PWAC Victoria: Sid Tafler, Writing Sample

The Reading Room

Patronage and the PM's Stock Deal

by Sid Tafler © 1998

The Prime Minister appoints a senator who helped him make a quick $45,000 profit on a stock flip. (Despite his denial in this column, the new senator later confirmed he did sell the shares to the prime minister.)
A version of this column was published in the Globe and Mail Provinces section, Mar. 13, 1998. This story drew front-page headlines across the country and dominated Question Period in Ottawa for several days.

It wasn't that long ago--was it?--that patronage was a nasty word in Ottawa. Just over four years ago, Jean Chrétien was elected prime minister, vowing a new era of honesty and morality in politics, to the relief of Canadians fed up with the self-indulgence of the Mulroney regime.

The Senate appointment last week of Ross Fitzpatrick, 65, Mr. Chrétien's old business and political crony and chief pointman in B.C., is as sure a sign as any that the bad old days are back again and our political leaders are sure Canadians have short memories.

Mr. Chrétien's latest patronage appointment in B.C. raises questions not only of political cronyism but also of the Prime Minister's own economic gain in private stock transactions in the shares of a B.C. mining company.

The PM earned a quick profit of $45,625 in one week buying and selling shares in Viceroy Resource Corporation, insider trading reports filed with the B.C. Securities Commission reveal.

Mr. Chrétien was a director of Viceroy and Ross Fitzpatrick--the B.C. businessman the prime minister appointed to the Senate last week--was chairman and CEO of Viceroy at the time of the stock transactions in March 1987.

Mr. Chrétien, who was not in politics at the time, purchased 10,000 Viceroy shares at $8 each on March 16, 1987 in a private transaction, which indicates the shares were not purchased through a stock exchange. Mr. Chrétien obtained those shares well below market value--Viceroy closed at $12.75 on that date on the Toronto Stock Exchange.

A week later, on March 23, Mr. Chrétien sold half those shares at $17.125, earning a profit of $45,625 on the 5,000 shares he sold. The March 23 sale was not a private transaction, indicating he sold the shares on the open market.

On the same day the future prime minister purchased the shares, Mr. Fitzpatrick sold 10,000 shares for the identical price of $8, according to an insider trading report filed by the Viceroy chairman. But Mr. Fitzpatrick said he did not sell the shares to Mr. Chrétien--he said they were likely purchased by way of a private placement.

But Andrew Richardson, manager of statutory filings for the B.C. Securities Commission, said Mr. Chrétien's purchase was not reported as a private placement, but "a transaction done privately of already existing shares."

Mr. Chrétien sat on the board of Viceroy Resource from 1986 to 1990, when he resigned to resume his political career. As a director, he was granted 50,000 stock options, giving him the right to buy these shares at $5.50 each. But B.C. Securities Commission records indicate these options were not exercised.

In the House this week, Mr. Chrétien acknowledged he worked with Mr. Fitzpatrick when he was out of politics, but said he received no remuneration and never exercised his stock options.

That may be credible or not, depending on how you define remuneration, but it certainly seems Mr. Chrétien did well by his business relationship with Mr. Fitzpatrick, who is now doing well by his political relationship with the PM.

The two men met in 1963, when Mr. Chrétien was a freshly-elected MP and Mr. Fitzpatrick had already served as executive assistant to Liberal MP Jack Nicholson. Their political alliance grew stronger over the years, and western Liberals say Mr. Fitzpatrick has been the Prime Minister's chief political adviser in B.C. since he formed a government in 1993.

Mr. Fitzpatrick served as chair of Mr. Chrétien's leadership campaigns in 1984 and 1990 and as B.C. campaign director in the 1993 federal election.

This is the second time Mr. Chrétien had planned to appoint Mr. Fitzpatrick to the Senate. In January 1994, just three months after Mr. Chrétien was elected prime minister, western Liberals were told of the forthcoming appointment. But B.C. media reports about the close connection between the two apparently squelched the deal.

Mr. Chrétien had recently won an election with the promise of a new political morality and a blatant patronage appointment so soon into his mandate was seen as unacceptable.

The appointment is an indication that patronage rides at a full gallop once again in Ottawa. Mr. Chrétien's gradual shift to old-style cronyism and his re-election to a second term have apparently altered the political climate. Also, at 65, and no longer involved with Viceroy, Mr. Fitzpatrick is more inclined to serve in the Senate today. "My business interests are different than they were a few years ago," he said.

The Senate appointments last week were greeted with howls of outrage from opposition MPs. Also appointed to the Upper House were Archibald Johnstone, 73, of P.E.I., a former flight lieutenant in the Second World War, and Joan Cook, 64, who ran and lost as a Liberal candidate in the last two provincial elections in Newfoundland.

"In the U.S. you have to win an election to become a senator, in Canada you have to lose an election to become a senator," said Gary Lunn, Reform MP for Saanich-Gulf Islands.

Mr. Lunn called Mr. Fitzpatrick's appointment "a classic example of pure patronage. It shows the Upper House is not functional." The Reform Party is so committed to making the Senate a democratic institution, he vowed the entire caucus would resign if his party didn't begin taking the steps to reform the Senate within a few months of forming a government.

Alberta Premier Ralph Klein has taken steps to hold elections for Alberta senators this fall, but B.C. Premier Glen Clark says he won't do the same, to avoid legitimizing the institution. Mr. Clark says the Senate is "a waste of money" and should be abolished.

But Mr. Clark said he respects Mr. Fitzpatrick and believes he will be a good advocate for B.C. He said the Senate is already filled with political appointments so "Mr. Fitzpatrick in that respect will be fine."

By appointing Mr. Fitzpatrick, Mr. Chrétien may have tried to head off a Reform-led campaign to pressure Mr. Clark to hold a Senate election in B.C. But the appointment seems to prove the point of the Reform Party and other Senate critics that the Upper House is nothing but a retirement home for party loyalists.

Sid Tafler
| Author Profile | More Writing Samples |

Last updated: April 23, 2001 http://www.islandnet.com/pwacvic/tafler03.html