Since September 2009, 65 federal officials have been penalized for ignoring the ethics disclosure requirements of Canada's Conflict of Interest Act. This statistic is a cautionary reminder to the hundreds of individuals who are assuming new government positions this month.

Since September 2009, Canada's Conflict of Interest and Ethics Commissioner has imposed an average of almost one administrative monetary penalty per month. Every monetary penalty, including the name of the violator and nature of the contravention, is posted on the Internet[1]. To avoid monetary penalties and unwanted publicity, senior federal officials – including new appointees – should take steps to ensure they remain fully compliant with their Conflict of Interest Act obligations.

Restrictions on Key Federal Officials

The Conflict of Interest Act requires detailed financial disclosure and related disclosure from more than 1000 federal officials known as Reporting Public Office Holders[2]. They include:

  • Cabinet Ministers
  • Parliamentary Secretaries
  • Prime Minister's Office employees
  • Ministerial staff members
  • Deputy Ministers and Associate Deputy Ministers
  • Most heads of federal corporations and agencies
  • Full-time federal officials appointed by Cabinet or appointed by a Minister with the approval of Cabinet
  • Governor and the Deputy Governor of the Bank of Canada
  • Chief Electoral Officer

Reporting Public Office Holders must make detailed disclosure to the Conflict of Interest and Ethics Commissioner of their assets and liabilities, and of their employment, professional, volunteer and corporate activities during the two years before they assumed public office. They cannot hold publicly-traded securities[3], they cannot hold outside employment[4] or engage in commercial activity, and they need the Commissioner's approval to serve on non-profit and charitable boards.

Any time there is a material change in his or her assets, liabilities, income or outside activities, a Reporting Public Office Holder must report that information to the Commissioner within 30 days. He or she must also disclose to the Commissioner the receipt of a firm offer of outside employment.

Further, a Reporting Public Office Holder must disclose to the Commissioner all gifts or other advantages of value exceeding $200 in a 12-month period from any one source, that have been accepted by the Reporting Public Office Holder or a family member. Where the value of a single gift exceeds $200, the Reporting Public Office Holder must also make a public declaration of the details.

A Reporting Public Office Holder who divests a controlled asset or is the subject of a recusal order or compliance order made by the Commissioner is required to provide a public statement summarizing that information.

Once they leave office, former Reporting Public Officer Holders are subject to restrictions on their employment and other activities[5]. These restrictions are in addition to the five-year lobbying ban imposed on many of them by section 10.11 of the Lobbying Act[6].

Enforcement: Financial Penalties

The financial reporting/financial disclosure requirements of the Conflict of Interest Act are enforced by administrative monetary penalty[7]. The maximum administrative monetary penalty is $500[8].

A Reporting Public Office Holder who is alleged to have violated a reporting/disclosure requirement is entitled to notice of the allegation and the proposed penalty and has a right to make representations to the Commissioner. The Commissioner shall determine on balance of probabilities whether the Reporting Public Office Holder committed the violation and, if so, whether the proposed financial penalty is appropriate.

The Act expressly provides that due diligence – understood to mean taking all reasonable steps to comply with the Act – is a defence to an alleged violation[9]. The limitation period for the Commissioner to commence a proceeding is five years after she becomes aware of the subject-matter[10].

Records of violations and penalties are public. Since September 2009, the Commissioner has published 68 public notices of administrative monetary penalties, involving 65 Reporting Public Public Office Holders[11]. Three individuals were repeat violators.

Typically the Commissioner imposes a penalty of $100 per violation (higher penalties generally reflect multiple violations). In the rare cases of repeat violators, the Commissioner appears to have imposed penalties of $150 per violation. The average administrative monetary penalty is $125 per public notice[12].

Two categories of violators have been responsible for more than four-fifths of all contraventions. 43 per cent of violators were ministerial staff members, including PMO employees[13]. An identical proportion of violators (43 per cent) was made up of appointees to agencies, boards and corporations. More than one-third of these appointees (or 15 per cent of all violators) were the CEOs or heads of federal agencies and Crown corporations[14]. The remaining categories of violators were Ministers (11 per cent of the total) and Deputy Ministers and Associate Deputy Ministers (3 per cent)[15].

The most common violation (accounting for 60 per cent of public notices of administrative monetary penalty) was failure to report to the Commissioner a material change in assets.  Failure to report other or unspecified material changes accounted for a further 10 per cent of public notices. The next largest category of violation (18 per cent of public notices) involved failure to meet the 60-day deadline for submitting a confidential report to the Commissioner or to meet the 120-day deadline for signing a summary of divestment(s), recusal(s) and/or compliance order(s)[16].

Four notices of penalty arose from Reporting Public Office Holders' failure to inform the Commissioner of outside income or employment[17].

Many Penalized for Failure to Report Material Change

As mentioned above, most administrative monetary penalties are imposed for failure to report a material change (most frequently a material change in assets) to the Commissioner within 30 days.

While the Conflict of Interest Act does not define "material change," the Commissioner has stated that materiality typically involves a change that might require modification of a Reporting Public Office Holder's compliance arrangements or that otherwise affects his or her obligations under the Act[18].

Examples of material changes that must be disclosed to the Commissioner within 30 days include:

  • In the case of a Minister or Parliamentary Secretary, a change in marital status[19].
  • In the case of any other Reporting Public Office Holder, a change in marital status if the spouse or partner has dealings with federal government entities[20].
  • Spouse or partner starts or ends employment with the federal Government or a federal public-sector entity, or a change in marital status involving a spouse or partner employed in the federal public sector[21].
  • Acquiring publicly-traded securities[22] – even if the decision is made by the broker or financial advisor handling the Reporting Public Office Holder's investment account.
  • A friend or relative initiating business dealings with the Reporting Public Office Holder's department or organization[23].
  • Renting out a cottage that was previously used for recreation[24].
  • Opening a new investment account[25].
  • Volunteering to serve on a community organization's board of directors[26].

Non-Compliance by Immigration and Refugee Board Members

Based on public notices of administrative monetary penalties, the worst Conflict of Interest Act compliance record belongs to members of the Immigration and Refugee Board[27].

The role of IRB members is to make decisions on immigration and refugee matters in accordance with legislation. For example, an IRB member can order the removal of someone who has breached Canadian immigration law. In total, 13 IRB members, including three current IRB assistant deputy chairpersons, have been penalized for failure to abide by the provisions of the Conflict of Interest Act[28]

One fifth of all officials on whom the Commissioner imposed monetary penalties were IRB members[29]. No other federal agency, department or office comes close to the IRB's level of non-compliance with the Conflict of Interest Act[30].

Four IRB members were re-appointed to office after being penalized for violating the Conflict of Interest Act[31].

Other Consequences of Monetary Penalties

While administrative monetary penalties (including names, amounts and types of contravention) are published by the Commissioner, typically they receive little media or public attention.

Numerous Reporting Public Office Holders have been promoted, re-appointed or given new responsibilities after being penalized for violation of the Conflict of Interest Act[32].

At present, Conflict of Interest Act compliance is not one of the background screening criteria for appointment to federal office[33].

Nonetheless, Reporting Public Office Holders should arrange their affairs to ensure compliance with the Conflict of Interest Act. This includes adopting strong compliance practices that will afford the protection of a "due-diligence defence" in the event of an allegation of violation.

Right to Counsel

Everyone has the right to seek advice from and be represented by legal counsel in dealings with the Conflict of Interest and Ethics Commissioner and her office.