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Home My WebLink About1996-0008HANNAN98_01_07 OwrARIO EMPLOYES DE LA COORONNE CROWN EMPLOYEES DE L'OwrARIO 1111 GRIEVANCE COMMISSION DE , SETTLEMENT REGLEMENT BOARD DES GRIEFS 180 DUNDAS STREET WEST SUITE 600, TORONTO ON M5G tZ8 TELEPHONErrELEPHONE (414) 324-1388 190, RUE DUNDAS OUEST BUREAU (J(J(J, TORONTO (ON) M5G tZ8 FACSlMlLE/TELECOPlE (414) 32tS-13{}(1 GSB # 0008/96 OPSEU # 96B291 IN THE MA ITER OF AN ARBITRATION Under THE CROWN EMPLOYEES COLLECTIVE BARGAINING ACT Before THE GRIEVANCE SETTLEMENT BOARD BETWEEN OPSEU (Hannan) Grievor - and - The Crown In Right of Ontano (Mimstry of Economic Development, Trade & Tounsm) Employer BEFORE Owen V Gray Vice-Chair FOR THE C Flood UNION Counsel Koskie Minsky FOR THE D Strang EMPLOYER Counsel Legal Sernces Branch Management Board Secretanat HEARING October 16 December 2, 9,10,16,17,1996 February 12, March 14,17, April 7, 8, May 20,1997 , DECISION In October 1995, the employer termInated MIchael Hannan's employment as a Senior BusIness Consultant for breach of its conflIct of mterest gUidelInes. The breach concerned his failure to disclose In a timely way hIS wife's Investment In one of rus client compames and his Involvement in financIng that Investment. He gneved the discharge. In due course, that grievance was referred to trus Board for arbItratIOn. Issues On the first day of heanng, counsel for the umon advised that In additIon to reInstatement and compensation for lost wages and benefits, the gnevor was also seeking damages for mental dIstress caused by certain alleged conduct of the Ministry and Its agents during the process that led to the deCISIon to dIS- charge rum. Employer counsel obJected that the claIm for damages for mental dIstress should not be entertained in this proceeding The parties agreed that I should deal first WIth one of grounds on wruch that objectIOn was based. that the claim was beyond the scope of the complaint described m the wrItten gnevance filed by the grievor After hearing and considering the partIes' arguments, I ac- cepted the union's argument that a complaint that there had been an "unJust dIsmissal" could embrace alleged wrongdoing commItted dunng and as part of the process by which the employer came to dismISS the employee as well as the propnety of the deCIsion Itself. There were three other grounds on whIch the employer asserted that the claIm for damages for mental dIstress was inarbItrable. that the claIm was barred by sectIon 16 of the Workers' Compensatwn Act, that the umon's partICU- lars of the alleged employer mIsconduct (delIvered at the Board's dIrectIOn) faIled to dIsclose either a VIOlatIOn of the collectIve agreement or a connectIOn between .2 such a vIOlation and the alleged mental dIstress and that, 10 any event, thIs Board IS wIthout JurIsdIction to award damages for mental dIstress arls10g out of discharge of an employee for cause. The partIes agreed that those grounds would be addressed in argument at the conclusion of the hearing on the ments. Before the hear10g on the merits concluded, however, the parties agreed to defer the hearmg of any further evidence and argument with respect to the claIm for dam- ages for mental distress, including the Issue whether the claIm was arbItrable, until after I had determined whether to set aside the discharge and substitute a lesser penalty Accord1Ogly, tlus deCIsion addresses only the questlon whether some lesser penalty should be substituted for discharge as the response to the gnevor's cond uct. Evidence The Grievor's Job MIchael Hannan has a B.A in economics as well as a B Ed. For a period of 10 to 12 years prIOr to joining the Mirustry, he was the owner of a company that manufactured tools in 1991 Before that he had been a teacher and a part-owner of a restaurant. In September 1991, Mr Hannan accepted an appointment to the classI- fied service in the then M10istry of Economic Development and Trade ("MEDT") as Semor BUSIness Consultant for the Central Ontario East Area at a salary of $114470 per week to start. At first he worked out of an office In Orillia. He was relocated to an office in Elmvale in the spring of 1994 and to an office 10 BarrIe In the fall of 1994 The area for whIch he was 10ltIally responsible covered the Distnct of Muskoka and the County of SImcoe. It was later expanded to 10clude a northerly portion of York RegIon. Lynn Hartman was the gnevor's Immediate supervIsor dur10g the rele- vant period. She testified that an MEDT consultant had a number of roles. The - 3 pnmary one was to work wIth a targeted group of compames m a geographIc area. small to medIUm SIze, fast growing, innovative companies The consultant was to encourage the compames to do strategIC planning, to identIfy the key ac- tIVIties they had to do to continue growmg, and assess the strengths, weak nesses, opportunities for and threats to theIr busmesses At appropriate times, the consultant was to brmg resources to bear to aSSIst the companies Those might be government or outsIde resources The consultant was to develop a port folio of these firms and develop client account relationships with them. This m- volved developmg trust, so that the- subject company would reveal mformatIOn, often sensitIve and confidential, from which the consultant could assess the needs and potentIal problems of the company and determine what could be done to address them. Durmg 1994 and 1995, MEDT consultants delIvered MImstry programs that were geared to mnovatIon and growth. The flagshIp program was called On- tario InnovatIOn and ProductiVIty ServIce ("OIPS") This provided finanCIal aSSIS- tance for mnovative, fast-growmg Ontano based firms of 10 to 200 employees. A key aspect of that program was the proviSIon of financial assistance so that eligI- ble companies could engage outSIde consultants to aSSIst them. The MEDT con- sultant would prOVIde names of such outSIde consultants to compames, elIgible or otherwIse, that could benefit from theIr aSSIstance In additIon to workmg WIth companies that met the growth rate and other tests for OIPS assistance, consultants were also expected to advise compames that dId not or dId not yet meet those tests The gnevor's own descnptIOn of hIs job was conSIstent WIth Ms Hart- man's. He noted that there were not many compames m Muskoka that met the cntena for OIPS and other MmIstry programs that he was mvolved m delIver- - mg If a company dId not qualIfy for one of those programs he would nevertheless offer It general busmess adVIce and information. One of the resources to WhICh MEDT consultants dIrected compames was the OntarIO Development Corporation ("the ODC") The ODC was a Crown Cor 4 poration engaged m lendmg money to tOUrist and mdustrIal busmesses m On- tarIO Its chIef executive officer reported to the Deputy MmIster of the MEDT, but its operatIOns were quite separate from those of the branch m whIch the MEDT consultants worked MEDT consultants were not mvolved in processmg and approving ODC loan applIcatIOns or admmistering ODC loans. MEDT con- sultants and ODC officers tended to have common clients, however An MEDT consultant would know that the ODC reqUired a detailed busmess plan, and would offer chents the names of outsIde consultants who could assIst m prepar- mg the reqUisite plan. A company that quahfied under alPS could get MEDT assIstance m paying for an outsIde consultant for that purpose. The grIevor had frequent dealmgs with BIll Copfer, the ODC officer for hIS area dUrIng the relevant period. They regularly called on clients together Conflict of Interest Guidelines The written offer of employment that the grIevor accepted in September 1991 asked that the grIevor sign a copy of the enclosed COnflIct of Interest GUidelInes. It also informed him that the Pubhc Servl,ce Act reqUIred that he ad- here to those gUIdelmes. The enclosed gUIdelmes saId this. MINISTRY OF INDUSTRY, TRADE AND TECHNOLOGY " CONFLICT OF INTEREST GUIDELINES" The Ministry of Industry, Trade and Technology places the responsibility on an employee to advise any confbct(s) of mterest to the Deputy Minister in Writing. A conflict of mterest IS defmed as a conflIct between a pubhc servant's personal interest and hIslher responsibility as a pubhc servant. This includes actual or perceIVed confbcts and those whIch have the potentIal to be actual or perceIved. A confbct of mterest may eXIst whether or not a pecuniary advantage has been or may have been conferred on the pubhc servant. The Public ServIce Act, 1980 and RegulatIon 881 SectIon 20.- (1) A pubhc servant shall not engage m any outside work or business undertaking, (a) that interferes WIth the performance of hIS or her dutIes as a pubhc servant; (b) m whIch he or she has an advantage derIved from hIS or her employment as a pubhc servant, - 5 (c) in which hIS or her work would otherwIse constItute full-time employment for another person, or (d) in a professlOnal capacity that wul, or IS likely to, influence or affect the carrymg out of hIS or her duties as a public servant, (2) Whenever a public servant considers that he could be involved m a conflict of mterest, m that he or she might denve personal benefit from a matter whIch ill the course of hIS or her duties as a publIc servant he or she is m a posltlOn to mfluence, he shall disclose the situatlOn to his or her deputy mmister, agency head or minister, as the case may be, and shall abIde by the adVIce gIven. (3) Whenever a public servant consIders that he could be in a posItion of conflict with the interests of the Crown arismg from any of hIS or her outsIde activities, he shall dIsclose the situation to hIS or her deputy mmister, agency head or minister, as the case may be, and shall abIde by the advice given. (4) Contravention of any of the provisions of subsection (1) or disregard of subsection (2) or (3) may be consIdered as cause for dismissal. The deputy mmister, agency head or mmIster, as the case may be, has the authority to determine the course of actlOn requITed to resolve any conflict of interest disclosed to hrmlher The proVIsions of section 20 of RegulatIOn 881, RRO 1980, quoted in the second box of this document, are substantially the same as those of section 15 of Regula- tion 977, RRO 1990, whICh was the regulation m effect durmg the events m IS- sue here The grievor's sIgnature and the date September 27, 1991 appear at the bottom of this form, below the words "I have read and understand the above" In June 1994, all e-maIl users m the MmIstry were sent an e-maIl mes- sage settmg out the text of a memorandum from the Secretary of Management Board to all Deputy MInISters on the subject of COnflIctS of interest and the reo qUIrements of the guidehnes. The grIevor was away at the time, and does not re- call seemg the message when he returned. The grievor does recall reCeIvmg an e-maIl message from Lynn