Unpaid Loans and Claims of 2006 Liberal Leadership ContestantsCommissioner of Canada Elections

Unpaid Loans and Claims of 2006 Liberal Leadership Contestants Overview of the Issues


On December 3, 2006, a Liberal leadership contest was held that resulted in several contestants being left with substantial unpaid loans and claims. The relevant extension periods permitted under the Canada Elections Act for repayment of outstanding loans by these contestants have now expired.


Earlier today, the Commissioner of Canada Elections announced that no enforcement action can be taken against the leadership contestants in relation to their unpaid debts. After having thoroughly reviewed the matter in light of the relevant provisions of the Canada Elections Act, and following extensive consultations with the Office of the Director of Public Prosecutions, the Commissioner has concluded that the Act, as currently drafted, lacks sufficient clarity to support prosecution in the criminal courts with respect to loans or claims that remain unpaid following the expiration of all extensions.


The Chief Electoral Officer has stated publicly on a number of occasions that the current Canada Elections Act regime respecting loans and other unpaid claims is unworkable. The recent conclusion reached by the Commissioner of Canada Elections highlights the urgent need for legislative reform in this area. Upon receiving the results of the review conducted by the Commissioner, the Chief Electoral Officer wrote to the Minister of State for Democratic Reform to advise him of the outcome of this matter and to again stress the need to include changes to the political loans and unpaid claims regime in the expected electoral reform legislation.


Although there is no effective legislative mechanism to sanction their non-compliance, it is clear that the affected leadership contestants did not comply with the legal requirement to repay their loans or claims from leadership campaign funds. Despite these difficulties, Elections Canada will continue to administer the regime relating to loans and unpaid claims in keeping with the spirit of the legislation. This means that Elections Canada will strongly encourage candidates and leadership contestants to respect their obligations and repay loans in a timely, transparent and accountable manner, as Canadians would expect.
Legislative Framework and Recommendations


The Canada Elections Act includes an offence for not paying a “claim for leadership campaign expenses” within 18 months (a similar provision requires candidates in an election to pay their claims within four months). The requirement to pay within the prescribed time does not apply in a situation where a contestant or candidate has requested and is granted an extension by the Chief Electoral Officer or a judge, or in the case of a legal dispute regarding the claims.


As noted on several occasions by the Chief Electoral Officer, the political loans regime is overly complex and difficult to understand. While loans are not specifically defined as “claims” under the Canada Elections Act, Elections Canada treats unpaid loans as unpaid claims.


There are certain deficiencies in the unpaid loans and claims regime under the Canada Elections Act, particularly in the context of enforcement in the criminal courts, where all of the elements of an offence need to be proven beyond a reasonable doubt. For example, the Act does not specifically contain an offence for non-payment of claims after the expiry of an extension period, nor does it include an obligation to abide by the conditions of any extensions granted. In addition, the Act “deems” unpaid claims outstanding after 18 months (for leadership contestants) to be “contributions” under the Act, which is a source of confusion. Wilfully exceeding contribution limits is a separate offence under the Act, with a separate burden of proof that cannot be satisfied by a “deeming” provision, and has nothing to do with the timing of the repayment of claims.


This lack of clarity regarding the unpaid claims regime has been the subject of recommendations presented to Parliament by both the former and the current Chief Electoral Officer. In his recommendations report Responding to Changing Needs – Recommendations from the Chief Electoral Officer of Canada Following the 40th General Election, which was submitted to Parliament in June 2010, Chief Electoral Officer Marc Mayrand presented a detailed series of proposals relating to the treatment of outstanding claims, including loans. He suggested that the rules in this area should be simplified, with a view to improving transparency and effectiveness.


The Chief Electoral Officer repeated these recommendations in his testimony before the House of Commons Standing Committee on Procedure and House Affairs in October 2012, on the subject of Bill C-21, the Political Loans Accountability Act, which is still before Parliament. He recommended legislative reform addressing not just loans, but unpaid claims more generally, reiterating his 2010 recommendations as to how to streamline and rationalize the regime. Among other things, he stated that “political loan reform should also propose rules that are simple enough to be understood and followed by both the political entities and the electors supporting them.”
Impact on the Political Financing Regime


Collectively, the 2006 Liberal leadership contestants had outstanding debts of $2,102,229 18 months after the contest date, and $399,300 after the expiration of the court deadlines. As of today, Elections Canada’s records show that an audited amount of $399,300 continues to be outstanding.


The issue of unpaid loans and claims is not limited to leadership contestants. In fact, it is not rare for candidates in elections also to borrow funds or use credit, including from their own resources, to finance their campaigns.


The lack of clarity in the Canada Elections Act to support prosecutions in cases where loans and claims are not paid within statutory deadlines is likely to affect the motivation of financial and official agents to raise funds to repay loans and claims following the conclusion of a contest or election. This, in turn, creates a gap in the contributions regime, whereby financial and official agents or candidates and leadership contestants could potentially use loans and claims as a way to circumvent the contribution rules.
Annex A: 2006 Liberal Leadership Contest: Loans Outstanding 18 Months After Contest Date
Loans Outstanding 18 Months After Contest Date


Names of contestants

Total amounts borrowed

Amounts outstanding in contestants' original returns

Amounts outstanding at June 3, 2008,

18 months after contest date

Amounts outstanding at December 31, 2011 (expiration of the court extension)


Maurizio Bevilacqua

$491,809

$201,809

$241,8091

$0


Scott Brison

$200,000

$150,000

$105,000

$0


Stéphane Dion

$905,000

$755,000

$740,000

$7,500


Ken Dryden

$300,000

$300,000

$300,000

$225,000


Hedy Fry

$153,500

$148,500

$104,500

$69,000


Martha Hall Findlay

$130,000

$130,000

$63,500

$0 2


Michael Ignatieff

$570,000

$529,496

$144,000

$0


Gerard Kennedy

$451,170

$255,420

$230,420

$0


Joe Volpe

$243,556

$195,000

$173,000

$97,800 2


Totals

$3,445,035

$2,665,225

$2,102,229

$399,300

Notes:
This table, which shows the progress made by the leadership contestants in repaying their loans, reflects data available on the Elections Canada website.
The data presented in this table do not include accrued interest on the outstanding loans.



Annex B: Unpaid Loans of Candidates in the 39th, 40th and 41st General Elections (all political parties)



Candidate unpaid loans


39th general election

40th general election

41st general election


Number of candidates

Amount

Number of candidates

Amount

Number of candidates

Amount


Total amounts

324

$4,447,765

289

$4,914,319

208

$3,048,185


Owed at 4 months after polling day (filing deadline)

217

$3,156,742

151

$2,557,323

96

$1,475,532


Owed at 18 months after polling day*

29

$390,476

37

$468,954

39

$741,326

Notes:
The 39th GE occurred on January 28, 2006; the 40th GE, on October 14, 2008; and the 41st GE, on May 2, 2011.
This table, which shows the progress made by candidates in repaying their loans, reflects data available on the Elections Canada website.
The data presented in this table do not include accrued interest on the outstanding loans.


* Last date on which Elections Canada publishes data, as per the Canada Elections Act (subsection 450(4)).


Return to source ofFootnote 1 An additional $40,000 was borrowed by the contestant after the submission of his original return.


Return to source ofFootnote 2 Amounts differ from the amounts referred to in the second court extension request due to audit adjustments.