.
“Implement ideas provided by Duane McMullen . . . who participated as a lunch speaker by phone,” state the minutes to the IFC Forum’s monthly meeting on March 3, 2014. “i.e. disseminate the idea that IFCs lubricate global commerce which helps poverty reduction.”
McMullen’s advice, experts say, could breach the ethics codes and policies the public service must abide by, and if investigated by the integrity commissioner could lead to suspension or dismissal.
“If the facts are as reported, (McMullen) was crossing two lines that a public servant shouldn’t cross,” said former senior civil servant and professor Ralph Heintzman. “The first was that he was publicly expressing his own personal policy views, which he ought not to have been doing. But the second, which makes it worse, is that they were contrary to the policies of the government of Canada at that time.”
McMullen declined to answer a detailed list of questions from the Star and CBC/Radio-Canada and referred all comment to the media relations department at Global Affairs Canada, which said: “Mr. McMullen’s involvement with IFC Forum at the time was fully in line with the spirit of Canada’s Trade Commissioner Service role and mandate,” in an emailed statement.
The question remains: How did a senior Canadian official end up calling into a strategy session for tax haven lawyers held half a world away in London, U.K.?
The trail starts in June 2013 in Enniskillen, Northern Ireland, where G8 leaders met to discuss the U.K.’s bold new approach to fighting tax evasion. To end the secrecy that allows shell companies to move billions of dollars around anonymously, Cameron announced all companies registered in the U.K. would be required to declare the names of their real owners.
In the lead-up to the summit, visiting leaders, including then Canadian prime minister Stephen Harper, faced questions over whether they would follow suit.
There had been speculation that Canada would abstain but on the eve of the meetings Harper confirmed he had “no reservations” about the proposed registry plans.
“This is a very important initiative by Prime Minister Cameron,” Harper said. “It is important that we do it and that we do it together.”
This talk about corporate transparency was causing anxiety in British overseas territories like Bermuda, the British Virgin Islands and the Cayman Islands, where anonymous shell companies and banking secrecy underpin the local economy.
The IFC Forum dispatched its representative, Richard Hay, a Canadian lawyer who went to the University of Toronto and Osgoode Hall law school and is licensed to practice law in Ontario, to attempt to dissuade visiting G8 officials from following the U.K.’s lead.
Hay had some success, reporting that “Canada, Germany and Russia were reluctant to endorse the U.K. G8 agenda,” according to the minutes of a July 23, 2013, conference call. One of these meetings merited further detail.
“Richard Hay met with Canada’s G20 (emissary) and Deputy Minister of International Trade,” state the minutes. “The Canadians are reluctant to participate in the U.K. transparency agenda but given the outcome of G8 feel under pressure to consider.”
Simon Kennedy, who currently serves as the federal deputy minister of health, confirmed to the Star and CBC/Radio-Canada that he was the Canadian official who met with Hay in London, but denied the IFC’s account of what was said.
“I was never under any instruction with regard to IFCs in particular, nor did I ever advocate for the supposed benefits of these entities in any of my work,” Kennedy wrote in an email, stating that his “primary focus” was “encouraging the sharing of information” to “facilitate tax compliance.”
“Promoting offshore banking would have run completely counter to this way of thinking, and I never once saw this position being advanced by Canada in any international forum,” he said.
After London, Hay asked Kennedy for another meeting. That meeting took place in January 2014 in Ottawa.
“It was not unusual for me to encounter someone on a trip abroad and to subsequently accept a meeting with them when they found themselves in Ottawa,” Kennedy told the Star in an email.
There is no official trace of the meeting. Kennedy said he did not have any paperwork and Global Affairs Canada found no records of it in response to eight separate access-to-information requests. Two further requests were not available at the time of publication.
The meeting was not reported to the lobbying commissioner, even though Hay, as a paid lobbyist for the IFC Forum, is required to register and report his meetings with senior government officials.
Neither Richard Hay nor the IFC Forum has ever been registered to lobby in Canada.
Lobbying without registering “is a serious breach” of the Lobbying Act, said Ian Greene, professor emeritus of public policy and administration at York University and author of Honest Politics: Seeking Integrity in Canadian Political Life.
The lobbying commissioner has the power to investigate undeclared lobbying, and can refer cases to the RCMP. A lobbyist who fails to register and report communications with public office holders risks a maximum fine of $200,000 and two years in prison.