Hartman in September 1994, forwarding a message she had received about COnflICt of In- - terest trammg being offered later that month. The forwarded message reIterated the dIsclosure reqUIrement. It referred to the ConflIct of Interest GUIdelmes and to MBS DIrective 6-25-1 As the message later noted, quotmg a memo from Man agement Board to Deputy MmIsters, 6 MBS Human Resources Directive 6.25-1 defmes "confuct of mterest" very broadly as a conflict between a public servant's personal mterest and hlslher responsibility as a public servant, including actual or perceived conflicts and those whlch have the potential to be actual or perceived, and whether or not a pecuniary advantage has been or may have been conferred on the public servant. Ms. Hartman's covering message saId Re. the Conflict of Interest training on Sept. 26 (see below) this is an unportant information seSSlOn on a serious issue, and I strongly encourage you to attend. We should all be aware of the kinds of sltuations which are potentially, or could be perceived as, a conflict of mterest. Let Shrrley Stitt in HR know if you are attendmg, and forward a Staff Devt. form to me as soon as possible. Thanks, Lynne The forwarded message referred to a training seSSIon for managers to be held on September 19, 1994 and one on September 26 for others. The September 26 training seSSIon was later cancelled for lack of interest. There IS no suggestIon that this deprived the grievor of an opporturuty he would otherwIse have taken up What IS SIgnificant is that this communicatlOn reIterated to the gnevor the Mmistry's concern about conflIcts of interest, both real and perceived, less than 3 months before lus wIfe mvested in one of his clients Buchanan Chocolates At some point in late 1992 or early 1993, someone wIth an mterest m promoting business m SImcoe suggested to Mr Hannan that the owners of a cof- fee shop m MIdland could benefit from lus seI'Vlces Mr Hannan went to VIsit the owners, a couple named Kelly and Rod Buchanan ("the Buchanans") In addItion to coffee, the Buchanans' shop sold baked goods and chocolates under the name Buchanan Chocolate and Coffee Co The Buchanans, and par tIcularly Kelly Buchanan, had ambItIOns to expand theIr busmess. They had a varIety of ideas, mcludmg the possibIlIty of expandmg and franchising theIr cof- fee operation. Over a senes of meetmgs, Mr Hannan suggested to the Bu- chanans that the coffee market was saturated and that It mIght make more sense to expand mto the manufactunng and marketing of theIr chocolate prod- ucts, wluch by all accounts were exceptIOnal. They dId not then qualIfy for any 7 formal MmIstry aSsIstance program. Mr Hannan suggested that they retam a pnvate consultant to help them prepare a busmess plan, and approach the ODC for financial aSsIstance The gnevor mtroduced the Buchanans to a prIvate consultant named Greg Canning He had met Mr Canmng m the course of hIS work as an MEDT consultant. He knew that Mr Canning dId good work and had a good reputation with the Ministry and the ODC The grievor also introduced the Buchanans to BIll Copfer, the ODC officer for the area. It is not apparent what the legal form of the Buchanans' busmess was at that time. The busmess later came to be conducted through two or three corpo- rate entIties. For the most part, those structural detaIls are ummportant. In what follows, the busmess and the legal entities through whIch it was conducted durmg the period in question wIll be referred to collectively as Buchanan Chocolates. The First ODe Loan The Buchanans retamed Mr Canmng to help them prepare a busmess plan, as the gnevor had suggested. In October 1993, a busmess plan was submIt- ted to the ODC in support of an applIcation by Buchanan Chocolates for a loan of $150,00000 By the time of the application, Mr Cannmg was (or was to be) the owner of one third of the shares of Buchanan Chocolates. The busmess plan con- templated both the franclusmg of store operatIOns and the dIrect marketing of chocolate products. The Immediate plan was to open a second store in Kingston, where Mr Canmng resIded, and to set up a facIlIty at whIch the chocolate prod ucts would be produced. Tlus first ODC loan applIcation was approved m early November 1993 Mr Hannan was not mvolved m preparmg the busmess plan or the appli- cation to the ODC He played no part m the approval of the loan, that bemg the - functIOn of employees of ODC and not of MmIstry consultants He continued to treat Buchanan Chocolates as a clIent, callmg on the Buchanans every 4 to 6 - 8 - weeks to see how the busmess was domg Sometimes he vIsited the Buchanans with Mr Copfer He saw Mr Copfer regularly, m any event, and Mr Copfer kept hIm up-to-date about what he knew of developments at Buchanan Chocolates. Mr Copfer testified that It took longer than it should have for Buchanan Chocolates to get its productIOn facility set up ApproprIate management sys- tems were not in place. Kelly Buchanan was not a good manager Mr Cannmg's son got involved in the business to put some systems in place. Not long after he started, however, Kelly Buchanan fired him. There was then a fallmg out be- tween the Buchanans and Greg Canning Mr Canning wrote to the ODC m late March 1994 to say he would no longer honour the guarantee he had signed wIth respect to the ODC loan. Mr Copfer passed all of this mformatlOn on to Mr Hannan. Mr Hannan testified that he and Mr Copfer were m regular contact about all the clients they interacted wIth. It is a measure of the extent to wmch Mr Copfer shared information with Mr Hannan that he even told him that in the ODC's view Mr Cannmg was still hable on the guarantee The Approval of the Second ODe Loan Mter Mr Canmng's WIthdrawal, m the summer of 1994 Mr Copfer mtro- duced the Buchanans to John GroskI, an accountant whom Mr Copfer thought mIght assist the Buchanans in tax-related matters By late October 1994, Mr Groski's involvement had led to a second applicatIOn to the ODC by Buchanan Chocolates, for a further loan of $75,00000 The plan was that financmg would also be obtained from the company's bank and from additional investors Mr Grosh was brmgmg m. The money would be used to complete the production fa- cIlity and aSSIst in estabhshmg kiosks m retail malls from wmch the chocolate products would be sold. The grievor played no part m preparing eIther the apphcatIon for the sec- ond loan or the busmess plan on which It was based. There IS no suggestIOn that he mfluenced or attempted to mfluence the ODC's consIderatIOn of the applica- tion. Buchanan Chocolates contmued to be one of hIS chents, however He con- tinued to visit them. He contmued to hear about them from Mr Cop fer He testI 9 fied, for example, that he heard from Mr Copfer about a meeting the ODC had had with Mr Groski, and that Mr GroskI had been try10g to "pull a fast one" by putt10g the assets 10 one company and the lIabIlIties in another The grIevor testIfied that he dId not have any deahngs with Mr GroskI He did see one of Mr Groslu's employees dur10g one of his VIsits to the company He knew from Mr Copfer that the company's strategy had changed from fran- chising stores to manufacturing chocolates and sell10g them at kiosks in malls. He saId he had not dIscussed that change 10 strategy wIth Ms. Buchanan. The second loan was approved on November 10, 1994, condItional on the company's obtaimng additIonal financ10g from the bank and from Mr Groslu's investors During a meet10g around tills time, Ms. Buchanan expressed concern to David WrIght, one of Mr Copfer's superiors 10 the ODC, about an agreement she was bemg asked to sign that would give the new investors majority control of Buchanan Chocolates either immediately or in certain CIrcumstances. Mr Wright adVised her to be careful what she signed. The Buchanans deCIded not to sign the agreement. The arrangement with Mr GroskI and his investors fell apart. Because Mr Groslo's group were no longer going to 1Ovest, the loan ap- proved on November 10, 1994 "no longer existed" from the ODC's perspective. In very short order, however, the Buchanans got Greg Canmng involved 10 Bu- chanan Chocolates aga1O. By November 24, 1994, the ODC had been told that Mr Canning had 10Jected an addItIOnal $50,000 00 and could raIse more 10 tIme. On the basis of that representatIOn, on November 24, 1994 the ODC approved a loan of $75,00000 to be advanced in stages, on terms that the shareholders were to mJect a further $50,000 by January 31, 1995 Mr Wright testIfied that Mr GroskI called hIm some tIme after the deal with the Buchanans fell through, and said some "unpleasant th1Ogs." These 10 eluded an allegatIon that Mr Cop fer and the MEDT consultant (Mr Hannan) were 1Ovestors 10 Buchanan Chocolates. Mr WrIght telephoned Mr Copfer about - 10 - thIS. Mr WrIght says he asked Mr Copfer whether he and Mr Hannan were m vestors m Buchanan Chocolates, and that Mr Copfer saId they were not. Mr Copfer testIfied that Mr Wright told him about the allegatIon and then asked lum whether he was an investor, and that he replIed that he was not. In any event, Mr Wright dId not pursue the matter further Mr Copfer testIfied that this conversation was in December 1994 or January 1995 (By that time, I note, Mr Hannan's wife had mvested indirectly in Buchanan Chocolates.) The grievor testIfied that he had no knowledge of Mr Cannmg's re- involvement in Buchanan Chocolates before it occurred. He had contmued to have contact with Mr Canmng prIOr to that re-mvolvement. In the course of their dealmgs, Mr Canning had told lum about lus WIthdrawal from Buchanan Chocolates. Mr Hannan had played golf WIth Mr Canning He and his wlfe-to- be, Lisa Whitely, had had dmner WIth Greg Cannmg and lus wife. He and Ms Whitely had attended Mr Cannmg's son's weddIng in August 1994 The Grievor's Marriage to Lisa Whitely Mr Hannan first met Lisa WhItely at a bUSIness meetIng in 1992 She was then the Secretary of the Gravenhurst Chamber of Commerce and President of M uskoka Tourism. She had been the general manager of the M uskoka Sands resort since 1986 For six years prior to that she had been the Innkeeper at the Ben Millar Inn near Goderich. Their personal relatIonship began about 6 months after that ImtIal meeting They were married in September 1994 They bought a house m Gravenhurst. She put her eXIsting home in Gravenhurst up for sale shortly be- fore the marnage. They each kept separate bank accounts and credIt hnes They also established a joint bank account and a JOInt credit line She began using the gnevor's surname for most purposes (and will be referred to that way hereafter), but contmued to use her maIden name m her bUSIness deahngs. 