Party of One (46 page)

Access to government by corporations was a priceless commodity, as evidenced by the king’s ransom paid by Barrick Gold to acquire the services of John Thornton. The veteran international banker, a former president of Goldman Sachs Group, received a “golden hello” of $11.9 million in cash when he joined Barrick as co-chair on June 5, 2012. As reported by Bloomberg News, “Barrick Chairman Peter Munk told investors . . . that he needed the former banker, ‘a highly desirable, well known commodity’ to secure access to governments and protect against possible losses of mineral rights.”
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Just as the government had circled the wagons around the PM’s chief of staff in the matter of Barrick Gold, the Conservatives came to his rescue in the immediate fallout from the Wright/Duffy affair. Former Harper communications director Dimitri Soudas emailed CBC in response to their May 16 story about the Wright payment to Duffy. Even though he was out of government as a member of the Canadian Olympic Committee, Soudas weighed in with what
would be the government’s first “narrative” to find a way out of the scandal; Wright’s payment was the act of a Good Samaritan.

In December 2013, Dimitri Soudas was brought back from the Olympic Committee, just before the Winter Games in Sochi, to become the new executive director of the Conservative Party of Canada. Someone had obviously been pleased enough with his remarks about Nigel to make Soudas the party’s principal election organizer. Four months later, Soudas was out the door again after he was accused of meddling in the nomination process of his fiancée, MP Eve Adams.

Soudas’s strategic encomium notwithstanding, the Opposition had always been troubled by the appointment to the PMO of a person with such deep corporate connections as Nigel Wright. The sheer size of Onex Corporation as the largest private investment capital firm in Canada meant to Wright’s critics that there was scarcely a file that would cross his desk that wouldn’t present a conflict of interest. The company had assets of $44 billion, revenues of $34 billion, managed $16 billion, and had 229,000 employees worldwide.

On November 2, 2010, Nigel Wright had appeared before Parliament’s Standing Committee on Access to Information, Privacy, and Ethics as the prime minister’s chief of staff designate. Liberal MP Wayne Easter pointed out forty Onex holdings that were connected to federal government departments. An ethical wall might protect Wright when it came to the aerospace industry—his area of expertise at Onex, where he sat on the board of two affiliated companies, Hawker Beechcraft and Spirit AeroSystems. But would an addition to Wright’s ethical wall be necessary to cover off special taxation, taxation on the private equity sector, and issues of tax deductibility?

Easter produced a chart showing an Onex connection to Cineplex and Indigo in cultural industries, Allison Transmission
in heavy equipment and fluids, Hawker Beechcraft in aviation, and ResCare in health. Bloc Québécois MP Carole Freeman pointed out that Wright was moving from the largest private corporation in Canada to the most influential position in the country next to the prime minister. Since the activities of Onex were so pervasive, how could he advise Stephen Harper without putting himself in perpetual conflict? Wright replied that he had sent a memo through the Privy Council Office that no matters touching Onex were to be sent to him.

NDP MP Pat Martin flatly rejected Wright’s “ethical wall” defence against his many built-in conflict-of-interest issues. He jokingly observed that the PMO couldn’t even send out for pizza because Onex had an interest in CiCi’s Pizza. On a more serious note, Martin raised the issue of the timing of Wright’s appointment. He said that journalists were initially told that the prime minister had offered Wright the chief of staff position just weeks before his appointment was announced in September 2010. Under questioning from Martin, Wright confirmed that he had actually accepted the position six months earlier, in March. That meant that when he accepted the offer to run the PMO, Wright was on the board of Hawker Beechcraft, a company with tie-ins to the F-35 project. This in turn led to the question that was uppermost on Martin’s mind: had Wright played any role in promoting the F-35 between March, when he was still at Onex, and October, when he took up his post in the PMO?

It was the elephant in the room, since Ottawa was embroiled in controversy over buying the hugely expensive high-tech aircraft to replace Canada’s fleet of CF-18s. Wright replied with icy precision. “Mr. Chair, I can say I have not had any conversations regarding the F-35 or Lockheed Martin with any public official, and I have not promoted—” Martin, who was listening as carefully as Wright was speaking, cut him off. “No, not with a government official, but
marketing it internationally?” Again, Wright was measured in his response. “I have not promoted in any way to anybody the sale of that airplane, or the purchase of that airplane for that matter.”

