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How public officials got into the weed game

Public servants and former politicians are buying into legal pot, raising concerns of cronyism and conflict of interest


 
An employee inspect medicinal marijuana by hand at Tweed INC. in Smith Falls, Ontario December 5, 2016. (Lars Hagberg/AFP/Getty Images)

Inspecting medicinal marijuana at Tweed Inc., in Smith Falls, Ont. (Lars Hagberg/AFP/Getty Images)

In 2013, Joshua Tepper became president of Health Quality Ontario, a government body that evaluates and helps guide the province’s health policy. His team advises on services ranging from mental health to end-of-life care and he began earning a salary as a civil servant of about $400,000. The following year, Tepper also started working with one of Canada’s largest marijuana companies, Mettrum Ltd. Between 2014 and 2016, he was listed as an “independent director” of the company, where he was paid for his services and acquired shares that, at the time, were worth about $110,000.

“It seems to be the very textbook definition of conflict of interest,” says Daniel Weinstock, a law professor at McGill University and a former Canada Research Chair on ethics and political philosophy. “Public good should be the only [interest] that gets folded into the legislation.” In legalizing marijuana, federal and provincial governments have been criticized for creating an oligopoly of major companies like Mettrum, called licensed producers, rather than a free-market model, which would grant licenses to mom-and-pop dispensaries and more easily enable Canadians to grow pot at home. Politicians justify the oligopoly by arguing that licensed producers make the purist weed and sell it most safely.

But civil servants like Tepper, along with past and present politicians of all parties, have found their way into these firms. While there is no evidence of undue influence, there is at least the appearance of  a conflict of interest surrounding a well-connected few. A former premier, police chief and members of Parliament, along with a past RCMP commissioner, a sitting senator—government men and women are now executives, advisers and shareholders in the country’s licensed pot companies, which will enjoy a privileged commercial position under the legalization bill  introduced Thursday by the Trudeau government.

Tepper says that he underwent strict clearance with the Ontario ethics commissioner before becoming involved with Mettrum. Health Quality Ontario has not reported specifically on the topic of marijuana, and he says he used vacation time to attend the board meetings. “There’s no overlap,” Tepper said in an interview. “Everything’s separate, separate e-mail account, separate everything.” Mettrum listed him as an independent director until August 2016, but Tepper says he stepped away from the role at least nine months before that and was simply not removed from their documents. Mettrum reported paying Tepper $76,250 between 2014 and 2015, but he says he only went to three to five meetings because he didn’t want to use up all his vacation time, so he was not compensated the full amount. He says he was paid $1,000 for one meeting he attended, and in total, “I don’t think I broke $10,000.”

By March 2016, Tepper was listed as owning 70,000 shares in Mettrum, which were worth about $112,000 at the time. He said he doesn’t own any shares in the company right now, though when he was on the board “there may have been some nominal accrual.” When asked by Maclean’s what he did with the shares, he said he did not recall if or when he sold them. While Health Quality Ontario hasn’t reported on marijuana, the organization did include statistics on drug use, including marijuana, in a report on mental health and addiction services in 2015. For that report, Tepper and a colleague wrote the foreword, stating their hope that the report would inform a provincial council that provides “direction on investments” in mental health and addiction services.

Some say there might not be a conflict. “Simply holding the shares while being the civil servant isn’t necessarily a bad thing,” says Chris MacDonald, a professor at Toronto’s Ryerson University and a consultant on business ethics. “It all depends on the kinds of decisions he’s faced with.” The Ontario government as a whole does face decisions affecting licensed producers: while a federal task force has given recommendations on how to distribute marijuana, the province must figure out which stores or pharmacies will sell the weed and from where they will source it. Ontario is home to the highest number of licensed producers in Canada, 24 out of 42, including Mettrum’s warehouse in Bowmanville. It is unclear what role Health Quality Ontario will play in these decisions, but Tepper says, “there’s nothing at all in our mandate that would touch on this space.”

If Tepper is in a conflict position, it might not be intentional. “People tend to wrongly equate it with corruption,” says MacDonald. “That’s not it at all.” Tepper says that when he got involved with Mettrum, “what I really wanted to do is make sure that anything the company did was [following] good, clean clinical guidelines,” and “best practices.”

Others in positions like his may have the idea that helping licensed producers helps keep the public safe from tainted weed grown by amateurs. However, even if Tepper believed this public safety motive was not influenced by his financial stakes in the company, MacDonald warns he could be subconsciously swayed (not to mention, licensed producers are not necessarily producing safer weed; Mettrum recalled 21,000 grams of its product in February due to a pesticide that is toxic when inhaled; customers complained of nausea and dizziness.)