11 The First Investment Mr Hannan testIfied that Mr Canmng dId not dISCUSS hIS November 1994 re-Involvement In Buchanan Chocolates wIth him. He first became aware of It from hIS wIfe He saId that in early December 1994 she told hIm that Mr Can- mng had approached her In late November about "puttIng some money together and gettIng involved In the company" They both testIfied that this conversatIOn occurred after she had agreed to Invest. Her house In Gravenhurst had not yet sold. She asked the grIevor for a loan of $25,000 00 for the purpose of purSUIng this venture wIth Mr Canning He agreed, and wIred $25,00000 to Mr Can- nIng's bank account in KIngston. He testIfied that he had no dISCussIOns wIth Canmng about tlus deposit, either before or after it was made In return for this first investment, Ms. Hannan received a share certIfi- cate In her name dated November 25, 1994 for 100 common shares of 1034285 Ontario Ltd., hereafter referred to as "CanningCo" She receIved a copy of a shareholders ledger for CanningCo, shOWIng she had acqUlred her 100 shares on November 25, 1994, along WIth copIes of other mInute book documents reflectIng the issuance of her shares and mdlcatmg that Mr Canmng had been Issued 100 shares in the company about a year earlIer She receIved a shareholder agree- ment between Canmng, herself and CanmngCo, whIch recIted that the only as- sets held by the corporation would be "all the shares In the corporatIOn Bu chanan Chocolate and Coffee Company Ltd", that It would incur no lIabIlItIes except in that connection, and that the shareholders would cause the corporatIOn to take actIOn to ensure complIance WIth the agreement. The date above her SIg- nature on the agreement IS November 30, 1994 Ms. Hannan testIfied that thIS arrangement WIth Mr Canrung was the culminatIOn of a series of telephone conversatIOns he had had WIth her after they were Introduced by Mr Hannan at a SOCIal functIOn. The conversatIOns con- cerned her busmess background, her IncreaSIng dIssatIsfactIOn WIth the de- - - mands of her Job at the Muskoka Sands and her mterest In gettIng Involved In some other bUSIness She saId that the Idea of mvestIng In Buchanan Chocolates 12 only arose shortly before the arrangement was made It IS not clear whether that was before or after the second ODC loan was approved on November 24, 1994 At one point in hIS testimony, Mr Hannan said he had been aware that his wife was haVIng telephone conversatIOns with Mr Canning He stated that he dId not know that they were dIscussing Buchanan Chocolates untIl she ap- proached him for the loan. He and she both testified that she did not dISCUSS the calls with him until that time. She testified at one pomt that when she decIded to mvest through or with Mr Cannmg in Buchanan Chocolates she knew it was a chent of her husbands. She later testified that she dId not then know whether It was a current or a former cl1ent. In any event, they both say that she did not seek or receIve from rum any mformatIOn or adVIce about whether it would be a good Idea to invest in Buchanan Chocolates, eIther before, dunng or after the re- quest for the loan. Despite what the shareholders agreement between Ms. Hannan and Mr Canning recited, CanningCo did not own all of the shares of the busmess re- ferred to here as Buchanan Chocolates. When asked how much of Buchanan Chocolates she thought CannmgCo owned at the tIme of thIS $25,000 mvest- ment, her first response was that she did not think she knew at the time She then corrected herself, saymg she had thought it owned 20 percent. She said she had not seen any financIal statements for Buchanan Chocolates before making any of her investments. She testified to the effect that she was enthralled by Mr Canrung, trusted his busmess acumen and believed thIS was a good mvestment because Mr Cannmg told her It was Some time after Mr Hannan forwarded the $25,00000 to Mr Canning's account, Ms Hannan prepared a document addressed to her husband that saId "This will certIfy that I, LIsa Hannan, WIll repay the loan in the amount of $25,00000 from the proceeds of the sale of my house" The document IS dated December 11, 1994. They had her SIgnature on It wItnessed by a fnend. - 13 - Mr Hannan testified that It dId not occur to hIm at the time that eIther her mvestment or his loan to her for the purpose of that mvestment created an actual or apparent conflIct of mterest. He saId "No bells went off In retrospect, they should have." He explamed that he had been m state of "euphorIa" followmg their wedding. He was concerned about respecting her mdependence. He dId not want to intrude on her decIsions. She was not happy workIng at the Muskoka Sands. He said he was happy she had IdentIfied somethmg else m whIch she could be mvolved. He testified that he made no comments, posItive or negatIve, about Buchanan Chocolates or the proposed mvestment. She had already made up her mmd to mvest. She needed money She asked him for the money The money he lent her would be her money He knew she could repay the loan from of the proceeds of the eventual sale of her Gravenhurst home Mr Hannan testIfied that he had been aware through Mr Copfer of an applIcation by Buchanan Chocolates for ODC funding in November, but had not told his wIfe about it. Although Mr Hannan saId he first heard of Mr Canning's return to Bu- chanan Chocolates from hIS wIfe, he testified that he also heard of it from Mr Copfer He could not remember when that was. He would have been aware from Mr Copfer that the loan had been approved, and they usually talked about dIS- persals on the loans Although Mr Copfer contmued to dISCUSS Buchanan Chocolates with him from time to time, he dId not tell Mr Copfer that hIS wIfe had become mvolved as an investor m that company When asked why he dId not, he had no explanatIOn to offer He said It was Just somethmg he dId not tell him, and added that he had had no intentIOn to hIde the fact. Mter his wIfe's mvestment through CannmgCo, Mr Hannan contmued to treat Buchanan Chocolates as a clIent, maintammg hIS pattern of callmg on the company every 4 to 6 weeks, sometImes WIth Mr Cop fer He dId not say any- thing about his wife's involvement to the Buchanans He stated that he also dId not have any dIscussIOn about Buchanan Chocolates with hIS wIfe, that hIS only knowledge of how Buchanan Chocolates was domg came from lus viSItS to It and 14 from Mr Copfer He knew, for example, that there was a problem of poor book- keeping. He stated that he dId not share wIth his wife any of the mformatIOn he obtamed about Buchanan Chocolates. Ms. Hannan testified that after her mItIal mvestment she got reports from Mr Canning from time to time about what the company was doing, but dId not discuss them wIth her husband. The Second Investment On February 28, 1995, Ms. Hannan borrowed $15,00000 on her personal credIt line and transferred the money to Buchanan Chocolates' bank account m Barrie. This was a result, she testified, of a telephone call from Greg Canmng He told her that the company was runmng short of operatmg capital, that there was an understandmg WIth the bank that It would extend credit if they had a secunty deposIt. Her $15,000 was to be used as a secunty deposit, she saId. Ms Hannan did not seek or receive from Buchanan Chocolates any documentation with respect to this advance. She had not seen any financial statements for Bu- chanan Chocolates at that pomt. She was still relymg entirely on Greg Canning who, she saId, was like a father figure to her "A few days later" she told her husband about trus further $15,000 mvestment. Asked why she had told rum, she saId it was "a matter of courtesy" She further explamed that It was a cour- tesy to let rum know what she was domg m her hfe. They both testified that there was no dIscussIon at that pomt about whether thIS second mvestment was or was not a good Idea. Mr Hannan testified that he saId nothmg to his wife about the second m- vestment out of "respect for her indIVlduality" He stated that he dId not tell the Buchanans or his employer of her further mvolvement because the transaction was hers, not rus. A few days after advancmg the $15,000, Ms. Hannan later learned that It had been used to pay an overdraft, not to secure further credit. She also learned that the company needed more money 15 The Third Investment The Hannans testified that they dId eventually have a dIscussIon about Ms Hannan's involvement m Buchanan Chocolate. If that dIscussion was not at the time she told him of her second mvestment, then it must have been wIthin a few days thereafter She told hun that thmgs were not gomg well, that there were ongoing management problems. She also told him that she would not put further funds mto the company unless she got a say in its operatIOn, a role m which her management skills could be put to use on a day-to-day basIs. At thIS point she had been on medIcal leave from her job at the Muskoka Sands, due to stress and hIgh blood pressure, smce late November 1994 After that conversatIOn wIth her husband, LIsa Hannan met wIth Greg Canmng and the Buchanans on March 8, 1995 They made an agreement that for a further mvestment of $40,000, Ms. Hannan would acqUIre 20 shares 5 shares from each of the Buchanans and 10 from CanmngCo. She was to be a member of the board of directors and corporate Secretary She was also to be general manager on a "consultmg baSIS," for wruch she was to be paId a salary of $80,000 as funds became available These and other terms were reduced to wnting and sIgned by the partIcIpants Tlus was the first time Ms. Hannan had met the Buchanans otherwise than as a customer of theIr coffee shop Ms Hannan testified that Kelly Bu chanan said something at this meetmg that mdicated awareness that she was the wIfe of the MEDT consultant. She had not preVIously informed the Bu chanans that she was an investor, nor had Mr Hannan. She had no reason to suppose that they knew of her benefiCIal mterest in the company (through Can- nmgCo) untIl then. She thought they would have become aware that she was m- volved when she deposited money m the company account at the end of February 1995, but dId not know On May 8 or 9, Ms Hannan approached her husband about the $40,000 she had agreed to put up He agreed that $20,000 would come from hIS credIt line and $20,000 would come from theIr Jomt credit lme. He testified that thIS 16 was m the nature of a loan that he expected her to repay wIthout mterest at a later date. Her Gravenhurst house stIll had not been sold She had also put a property she owned near Godench up for sale. He testified that she had suffi- CIent assets to repay the loan. Lisa Hannan's Involvement as General Manager of Buchanan Chocolates Ms. Hannan worked at Buchanan Chocolates from shortly after the agreement of March 8 was made until April 18, 1995 Mr Hannan drove her to and picked her up from Buchanan Chocolates a couple of times durmg that pe- rIod. He testIfied that he could not recall vIsitmg the company in hIS capacity as an MEDT consultant durIng that perIOd. If he had, he saId, It would have