Their final exchange cut to the quick. Martin opined that the idea of an “ethical wall” was fatuous. “Walls in and of themselves don’t have ethics. The ethics have to reside within individuals, and it seems like this is a construct of convenience to defend the indefensible, which is your position as chief of staff.” Unflappable, Wright smoothly replied that the ethics of the person administering the ethical wall were vital. He talked about the “common-sense” protection of his own reputation and the reputation of the prime minister being “critical,” and promised to get the working relationship right. He also said that the prime minister’s values and his values were aligned in every way. And then this: “. . . not only my first loyalty but also the first loyalty of the deputy chief of staff, of every staff member in the PMO, and the Prime Minister himself is to the law of the land.”

If the Opposition seemed obsessed about Nigel Wright’s possible conflicts, Stephen Harper was partly responsible. The Harper government had actually tightened the connection between the federal government and big business in a way that made necessary the close scrutiny of appointments like Nigel Wright’s. Getting this magnitude of a star out of the private sector and into public service was seen in business circles as a big accomplishment for Stephen Harper. Commenting on the Wright takeover of the PMO from outgoing chief of staff Guy Giorno, Duncan Dee, then chief operating officer of Air Canada, said, “This is as close to a coup as it comes. . . . Nigel is one of the brightest Canadians I know, and he’s incredibly focused on doing the right thing. He’ll bring a tremendous sense of the economy and of politics. . . . There aren’t many people who can synthesize both the economy and politics.”

Wright earned about $2 million a year at Onex, and had millions of dollars in stock options. When he was asked to become the prime minister’s chief of staff, Wright said it was “a once in a lifetime privilege, impossible to do anything with other than say yes.” He had always been interested in public policy, and the skills he used to negotiate multi-billion-dollar business deals were no doubt useful in negotiating foreign-trade deals. It was understood that he would return to Onex after his time in the PMO.

The ease with which Wright planned to move between these two worlds shows how little space there is between business and government in Canada today. The Canadian Pension Plan Investment Board (CPPIB) is a case in point. In 2007, the passage of Bill C-36 transferred all CPP assets to the control of the “arm’s length” CPPIB. The CPPIB was created in 1997 by the then finance minister, Paul Martin, to manage the investments of the CPP. Under the Harper government, the formerly conservative management approach has shifted toward a willingness to take on riskier investments for better returns. Offices were opened in London and in Hong Kong in 2007, and in New York and Sao Paulo, Brazil, in 2014. CPPIB participates directly in mergers and acquisitions to boost returns. In October 2013, the organization led the $6.3 billion buyout of Neiman Marcus group, which owns Bergdorf Goodman. The fund has also invested in Formula One racing, and $700 million worth of Manhattan office towers.

As of December 31, 2013, the CPPIB had assets of $201.5 billion, making it one of the ten largest pension funds in the world. CCPIB chief executive officer Mark Wiseman said the board continues to diversify its portfolio, as evidenced by its real estate investments in South Korea, Brazil, and China in the third quarter of 2013.
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Wiseman joined CPPIB in 2005 as senior vice-president of private investments, and became CEO in July 2012. Nigel
Wright’s former and future boss at Onex Corporation, Gerry Schwartz, told
Canadian Business
magazine that you can feel the weight of the CPPIB in the marketplace, and Wiseman’s influence. “He’s done a marvellous job,” Schwartz said. The pension board is not just an investor, “it’s actively engaged with the assets it acquires and firms it works with.”

The CPPIB is now partnering with companies such as Onex Corporation. In July 2010 CPPIB and Onex partnered to purchase Tomkins PLC for $4.5 billion. Takeover talks had begun in March, the same month Wright had agreed to join the PMO. It was the largest global private equity transaction in 2010. The then British-based company provided hydraulics to the oil, gas, and mining industries.

According to Bloomberg, the bid was 41 percent higher than Tomkins’s closing price the day before the takeover bid. The manufacturer had reported losses in the previous two years, and CPPIB and Onex were the only suitors in a leveraged buyout. Tomkins’s chief executive officer, James Nicol, would remain. Nicol had spent his early years in management at Magna International Inc., where he became president and chief operating officer. CPPIB investments also include Magna Corporation.

