“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.
Very astute comparison, Susan. Your keen observations and depth wow us.
Gosh, thanks Ted! I wonder whether Nigel Wright will ever fully understand that what he did was wrong. Likely not because unlike Fastow he didn’t end up in prison trying to explain to his 15 year old son how he got there. Tells you something about the difference between business and politics, doesn’t it.
Excellent piece Susan – sharp, fair and well-focused. We’re no doubts having our “Nixon Moment” as I have said to some close colleagues & a friends. I am old enough to remember the Nixon Impeachment and of course Watergate and its aftermath. What’s deeply troubling here is the lies and deception – no doubts this coming week well learn a bit more about this sordid affair …
“Nixon moment” — what a perfect description! Thanks.
Ted said it perfectly! Can’t wait for Oct. 19th to see who wins the bet. Go, Susan!!
Jane, so far it looks like most of us are betting against Harper. That’s promising!
Would prefer not to hear Enron mentioned Susan as it leaves me loosing all faith in big companies and there antics. I was in a rv park in Texas when a retired power employee had his motor home re-possessed as he had lost everything in that enron mess. I can still see the tears in his wifes eyes as he was telling us what happened and that he would have to start all over as Enron had talked employees into investing there pension plans back in the company. Nixon is a little different as he was a sad case to be pitied really.
I certainly understand your point Tom. Enron’s behavior was inexcusable. What’s really frightening is that Fastow says that what corporations are doing today in terms of corporate fraud is 10 times worse than what Enron did. Here’s his exact quote: “The things that Enron did, and that I did, are being done today. In many cases, they’re being done in such a manner that makes me blush, and I was the CFO of Enron.” Law makers have to put a stop to this, but so far the lobbyists are winning.
The Constitution requires that a prospective Senator own (free & clear) $4,000 worth of property in the province he or she is to represent. What Harper, Duffy & the Cons did was flip that requirement on its head, trying to assert that owning property in PEI made Duffy a resident of the province. That isn’t how any reasonable person would read the qualifications for Senator.
If Duffy truly had been a resident of PEI, instead of the Ottawa area, none of this would have happened: his housing expenses would have been legitimate. But the Cons wanted Duffy in the Senate, and they twisted the rules and the facts to try and make him a PEI Senator.
Jerry, you make an excellent point about Harper’s “misreading” (to put it in the kindest terms possible) of the Constitution Act. I pulled it up on the government website. The Act required prospective senators to be at least 30, subjects of the Queen, and to have their permanent residence in the province for which they were appointed, and possess at least $4,000 in real property. The government website says the “latter provision is of little consequence today, although it could serve to ensure that senators are solvent”. Nevertheless Harper latched on it to justify appointing Duffy. And look where it has gotten him. Ultimate justice or karma, it always wins in the end. Here’s the link: http://www.parl.gc.ca/About/Senate/LegisFocus/focus-e.htm
We are in dire need of an oxymoron; an ethical politician!
Well said Peter (on many levels).
lovely article .. exceptional analysis of The Harper Immaculate Deception
Thank you Diamondwalker. The “Immaculate Deception” as you correctly put it continues. Harper insists he had no idea that the PMO was running amok under his watch. I’m not sure why he thinks that’s an iron clad rebuttal. To use the corporate analogy, in similar circumstances a CEO would be fired. Perhaps he thinks Canadians are too dense to understand what really happened here.
I can’t think of anyone I know who would assert that someone else is “good to go” on a project without discussing it with them first. Can you?
I think there are a lot of Canadians who’s colleagues, friends, and families will say that they were “good to go” after this Oct. 19th
Mr.Harper, “Good to go”
As in, “Going, going, GONE!”
Agreed. The more Harper and the gang try to justify the cover up the stupider it gets. Starting with Wright’s position that the source of the funding didn’t matter so we went to great lengths to hide it, then moving to “Good to go” means Harper didn’t know not that he did, to a string of underlings not hearing Harper’s lawyer tell them Wright had paid, or reading their emails in which Wright says he’s paying…it’s ridiculous.
Oct 19 will be a glorious going, going, GONE day!