been a Jomt VISIt WIth Mr Copfer During her time as general manager of Buchanan Chocolates, Ms Han- nan prepared or reVIsed a business plan in which she was referred to as LIsa WhItely She testified that the purpose of the plan was to attract further inves- tors, and that was the name by whIch she would have been known in the bUSI- ness community The plan mdicated that she owned 20 percent of the shares of "Buchanan Chocolate Co.," the Buchanans each owned 20 5 percent and Greg Canning owned 39 percent. Mr Cop fer knew Lisa WhItely/Hannan. He knew of her marnage to Mr Hannan. He had been inVIted to the weddmg. He knew in March that she had become general manager at Buchanan Chocolates. He was pleased. he thought she could supply the management expertise and dIscIplme the busmess lacked He was not aware that Ms. Hannan was an mvestor m Buchanan Chocolates un- til early April, when he received a copy of the revIsed busmess plan m which she was described as Lisa Whitely The ODC had advanced $18,750 on the second loan when that loan was approved m late November 1994 It advanced a further $21,250 at the end of March 1995 That advance was supposed to be used to purchase eqUipment. Ms 17 Hannan testified that Kelly Buchanan caused It to be applIed to unpaId rent m stead Ms Hannan informed Mr Copfer of thIS They and others met to discuss how the loan, which was still not fully advanced, might be restructured to allow for the use of some of the funds for operatmg capItal rather than for purchase of equIpment, as the loan agreement required Mr Copfer then prepared a Change Notice reflectmg a proposed restructunng of the loan. He sIgned It on Apnl 12, 1995 Although preVIOUS documents had referred to major particIpants m Bu- chanan Chocolates by name, tlus document referred to Ms Hannan only as "a new shareholder who is now the General Manager" Mr Cop fer testified that lus supenors were prepared to approve the change, but further developments made that academic. The Collapse of Buchanan Chocolates Apnl 17, 1995 was Easter Monday Ms. Hannan testified that after the Easter weekend, Kelly Buchanan refused to deposit sales revenue she had col- lected from the company's mall kIosks. She said somethmg to the effect that If the company was going to fail she wanted to take something with her Ms. Han- nan demanded that Ms Buchanan deposit the money, threatemng that she would qUit and mform the ODC and the banks of the defalcation If she dId not. Ms Buchanan persIsted, and Ms. Hannan qUIt. Some time thereafter, the bank. put the company mto receiverslup On May 19, 1995 Mr Copfer wrote a report that Buchanan Chocolates had closed and that the loans should be called. HIS report recIted the lustory of the loans It mentIOned LIsa Hannan by name, saymg that she had been brought m as an mvestor by Mr Cannmg It added parenthetically that "her husband IS the MEDT consultant m Barne." Mr Copfer testIfied that he dId not know why he added that observatIOn. HIs report further recItes that on May 16 he had re- ceIved a call from Kelly Buchanan saymg that the company had closed. David WrIght testified that he was not sure when he first became aware that someone connected wIth Mr Hannan had been involved m Buchanan Chocolates. He thought It mIght have been m late March or Apnl, when LIsa 18 Hannan and Kelly Buchanan had theIr falling out. Whenever it was, he said, he promptly went to speak to Mr Symmgton, the COO of ODC They then tele- phoned Peter FrIedman, who was m charge of MEDT field officers Mr FrIedman testified that he receIved that call on May 17, 1995 Mr Symmgton told him that an ODC borrower, Buchanan Chocolates, had gone into receivership and either Mr Hannan or rus Wife was mvolved in the company The Disclosure Request Lynn Hartman, Mr Hannan's ImmedIate superior, was away when Mr Friedman received the call from Mr Symington. On May 18, 1995, Mr Friedman telephoned Mr Hannan and asked him for a written account of hIS and hIS WIfe's mvolvement in Buchanan Chocolates. Mr Hannan testified that durmg this telephone conversation Mr FrIed- man used the words "COnflIct of mterest." He says it was only then that "alarm bells went off' for him on that subject. SlX days later, on May 24, 1995, Mr Hannan sent the followmg letter to Mr Friedman. TIus will confrrm that my wile mvested in a company, Buchanan Chocolates, which I have worked with on a professional basis smce 1992 and has received ODC fundrng. By not advising the appropriate government authorities and obtainmg approval prior to my wife's mvolvement m thIS company, I understand I have contravened the conflIct of interest policy In November, 1994, Greg Cannmg, a shareholder and also acting as a consultant to Buchanan Chocolate, contacted my wile, Lisa Hannan to mvest funds m this company which was done A further mvestment was made on February 28, 1995 on the baSiS that this equity would be used to secure a lme of credIt from the bank. The bank used this money to reduce the overdraft, Up to this point, Lisa was not mvolved m the daily operatIOns of the company or in any deCiSion making; all management functIOns contmued to be handled by the existmg management team. In March, my wile was agam asked to mvest additIOnal funds and, thIS time, made the mvestment condItIOnal on a management position wlthm the company which commenced on March 14 and ended on April 18, 1995 when the Prmcipa1s, Rod & Kelly Buchanan made it apparent they were not wIllmg to accept management aSSistance and drrectlOn. 19 I In t.he eourse of m\ Job Introduced the eompan\ to the ()I)( and at no limp dJ(1 I use my positIOn t.o Inl1uence or oeeome personalh Involved wlt.h Ilw; or~an Iza t10n \n\ fundm~ seeuf(~d from t.he ()J)( \..as done t.hrough t.he normal apphcat.l(lO proeess 1\h wIfe s II1vo\vement \\ as an II1dependenl decu:illlO on her part and I reahze In retrospect. It eould ven well be percClved that there was an ImproprIety I do understand however II1nocenl and mdepcndcnt her Involvement \HIS my pOSItIOn requIred me to have thIS approved which I faded to do. I further understand the ImphcatIOns on thIS MInIStry and ItS [SIC] duty to ensure that rules are adhered to I value my career and do not WIsh to JeopardIze my pOSItIOn any more than my oversIght has already done I look forward to meetmg you at your earhest convemence to further dIscuss thIS matter and t9 develop a course of actIOn that addresses the concerns raised In our telephone conversation It IS noteworthy that thIS letter makes no reference to the gnevor's havmg loaned or pledged hIS credIt (through the use of the Jomt credIt lIne) to prOVIde the bulk of hIs WIfe's conSIderable mvestment m hIs clIent company The Meeting of May 30, 1995 On receIpt of Mr Hannan's letter, Mr Fnedman decIded that he and Jo- anne LeBlanc, a member of the Mmlstry's Human Resources Branch, should meet WIth Mr Hannan to dIscuss the matter further The three of them met on May 30, 1995 The gnevor described hIs deal- mgs WIth Buchanan Chocolates, hIs mtroductlOn to It of Greg Cannmg, the first ODC loan, and how he contmued to VISIt the company, whICh he saw as a poten- tial "CAM" account He said he had only seen one financial statement for Bu chanan Chocolates, and that was before the first ODC loan. He mentlOned that there had been a second ODC loan applIcation m whIch he had played no part. He told them that Greg Canmng had contacted hIS wife m November fol lowmg earlIer SOCIal contacts He said she had then mvested approXimately $30,000 He emphaSIzed that thIS was after the second ODC loan had been ap proved He explamed that she had put m another $15,000 later, followed by a further mvestment of $40,000 and active mvolvement as general manager from March 14 to Apn118, 1995 ~o He gave them qUIte a lot of detaIled InfOrmatIOn. He testIfied that he showed them the shareholders agreement between hIS wIfe and Mr Canmng, and the March 8, 1995 agreement between hIs wIfe, Greg CannIng and the Bu chanans He dId not brIng wIth hIm or show them hIS wIfe's promIssory note eVI dencIng the first loan from hIm, however, nor the bankIng documents later pro- duced durmg thIS hearmg to demonstrate the ongm of the funds subsequently mvested He told Mr Fnedman he recogmzed that he should have advIsed hIm and dId not. He acknowledged he had made a serIOUS error, and saId he felt hke a "horse's ass" There IS a dIspute about whether the gnevor saId at thIS meetmg that he had not known about the first Investment untIl after It was made Joanne Le- Blanc testIfied that he dId, relymg on notes that she claImed to have made m the course of the meetmg In cross-exammatIOn, she was confronted wIth a copy she had made of her notes and gIven to Mr Hannan at the end of the meetmg It was apparent from that document, and she then acknowledged, that many of the no- tatIOns that she had earher testIfied were made durmg the meetmg were m fact mserted afterwards between hnes that had been wntten at the tIme The gnevor testIfied that he dId not say that he had not known about the first mvestment untIl after It was made, that he only saId that about the second mvestment. The words "I found out after It was done" appear m the part of Ms LeBlanc's notes dealmg WIth the first mvestment Those words were clearly added to the notes afterwards, however Ms LeBlanc's claIm at hearmg that they were nevertheless saId at that pomt and not at a later pomt m the meetmg IS no more rehable than her earlIer assertIOn that all of the notes m that part of her notes had been WrItten durIng the meetmg I found Ms LeBlanc's explana tIons of the after the fact mterlmeatIOns m her handwntten notes and of the dls crepanCles between those notes and a typewntten document styled "fact findmg mtervlew notes" qUIte troublmg I accept that the gnevor dId not expressly tell Mr Fnedman and Ms Le Blanc that he dId not know about hIS WIfe s first mvestment untIl after It was :2 1 made, that he only saId that about the second lllvestment I can understand however, how Mr Fnedman and Ms LeBlanc mIght have been left with the 1m preSSIOn that hIS remark applIed to all of the lllvestments, smce he was at palllS to portray her actIOns throughout as havlllg been entirely llldependent of hIm In all the detail the gnevor provided m thIS meetmg, not one word was spoken about the fact that the bulk of the funds hIS WIfe had lllvested m Bu chanan Chocolates had come from hIm or been obtamed m whole or m part on hIS credIt. He testIfied that he dId not volunteer those facts because m hIS mmd It had been her mvestment, made wIth money that was hers once he had agreed to loan It to her, that It was no dIfferent from her havmg got the money from the bank and that he knew she had assets wIth whIch she could repay the loans He also noted that Mr FrIedman had not asked hIm where hIS WIfe had got the money she mvested Mr Hannan testIfied that he had gone to