When CBC News Investigative team aired a two-part series about tax avoidance, they used the result of an undercover operation. They used an “anonymous investor” to find out what kind of advice was out there for people who wanted to avoid taxes. The test was to see how close to the legal line, or over, the advice might be. The complainant, Rod Morris, felt that the use of hidden cameras to approach a tax advisor was a violation of policy. The policy talks about prior knowledge of illegal activity, breach of trust or anti-social behavior as some of the criteria for using a hidden camera. In this case, he pointed out, the team had no reason to believe the advisor in question was doing anything illegal. You can’t make the policy fit any situation. The use of hidden camera to test the practices of a service or industry that is under scrutiny and which research indicates is open to abuse, is a time honored and acceptable practice. I find this broadcast followed policy. But CBC News management might want to add some language to the policy that covers this very situation more explicitly.
Last October, CBC News The National ran a two-part series on the ways Canadian companies and individuals seek to avoid paying taxes in Canada by moving money offshore. You considered the use of a hidden camera interview of a Toronto tax lawyer featured in the October 7 broadcast to be unfair to the individual.
The broadcast was centred on a private investigator who is also a restaurant owner. Working with CBC News, he approached various tax advisors in Canada and Barbados to test what kind of advice he would be given to avoid paying taxes on money earned in Canada. Canadian companies legitimately set up operations in Barbados to avoid higher tax rates on profits earned outside of Canada. The premise being tested in this story was that the same system was being used to avoid Canadian tax rates on profits made in Canada.
You believe that “the CBC has ignored its own published journalism standards in an investigative feature and injured a private citizen’s reputation.” You thought that the reporter’s explanation that the hidden camera was used to investigate a “secretive industry where the industry as a whole has come under scrutiny” was a violation of CBC’s policy on hidden cameras. You thought so because the technique was used without any specific knowledge of wrong doing or anti-social behavior as laid out in the policy. You point out there was no evidence that the lawyer first approached with a hidden camera had done anything illegal:
“One of the featured tax lawyers is guilty by association. He commits the crimes of hubris, lack of judgment and recommending a legitimate tax avoidance tool with an irresistible TV soundbite. The self-proclaimed devious Mr. Garbutt is the best piece of theatre in the whole televised investigation. Unfortunately he isn’t the random, secretive, law breaking tax counselor the revised hidden camera ethics policy and the investigative feature advertises.
The rationale for approaching the off shore tax consultants with hidden cameras fail at least 2/3 of CBC’s published ethics policy tests for a private place. There was no credible information about illegal activity and there was no attempt to acquire the information openly by the CBC.”
Furthermore, you believe that tax avoidance is not anti-social, so the use of the hidden camera technique fails by that criterion as well: “Counseling off-shore tax avoidance is not illegal or anti-social.”
You also raised some broader questions about investigative journalism and investigative journalism techniques. You pointed out that investigative journalism places a “large extra burden on ethical standards.” The very methods used in the course of investigative journalism risk crossing the ethical barriers of professional journalism, you said:
“The very term ‘hidden-camera journalism’ in TV news illustrates the paradox of what is meant to be, by example, a transparent and forthright journalistic process. The extra burden referred to is one of heightened vigilance and increased adherence to those ethical standards because of these challenges.”
Overall, you thought CBC News failed to meet its own standards and is arbitrary in the way it interprets the policy; the reporters and producers took existing policy and refashioned it to suit their own interests.
Mark Harrison, Executive Producer of The National, responded to your concerns. He explained the factors journalists considered when applying the hidden camera policy. The three factors he cited were that the story must be of “significant public interest,” that the clandestine recordings in a report are central to the story and not there just for effect, and that a more open way to get the material is not available. He believed that the story met all three criteria. He explained that the broadcast, along with the first part of the series broadcast October 2, was of significant public interest because:
“We had information indicating that some Canadians were engaged in highly questionable financial transactions to avoid paying taxes. The tips were based on investigative reports about secretive offshore financial holdings we had broadcast and published earlier in the year.”
He believed the story used the material recorded in clandestine fashion appropriately:
“Hidden cameras were not used to enhance our TV storytelling by making minor elements of the report more engaging. Rather, the taped content dealt with the heart of the story --- namely, advice on how to move money offshore to avoid paying taxes.”
