1999-March 2, 2001 Ethics Counselor Exonerates Canadian Prime Minister Jean Chrétien May 7 Summary

  • Last updated on November 11, 2022

Despite three exonerations by the federal ethics counselor, Canadian prime minister Jean Chrétien continued to face allegations that he had improperly used his influence on behalf of a government-backed loan involving a potential conflict of interest. The issue of illicit gain was often overshadowed by credible evidence that he made misleading statements about his efforts on behalf of the loan.

Summary of Event

In 1988, Jean Chrétien and two business associates purchased the Auberge Grand-Mère, a large hotel near Chrétien’s hometown of Shawinigan, Quebec, Quebec Canada. The group also purchased the golf course adjacent to the hotel. In the elections of 1993, the Liberal Party, with Chrétien as its candidate for prime minister, issued a campaign platform that promised to “govern with integrity” and overcome “cynicism about public institutions.” [kw]Chrétien, Ethics Counselor Exonerates Canadian Prime Minister Jean (May 7, 1999—Mar. 2, 2001) Auberge Grand-Mère scandal "Shawinigate"[Shawinigate] Chrétien, Jean Duhaime, Yvon Wilson, Howard Clark, Joe [kw]Jackson Fathers a Child Out of Wedlock, Civil Rights Leader Jesse (May, 1999) [kw]Wedlock, Civil Rights Leader Jesse Jackson Fathers a Child Out of (May, 1999) Jackson, Jesse National Enquirer Auberge Grand-Mère scandal "Shawinigate"[Shawinigate] Chrétien, Jean Duhaime, Yvon Wilson, Howard Clark, Joe [g]Canada;May 7, 1999—Mar. 2, 2001: Ethics Counselor Exonerates Canadian Prime Minister Jean Chrétien[02950] [c]Government;May 7, 1999—Mar. 2, 2001: Ethics Counselor Exonerates Canadian Prime Minister Jean Chrétien[02950] [c]Politics;May 7, 1999—Mar. 2, 2001: Ethics Counselor Exonerates Canadian Prime Minister Jean Chrétien[02950] [c]Ethics;May 7, 1999—Mar. 2, 2001: Ethics Counselor Exonerates Canadian Prime Minister Jean Chrétien[02950] [c]Corruption;May 7, 1999—Mar. 2, 2001: Ethics Counselor Exonerates Canadian Prime Minister Jean Chrétien[02950] [c]Banking and finance;May 7, 1999—Mar. 2, 2001: Ethics Counselor Exonerates Canadian Prime Minister Jean Chrétien[02950] Beaudoin, François

Jean Chrétien casting his ballot in a 1995 election.

(AP/Wide World Photos)

After winning the election, Chrétien attempted to reorganize his private business affairs to avoid a possible conflict of interest. He and his associates sold their shares in the hotel to his longtime friend and fellow Liberal, Yvon Duhaime. Shortly thereafter, the associates entered into an agreement to sell the golf course to Prince, Jonas Jonas Prince, a Toronto businessman. Unknown to Chrétien, however, Prince backed out of the deal, claiming that he had only agreed to a nonbinding option to purchase the property.

In deciding what to do with his various investments, Chrétien sought the advice of Howard Wilson, the federal ethics councilor responsible for upholding the code of conduct among federal officials in Canada. In accordance with Wilson’s recommendations, Chrétien put all of his investments into a blind trust. Because the golf course had not been sold, his share of the property, which had an estimated value of $275,000, was included as part of the trust. In 1996, Chrétien finally learned that he continued to be part owner of the golf club, and he informed Wilson about the matter.

About this time, Duhaime, the new owner of the Auberge Grand-Mère, wanted to expand and improve the building. He attempted to borrow $2 million, but private institutions refused the loan, saying that it was too risky. Duhaime then asked his friend Chrétien for assistance to obtain a loan from the Business Development Bank of Canada Business Development Bank of Canada (BDC), a federal government enterprise. Chrétien agreed, and on April, 1996, he telephoned BDC president François Beaudoin on behalf of Duhaime. Even after a second appeal by the prime minister, however, the BDC rejected the loan application as too risky. In early 1997, Duhaime applied to the BDC for a smaller loan of $616,000, and he also applied for a grant of $164,000 from the Canadian Human Resources Department (HRD). This time, after additional encouragement from Chrétien, both the loan and the grant were approved.

In early 1999, an investigative journalist working for the National Post learned that Duhaime had obtained the BDC loan and the HRD grant. Many observers suspected that the federally supported aid was a conflict of interest. Because the expansion of the hotel increased the monetary value of the golf course shares, the loan indirectly, and to a minor extent, advanced the net worth of the prime minister. Leaders of rival political parties, including Reform leader Preston Manning and Progressive Conservative leader Joe Clark, called for a full investigation into the affair.

Ethics counselor Wilson conducted a relatively superficial inquiry. On May 7, he ruled that Chrétien had not violated any conflict-of-interest rules in regard to the Duhaime loan, although at this time Wilson did not know that Chrétien had personally intervened to help secure the loan. Chrétien’s critics pointed out that Wilson reported to the prime minister alone. The next month, Reform leader Manning and another member of Parliament alleged that Chrétien had benefited from deals with businessman Claude Gauthier, who had purchased land next to the golf course. Chrétien threatened to sue the two men, but then dropped the threat, saying that he did not want to stifle debate. A few months later, Chrétien’s shares in the golf course were finally sold to a prosperous Montreal investor.