the meetmg thmkmg the matter could be resolved then. At the end of the meetmg, however, Mr FrIedman m formed the grIevor that there would be a further "thIrd party" mvestlgatIOn, and that whIle he could return to work he should not have any dIscussIOns wIth Mr Canmng or Mr Cop fer At thIS pomt Mr FrIedman was qUIte dIsturbed that one of theIr field con sultants had been callmg on a company whIle hIs WIfe was an mvestor m It and at one pomt was in actIVe management It was not yet clear, he saId, whether Mr Hannan was dIrectly mvolved III the mvestment or whether there was a "splIt" WIth his WIfe so that he was not mvolved It was decIded that there should be a more thorough mvestIgatIOn, both WIth reference to the Mmlstry's mterest m the actIVIties of Mr Hannan and hIs WIfe and the ODC's lllterest m the Clr cumstances m whIch Buchanan Chocolates had ceased busmess Asked why he dId not suspend the grIevor at that tIme (It bemg the grIevor's pOSItIOn m these proceedlllgs that he ought to have been suspended w~th pay pendlllg the outcome of the lllvestlgatIOn) Mr FrIedman testIfied that ) ) dId not then feel that the gnevor s contll1ull1g to do llls work would Jcopardm the mvestIgatIOn or that there would be any other harm m contmumg such as there would be m a harassment or abuse sItuatIOn. The Lymburner Investigation Thereafter, Gordon Aue, the Mmlstry's DIrector of Internal AudIt, re- tamed Pat Lymburner to InVestIgate two matters Mr Hannan's apparent con filct of mterest and the CIrcumstances surroundmg the collapse of the Buchanan compames generally Mr Lymburner was then a prmcIpal In a company that provIded accountmg and mvestlgatlve servIces He had been employed from 1988 to 1993 as supervIsor of InvestigatIOns m the MImstry s ForensIc Accountmg and InvestIgatIOns Branch. PrIor to that he had spent 25 years wIth the MetropolItan Toronto PolIce Force, 17 of them as a fraud mvestlgator Mr Lymburner revIewed l'vhmstry files wIth respect to the ODC loans to Buchanan Chocolates He revIewed the files of the receIver appomted by the bank after Buchanan Chocolates defaulted on Its loan. He conducted corporate and PPSA searches on the Buchanan compames and theIr prInCIpals He ar ranged to meet with the Hannans The meetmg took place on July 10 1995 In the presence of a umon stew ard Most of Mr Lymburner s questIOns were dIrected to LIsa Hannan, She de- scribed the timIng and amount of each of the three mvestments and of her m volvement as general manager Her account to hIm of the tlmmg, amount and source of her mvestments was roughlv the same as her testImony m thIS pro- ceedmg (HIs notes mdIcate that she told hIm that one half of the last $40,000 came from her husband's credIt hne and one half came from her own credIt Ime whereas the eVIdence before me IS that the second half came from theIr Jomt credIt Ime I do not assIgn anv partIcular sIgmficance to thIS dIscrepancy) Early m the meetmg Mr Lymburner showed Ms Hannan a busmess plan he had found m the ODC file that named "LIsa WhItely" as a member of the management team. She saId she had seen It before, that It had been prepared to 2'~ attract further Investors The Hannans allege that Mr Lymburner then con nected the busmess plan, her havmg been descnbed m It by her malden name and the fact that she was a shareholder wIth the prospect of theIr bemg person ally liable for the debts of Buchanan Chocolates They say he played "good cop / bad cop" by sympathetically descnbmg them as vIctIms at one pomt, and then at another pomt threatemng that they could lose everythmg by reason of her per sonal liabIlity, saymg that the federal government (a guarantor on one of the company's loans) mIght come after them. Mr Lymburner offered a dIfferent ac count of the meetmg He testIfied that he was concerned that the Hannans mIght ha ve been vIctims of fraud by someone He sald he had asked them If they had consIdered that (wIthout perhaps usmg the word fraud) He also asked them If they had sought legal advIce He demed havmg sald anythmg about personal li abIlIty, or suggested that the use of Ms Hannan's maIden name had been m- tended to mIslead The Hannans say Mr Lymburner's conduct as agent of the employer was Improper and, together wIth the employer's delay m commg to a decIsIOn and faIlure to put Mr Hannan on paId leave for the duratIOn, caused the mental dIS- tress for whIch he later reqUIred treatment and for whIch he seeks damages As I have already noted, the resolutIOn of that claIm has been deferred I mentIOn the mental dIstress only because treatment he receIved that September for depres SIOn IS offered to explam the gnevor's faIlure to respond to commUnICatIOns from Ms Hartman and Ms LeBlanc m early October, when the employer wanted to meet WIth Mr Hannan agam. In hIS report to the employer, and m hIs testImony m these proceedmgs Mr Lymburner stated that the gnevor told hIm that he had known hIs loans to hIS wIfe would be used for the purpose of mvestmg m Buchanan Chocolates Mr Lymburner also reported that the gnevor told hIm that he had agreed WIth hIs WIfe that her mvestment was a good mvestment. Mr Lymburner acknowledged m cross-exammatIOn that the gnevor had not used those exact words, but mam tamed that that was the ImpreSSIOn created by hIS words He further reported 2 I that Mr Hannan had saId that he was aware of the ODC loans but believed that that was "all approved and behmd them" when the mvestments were made Mr Lymburner claImed that Mr Hannan went on to say that "he otherwIse would not have mvested" When It was put to hIm that LIsa Hannan had been the m vestor, he stated that "I was probably of the VIew that they were one and the same," and that Mr Hannan "probably saId 'we would not have mvested '" Mr Hannan demes havmg told Mr Lymburner that he had told hIS WIfe the mvestment was a good one. He also demes havmg saId anythmg that de- scribed himself as havmg Invested m Buchanan Chocolates. It IS apparent from hIS testImony that Mr Lymburner went to the mter VIew WIth the attItude that a husband and WIfe were one and the same for these purposes, that nothIng much depended on whether Mr Hannan or hIS WIfe had been the apparent Investor and that It was not necessary to dIStIngUIsh between what he dId, what she dId and what they dId That would have Influenced the ImpreSSIOns he formed As I have noted, In at least one mstance he reported an ImpreSSIOn he had formed from what Mr Hannan had said as though It was somethmg Mr Hannan had actually saId In all the CIrcumstances I do not re- gard Mr Lymburner's testImony as a relIable basIs for concludIng that Mr Han- nan acknowledged that he had been or had regarded hImself as an mvestor m Buchanan Chocolates After the meetmg, the employer asked Mr Lymburner to mvestIgate whether the grIevor had mfluenced ODC offiCials WrIght and Copfer m theIr de- CISIOns to grant the loans to Buchanan Chocolates After mtervIewmg both of them, Mr Lymburner concluded that the grIevor had not mfluenced them. Mr Aue also asked Mr Lymburner to prOVIde hIm WIth comments about whether Mr Hannan had had a conflIct of mterest. Mr Lymburner responded WIth a let tel' to Mr Aue dated August 10, 1995 Mr FrIedman testIfied, however, that he was not aware of the letter untIl after the grIevor's dIscharge 25 Mr FrIedman received and revIewed Mr Lymburner's report when he re turned from vacatlOn on August 1, 1995 He noted that the first mvestment and half of the thIrd came from Mr Hannan as a loan to hIs wIfe for the purpose of her mvestment m Buchanan Chocolates He regarded thIS as a new and Impor tant fact. He consIdered that a field officer actmg m a clIent account manager form of relatlOnshlp receives Vital clIent InfOrmatlOn to assIst the clIent In ItS de- velopment Here, a field officer m the process of workIng wIth a company had got Involved m a conflIct of mterest whIch he saw, and thought a busmess clIent would see, as qUIte severe In early August Mr FrIedman sought legal advIce about the latitude the MmIstry had wIth respect to a dIscIplmary response In early September he receIved an answer It IS not apparent why, but It took untIl early October for the employer to seek another meetmg WIth the gnevor FollOWIng the meetmg WIth Mr Lymburner the Hannans sought legal ad VIce Mr Hannan testIfied that after receIvmg legal adVIce, he remaIned gravely concerned about the pIcture he says Mr Lymburner portrayed that the RCMP mIght arnve on the scene at any tIme He found It dIfficult to carry on workmg, not knowmg what would happen, not knowmg who knew about hIS sItuatIOn. The sale of Ms Hannan's property near Godench closed m July 1995 Out of the proceeds she repaId the money she had borrowed m March - the $20,000 from Mr Hannan's credIt hne and $20,000 from theIr Jomt credIt hne - as well as the mterest that had accrued on the loans The sale of her Gravenhurst prop- erty closed m August 1995 The Hannans testIfied that from those proceeds she repaId the $25,00000 she had borrowed from Mr Hannan to make the first m- vestment. The Hannans testIfied that as tIme wore on followmg the meetmg WIth Mr Lymburner, Mr Hannan began to suffer from depresslOn. HIS WIfe became worned about hIm. She made an appomtment for hIm WIth theIr GP He resIsted ImtIally, but ultimately went to see the doctor On September 29, 1995 the doctor - put hIm on an antI depressant drug, recommended that he should take 3 weeks off work and gave hIm a note to that effect Mr Hannan put off thIS medIcal ~(j leave untIl October 4 because he had a submissIOn to make for a chent under alPs On October 3, 1995 the secretary m the office where he worked gave hIm a telephone message from Lynn Hartman. He then gave the secretary the doctor's note, and told her he was effectively on SIck leave He left work early that after noon. He dId not return Ms Hartman's call The Attempted Further Meeting After Mr FrIedman got the mItIallegal adVIce m September, he and oth ers met and decIded there should be another meetmg WIth Mr Hannan to dIS cuss the Lymburner report and get further clarIficatlOn. Ms Hartman trIed un- successfully to contact Mr Hannan on October 3, 1995, as I have already noted Thereafter, management was aware that he was on medIcal leave, but still wanted to meet WIth hIm. Ms LeBlanc made further attempts to contact hIm by leavmg messages on the anSwerIng machIne at hIs home She testIfied that someone, she belIeves It was Ms Hannan, told her he could not speak to them untIl after hIS medIcal leave. Mr FrIedman then deCIded to proceed WIthout havIng a further meetmg The Termination Decision The Deputy MInIster delegated to Mr FrIedman the power to determIne the grIevor's dISCIplIne but, as I understand hIs eVIdence, partIcIpated In dISCUS SIons WIth hIm about what should be done Mr FrIedman consIdered that consultants deal WIth clIents on the basIs that they WIll be keep mformatlOn