Angry in the Great White North

Kevin Libin summarizes the weirdness of Joyce Murray's Elections Canada filing nicely:

Here's what Ms. Murray's returns tell us: She raised $1,300 and spent more than $12,000, all of it (according to the documents) on July 4 -- three months after the nomination race [to be the Liberal candidate for Vancouver Quadra] ended. The sole supplier of all goods and services, from advertising to telephone lines, was Joyce Murray. Nearly half of it was spent on something itemized only as "Hono?" Another $145 was spent on something called "M?". Weirder: Ms. Murray's campaign expenses add up to a strangely perfect round number: exactly $12,700. Exactly. To the penny. And none of the $1,300 that was raised went to pay off the expenses. No wonder it all seemed so strange to blogger Steve Janke, who, to give credit where it's due, first raised the impenetrability of the documents last week. That's because it is strange.

OK, thanks to this article, we now know what this all means:

Over the phone, [Joyce Murray's financial agent Martin Eady] tries explaining what happened. It requires a lot of explanation: Ms. Murray decided she wanted to focus on winning the nomination, not raising money, so she financed the campaign herself. That's why she's the sole supplier. Mr. Eady says he even prepared a return showing the original suppliers -- the copy place, the phone company, Pizza Hut, and so on -- but was told to redo it: since Ms. Murray paid for the expenses personally, she was to be listed as the supplier. Mr. Eady also e-mailed me the final documents he sent to Elections Canada, where "Hono?" is actually clearly typed in as "Honorarium"-- remuneration, he says, for Ms. Murray's campaign manager -- and "M?" as "Meals"; he can't figure out why Elections Canada's version is different. As for the conveniently round number of $12,700.00, Mr. Eady recalls that Ms. Murray had budgeted that as a fixed amount ahead of time. After all costs were accounted for, she took whatever was left in the $12,700 budget and paid it to her campaign manager -- the honorarium in question.

But isn't the point that we don't have to call Martin Eady, who knows a thing or two about financial returns being the director of corporate finance for the B.C. Securities Commission, to understand all this?

When [Kevin Libin] suggested that Ms. Murray's public filing doesn't really tell anyone anything about what went on with her campaign money, Mr. Eady laughed and agreed: "No, it doesn't."

No it doesn't.  And the vagueness of the filing leaves openings for a less scrupulous person to avoid meeting his or her obligations.  If you are your own supplier, at least on paper, could you not write-off your debts as uncollectable by you?

Why would you do that?  A well-heeled candidate could self-finance in excess of the contribution limits, and never have to go through the trouble of recovering the costs through tedious fund-raising, a distracting chore that would hobble opponents who don't have access to that sort of wealth:

Joyce Murray's campaign, the government agency says, is now in debt. She has a year-and-a-half to raise the money privately to repay herself for all her supplies, or she'll be violating the rules that cap individual donations.

Then again, section 478.22 (d) of the Elections Act allows candidates to write off "uncollectible debts, in accordance with the creditor's normal accounting practices." So, who's to say someone less ethical than Ms. Murray might someday argue that they can't collect the money from themselves, skirting the donation limits? With this kind of murky financial reporting, would anyone even notice?

This sort of linkage between wealth and political power is exactly what the reporting rules were supposed to eliminate.

Even Joyce Murray's financial agent (who is remarkably open about the weaknesses in the system even as he discusses the returns he helped file) points out another way the obscure filing could be problematic:

And Mr. Eady notes that when candidates are turned into re-sellers of goods to their own campaigns, as far as he can tell, "there's nothing to stop someone" from using the campaign to make a profit -- buying a pepperoni pie at Pizza Hut for $15 and charging the campaign $50 (though Ms. Murray didn't, and he has the receipts to back it up).

And then you could flip the profits back to the party via cash-stuffed envelopes left in restaurants.

OK, that wasn't called for, but I couldn't help myself.

Are the rules doing the job?  Not according to another accountant who has also prepared these filings as a financial agent:

"If there are no teeth in the rules, and they can just be ignored by those who go through the process, then those rules need to be tightened up considerably," says Ross McNichol, a Calgary CA who has served as a financial agent in the past. "[Joyce Murray] identifies less than half of the total $12,700 by category, and over 25% of that is referred to as 'miscellaneous' ... If Elections Canada has designed their reporting system to provide information to the public, and if this passes for proper disclosure, then I would have to say they have failed miserably, if only about 20% of the total spending has to be identified by broad category, and the real suppliers remain unidentified." He calls the filings "a pretty sad package."

No one is saying Joyce Murray did anything wrong, or that she is planning to shirk her responsibilities to raise the money needed to pay her debt to herself through legal donations of $1,100 or less collected from individuals.  But for all the filing burden and the public disclosure, we are left with our faith in Murray and Eady that this is the case.  That's where the system breaks down, because before we had this extra layer of rules and responsibilities, all we had was faith in our politicians that the money raised and the money spent was not undermining our political process.

Clearly that hasn't changed.

As Kevin Libin concludes, if this is what passes for transparency, then maybe the whole thing ought to be scrapped. 

That might be taking things too far.  Maybe we just need to ensure that candidates can't be their own resellers, and that self-financing is recorded as a loan.  But then I have no doubt there are other holes in the system.

No system is foolproof.  But then a foolproof system only protects against fools.  The risk is from someone who is no fool, someone who is deliberately exploiting loopholes in the rules for his own benefit, in defiance of the spirit of the rules.  And clearly that opportunity exists today, as we can see by taking Joyce Murray's filing and imagining what could be done with it. 

But then again, with the public disclosure of the filings, we have spotted this particular problem, and have been able to confirm that it is all above board (for now, anyway).  So in a sense, the system worked.  If just barely.