Will blind trusts place ministers above suspicion?
The government’s plan to rid ministers of conflicts of interest is to use blind trusts, but can they work effectively?
Matthew Vella The government is considering the introduction of blind trusts, as a means to avoid any conflicts of interests that may arise when ministers pass laws. But can the system be expected to work properly?
In 2009, Finance Minister Tonio Fenech’s freebie trip aboard George Fenech’s private jet to watch Arsenal play Villareal in Spain opened him to accusations of a conflict of interest: the minister had been preparing and pushing for amendments to the gaming law, and gambling hall owners accused him of favouring the casino owners, like George Fenech.
While Fenech was culpable of accepting a gift that, arguably, “might be deemed to create an obligation, real or imaginary”, what happens in cases when ministers have a direct interest in legislation that could affect their investment income?
The parliament’s Select Committee for the strengthening of democracy is expected to examine a document presented by government on the formation of blind trusts, to ensure ministers are above suspicion when passing laws.
A blind trust would take shape as follows: the government minister gives power of attorney to a trustee or executor who will have full discretion over his or her assets, while the minister – as trust beneficiary – will have no knowledge of the holdings of the trust, and no right to intervene in their handling.
The aim of the blind trust is to avoid a conflict of interest between the beneficiary and the investments. By placing their personal assets, such as investment income, into a blind trust, ministers should be able to avoid a conflict of interest when directing government funds to the private sector.
On the face of it, it should mean ministers’ decisions on laws are not based on their business interests, because it is other executors who are deciding how their personal funds are invested. Supposedly, the minister would remain independent of the trustees and not influence them… or ‘blind’ to how these funds are being managed.
Drawbacks There are, of course, some clear shortcomings. Nothing actually prevents a trust beneficiary from conferring with his ‘trusted’ trustees on the way his or her funds are being managed. One of the problems of blind trusts is that the trustees’ identities are not usually made public – they could easily be the ministers’ business partners or personal lawyers. Hardly independent.
And once they are no longer in office, ministers will regain control of these assets, which means they will retain an interest in the way their funds are managed.
Going by the way trusted friends and party donors get appointed to government boards and chairmanships (in a way not unlike the British Labour government’s cash-for-peerages scandal), it is hard to think that blind trusts in Malta would achieve their expected result.
One of the first scandals to taint Tony Blair’s Labour government was the use of ‘blind trusts’ to get millionaires to bankroll Labour’s electoral campaign, some of whose names leaked out, and some of whom received life peerages into the House of Lords after Labour won the election.
The Neill Committee’s report in 1998 found the use of blind trusts to be “inconsistent with the principles of openness and accountability” and recommended that such trusts be “prohibited as a mechanism for funding political parties, party leaders or their offices, Members of Parliament or parliamentary candidates” – this was later incorporated into British electoral law. mvella@mediatoday.com.mt
Any comments?
If you wish your comments to be published in our Letters pages please click button below. Please write a contact number and a postal address where you may be contacted.
Search:
MALTATODAY
BUSINESSTODAY
Download MaltaToday Sunday issue front page in pdf file format