that the clIents provIde confidential and not take advantage of It He felt that Mr Hannan had had that kInd of relatlOnshIp WIth Buchanan Chocolates Havmg gamed the Buchanans' confidence, Mr Han nan had convmced them to focus on a partIcular part of theIr busmess WhIle contmumg to carry out hIs dutIes, he had allowed hImself to become mvolved m mvestmg In the company Mr FrIedman belIeved that thIS conduct would be un acceptable to any busmess owner He was extremely concerned that If these events became known, they would JeopardIze the abIlIty of any field officer to ,)". ~I work with chents He was not concerned that Mr Hannan had mfluenced the grantmg of the ODC loan m any way In his view, however, the fact that Mr Hannan had known the government had put money mto the company made it more sensitlve that he was calhng on the company while his wife was mvestmg m it. Mr FrIedman felt It was sigmficant that Mr Hannan had put up money for hIS wIfe's mvestment even If the transactIOns were bona fide loans It demon- strated that Mr Hannan knew of the investments and was mvolved m some dis cuss IOns wIth hIS wife about them. From the amounts mvolved, he assumed that Mr Hannan would have asked questIOns about the transactIOn. He assumed also that Mr Hannan had used mformatIOn receIved as an MEDT consultant m terms of mfluencmg hIS wIfe's decIsIOn to mvest. In any event, he felt that from an entrepreneur's pomt of view there would be a perceptIon that that had hap- pened or could have happened, and that that perceptIOn was as damagmg as If It had happened It was m the nature of the Job that a consultant receIved senSI tIve, confidential mformatIOn from chents on whom he called He dId not know what mformatIOn Buchanan Chocolates had gIven Mr Hannan, but dId know from Mr Hannan that he had mfluenced the Buchanans to go from one kmd of operatIOn to another, and had mtroduced them to the ODe WIth respect to Mr Hannan's calls on the company thereafter, Mr FrIedman testIfied that when a clIent account manager calls on a clIent, It IS not to have coffee, it IS to dISCUSS busmess and see if he can help them. The grIevor's record was good, there was nothmg negative m It HIS ten ure at the MmIstry had been relatIvely short Mr FrIedman felt that the grIevor's reputatIOn, credIbihty and trustworthmess had been damaged, that he could not contmue to represent the government as a chent account manager He concluded that dIscharge was the appropnate response By regIstered letter dated October 10, 1995 he mformed the gnevor that his employment had been termmated for breach of the conflict of mterest gUldelmes 28 Argument Employer counsel argued that It was unlIkely that the Hannans would have been as uncommUnIcatIve wIth each other as they claIm they were con cernIng Buchanan Chocolates after Ms Hannan became Interested In It as an mvestment. It was also unlIkely, he submItted, that the gnevor would not have apprecIated at least the appearance of conflIct mherent In the sItuatIOn that arose after hIS wife told hIm she proposed to Invest m Buchanan Chocolates and asked hIm to help finance the investment If he truly dId not, and he really was no more mSlghtful than hIS testImony would suggest, then he was unsUIted to a pOSItIOn that reqUIred, as hIS dId, both that he report actual or apparent conflIcts and that he attempt to aVOId them In any event, he argued, even If one belIeves that the grIevor's faIlure to report before May 1995 was due to a faIlure to appreCIate the sIgmficance of hIS SItuatIOn, that can only mItigate hIS conduct prior to the call from Mr FrIedman m May 1995 He responded to that call by provldmg a dIsclosure, but the dISclo- sure was Incomplete He faIled to dIsclose hIS Involvement In finanCIng hIS WIfe's mvestment. He was oblIged to dIsclose that whether he was asked a specIfic questIon about It or not. HIS faIlure to do so was a delIberate breach of that oblI gatIon for whIch he had shown no remorse Counsel submItted that the MInIStry had a legItImate concern about the effect that a consultant's actual or apparent conflIct of mterest could have on the reputatIOn of It busmess consultatIOn program m the bUSIness commumty, as mdlcated In the Board s declslOn In Re Van Der Lmden and the Crown In RLght Of Ontano (MmLstry of Industry and Tounsm) (1981), 28 L.A.C (2d) 352 (SWIn ton) He CIted the arbItrator's observatIOns In Re Sunnybroo/'l Health SCLences Centre and ServLce Employees' Internatwnal Unwn, Local 777 (1995), 47 L,A.C (4th) 44 (Kaplan) at page 50 In support of the propoSltlOn that the employer IS entItled to a certaIn level of mtegnty from employees WIthout haVIng to set out m wrItmg all of the ways that "actual or perceIved conflIcts and those WhICh have the potentIal to be actual or perceIved" mIght anse Counsel also referred to :!9 remarks m Re Regwnal Ml11UCLpahty of Hamtlton Wentworth and Canadwn Un wn of PublLC Employee, Local 167 (1978) 18 L.A.C (2d) 46 (Kennedy) concernmg the obhgatlOns of CIVIl servants and to Laverty v Cooper PlatUlg lnc (1987) 17 C C E L. 44 (Ont DIst. Ct) and Edwards 2216/94 (Fmley) wIth respect to con flICtS of mterest m a spousal context Umon counsel observed that thIS IS not a case m whIch the grIevor demed havmg done anythmg wrong The Issue was whether dIscharge should be the consequence of the grIevor's wrongdomg Umon counsel argued that a number of features of the case should tilt the scales m favour of a lesser penalty Counsel submItted that thIS IS not a case m whIch there was a blatant and maSSIve conflIct. He argued that I should accept the grIevor's testimony that he dId not dIsclose to hIS wIfe any mformatIOn he obtamed as an MEDT consultant. Indeed, he suggested, she might not have mvested If he had There was no at- tempt to Influence a government agency The grIevor was not the mvestor He was not "hands on" wIth Buchanan Chocolates as a consultant after he Intro- d uced them to Mr Cannmg Although he called on them thereafter, he had nothIng to offer them He had no Involvement In the apphcatlOns for or approvals of the ODC fundIng There was a perceIVed conflIct, but not an actual one By March 8, 1995 Ms Hannan's mvolvement as an mvestor partner of Mr Canmng's and prospectIve role as general manager were all known to the Buchanans Umon counsel noted that there was no eVIdence that they obJected Shortly thereafter Mr Cop fer knew that she, the WIfe of an MEDT consultant, was the general manager and an mvestor m Buchanan Chocolates No alarm bells went off for Mr Copfer; he was SImply pleased that someone WIth manage- rIal skIlls was mvolved In the management of the company GIven that the Bu chanans and Mr Cop fer were not troubled then, counsel submItted, It IS under standable that the grIevor mIght not have been senSItive to the potential ap pearance of conflIct then or earher, when hIS WIfe entered mto the mvestment )() Counsel submItted that the gnevor s actIOns were not those of a deceptIve, untrustworthy person, and that he was co-operatIve and forthcomIng WIth the employer The purpose of hIS letter of May 24 and the meetIng of May 30 was to address a questIOn about hIs WIfe's Involvement, not about hIS and hIS WIfe's In volvement. HIs Involvement In loanIng hIs WIfe some of the money she Invested came out easIly when questIOns were asked The employer's deCISIOn was mud dIed by Mr Lymburner's unrelIable InvestIgatlOn and Inaccurate report Mr FrIedman failed to conSIder the mechamcs of the Investments and the actual na- ture of the relatlOnshIp between the gnevor and hIS WIfe TheIr relatIOnshIp was atypIcal. What mIght have been dIscussed In another relatIOnshIp mIght not have been dIscussed In thIS one She was not a "stay at home" WIfe who was mere front for her husband. She dId not ask hIm for adVIce, she only asked hIm for loans Umon counsel argued that the central Issue must be whether the em- ployment relatIOnshIp was Irretnevably broken. He submItted that It has not been here He clted Re Regwnal MUTHcLpalLty of Hanulton Wentworth, supra, where the arbItrator reInstated a planner whose after hours employment was found to have breached conflIct of Interest gUIdelInes and substItuted an unpaId suspensIOn of more than a year as the penalty for the mIsconduct, Re Sunny brooli Health SCLences Centre supra, where the arbItrator substItuted a one month suspenSIOn WIthout pay for dIscharge as the penalty for a nurse who so- lICIted, accepted and then faIled to repay a loan from the WIfe of a genatrIc pa tlent, Re Gray's Department Stores Ltd. and Retml, Wholesale and Department Store Umon, Local 1002 (1973), 4 L.A.C (2d) 111 (Palmer), where a sales clerk who entered Into a busIness In competItIOn WIth hIS employer's was remstated WIthout pay roughly 9 months after hIs dIscharge, and Re Pubhc UtLlLtLes Com l1HSSWn of Scarborough and UtLlLty Worliers of Canada, Local 1 (1996) 54 L.A.C (4th) 442 (Craven), where the arbItrator substItuted a three month suspenSIOn and "last chance" terms for dIscharge m the case of a waterworks employee who - was observed lookmg through superVIsors' desk drawers and readmg personal documents found therem. 'H Counsel also made reference to the general remarks III Re Pfnlz"ps Cables Ltd. and Internatwnal Unwn of Eleelneal, Radw and Maehwe Worhers, Local 510 (1974), 6 L.A.C (2d) 35 (Adams) about the rehabilItatIve view of progressive dIscIplllle and the arbItrator's functIOn III assesslllg whether to substItute a lesser penalty He observed that Edwards, supra, had referred to Re Hallborg and the Crown In R~ght Of Ontano (Mimstry of Revenue) (1979) 22 L.A.C (2d) 289 (Weatherill) and Re McKay and the Crown In R~ght Of Ontano (Mimstry of Northern Affmrs) (1981) 28 L.A.C (2d) 441 (Rayner) Both cases lllvolved politI cal actIVIty, whIch the Public ServIce Act deemed to be sufficIent cause for dls charge By contrast, the prOVISIOn of the RegulatIOns under that Act that IS ap plicable here says only that breach of Its prOVISIOns "may be conSIdered as cause for dismissal. Umon counsel submItted that the appropriate dispOSItIon would be to substItute a short suspensIOn together wIth terms dnvlllg home the employment consequences of actual or potentIal conflIcts of mterest and provIdmg for the em ployer's further educatmg the gnevor wIth respect to conflicts of mterest Decision The grIevor IS a well-educated mdIvldual who was employed m a semor, responsible and (relatIvely speakmg) hIghly paId Job He had been alerted to the employer's concern about conflicts of lllterest from the outset of hIS employment He had been told he was to report to the Deputy Mmlster any "actual or per ceIved conflIcts and those whIch have the potentIal to be actual or perceIved" and that a conflict of mterest may eXist "whether or not a pecumary advantage has been or may have been conferred on the publIc servant." It was m the nature of hIs posItIOn that he would receIve