The Lobbying Act puts the responsibility to report on the lobbyist. But Greene says there’s also an onus on the civil servant to make sure the lobbyist is registered.
“You would certainly ask: ‘Have you been registered as a lobbyist?’ ” Greene said in an interview. “If not, I’m not talking to you.”
Richard Hay, his law firm Stikeman Elliott, and Lansons Communications, a PR firm that works for the IFC Forum, are registered to lobby in the U.K.
Hay declined an interview request and referred all comment to Tony Langham, founder of Lansons.
Langham, who spoke with the Star and Radio-Canada on behalf of the IFC Forum, said it is not registered in Canada because it “never had the objective of influencing Canadian government policy.”
“Canada hasn’t been an objective for us,” he said. “The United Kingdom and the European Union, that’s the focus.”
But the IFC meeting notes tell another story. They describe meetings with officials from Brazil, Australia, Russia and Canada to discuss international efforts to establish corporate reporting standards and increase tax transparency.
Kennedy wasn’t the only civil servant present at the meeting in Ottawa.
The IFC notes refer to a second Canadian official, who “expressed concerns as respects U.K. proposals for public registers.”
This official, referred to as Kennedy’s “head of operations,” was Duane McMullen, whom Kennedy confirmed was there.
The IFC was receptive to McMullen’s message and invited him “to express these sentiments at the next IFC (Forum) meeting in March by phone,” the meeting notes state.
During that call, McMullen told the IFC Forum how best to advance their case,
“IFCs lubricate global commerce which helps poverty reduction. IFCs are friction-reducing, contributing to this process. Regulatory and NGO-driven changes proposed today are often friction increasing,” McMullen said, according to the IFC’s record of the meeting.
“People in Africa are able to connect and have access to global resources in part because corporate structures are facilitated by IFCs,” McMullen said, according to the notes.
In the months and years since this call, the IFC Forum has deployed this message repeatedly.
On its website, the tax haven lobby group writes: “IFCs are the biggest investors in developing countries, such as China and India, and have helped lift hundreds of millions of people out of poverty.”
Hay would personally echo this messaging in a Financial Times column published last year, just days after the Panama Papers leak was first made public:
“Financial centres facilitate trade, investment and economic growth,” and have helped develop China’s economy, which has “lifted more than 500m people out of grinding poverty,” Hay wrote.
McMullen’s actions appear to run contrary to several formal policies and codes of conduct by which civil servants are bound to abide.
“I can tell you that’s totally inappropriate. A public servant’s role is to be neutral. Not to be openly helping certain firms,” said Alan Cutler, a former civil servant who came to prominence for blowing the whistle on the sponsorship scandal. “Impartiality has been thrown out the window.”
The values and ethics code for the public sector states: “Public servants shall serve the public interest by . . . Never using their official roles to inappropriately obtain an advantage for themselves or to advantage or disadvantage others.”
“It’s describing exactly what happening. He’s advantaging someone else. He’s giving advice to advantage others,” Cutler said.
Duff Conacher, co-founder of Democracy Watch and a professor at the University of Ottawa, said providing that kind of advice also breached the conflict of interest code for public servants, which states: “Public servants . . . are not to offer extraordinary assistance to any entity or persons already dealing with the government.”
Conacher believes giving the advice is worthy of a significant suspension without pay.
Context is important in determining if the code was breached, said Robert Shepherd, a professor of public policy at Carleton University.
“The words used may appear controversial, but they are borderline in terms of being within the spirit of the various codes of conduct,” Shepherd said.
Three federal commissioners — the lobbying commissioner, the integrity commissioner and the conflict of interest commissioner — declined interviews and would not comment about this case.
When presented with a summary of the documents that describe McMullen’s participation, Global Affairs Canada found nothing wrong.
“Trade commissioners talk to people on all sides of an issue and in doing so, try to understand their positions, point out their weaknesses and identify areas of common ground,” stated spokesperson Natasha Nystrom in an email.
That explanation doesn’t cut it for David Seigel, a professor of public policy and administration at Brock University and the co-editor of the textbook Public Administration in Canada.
Seigel uses a simple test to decide if something is unethical or not.
“Ask yourself how your actions would look if they appeared on the front page of the Toronto Star?” Seigel said.
“I would think that the people involved in this are not terribly comfortable knowing that their actions are appearing on the front page of the Toronto Star. That really tells you something, doesn’t it?”