More central roles in marijuana companies belong to civil servants and politicians who have stepped away from office. Shane Morris is on a leave of absence from his role as the director of policy leadership in the federal government’s major projects management office, which oversees large natural resources ventures. He stepped away in June 2015, and the next month became a vice-president of Hydropothecary, a publicly traded company based in Gatineau, Que. The firm says in an e-mail that Morris underwent ethics clearance and was found to have no conflict of interest, perceived or real. According to information filed on March 27, Morris held 14,670 shares in the business, currently worth about $31,500, along with options for another 300,000. The company did not comment on when he will return to his government job. 

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Mike Harcourt, the former B.C. premier and mayor of Vancouver, recently bought shares now worth$114,000 worth in True Leaf Medicine, where he serves as chairman. Norman Inkster, who was commissioner of the RCMP ending in 1994, is an independent director at Mettrum, which reports having paid him $99,500, and he held $705,000 worth of shares as of September 2016. Larry Campbell, a senator since 2005 and former mayor of Vancouver, became an advisor to Vodis, another licensed producer, in 2014. He has dismissed allegations of conflict of interest in past media interviews, but declined to comment for this article.

Between politics and pot, the cross-pollination goes on. Former prime minister John Turner joined the board of a company called Muileboom Organics in 2014 as it was poised to become a major commercial enterprise in Ontario, although he later backed out due to public outcry against the operation. George Smitherman, former Ontario minister of health and long-term care, ending in 2008, and a Toronto mayoral candidate in 2010, sits on the board of Alta Vista Ventures, another licensed producer, and owns 500,000 shares in the company, currently worth $60,000. Mark Zekulin, former senior advisor to Ontario finance minister, is now the CEO of Tweed, a marijuana company co-founded by Chuck Rifici, who was the chief financial officer to the Liberal Party of Canada during the last election, when Justin Trudeau promised to legalize weed and strictly regulate it. “It’s a good old boys club gone awry with people transitioning from the public to private sector,” says David-George Oldham, a medical marijuana user who is trying to help patients grow medical cannabis at home. “There should be a clear line drawn in the sand in those who are regulators or legislators and those vying to make money.”

Ethics of civil servants are governed by a patchwork of rules that vary between levels of government. Ontario’s vague conflict rules say civil servants cannot hold positions that “interfere” with their abilities to perform their Crown jobs. The rules prohibit them from purchasing an entity that performs activities “related to the private sector,” but also seem to allow such a purchase as long as they disclose these interests to the ethics commissioner (but not the public).

Rules governing federal public servants appear clearer. Treasury board policy requires them to disclose potential conflicts to the deputy ministers of their departments, who can order them to divest of assets or take other measures to resolve the conflict. Upon leaving government, employees in some positions can face a one-year “cooling off” period before taking a private-sector position that creates the appearance of a conflict. Public office-holders like MPs or ministerial appointees, meanwhile, fall under the federal Conflict of Interest Act, which says they cannot be a “director or officer in a corporation or organization,” or “serve as a paid consultant,” and must publicly disclose any such activities. They must divest their assets within 120 days of taking office. However, after leaving office, even former prime ministers have no “cooling off” period through which they must wait before jumping into businesses.

“There’s an opaqueness here. There’s a lack of disclosure. There’s a lack of standards,” says Richard Leblanc, a professor of law, governance and ethics at York University. He suggests a cooling off period of three to five years for junior civil servants, and longer periods for more senior officials, before they take posts with companies affected by policies of their former area of government. He also suggests two other measures: a stricter code of conduct for all civil servants, and proactive disclosure of a retiring public official’s investments. “Absent all three, it’s not incorrect to infer [that] that’s where you have the self-dealing interests,” says Leblanc. In the field of marijuana, he says, “the capacity for self enrichment is even greater because it’s a start-up [industry]. We must exercise an abundance of caution.”

Canada is particularly prone to conflicts of interest because of its small population. “We don’t know what happens in the back channels. They can pick up a Rolodex,” says Leblanc. “You have access points. You’ve got MPs, cabinet ministers … It’s a much more cozy environment.”

Correction: This article previously stated that Chris MacDonald is a professor at York University. He is a professor at Ryerson University. 

Correction: An earlier version of this story stated that Hydropothecary merged with Canadian Cannabis Corp; though the companies had been in merger talks, the deal was not completed. It also stated that Shane Morris, Hydropothecary’s vice-president, had acquired 300,000 shares in Hydropothecary; according to recent filings, he held 14,670 shares and options to buy a further 300,000.


 

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