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Group Calls for Formal Ethics Inquiry into Spy Watchdog Turned Enbridge Lobbyist Chuck Strahl | DeSmog Canada
Public interest group Democracy Watch released a letter (link to pdf) to ethics commissioner Mary Dawson Friday, requesting she launch an inquiry into former Conservative cabinet minister Chuck Strahl in the wake of revelations that he’s working as an Enbridge lobbyist while also serving as Canada’s top spy watchdog.
The letter points to rules in the Conflict of Interest Act that require public office holders to manage their private life to avoid conflicts of interest. Strahl’s work as a lobbyist, Democracy Watch suggests, invites conflicts of interest, rather than prevents them.
Recently the Vancouver Observer revealed Strahl had registered in B.C. as an Enbridge lobbyist. As the chair of theSecurity Intelligence Review Committee (SIRC), some questioned Strahl’s suitability to judiciously oversee the Canadian Security Intelligence Service (CSIS), the spy agency involved in the monitoring of Enbridge’s Northern Gateway pipeline hearings.
Democracy Watch also notes that Strahl violated the waiting period meant to prevent former public office holders from using their government contacts to advance private corporate interests.
Enbridge met with Strahl in his role as a cabinet minister on April 29, 2010. Strahl left his position on May 17, 2011. Five months later, in October 2011, Strahl signed an open letter in support of Enbridge’s Northern Gateway Pipeline. In December of 2013, Strahl registered as a B.C. lobbyist listing Northern Gateway Pipelines L.P. as his client.
According to Duff Conacher, board member of Democracy Watch and adjunct professor with the University of Toronto faculty of law, Strahl is allowing his work with government departments and Enbridge to overlap in illegal ways.
“There’s a rule that you cannot work for any entity, or any organization, or anyone, that you had significant dealings with during your last year in office… And therefore Strahl should not have been dealing with Enbridge until May 18, 2013, which would have been two years after he left office,” he told DeSmog Canada.
“The open letter Strahl signed on to was illegal,” Conacher said. “You’re not allowed to make representations to anyone for any entity that you had significant official dealings with during your last year in office.”
Yet signing an open letter in favour of Enbridge projects is just the beginning of Strahl’s misdeeds, according to Conacher. Far more serious is Strahl’s position with the oversight committee tasked with protecting citizen rights from CSIS.
“Beyond that though there is a general rule about preventing conflicts of interest…so I don’t think he can work for Enbridge as chair of SIRC because that causes conflicts; it does not prevent them.”
In addition, Conacher worries Strahl’s cabinet position may have exposed him to government information that could be used to benefit Enbridge’s push for the Northern Gateway pipeline.
“There is another rule, that never ever in your entire life after you leave cabinet can you give advice using secret information that you’ve learned on the job,” he said.
“It’s not only that your not allowed to share the secret information; you’re not allowed to do that. But you’re not allowed to even give advice using the secret information. He can’t un-know what he knows and so his advice is based on what he knows. What he knows is secret information, therefore he’s prohibited from giving that advice.”
Canada’s ethics commissioner Mary Dawson has been politely side-stepping the issue, Conacher says. Her track record shows she tends to avoid controversy as well, with over 80 former ethics rulings made in secret. Conacher’s concern is that Dawson, a Conservative-appointed commissioner, is avoiding the hard questions — questions Democracy Watch details in its eight-page letter to her.
“It’s beyond conflict of interest. It’s also these other rules that apply and it’s not resolved by Strahl just recusing himself if a complaint comes forward about CSIS and Enbridge,” he said. “And that’s what Mary Dawson has been dodging.”
Dawson is not required to investigate ethics complaints filed by members of the public. She would be required to investigate, however, if a member of parliament made the same complaint.
Strahl’s behaviour, Conacher says, is “very dangerously undemocratic” and “unethical” because it places “the interests of a few private companies way above the public interest.”
“That’s why it’s illegal,” he says. “Thankfully, it’s illegal.”
The Conflict of Interests Act has been reviewed over the past year by the House of Commons ethics committee. A full report outlining the position of each federal party on ethics issues is due out this week or when parliament resumes.
“You don’t have democracy if these rules are not strict, strong and enforced. As everyone knows: if you allow private interests to trump public interests then you don’t have democracy,” Conacher said.
