OTTAWA — The federal lobbying commissioner is renewing calls for the closure of a loophole in the rules governing former high-level government officials after her investigation found that David MacNaughton, president of Palantir Canada and Canada’s former ambassador to the U.S., did not break the law when pitching his firm’s services to cabinet ministers and top public servants. 

The watchdog launched an investigation after The Logic reported in April 2020 that MacNaughton had said Palantir was working with the federal and several provincial governments on their responses to the COVID-19 pandemic.  

The former ambassador is subject to a five-year lobbying ban, but the commissioner found most of his contacts with senior officials were about possible pro-bono contracts—which aren’t covered by the restriction—and that he didn’t spend enough time on other communications to meet the prohibition’s threshold.

In a statement to The Logic, MacNaughton said he welcomed the commissioner’s conclusions that he complied with the Lobbying Act, and would keep working with the watchdog to ensure he stayed “in full compliance with the letter and intent” of the law. Palantir did not immediately respond to a request for comment.

The Logic first reported in April that MacNaughton told the audience at a private event that Palantir was working with Ottawa, and offering its services to governments for free during the pandemic. The following day, then-innovation minister Navdeep Bains told a parliamentary committee that while he was unaware of any formal commitment on the COVID-19 response, the former ambassador had provided advice to federal officials in the past.

Tuesday’s report from commissioner Nancy Bélanger states that—anticipating a lobbying complaint after The Logic broke the story—lawyers representing Palantir and MacNaughton contacted her office to say the company and executive had complied with the rules and would cooperate with any investigation. 

The watchdog’s investigation found that MacNaughton communicated 49 times with 22 senior federal officials between January and May 2020, including Deputy Prime Minister Chrystia Freeland and Treasury Board President Jean-Yves Duclos, Bains and then-finance minister Bill Morneau, as well as five deputy ministers and seven senior staffers to cabinet members.

The report states that 18 contacts saw MacNaughton offering “advice and perspective” on a range of subjects, most of which weren’t covered by his ban. Former top officials who’ve moved to companies can lobby, as long as it doesn’t make up a “significant part” of their work. The threshold is typically set at 20 per cent, or 32 hours in a four-week period; the commissioner found MacNaughton spent just over two and a half hours on contacts covered by the restriction.     

The 20 per cent threshold applies to former top officials who go to work for businesses, but not to those who take jobs at other types of organizations like charities and academic institutions. Tuesday’s report says Parliament could “remove the existing inconsistency” by “eliminating the ‘significant part of work’ exception” for ex-officials employed by companies or by granting the same carve-out to those working for other kinds of organizations. That repeats a recommendation in the watchdog’s February submission to the House ethics committee. 

“There is a reason why I am flagging, in my observations, [that] gap,” said Bélanger in an interview with The Logic. “There is a prohibition, but there’s also an exception to the prohibition, and because of that … there was no breach of the Lobbying Act.” While she’s not opposed to the carve-out, Bélanger said it needs to be “clear and fair and apply equally” to corporations and other organizations.  

The other 31 communications were “pro bono offers of assistance to the federal government to provide access to Palantir products and services in connection with the government’s response to the COVID-19 pandemic.” The report said such help would have been provided via a procurement contract; seeking such agreements isn’t considered lobbying under the restrictions for former top officials. 

“Last spring, as the COVID-19 pandemic ravaged all parts of our lives, I did what many Canadians chose to do by putting my hand up to help the government however and wherever possible,” MacNaughton said in his statement to The Logic Tuesday. “Palantir Technologies was assisting governments in other countries on a pro bono basis, and I wanted to make sure the Government of Canada benefitted from that as well.”

The commissioner’s report notes that, shortly after starting at Palantir in September 2019, MacNaughton wrote to her office to confirm that in his new role he was “able to be part of a team selling Palantir services to the Government of Canada” and that “selling products or services did not constitute lobbying.” The watchdog concurred.

Bélanger said she wasn’t opposed to treating some contract-related communications as lobbying, but that Parliament had excluded it for valid reasons. “Transparency already exists, because of the public mechanisms by which procurement is obtained or awarded,” she said. Requiring registration and reporting for “every process to purchase goods and services” would create “a lot of volume, and possibly quite a high burden” on companies and other organizations bidding.     

Critics and MPs have long called for changes to the federal Lobbying Act. A particular target has been the section that lays out the “significant part of work” exception, also known as the 20 per cent rule. The threshold also governs when organizations’ in-house lobbyists must register with the watchdog; the commissioner’s February submission recommends removing it in favour of an obligation for lobbyists to enroll by default.  

Lobbying that falls under the threshold “is happening without transparency,” said Bélanger, noting that someone could be spending 15 per cent of their time on such contacts without needing to register. “There’s quite a bit of lobbying that can occur during the month, and no one would know about it.”   

Outright lobbying bans for former officials are a disincentive for people to take public-service roles, said Ian Stedman, assistant professor at York University’s School of Public Policy and Administration. “There should be a ban against lobbying on a particular file [if] you have insider knowledge,” he said. He noted that compliance with the 20 per cent rule is typically hard to audit, since the commissioner relies on the lobbyist and officials contacted for information about communications and time spent. However, “it seems that recordkeeping wasn’t a problem” in the MacNaughton investigation. 

In September 2020, ethics commissioner Mario Dion found MacNaughton had broken conflict-of-interest rules by offering Palantir’s services to the federal government for its COVID-19 response, and ordered nine top government officials including Bains and Freeland not to have “official dealings” with the former ambassador for a year.

NDP MP Charlie Angus, whose letter to Dion following The Logic’s reporting prompted the ethics commissioner’s investigation, said it’s “ridiculous [that] someone [can] be found guilty under one act, and then be found innocent under another when they both pertain to the same behavior.” He called the exemption for procurement-related contacts and the significant-part provision “giant loopholes.”     

If MacNaughton “decided to volunteer for some wildlife preservation organization, he would be absolutely forbidden to do any outreach [because of his] his former position,” said Angus, who also wrote to Bélanger in early May asking her to investigate the former ambassador. “But if he’s working on behalf of a giant U.S. data-surveillance corporation, all he needs [is that] it is not a significant part of his day-to-day work, and it’s okay.”