confidential m formatIOn from clIents for the purpose of advanclllg the clIents' mterests When one of those clients became an ODe borrower then, as the eVIdence showed he - - rmght also receive conSiderable lllformatlOn from the ODC consultant concermng the ODC's knowledge of the client's affairs Buchanan Chocolates was such a clI )2 ent The gnevor contmued to treat It as a clIent after hIS wIfe acqUIred an mch reet mterest m It He helped finance her acqUIsItIOn of that mterest He dId not report eIther hIS wIfe's mvestment or hIs role m financmg It. When hIS employer became aware of and asked hIm about hIS wIfe's mvestment, he was at pams to descnbe her mvestment as havmg been somethmg done mdependent of hIm and dId not then dIsclose hIS role III havIllg financed It. I accept that durmg the tIme hIS wIfe was an mvestor m the clIent com- pany, the gnevor did not make any deCISIOn about ItS entItlement to government aSSIstance or seek to mfluence any such deCISIOn. There was, however, the pOSSI bIlIty that as It grew the company could qualIfy under one of the MIllIstry'S pro- grams That was, as I understand It, part of the ratIOnale for hIS contIllumg to call on the client. In any event, the focus of conflIct of mterest rules III the publIc servIce IS not Just on CIrcumstances III whIch a CIVIl servant actually profits or the exerCIse of hIs/her Judgment IS actually affected In McKendry and the Treasury Board (May 31, 1973, E B JollIffe, unre- ported, quoted m Re ReglOnal Mumc~pal~ty of Ham~lton- Wentworth and Cana- dwn UnlOn of PublLc Employee, Local 167 (1978), 18 L.A.C (2d) 46 (Kennedy) at 54 and 55) the arbitrator made these observatIOns about conflIct of mterest III the federal publIc servIce. 1 Pubhc servants must not seek, for private gam to make use of infOrmatIOn not avaIlable to the general pubhc to which the, have access by reason of theIr offiCIal dutIes. 2. A conflIct of mterest occurs ,.. hen the pubhc mterest m proper admmIstratIOn of a government office and a government offiCial s mterest In hIS pnvate economIC affaIrs clash or appear to clash and a findmg of conflict of mterest does not depend on Wilful wrongdomg b, the offiCIal or on the Issue of.... hether the offiCial's Judgment has ill fact been affected 3 A government offiCial should not put himself m a pOSitIOn where hiS Judgment could even unconsclOuslv be affected b, fnendshlp ThIS IS not a matter of vlelchng to publIc SuspiCIOn or malICIOUS cntICIsm The essentIal requIrements are that the publIc seIVant should sen e onh one master and should never place hImself m a pOSition \..here he could be e\ en tempted to prefer hiS own mterests or the mterests of another over (hr Interests of publIc he IS employed to seIVe Those reqUIrements constitute the .3'3 ratIOnale of the doc1nlw that he should aVOId a positIon of up/wren' 11IilS as well as adual bias and that he should never place himself III a positIOn where as Dmm rvlannlng- puts It two In terests c1m;h or afJfJ('ar (0 clash LIkewIse, m Edwards, 2216/94 (Fmley), thIS Board observed that The nature of conflict of Interest. 1l~g-lslatlOn and policy respectmg public servants m the PrOVince of Ontano IS preventlYe In direction and IS very broad 10 concept. It puts the onus on the employee to make known to the Deputy MInister an actual perceived, or potentially actual or perceived conflIct In order that the Deputy Minister may prOVide adVice on the matter and see that the matter IS promptly resolved, The penalty for faIlure to notuy can be severe, It can go so far as dismissal. The Deputy MInIster has WIde dIscretion In provldmg that adVIce and resolvmg the issue or m removmg the conflIct, It IS not necessary for any fmancml advantage to come to a pubhc servant for a confllCt of mterest to eXISt. The publIc servant whose SituatIOn at tracts the conflIct of mterest label, may have taken no action whatsoever and further may have no mtentIOn of takmg any actIOn whIch would be contrary to the Employer's mterest. A publIc servant who finds hIm or herself so labelled may feel that hIS or her honesty IS bemg Impugned, ThIS, however does not follow A publIc servant With a conflIct of mterest label IS not bemg accused of a lack of mtegrIty or honesty For such an accusatIOn there would need to be some specuic actIOn on the part of the employee whIch would attract such a designatIOn It IS sufficlCnt m conflIct of mterest SituatIOns that there IS the suggestIOn of the possibllItv of a conflIct of mterest and no actIOn need ever have taken place and no benefit, present or future, need be denved, The grIevor m Re Van Der Lmden and the Crown In R~ght Of Ontano (Mimstry of Industry and Tounsm) (1981),28 L.A.C (2d) 352 (Swmton) was em ployed m a pOSItIOn SImIlar to the grIevor's He entered mto a busmess relatIOn- ShIP WIth a clIent to whom he had prOVIded consultmg servIces as a government employee He went on a two day busmess trip at the clIent's request, and much later presented the clIent WIth an ItemIzed expense account The expense ac count came mto the hands of the employer, who compared It WIth expense claIms that the grIevor had submItted to and been paid by the MImstry It dIscovered that there were ten duplIcate Items, and that least part of trip for the clIent was made on MmIstry tIme The gnevor claImed to have been unaware that he was m a conflIct of mterest SItuatIOn, and demed that there had been one The board rejected the grIevor's VIew (at page 357) Here the gnevor would have us define conflict of mterest In narrow terms He has clmmed that he ....as not m a pOSitIOn of conflIct of mterest because he (hd not stand to gain financIalh from hIS aSSOCIation ....llh the Mmlstn S chent. Were thiS Board to accept thiS propOSitIon ....e would be placmg much 34 too narrow a dPl'irlltloll Oil the phra:-;( ('ollflwt of IIltere:-;t Tlw fir:-;t :-;l'lIfellcl' of the Mmr:-;try:-; ~llldehne:-; III ex H exphclth states that conllH't of IIltere:-;t can occur even where there 1:-; no cllrecl monefan ach anfagl' to I he empJ()Ye(~ and places an onu:-; on an emplo\ee to con:-;ult with hIS Deput\ f\ll1llstl'r If hI' IS III a pOSSIble conlllct of mterest situatIOn In decHllIlg whether a pubhc :-;ervant IS m a pO:-;ltlon of connie( of IIlterest a Board such as thl:-; should look to whether the pubhc servant has placed hImself In a SituatIon where hiS personal mterests or activItieS mterfere wIth hiS RUlllty to carry out hl:-; obhgatlOns as a public servant or mterfere WIth the Government s abIlity to carryon jts programmes for the seIV Ice of the pubhc The MImstry expressed the same concern that It has m thIS case about the per- ceptIOn that would arIse m the busmess commumty If consultants were seen to be engagmg m outSIde busmess actiVIty (at page 358) rr]he Mmlstry feels the necesslt\ of presentmg an appearance of neutrality by Its employees so that even the most cautIOUS of clIents WIll feel secure m re1easmg ItS mformatIOn The .rvhmstry cannot nsk the POSSIbilIty that a chent WIll fear mIsuse of confidentIal mformatIOn b) an enterpnsmg entrepreneur employed by the Government to Its detrunent or that the chent will dIstrust the adVIce gIVen because the employee who proffers It IS, or mIght be, engaged m actiVIty competitIVe with that of the chent. Therefore outSIde busmess actIVIty m thIS branch appears to mterfere WIth the pubhc servants' performance of theIr duty and that of the branch Although m that case there was actual harm to the employer's mterests, m that the grIevor's busmess actiVItieS took place on the employer's tIme, the Board noted (at page 360) that proof of actual harm was not necessary to support dIS- charge WhIle the employer here has been damaged by the gnevor s actIVItIes because hIS outSIde actIVItIeS mterfered WIth hIS Job It IS Important to canvass the Issue as to whether "actual" damage IS necessan to "arrant dIscharge for conflIct of mterest. The emplover s WItnesses and counsel have emphaSIzed the Importance to the l\hmstl) s operatIOns of protectillg Its reputatIOn as a chsmterested part' offermg profeSSIOnal mformatIOn to pnvate busmess chents. Employees \\ ho engage ill entrepreneunal actIVItIes for theIr own mterest may well create feelmgs of apprehenSIOn ill chents of the MillIStry partIcularly tf they ma, be potentIal competItors Therefore the Mmlstry IS JustIfied ill trymg to pre' ent i;uch aCtlvIt, and m stressmg the Importance of aVOIdance of any appearance of conflIct of mterest by Imposmg the penalty of dIscharge even III the absence of proof of actual harm Here the gnevor takes the pOSItIOn that he was not mvolved m any way m - the busmess actiVItIes m questIOn, HIS theme throughout has been that thIS was hIS WIfe's mvestment, not hIS In argument, counsel debated whether someone '35 could be said to have an Interest" In another s Investment by reason only that they were spouses Counsel for the employer made reference to the "famIly prop erty" sectIOns of the Fallnly Law Act, R S 0 1990, c. F 3 He cited the Board's observatIOn m Edwards, supra, at page 25 Osborn s Concise Law DictIOnary defines Interest al-; follows A person IS smd to have an Interest m a thmg when he has nghts titles advantages duties hablbtles connected With It, whether present or future, ascertamed or potentwl proVided they are not too remote One may have an mterest m a busmess Without bemg mterested m It and Without takmg any actIVe part m It, Spouses mOntana have an actual Interest In each other s finanCial mterests unless they make legal arrangements to alter that SituatIOn Umon counsel argued to the contrary that the prOVISIOns of the Fannly Law Act do not gIve one spouse an actual mterest m the other's property prIor to the makmg of an applicatIon for dIvISIOn of property under that Act. The Issue here IS not whether the gnevor had a property mterest m hIS wIfe's mvestment that he could sell or encumber, It IS whether he had an mterest of the sort contemplated by the rules about "conflIct of mterest." For that pur- pose, the appropnate perspective on the spousal relatIonship was articulated by arbItrator Sprmgate m Re Harmlton Spectator and Southern Ontano Newspaper Gwld, Local 87 (1991),23 L.A.C (4th) 364 at 391 [S]OCIety Increasmgly recogmzes that marrIed people can retam theIr own identIfies and act mdependently of theIr spouses ThiS does not, however alter the fact that spouses generalh share a specIal relatIOnshIp \\ Ith each other An employee clearly may not engage m a busmess that competes With the business of hIS or her employer, eIther durmg or outsIde of workmg hours Re Gray's Department Stores Ltd and Retml, Wholesale and Department Store Un ton, Local 1002 (1973), 4 L.A.C (2d) 111 (Palmer) The deCISIOn m Edwards, su pra, and the deCISIOn of the OntarIO Distnct Court m Lavert:} v Cooper Platmg Inc (1987), 17 C C E L 44 both dealt With sItuatIOns m which an employee's spouse