Elections Canada says Khan can lend himself money
Published Thursday, January 18, 2007 7:11PM EST
OTTAWA - Elections Canada says there's nothing illegal in MP Wajid Khan using loans from his Toronto car dealership to finance his riding association and his election campaigns.
And even if those loans are never repaid -- effectively turning them into huge personal or corporate donations that are supposed to be prohibited -- there is likely nothing that the independent watchdog can do about it.
"The Canada Elections Act does not contain any rules regarding who may make loans to an electoral district association," agency spokesman Stephane Bachand said Thursday.
Loans are supposed to be repaid within 18 months or they are deemed to be contributions. However, Bachand said the law specifies that loans may be written off by the creditor, following normal accounting practices, as an uncollectable debt.
Bachand would not comment specifically on the propriety of loans involved in Khan's case, saying Elections Canada is still reviewing the financial reports filed belatedly by his old Liberal association in Mississauga-Streetsville.
Those reports, filed earlier this month, showed that Khan's car dealership loaned $180,000 to the MP's former Liberal riding association, some of which helped finance the MP's 2004 and 2006 election campaigns. His dealership loaned another $86,000 directly to Khan's 2004 campaign.
Khan is also under fire for refusing to release the findings from a $13,000, 19-day tour of the Middle East he undertook last fall as a special adviser to Prime Minister Stephen Harper.
He defected to the Conservatives earlier this month and his old Liberal riding association is now defunct, having been deregistered by Elections Canada for filing its 2004 and 2005 returns so late.
The Liberal party is in the process of registering a new association in the riding and has no intention of paying off the debts piled up by Khan's old association.
It's not clear how much, if any, of the loans may have been repaid. But NDP MP Pat Martin said it's unlikely the outstanding amount will ever be paid to Khan's dealership or to Khan himself, who guaranteed the loans.
Hence, Khan or the dealership will end up having effectively donated well in excess of the personal donation limit of $5,100 or the $1,000 limit on corporate donations that applied at the time.
"He's a shrewd businessman who exploited a loophole most capably," Martin said.
But Khan is far from alone on that score.
Politicians in all parties take out loans, said Martin, pointing to the hundreds of thousands loaned to Liberal leadership candidates last year, including more than half a million loaned to the eventual winner, Stephane Dion.
Martin said he too has taken out loans during elections to get his campaign started until donations begin to pour in. However, Martin said he borrows only $20,000 in seed money from a credit union, which is rigorous in demanding repayment.
Martin tried last spring to close the loophole through an amendment to the Conservative's vaunted Federal Accountability Act.
He proposed specifying that loans be made only by accredited financial institutions, not individuals or companies. He also proposed that no single loan be allowed to exceed the personal donation limit of the guarantor.
"It was the fix that was necessary and both the Liberals and the Conservatives panned it completely ... They didn't just vote against it. They mocked it with derision," Martin said.
"It's not as if they were unaware of the loophole ... They chose to ignore it."
Some critics have suggested the failure of Khan's old association to file financial reports looks like an attempt to cover up the loans. But Khan's association is not alone on that score either.
Twenty-seven riding associations have been deregistered by Elections Canada, including three Liberal associations, two NDP associations, a few fringe party associations and a host of Green Party associations. Failure to file financial reports is cited as the reason for delisting in a number of cases, including Liberal MP Maria Minna's Toronto association.
Minna blamed administrative and technical glitches caused by unfamiliarity with the law for the delay.
Riding associations were not required to file annual, audited reports with Elections Canada until 2004, when political financing reforms went into effect. Minna said her association, like all others, is made up of volunteers who are still trying to learn the complicated new rules.
Consequently, she was careful not to criticize Khan's old association for its tardy filing.
"Obviously, similar things could've happened (in Khan's riding). Who am I to judge?"