UPDATE 4-No conflict in Carney vacation with Liberal-Bank of Canada

Mon Dec 17, 2012 4:00pm EST

* Confirms Carney stayed with Liberal MP, finance critic

* Central bank says Carney and Brison friends for decade

* Liberals reported to have pressed him to run for leader

By Louise Egan and Randall Palmer

OTTAWA, Dec 17 (Reuters) - Bank of Canada Governor Mark Carney did not breach conflict of interest policy by vacationing at the home of a Liberal Party lawmaker, his chief spokesman said on Monday, following a report that the visit occurred while the opposition party was seeking to recruit him.

Carney, who will become the Bank of England governor in July, finds himself at the center of controversy after the Globe and Mail newspaper reported new details on Saturday about the Liberals' efforts earlier this year to woo him into running for leadership of the third-place political party.

A Bank of Canada spokesman confirmed the report that Carney and his family stayed at Liberal legislator and finance critic Scott Brison's home in Nova Scotia during part of their summer vacation.

The news led some analysts to question Carney's judgment and the central bank's political independence. The spokesman said Carney and Brison had been personal friends for about a decade.

"The Bank of Canada's general counsel, who is responsible for enforcing the bank's conflict of interest policy, has assessed that this visit does not breach the bank's conflict of interest guidelines in any way," the spokesman, Jeremy Harrison, said in a statement.

"Neither the Bank of Canada, nor Governor Carney, have an actual or potential commercial or business relationship with Mr. Brison," the statement said. "Mr. Carney's acceptance of hospitality provided by a personal friend does not arise out of 'activities associated with official bank duties'. Nor can it be defined as partisan or political activity."

The Globe and Mail newspaper reported that Brison, along with a number of other senior party members, have expressed interest in seeing Carney lead the Liberal Party.

The article cited unnamed Liberal officials as saying Carney asked questions about the race. The bank said it would not comment on anonymous citations.

Carney, in an interview with the newspaper, declined to answer questions about any political leanings. He said he had been approached over the years by people from across the political spectrum and that he "obviously" did not act on any invitation to seek political office.

"Different people, different parties, different approaches, different -- and you can say different levels of seriousness. And so, I mean there's nothing striking about anything in the recent past," he said, according to a transcript provided by the central bank.

"Nobody did anything on my behalf. I never asked anybody to do anything. I never made an outgoing phone call ... so take anything you hear with a grain of salt."

In public, Carney has repeatedly batted away questions about any political ambitions, at one point saying at a news conference in October: "Why don't I become a circus clown? I appreciate the great concern about my career but I have gainful employment and I intend to continue it."

Then in a Nov. 7 television interview, Carney gave his clearest denial of interest, saying "I have no intention of seeking political office."

LACK OF JUDGMENT

But the latest revelations have led to criticisms from some commentators, who say there are risks that the central bank's impartiality could be called into question if officials are linked too closely to politics.

The bank's conflict of interest guidelines urge employees to avoid the appearance of impropriety in accepting hospitality or gifts.

"It does shows a complete lack of judgment," said Mike Moffatt, an economist at the Ivey School of Business at the University of Western Ontario.

"The larger issue here is that Carney is being seen as the guy who can do no wrong," Moffatt said. "For the most part, he's been a very strong governor. There's some point where you start to believe that anything you do is justified because you've been doing such a great job and that's where these sort of ethical lapses get in."

Finance Minister Jim Flaherty declined to comment on the issue when questioned by reporters on Monday. Conservative Prime Minister Stephen Harper's chief spokesman Andrew MacDougall said: "Mr. Carney has done an admirable job as governor of the Bank of Canada."

There had been reports for months that the Liberals, once Canada's dominant party, had tried unsuccessfully to recruit Carney after losing heavily in the 2011 election. A Facebook page was created called "Draft Mark Carney for LPC (Liberal Party of Canada)" with Brison being one of the high-profile Liberals who "liked" it.

In the end, he accepted an offer to replace Mervyn King at the Bank of England.

The current front-runner for Liberal leadership is Justin Trudeau, a former school teacher and son of onetime Canadian Prime Minister Pierre Trudeau.

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