Cabinet ministers and blind trusts: how it all works

One of jobs of P.E.I.'s Conflict of Interest Commissioner is to brief incoming MLAs on the requirements for them to disclose their assets and sources of income.

Commissioner John McQuaid has been meeting one-on-one with MLAs to go over those disclosures.

While there are measures all MLAs must take to try to avoid conflicts-of-interest or perceived conflicts in the public eye, for cabinet ministers there is an added requirement: putting business interests and investments into a blind trust.

What is a blind trust?

According to the federal Office of the Conflict of Interest and Ethics Commissioner, a blind trust is a financial arrangement "in which the trustee, or blind trust agent, is empowered to administer the assets of the trust without any input from the trust's beneficiary, and may not provide the beneficiary with any information about the day-to-day operations of the trust."

Under P.E.I.'s law, cabinet ministers are not allowed to hold or trade in "securities, stocks, commodities and futures" or to "carry on business through a partnership or sole proprietorship" unless those assets are placed in a blind trust.

Trustees must serve at arms-length and have to be approved by the conflict of interest commissioner. They can't consult with the minister whose assets they're managing. They provide an annual report to the conflict commissioner on income from the minister's trust, and provide information to the minister to allow them to file income taxes.

Under the law, cabinet ministers are entitled to be reimbursed using taxpayer funds for fees charged by their trustees.

What is the purpose of a blind trust?

According to McQuaid, the primary reason for requiring cabinet ministers to place their businesses in a blind trust is because being a minister is a full-time job. 

"To be involved in the management of a business or extensive management of the business ... while you were a minister would take away from your responsibilities as having a full-time job as minister."

Ian Stedman, a lawyer who specializes in government ethics at York University's Osgoode Hall Law School, said there's another important function — to hopefully clear up any doubt in the mind of the public as to whose interests a cabinet minister is serving.

"If you are responsible for the business of government running a ministry … you should not be able to put yourself in a position where the public questions whether you're making decisions in the public interest or for your own personal interest," Stedman said.

Stedman said blind trusts are used across Canada and are "pretty effective" but do have shortcomings: for example, they can be good at shielding a politician from knowing what's in their stock portfolio, but a cabinet minister won't "forget" about a business they own just because it's under a blind trust.

Opposition Green Leader Peter Bevan-Baker put it this way, "blind trusts are an imperfect instrument but it's what is universally used in this situation and the best we've got."

A farmer to serve as agriculture minister?

Is that a conflict?

Or for a doctor to serve as health minister or a teacher to serve as education minister?

Stedman said there are benefits to appointing a cabinet minister with specific expertise in their own portfolio.

"Of course having someone run a business who knows what the business is about is a good idea. The question is, is it different in the public sector?" Stedman said. "Is it acceptable to have someone in that office who could eventually benefit from the decisions they make?"

P.E.I.'s Conflict of Interest Act includes a provision which prevents MLAs from being involved in decisions that could further their private interest. However it also states that things which benefit a broad class of people don't qualify as private interests.

As examples, McQuaid said MLAs are allowed to vote on increasing the basic personal tax exemption, because, while they would benefit from the increase, it would affect a broad class of people — in that case, all Island taxpayers.

By the same token, McQuaid said farmers or even dairy farmers are also a broad class of people, so an MLA could participate in decision-making processes which could benefit dairy farmers, even if they were a dairy farmer themselves.

Stedman does suggest that to eliminate the possibility of a public perception of conflict of interest, P.E.I. might consider implementing "screens" in such a situation to divert some decision-making away from a cabinet minister.

"If a decision is to be made … and it could impact dairy farms, I would say the deputy minister has to make the decision, or … a different minister would have to step in."

Can a minister still milk his own cows?

Ministers are not allowed to "carry on business" under the Conflict of Interest Act but the commissioner has the power to grant exemptions to that, allowing a minister to take part in some aspect of business operations.

In order to provide that exemption the commissioner must be "satisfied that the activity, if carried on in the specified manner, will not create a conflict between the minister's private interest and public duty."

So a dairy farmer might be allowed to continue milking cows every morning, as P.E.I.'s new minister of agriculture has said he intends to do. McQuaid said if such an exemption was granted it would be noted in the minister's public disclosure statement.

CBC asked to speak with Bloyce Thompson for this story, but was told he would be willing to speak about the issue of blind trusts and conflict of interest after he has completed the process with the conflict of interest commissioner.

Why can't a fisherman serve as a P.E.I. cabinet minister?

PC MLA Sidney MacEwen has expressed concerns about federal rules that specify who can own and operate a fishing licence on the East Coast.

He said Fisheries and Oceans' owner-operator policy prevents him from putting his lobster fishing operation in a blind trust and wants DFO to review the policy.

McQuaid said from the perspective of P.E.I.'s Conflict of Interest Act, "a fisher's business would as I see it be no different than any other business that could be placed in the hands of a trustee."

McQuaid said he couldn't comment on whether a fisherman on P.E.I. could place their business in a blind trust but be granted an exemption to be allowed to take part in the operation of their fishing vessel.

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