And, finally, he also thought there was no other effective way to obtain the same result:
“I strongly disagree with your conclusion that we could have obtained the identical information by having a CBC reporter openly schedule interviews with tax experts and financial advisers. In our experience, such approaches generally result in far less candid responses to questions in stories like this. Furthermore, we do not serve our audience well if we rely solely on what amount to scripted or rehearsed answers in public interviews when investigating potentially questionable behaviour.”
He also explained that each of the people recorded by a hidden camera was given the opportunity to comment on what they had said. In the case of the tax lawyer you cite in your complaint, he pointed out the lawyer stood by his secretly recorded comments, but he regretted using the term “under-handed” in the discussion. Mr. Harrison added that “dubious or contestable financial advice intended to help wealthy citizens avoid paying taxes” meets the criterion of anti-social behavior, as laid out in CBC’s Journalistic Standards and Practices.
Mr. Harrison also addressed your concerns about the reporter’s explanation of how hidden cameras were used in this case. Her script said:
CBC's policy for hidden-camera journalism generally requires that we have credible information about wrongdoing before we film… However, when dealing with a secretive industry like this one when the industry as a whole has come under critical scrutiny, the practise is to permit testing in this way on a random basis.
Mr. Harrison said he disagreed that this was an unethical thing to do, and it was in fact a long- standing practice when investigating possible systemic problems in a given industry. He explained in stories like this one there is not an investigation of wrong doing by a particular individual, but it is an attempt to verify allegations of questionable practices in an industry by probing the practices of “random” individuals.
You question whether CBC followed its own hidden camera policy, and feel that it does not allow for random testing. You raise important issues about how the policies are written, and used in daily operations. Underlying it all are issues of fairness, a core value of CBC News:
In our information gathering and reporting, we treat individuals and organizations with openness and respect. We are mindful of their rights. We treat them even-handedly.
You raised the very interesting question of whether investigative journalism by its very nature is in conflict with ethical journalism. CBC’s Journalistic Standards and Practices actually anticipates and provides some guidance on that issue. The section on Investigative Journalism, begins as most sections of the policy guide with an overarching statement of principles. In fact it is entitled “Unique Features.” This is what it says:
Investigative journalism is a specific genre of reporting which can lead to conclusions and, in some cases, strong editorial judgments. A journalistic investigation is usually based on a premise but we do not broadcast an investigative report until we have ensured that the facts and evidence support the conclusions and judgments.
To achieve fairness, we diligently attempt to present the point of view of the person or institution being investigated.
It was written this way not to give license to journalists to do anything they please, but to highlight that the process is different and, as you point out, to emphasize a high burden of proof. To further emphasize that all CBC policies and core values apply, all the other policies under the Investigative Journalism heading are an aggregation of policies that apply to all journalistic endeavours.
In the interests of full disclosure, I was one of the people involved in the creation of this latest iteration of CBC Journalistic Standards and Practices. Most of the policies were rewrites of ones predating my involvement with it, and were not substantially altered in principle or approach. The current edition was also reviewed by outside experts and judged to be on a par with or best in class of journalistic codes. It was also approved by CBC’s Board of Directors.
Policies cannot be written with every contingency in mind. They are written based on a set of principles and provide some guidelines and criteria to follow. As in most ethical decision making, there are always competing values at stake, so it is impossible to anticipate every story or situation. For higher stakes activities, like clandestine recordings, there are some safeguards. Before any clandestine footage is aired, it must be approved at a senior management level. In this case the approval came from David Studer, the Director of Journalism Standards and Practices. He told me he was involved with the project from the outset, before any recording was done, and there was careful scrutiny and much discussion every step of the way. In this respect, and in respect to the requirement to give the subject of a hidden camera interview the right to respond, the policy was followed.
You believe that there was violation of the policy because there was no specific knowledge of wrongdoing or illegal activity when CBC’s anonymous investor approached the Toronto lawyer featured in the piece. As noted in the “Unique Features of Investigative Journalism” the approach was not made until extensive research about the practices of the industry had been undertaken. There was credible information that such practices did occur and it seems a reasonable argument it would be harder to find out about it by doing straightforward interviews. CBC had had access to a large volume of documents indicating questionable offshore activities. It is unfortunate that one of the experts used in the piece, the former employee of the Canada Revenue Agency, was not identified. However he also brought insider knowledge to this ambiguous world.