In November 2012, CPPIB partnered with Onex again to purchase Tomkins Air Distribution for $1.1 billion. One of the spinoffs from the parent company is Titus, which provides data security to the military in Canada, the United States, Australia, Belgium, and Denmark. Titus also provides services for governments, the aerospace industry, police forces, and the financial industries.

Onex, Magna, and the CPPIB—a cozy, interconnected world of high finance that Nigel Wright had once navigated with extraordinary success. (Onex and CPPIB put Tomkins PLC up for sale in November 2013 and sold it in early April 2014 for $5.4 billion.) CPPIB has also invested $80 million in Syncrude,
$553 million in Exxon, $62 million in Nexen, $218 million in the TransCanada Corporation (Keystone XL), and $201 million in Enbridge (Northern Gateway). RBC is the pension plan’s largest domestic holding, with $707 million invested in the bank according to a series of articles in the
Huffington Post
by Amy MacPherson.
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Nigel Wright may have been able to negotiate multi-billion-dollar deals with ease, but his negotiations with Mike Duffy were turning into an ethical meltdown and a political disaster. On May 16, 2013, the same day Duffy resigned from the Senate, RCMP superintendent Biage Carrese sent a letter to Clerk of the Senate Gary O’Brien, informing him that the Force was “conducting a review of the examinations conducted by Deloitte. . . .” The RCMP requested Senate policy documents for the last ten years. By this time, Duffy was holed up in his Cavendish cottage looking at a clutch of journalists who were gathered on his property, though they would soon be ordered to leave by police.

The next day, May 17, 2013, PMO damage control kicked into high gear. Senator Pamela Wallin, co-host with Senator Duffy at the Conservatives’ 2011 Convention, announced that she too was leaving the Tory caucus over disputed expenses arising out of the Deloitte audit. Like Duffy, Wallin denied any intentional wrongdoing and was effectively ordered to leave caucus. She had already stepped down as chair of the Senate’s National Security and Defence Committee, the Foreign Affairs Committee, and the Subcommittee on Veterans’ Affairs in April 2013. At the time, she cited personal reasons, though few doubted it also had to do with multiple reviews of her expenses.

If the PMO thought that defenestrating another high-profile Conservative senator would blunt the momentum of the scandal and possibly save the public service career of Nigel Wright, they were dead wrong. Legalities to one side, there was an appearance
of a double standard in the PMO’s game plan. If it was a hanging offence for Mike Duffy to have taken a $90,000 gift to pay back improper expenses, it was surely a hanging offence to have given him the money to do it.

Nigel Wright was just days away from the end of his exempt staff career. Retaining him, now that the payment to Duffy was public knowledge, would be an unmistakable sign to Canadians that the prime minister approved of Wright’s “gift” to Duffy. And there was one more thing. On the day that Senator Wallin left the Tory caucus, CTV’s Robert Fife filed another devastating story about the Wright/Duffy affair. He reported that the Senate’s Internal Economy Committee had sanitized the original Senate report of Mike Duffy’s expenses, a document that concluded that he in fact had broken residency rules. The rot appeared to run deeper than a single transaction between Wright and Duffy.

The prime minister decided it was time to cut bait. Early on Sunday, May 19, 2013, the PMO released two statements. In one of them, Wright reported that the PM had accepted his resignation. Already constructing his and the prime minister’s defence, Wright said that what he did was in the public interest, and that he accepted sole responsibility. His words were as carefully chosen as the ones he used in front of the Parliamentary Ethics Committee. “I did not advise the Prime Minister of the means by which Senator Duffy’s expenses were repaid, either before or after the fact.”

In his first personal comment since Fife broke the story, Prime Minister Harper confirmed that he had accepted Wright’s resignation. “It is with great regret that I have accepted the resignation of Nigel Wright as my Chief of Staff. I accept that Nigel believed he was acting in the public interest, but I understand the decision he has taken to resign. I want to thank Nigel for his tremendous contribution to our government over the past two and a half years.”