In his 712-page tour de force, The Great Deformation, David Stockman dissects America’s descent into the present era of “bubble finance.” He describes the housing bubble’s early stages as follows:
The American savings deficit was transparent after the turn of the century, but the Fed flat-out didn’t care. … Greenspan and his monetary central planners had a glib answer: do not be troubled, they admonished, the Chinese have volunteered to handle America’s savings function on an outsourced basis.
So instead of addressing the growing deformations of the American economy after the dot-com crash, the Fed chose to repeat the same failed trick; that is, it once again cranked up the printing presses with the intent of driving down interest rates and thereby reviving speculative carry trades in stocks and other risk assets.
Needless to say, it succeeded wildly in this wrong-headed game plan: by pushing interest rates down to the lunatic 1 percent level during 2003-2004, the Fed sent a powerful message to Wall Street that the Greenspan Put was alive and well, and that the carry trades now offered the plumpest spreads in modern history. Under the Fed’s renewed exercise in bubble finance, asset prices could be expected to rumble upward, whereas overnight funding costs would remain at rock bottom.
That is exactly what happened and the equity bubble was quickly reborn. After hitting bottom at about 840 in February 2003, the S&P 500 took off like a rocket in response to virtually free (1 percent) money available to fund leveraged speculation. One year later the index was up 36 percent, and from there it continued to steadily rise in response to reported GDP and profit growth, albeit “growth” that would eventually be revealed as largely an artifact of the housing and consumer credit boom which flowed from the very same money-printing policies which were reflating the equity markets.
In hindsight, it’s hard to refute Stockman’s perspective on the Fed’s role in the housing bubble. But that won’t stop some from trying, and especially the many academic economists beholden to the Fed. Research papers have stealthily danced around the Fed’s culpability for our crappy economy, as we discussed here.
More importantly, if Stockman is right about bubble finance, there’s more mayhem to come. Consider that denying failure and persisting with the same strategy are two sides of the same coin. Just as investors avoid the pain of admitting mistakes by holding onto losing positions, Fed officials who claim to have done little wrong are also more committed than ever to propping up asset markets with cheap money.
For those concerned about another policy failure, a key question is: “As of today, where do we stand with respect to bubbles and bubble finance?”
We’ll compare two indicators that may help with an answer:
- Stock valuation indicator: To eliminate the problem that price-to-earnings (P/E) multiples tend to skyrocket when earnings shrink in a recession, we use price-to-peak-earnings (P/PE). This is the S&P 500 (SPY) index divided by the highest earnings result from any prior 12 month period. (See here for further discussion.)
- Monetary policy indicator: We use the difference between Fed policy rates (the discount rate until 1954 and fed funds rate thereafter) and inflation, averaged over the prior two years. By taking a two-year average, we capture lags in the economic effects of rate changes (commonly estimated at up to 24 months), while also smoothing out anomalies.
Here’s the data:
The chart shows that it wasn’t until the Fed’s battle with the Internet bust – described above by Stockman – that policy rates were first lowered below inflation at the same time that stocks were “fully valued” (which we defined as a P/PE above 17). The Fed had never before allowed the policy/valuation mix to drift into the chart’s bolded, upper-left quadrant.
Today, we’re well into our second experiment with that quadrant, which is a precarious place to be. It doesn’t take much analysis to see that strong policy stimulus despite an elevated price multiple is a recipe for bubbles.
In other words, the chart suggests another reason to expect the next bear market to be severe, as we discussed in “P/E Multiples, Deleveraging and the Big Experiment: Sizing Up the Next Bear Market” and again in “Bubble or Not, U.S. Stocks Are Priced to Deliver Dismal Long-Term Returns .”
Worse still, we haven’t even contemplated the Fed’s preoccupations as we head into Janet Yellen’s reign. The next time you puzzle over the transparency of the forward guidance or the timing of the taper or the transparency of the guidance for the timing of the taper (you get the idea), we suggest coming back to the data above.
In the bigger picture, interest rates alone are enough to show that we’re back in the danger zone.
While the policy/valuation mix reached the chart’s bolded quadrant for the first time in 2003, you may wonder about close calls. Eliminating the bubble finance era, we find two:
The first occurred in late 1958 and 1959, and Fed Chairman William McChesney Martin met the challenge with aggressive increases in both interest rates and stock market margin requirements. Stockman discussed these policies in The Great Deformation, stressing that Martin responded to financial excess only four months after the end of a recession. Martin’s actions helped to slow lending growth while preventing asset bubbles.
