Connecting the dots: Was Mark Carney involved in the income trust leak that cost the Liberals the 2006 election?

In view of the cosy relationship that we've learned exists between Mark Carney and Liberal MP Scott Brison, it is worth examining whether Mark Carney had a role in the income trust policy leak that cost the Liberals the 2006 election.

Dot 1:   Mark Carney and Scott Brison have been friends since approximately 2002.

Evidence: A statement dated December 17, 2012 from Jeremy Harrison, a spokesman for the Bank of Canada reads:: "Mr. Brison and Governor Carney are personal friends, and have been so for about a decade"

Dot 2:  Mark Carney was the central individual in the Department of Finance in 2005 responsible for the income trust file, whilst Ralph Goodale was Finance Minister

Evidence: In testimony before Parliament December 5, 2007,  in response to MP Garth Turner's question: "Mr. Carney, you've been called the architect of the Conservative

government's income trust strategy, and I'm wondering if that's a fair characterization?", Mark carney stated: 

    " I was a senior public servant, as you know, in the Department of Finance. Quite frankly, I was a senior public servant under the previous Liberal government and under the current Conservative government. I ran the last five budgets and all tax decisions that were put forth by both governments. I think it's safe to say I was involved, yes."

Dot 3:  Ralph Goodale stated  that he would be making an announcement at the close of the markets on Wednesday November 23, 2005 concerning the tax treatment of income trusts. This was a highly anticipated announcement and it was uncertain which direction the government would take. Whatever the announcement it would have enormous financial impact either way.  However it became obvious from trading prices and trading volumes that the substance of what Ralph Goodale was going to announce had somehow been leaked into the market ahead of the announcement, allowing certain market participants to financially benefit to the detriment of others.

Dot 4:  On the morning of November 22, 2005, the day before Goodale's announcement,  Scott Brison sent an email to Dan Nowlan, a senior investment banker at CIBC who was responsible for CIBC's overall income trust underwriting activity, and Brison stated that Nowlan would be pleased with the government's decision, a decision that had yet to be made known to the public. As someone involved in underwriting new income trust financings, that could only mean that Goodale's announcement would favour income trusts.

This type of activity is a text book case of "tipping" on Scott Brison's part and would have constituted insider trading had Dan Nowlan acted upon it.

In defending himself, Scott Brison stated in a March 2006 Globe article  that he had neither advance knowledge of Goodale's decision, nor was he speculating.  That's kind of remarkable claim, as there is no middle ground. Scott Brison was either speculating in his email to Dan Nowlan or he knew? Which was it? The more plausible explanation is that Scott Brison knew what Goodale was going to announce. How did Scott Brison know? Given that Ralph Goodale subsequently claimed that the only two MPs who knew the policy substance of what he was about to announce concerning income trusts was himself and Paul Martin, then where would Scott Brison have garnered his insights? Again the most plausible explanation would be that Scott Brison got his insight from someone working on the file inside the Department of Finance, and who more likely than Mark Carney who after all was the senior person in Finance running the file and was a personal friend of Scott Brison's?

Mark Carney's role in all of this is speculative, but clearly Mark Carney has shown bad judgement in the past when it comes to his dealings with his friends in public office, as witnessed recently.

The only person charged by the RCMP after their criminal investigation, interestingly enough, was another senior Department of Finance official, Serge Nadeau who had purchased income trusts immediately in advance of the announcement. knowing they would increase in value upon the announcement.

One thing however that is not speculative is that the obvious leak the took place in advance of Ralph Goodale's income trust announcement, had a huge impact on the marketplace, and ultimately and even greater impact on the 2006 election.  The Liberals ended up losing the 2006 election when they went from being 4 points ahead in the polls to 4 points behind in the midst of the election, when the RCMP sent a letter to NDP Finance Critic Judy Wasylycia-Leis  stating that  that they were launching a criminal investigation into the income trusts policy leak and named Ralph Goodale in that letter.