You were particularly concerned about the idea that this was “random” and therefore inherently unfair. Journalistic endeavours involve much more than finally ends up on air. There is always an element of choice about who and what is used in a story to stand in for a broader picture. I am not sure what other options would be available when the goal of the piece, clearly stated, was to shed some light on an issue of public interest. Mr. Studer informs me that the team tested 15 tax advisors in all. He said “the advice offered in 7 of these tests, our experts said, wouldn’t stand up to scrutiny. In the case of six others it was not as clear cut…”
I do not believe that the premise, based on extensive research, that the team was investigating could have been tested by an open approach. There is a great deal of ambiguity and greyness in this world. Someone knowing he or she is on camera would be even more cautious in the language used. The tax lawyer you cite in your complaint was not the only person featured. In his segment, he suggests a particular way to invest money in Barbados, and avoid higher tax rates. The question is if this is acceptable practice. American lawyer and tax expert Jack Bloom, one of the experts used in the broadcast, has this to say about it: “This is what in the American parlance is called a life insurance wrapper to hide assets, and by and large these don't stand up to scrutiny.”
The other unnamed expert in the piece commented that “Everything in isolation is defensible but everything with a complete picture is not, because the only bona fide business purpose that is being satisfied here is avoidance of Canadian taxes.”
The tax lawyer, when presented with these contrary opinions, stood by his position. The reporter also asks him if he stands by one of his earlier statements that he needs to be the “most devious, under-handed son of a bitch in the room, and that's what you're paying me for. Yeah, I was actually, yes, I a hundred percent agree with that. I would a hundred percent agree with that, because the word "under-handed" I don't like, I don't like that I said that, but it goes back to the idea that I've always said is that your job as a tax lawyer is to make sure that you're paying not one penny more than you're legally required to. Like I said, they invent better mousetraps, we invent better mice. That's the nature of the game, okay?”
The policy of fairness and the criterion of clandestine recording were observed.
You were also troubled because you do not think tax avoidance can be characterized as “anti-social.” The problem may be where one person’s effective tax planning turns into tax avoidance. One of the things highlighted in both of The National’s pieces is that the line is blurred, but there is a cost. The Canada Revenue Agency addresses it this way on their website:
What is tax avoidance? How does it differ from tax planning and aggressive tax planning?
Tax avoidance and tax planning both involve tax reduction arrangements that may meet the specific wording of the relevant legislation. Effective tax planning occurs when the results of these arrangements are consistent with the intent of the law. When tax planning reduces taxes in a way that is inconsistent with the overall spirit of the law, the arrangements are referred to as tax avoidance. The Canada Revenue Agency's interpretation of the term "tax avoidance" includes all unacceptable and abusive tax planning. Aggressive tax planning refers to arrangements that "push the limits" of acceptable tax planning.
Tax avoidance occurs when a person undertakes transactions that contravene specific anti-avoidance provisions. Tax avoidance also includes situations where a person reduces or eliminates tax through a transaction or a series of transactions that comply with the letter of the law but violate the spirit and intent of the law. It was to address these latter situations that the general anti-avoidance rule was enacted in 1988.
As for the cost, the International Monetary Fund, in a report on the issue of tax avoidance and tax evasion, cites a study which estimates that about “6 percent of the global net financial wealth of households—about $4.5 trillion—is unrecorded and located in tax havens (Zucman, 2013).” The OECD also published an extensive report on the issue in 2013, and it has been on the agenda of several G20 meetings. Whether one approves of the practice or not, there is no doubt there are societal impacts.
The CBC News teams involved in the production of these stories did extensive research, and provided insight about practices in an industry that has come under international scrutiny because of its impact on economies. While the policy on hidden cameras does not address the situation of this wider approach, the specific policy and the Journalistic Standards and Practices as a whole provide enough principles and criteria that guided the tax evasion investigation. You raise a valid point that the policy is silent for this type of investigation. Since CBC News does undertake them fairly often, management might want to add at least some reference and criteria that would address situations where a particular service or industry practice is the subject of investigation.