“It’s like inviting Kim Kardashian to talk to your daughters about chastity.”—Andrew Fastow, former CFO of Enron in a speech on ethics
You know it’s bad when Nigel Wright could take pointers on ethical conduct from Andrew Fastow, the man who cratered Enron.
Fastow describes himself as Enron’s “chief loophole officer.” He spent five years in jail for securities fraud and is now on the lecture circuit talking about corporate ethics.
His Enron experience illustrates just how far afield Wright and the Prime Minister’s Office (PMO) strayed in the Duffy affair.
Is it legal, moral and ethical?
Fastow exploited the grey zone where accounting and securities rules were fuzzy, vague or non-existent. He wasn’t concerned about the moral or ethical implications of his actions, asking only whether the law prevented him from proceeding.
Wright had a different challenge. While it’s true that the rules governing residency were somewhat vague in Duffy’s case this vagueness was no longer the issue when the problem landed on Wright’s desk.
Wright had to decide whether Duffy should repay his housing expenses (whether he owed them or not) to get out of the political spotlight and whether the independent audit of his expenses should be allowed to run its course.
When Duffy balked at repaying, there was nothing illegal about Wright paying them on Duffy’s behalf.
However it was morally and ethically wrong for Wright to tell Duffy to lie about who made the payment, and for Wright and the PMO to lie to Harper about Wright making the payment, and for Wright to ask the independent auditor to release Duffy from its audit and for Wright to interfere with the independence of Parliament by telling Conservative senators how to manage the Duffy matter in the Senate.
Where is the contrarian?
Fastow didn’t have to convince his external accountants to sign off on fraudulent deals because he made the accountants part of the transaction team. In essence he neutralized the very people who were supposed to keep him honest.
Today he’d add a contrarian to the team to challenge decisions and force executives to justify their actions. (He notes that being a contrarian can be a career-limiting move).
Wright attempted to neutralize the independent auditor by working a channel through Senator Gerstein to pull Duffy out of the audit but failed due to the wording of Deloitte’s mandate.
Wright’s team included a “contrarian”, the prime minister’s in-house counsel, Ben Perrin. Perrin could have averted disaster had Wright chosen to engage him fully, but like many executives who don’t want to hear what a lawyer has to say (especially if it’s “no”) Wright cut Perrin out of the file until the last possible moment, perhaps because Perrin had a mind of his own.
Perrin was prepared to challenge anyone including Harper.
He told Harper he was wrong in relying on a clause in the Constitution Act of 1867 to justify Duffy’s appointment as a senator simply because Duffy owned property worth at least $4000 in PEI. The prime minister overruled him.
Perrin challenged Wright for telling Duffy not to cooperate with the auditor, saying it was unethical to tell Duffy to do something that would make him look bad.
The interesting thing about Perrin is that even though he was a late addition to the team he saw everything. He confirmed that Harper’s principal secretary, Ray Novak, was told not once but twice that Wright paid the $90,000 on Duffy’s behalf.
Thanks to Perrin the trail of bread crumbs is leading right back to the prime minister.
Both Fastow and Wright have had time to reflect on their actions and decide whether to “own” them.
Fastow says “I think I’m guilty, and the most egregious reason that I’m guilty is that I engaged in transactions that caused a misrepresentation and caused Enron to appear different to the outside world than it really was.”
Wright on the other hand says he didn’t mislead Harper by failing to tell him that he, not Duffy, would repay the $90,000. He says: “I don’t think it was a lie, I just think it wasn’t on my list of things I needed to check with him.”
Wright says he told Duffy to lie because: “From an issues management perspective…it was better to have people believe that the money was coming from him. Better for [Duffy], better for the government.”
Wright’s assertion that source of the funds was insignificant is nonsense. If it didn’t matter to the prime minister, “the people” or “the government” that the money came from Wright not Duffy there was no need to embark on this cloak and daggers operation in the first place.
The right question
Fastow says he didn’t intentionally try to mislead. He blames it on a “character flaw”—the failure to ask the right question namely: “what was the purpose of the transaction.”
It’s a good question.
What was the purpose of Wright repaying Duffy’s debt and lying about it? Was he acting charitably in accordance with Matthew 6:3 or was he trying to protect The Brand and it got away from him?
In the end it all comes back to Stephen Harper. He started his reign with promises of transparency and accountability. Now he shuts down any questions about the Duffy trial by rejecting the premise of the question or repeating the same two talking points: “These are the actions of Mr. Duffy and Mr. Wright and “Mr Novak and I learned about the payment from the CTV news”.
On Oct 19 we’ll see whether Canadians believe him or decide he’s like Kim Kardashian talking to our daughters about chastity.
I’m betting on Kim.