engaged m a busmess m competitIOn With the employer's and the em ployee had knowledge of her employer's busmess that would be useful to that 36 competmg bU!liness In the Laverty case, the court found that those circum stance~ were cause for discharge at common law without proof that sUl:h mfor I matlOlfl has ac:ually been communicated. In Edwards, the Boa.rd found that the employer was entitled in those circumstances to requlre that the emplo:ree take step to ,elimin.lte the Jotential conflict pursuant to the government's CJnfllct of I mterest suidelines, ai"in without the necessity of proof that the emplc,yee had actually given her spollSe any information about the employer'a bUSiner Wlule the facts in thi)se cases. are not the same as the facts here, they illustrat some of the implications that the speCIal relationship of spouses carry in the c nflict of mterest context. The fact that spouses generally share a special relationshIp makeJ it diffi- I cult to believe that the Hannallll dId not d18cusa Buchanan Chocolates ::r.M than theyacknowllldge between November 1994 and March 1995 The po rayal of them both as sophisticated business people makes it seem all the more unlikely that relevant business information was neither sought nor provIded, If indeed they did not J: erceive that It would be improper to do so. Of course, mu(h of Me I Hannan's account of her investment transactions is at odds with the c I. racten zation of her as a sophisticated busmess person, and it may be that it is the characterizati on, not the account, that is inaccurate. Whether or not he Han nans actuall~ discuss~d Buchanan Chocolates more than they ack wledge, however, the tact that they had a spousal relationship nevertheless gal'e rise to an ohyious appearance of and potential for conflict when Ms, Hannan mjested 111 , I a client of Ml' Hannan's It was his obligatIon to report that Investment to his I employer It 'lVas also hls obhgation to report that he had financed h~ mvest. ment. The gIievor's havmg financed hIS wife's investment intensifie~ the ap pearance of a 1d potential for confllct. That and other circumstances sur~ounding I the transacti(,n - her1havmg lnvested indirectly, through someone earler intro- duced to the llient by her husband, and hill having withheld mformattn about his wife's mV(istrnent durmg conversations about their joint client with IS frIend . 37 Bill Copfer - mIght very well have engendered m the chent population the very sort of suspidm and d~strust that the Ministry leg.tlmately wished to a~oid It is surprising that the gri~vor would not have appreciated at least the appe~rance of , conflict inherE nt In the situatwn. If he truly did not, if he really was no 'more in sightful than hIS testiIIlony would suggest, then there is some force to ~mployer counsel's observation that he was for that reason unsuited to a position that re- I I quired. as hIS dId, both that he report and that he attempt to avoid act1..1a1 or ap- paren~ connie' ;8. The fact that tha Buchanans did not complain when they learned I that the grIeVor'g wife was an investor IS not a particularly good test of wh I her the grievQr ought to have been aware of the potential conflict of interest. no reason to CJmplain when that might ahenate someone apparently pr pared to pour ~oney illto their venture as Ms. Hannan had They would not hav been on moral high gr;,)und complaining later, after Kelly Buchanan had stolen~ompany funds In any event, iUs not at all clear that the Buchanans ever learnl~d of the fact, manner or timing of Ms. Hannan's first investment, There is likewise no eVIdence that Mr Copfer knew of the fact, minner or i timing of Ms. Hannan's first investment. The evidence is that m April I 1995 he learned from r business plan that Ms. Hannan was an investor at thai I time If he did not sa a.nything wrong with that at that time, It IS difficulty b under stand why he avoided identifying her by name m the documentation he Jrepared for hi~ superln'ts' consideration in April. If thIS does not betray some un asiness, If Indeed he S;lW notlung wrong at the tIme, it must be remembered th t he did not know the detaila of the transactiona, In any event, he was not a m ,mber of management. It was n,ot his job to police his fnend's oblIgatiOns to th'eir mutual employer Hu faIlure to react dIfferently to the knowledge he acquIred I IS not a partIcularly g::lOd test of whether the grievor ought to have been alert tel and re- I ported, the ap parent and potential conflict of interest at a much earlier lage. I Union :x>unse1 urged me to accept Mr WrIght's guess that he 1euned of Ms. Hannan'E involvement in mid Apnl, reJect his testimony that he a;ded im 38 mediately, aqi conclu~e Instead that there was a delay untll mld May when Mr Fnedman he~rd from!Mr Symington. He argued that that delay indiCltes that. Mr Wright d ld not re,ard this as serious, and that this should mitigate the sen ousn~88 of the grievor's conduct for purposes of discipline. I accept Mr I Wright's teBtl~ony th:lt he acted immediately upon learning from Mr Cop fer that Mr , I Hannan's wile was mvolved m the company, and reject as inaccurate .li8 guess about the tintmg. It seems more likely that Mr Copfer's call to Mr Whght was close lin time to the mid-May date on Mr Copfers Written report. If wha t the grievor disclosed in his letter of May 24 and in the D eetlng of I May 130 had been all there was to disclose, the employer's havlllg kel't him at work: thereaf;er would have weighed more in his favour on the questic1n of pen , . alty, /is would. Mr Friedman's explanation that at that point he did not Junk the griev'or woulc I transgress again. The fact is, though. that the grIevor ha.I not dis- closeli every tiling relevant to an assessment of "actual or perceived conlicts and I , those which lave the potential to be actual or perceived." He had not idlsclosed I that ~e had ranced his wife's investment. I am not persuaded that th.8 was an over~ight or . ere error of judgment. l Between receiving Mr Fnedmants call and maihng rue reply 01 May 26, 1995l the grievor had, several days in which to reflect on the meaning (,f COnflIct i of interest aId on wh,-t compliance with the guidelines and with Mr Fredman'S requ~8t waul:! require. He had a few more days to consIder how much e should e1abdrate at :he meeting of May SO At no point in hiS testimony did tl.e grievor I I sugg~st that he thought hIS employer would regard his having financed 'hIS wIfe's I mve~tment r insIgmficant, H1S explanation for his failure to disclose t was, in effect, that . e did not think it should be slgmficant, The grlevor must have known, however, that management would react negatively to the new ~ that he I ha.d financec his wife's investment In a chent company, and that tHe would . ! complicate the conflict of interest Issue m their mmds. I conclude that .le dId re- I allz_: that 1n he wrote ht. letter of May 24 and, later, when he aU';"ded the meeting of _ ay 30 39 The gri !Vor evidently Judged Ihallf he lefl oullhat aspecl of If story and sImply portrayed the investments as havmg been made entirely inde endent of him, there was a greater prospect that his explanation would be take at face value, that thR consequences would be assessed qUickly, as he hoped, E'nd that those consequllnces would fall short of discharge. He took a calculated riE k in de. I liberately wiUholdingthose facts. I am not dissuaded from that view by :the fact that he later ~vealed his role in financing the investment. He did so anI) I after it became appamnt that the employer would not SImply accept his simplifiJd story, that it: was prepared to,expend resources on checking it I agree with l.UllOn counsel that the question that I rnust cOllSider is , whether the eLnploym~nt relationship has been irretrievably broken. Tle facts here are diffe:.: ent from., those in the cases relied on by unIOn counsel toi'demon : strate that a lesser penalty is appropriate. In Re Gray's Department Stotes Ltd., I . supra,: the griovor's ImmedIate supervisor had been a.ware of his beingmgaged In competition with the employer and had done nothing to stop it. The bo:ilrd took thIs tol demOn! ,trate that the matter was not as serious as the employer launed, and repuced the penalty on that basis. In Be Regwnal MumClpality of H mtlton. Wentworth, supra, the initial response to the confl.1ct in question had be n to di I I reet tl1at the ,rievor cease his conflIctmg actIvity, but not that his employment would :be terminated. The later decision to discharge the grIevor had bee'n based I on addItIonal factual allegatlons that the employer failed to prove at arb~ratlOn. The m/-Scondu(:t addressed in Re Pubhc Utilihes Commlsswn of Scarbor gh dId not Involve co 1f1ict of ~nterest, nor any question of the apprehension . ,he em , , p1oyer!s clientE"le would' have if the employer were seen to tolerate It T1e nurse in Re ~u1lnYbrl)ok Health Sciences Centre acknowledged her wrongdomg . nd was remor$eful. The grievor here has acknowledged that he erred in failing t:) report wife's iinvestm:mt, an error he attributes to post nuptial euphoria. He las not I acknOWledged the u:'iiptOpnety of his failure to report his involvement m . 'undmg her intestmen;, a failure that continued for weeks after he was asked t~ report on his wife's mvestment and gave the appearance of having done so --.. 40 Put arlother way, the questIon here is whether the grievor should have another chance to demonstrate that he can be trustworthy and rchabl! In mat ters of conflict of mterest, real or perceived, actual or potential. He had a chance to demonstrate that in May 1995 Having been alerted to his obligatuln to dis- I close, the gri:lvor made only partial dIsclosure He withheld relevant filets It IS no answer that he was not asked a specific question, It was his obhgatl)n to dIS- close such fads wltho:ut being specifically asked. I have concluded that the with I I holding was Ileliberate It demonstrated that even when his attention was drawn I lU general te nns to ~8 obligation to do so, the grievor could not be a r iable fe- porter of ClfcLUllstances giving rise to a real or perceived, actual or pate tial con fliet of mterE:st. Having regard to the employer interest Identified and acknowl- edged in Va n Der Ltnden, supra, that withholding together with th. ongOlng I failure to rei art prior to May 18, 1995, constituted just cause for dlBche'rge I am not parsuadlld that a: lesser penalty should be substItuted for the grlJvor's dis. charge. ACCOrrnglYI that aspect of the grievance IS di..9missed, I remdln seised wIth the oth,r issues :referred to on the first two pages of this a ward. .." / .' . - '-,.... .:.-c..;/. .- \ // v --' r .-- 'C < '"-..~,., I'J......-.0..... .-- ......',..,- ..,.' \po- .. ' 'i~ / I Dated at To~nto thiS 7th day of Owen V Gray, Vicefbair January, 198 -..-....- !