Meanwhile, the financial situation of the Auberge Grand-Mère deteriorated significantly, and in April, 1999, BDC president Beaudoin recommended that the loan be recalled. Within a few weeks, Beaudoin’s responsibilities were sharply reduced, and he resigned in September with an annual pension plus a severance payment of $245,000. In December, however, the BDC repealed both the severance agreement and pension. Beaudoin initiated a wrongful-discharge lawsuit, alleging that he had been forced to resign and had lost his severance package because he had dared to question the Grand-Mère loan. BDC officials claimed that Beaudoin had been incompetent and violated bank policies.

Beaudoin’s suit revealed the details of Chrétien’s personal appeals to the BDC. While Chrétien admitted that he had helped Duhaime secure the mortgage, he argued that it was appropriate for a member of Parliament to help promote the economic growth of his or her parliamentary riding. Wilson conducted a second inquiry into the matter, and on November 21, 2000, he ruled that Chrétien’s telephone calls did not violate the federal ethics code.

Because federal elections were about to take place, however, the revelations were very embarrassing to both Chrétien and the Liberal Party. The leaders of the four major political parties insisted that there was a need for an independent inquiry, perhaps even a criminal investigation by the Royal Canadian Mounted Police (RCMP). The leaders suggested that Wilson, who had been appointed by the prime minister, might have a conflict of interest himself. The leader of the Canadian Alliance went so far as to call Chrétien a criminal. The New Democratic Party leader called Chrétien “morally bankrupt.” The leader of the Bloc Québécois Party remarked that the bank loan “still smells like something.” Conservative leader Clark declared that Chrétien should apologize to Canadian citizens for his abuse of power.

In the parliamentary elections of November 27, despite the bad publicity about the Grand-Mère loan, the Liberal Party won the majority of seats, thereby making Chrétien the first prime minister in half a century to win three consecutive majorities. On February 19, 2001, the RCMP announced that there was no basis for a criminal investigation into the loan. Clark, nevertheless, vowed to continue asking questions about the loan, and the next day he accused Chrétien of making false statements in the House of Commons. As evidence, he produced a 1999 memo indicating that Chrétien’s former assistant had recommended the loan to the BDC, which appeared to contradict Chrétien’s earlier claim that his assistants had not played any role in the affair. The prime minister’s office explained that Chrétien had meant that his assistants had nothing to do with the approval of the loan. Accusing Clark of conducting a witch Witch hunts hunt, Chrétien declared, “He started as Joe Who and now he’s perhaps Joe McCarthy.”

On March 2, Wilson’s office cleared Chrétien for the third time. However, because Chrétien announced Wilson’s ruling in the House of Commons ninety minutes before Wilson released the report, the opposition asserted that the relationship between the prime minister and the ethics counselor was too cozy. Meanwhile, news reports about Beaudoin’s lawsuit kept the Shawinigate affair, as the scandal came to be called, in the news media. On March 23, Clark insisted on an independent investigation into the controversy and that Chrétien should step down as prime minister until the investigation’s conclusion. On March 26, Chrétien tried to limit criticism by agreeing to release all documents relating to the Grand-Mère affair, pending the consent of those persons involved in the loan.

Impact

In early 2002, Chrétien finally endorsed a bill that included an independent ethics commissioner who would report directly to the House of Commons rather than to the prime minister. Although the House quickly passed the bill, it was stalled in the Senate.

The Shawinigate scandal continued to have a negative impact on Chrétien’s popularity, and it contributed to the Liberal Party leaders’ decision to replace him with his rival, Paul Martin. In Chrétien’s farewell address of November, 2003, the integrity agenda was not on his list of achievements. On December 12, the same day that Martin was sworn in as prime minister, Martin announced that one of his priorities was to obtain passage of the ethics bill, and he achieved this goal within a few months. If such legislation had been in place at the beginning of the Chrétien era, it is entirely possible that Shawinigate as well as other scandals might have been avoided.

Even after Chrétien left office, stories relating to the Shawinigate scandal continued to appear in Canadian newspapers. On February 6, 2004, Beaudoin won his lawsuit against the BDC and the judge ordered the restoration of his annual pension and severance payment. In addition, the financial situation of the Auberge Grand-Mère continued to deteriorate, forcing taxpayers to absorb a significant loss. The complex was badly damaged by fire in February, and Duhaime was charged with the crime. Auberge Grand-Mère scandal "Shawinigate"[Shawinigate] Chrétien, Jean Duhaime, Yvon Wilson, Howard Clark, Joe

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Chrétien, Jean. My Years as Prime Minister. Toronto, Ont.: Knopf Canada, 2007. Describes Shawinigate as a politically motivated witch hunt and puts much of the blame for the scandal on Conrad Black, owner of the National Post.
  • citation-type="booksimple"

    xlink:type="simple">Glor, Eleanor, and Ian Greene. “The Government of Canada’s Approach to Ethics: The Evolution of Ethical Government.” Public Integrity 5 (2002): 41-67. A useful summary of the state of Canadian standards at the end of Chrétien’s term as prime minister.
  • citation-type="booksimple"

    xlink:type="simple">Greene, Ian. “The Chrétien Ethics Legacy.” In The Chrétien Legacy, edited by Louis Harder and Steve Patten. Montreal: McGill-Queen’s University Press, 2006. Summarizing Shawinigate and ten other scandals during Chrétien’s premiership, Greene concludes that his record was “mediocre” but better than that of predecessor Brian Mulroney.
  • citation-type="booksimple"

    xlink:type="simple">Martin, Lawrence. Iron Man: The Defiant Reign of Jean Chrétien. Toronto, Ont.: Penguin Canada, 2003. A critical biography of Chrétien written by one of Canada’s most outstanding journalists.
  • citation-type="booksimple"

    xlink:type="simple">Tuns, Paul. Jean Chrétien: A Legacy of Scandal. London: Freedom Press, 2004. A rather extreme and one-sided attack on Chrétien’s ethical record as prime minister, written by a conservative journalist.

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