The second close call occurred in 1972, when Fed Chairman Arthur Burns held the discount rate steady at a five-year low of 4.5%. Alongside President Nixon’s blunders, Burns’ dovish approach soon spawned double-digit inflation, a painful recession and a severe bear market.
Overall, four past chairmen faced a policy/valuation mix that was either headed toward or inside the bolded “danger zone” in our charts. Martin tightened preemptively and escaped unscathed. Burns and Greenspan will forever be seen to have lost the plot. The history books aren’t yet written for Ben Bernanke, but we don’t like his chances.
The watchdog agency that oversees the Canadian Security Intelligence Service (CSIS) says it will review the complaint of a Hamilton man who alleges agents visited his house to “intimidate” him.
The Security Intelligence Review Committee (SIRC), the five-person board of political appointees that examines CSIS’s operations, has tapped chair Chuck Strahl to investigate the claim put by longtime activist Ken Stone.
In July, Stone made a formal complaint to SIRC about a Jan. 25 visit by CSIS agents to his Mountain home.
Stone, long a vocal labour and anti-racism advocate, said the agents asked him about an op-ed he wrote titled “Harper is wrong in demonizing Iran” that was published in the Jan. 11 edition of the Hamilton Spectator.
In his letter to SIRC, the 67-year-old alleges that the visit was intended “to intimidate me and members of my family from lawfully exercising our Charter rights to freedom of expression and association” and, counter to CSIS’s mandate, did not address a meaningful security threat.
The visit, he wrote, “caused me and my family a considerable amount of anxiety.” He has asked for a formal apology from CSIS as well as statement from SIRC demanding that CSIS “cease and desist from home and workplace visits to residents of Canada that are designed to intimidate residents of Canada from exercising their Charter rights.”
Last week, Stone received a letter stating that SIRC will hold hearings into the case, but a date for the proceedings has not been set.
Stone said he plans to attend the hearings in Ottawa, and will retain a lawyer to help him make his case.
Both ‘pleased’ and ‘disappointed’
Stone said he’s pleased the committee has chosen to take on his case, but he is doubtful that the process will yield the answers he seeks.
“On the one hand, I’m pleased that they have taken up the complaint because they had the discretion not to take up the complaint. The fact that they chose to take it up is a good sign,” he said.
However, Stone said he’s “disappointed” that Strahl, a former Conservative MP and federal cabinet minister, has been assigned to investigate the case.
“He’s a Conservative Party hack and I don’t expect a lot of sympathy from him.”
That Strahl and his fellow SIRC members are political appointees “shows a fundamental problem with oversight over CSIS,” Stone added.
Committee members, he said, would put their jobs at risk if they slammed the government’s policies, and neither CSIS nor Parliament are required to adopt SIRC’s recommendations.
Contacted by CBC Hamilton on Thursday, SIRC said it would not be able to respond to Stone’s criticism. But in an interview with CBC Hamilton in March, SIRC senior counsel Sylvie Roussel defended the committee’s integrity.
“We have a process and we follow that process,” she said, noting that panel members “take their role very seriously.”
‘Canadians deserve better’
Jean Paul Duval, a spokesman with Public Safety Canada, said the ministry does not comment on specific cases.
However, in an email statement to CBC Hamilton, defended SIRC’s review process.
“SIRC is at arm’s length from the Government and provides independent review that CSIS activities comply with law and Ministerial Direction,” he wrote.
When Stone first went public about the CSIS visit in the winter, he initially said he would not go through with making a complaint to SIRC, figuring it would be futile exercise. He later decided he wanted to his grievance on record, regardless of the outcome.
On Thursday, Stone said he hopes the government will eventually adopt an civilian oversight body — akin to the Ontario Civilian Police Commission — that is independent and not led by political appointees.
“All in all, it’s not a satisfactory oversight process,” Stone said. “Canadians deserve better.”
- Letter warning Stephen Harper against appointing Arthur Porter to oversee spy agency raised no red flags (news.nationalpost.com)
- Globe and Mail Exposed Criminal Csis (canadasblog.wordpress.com)