Bill C-46 (Historical)
An Act to amend the Criminal Code (capital markets fraud and evidence-gathering)
This bill was last introduced in the 37th Parliament, 2nd Session, which ended in November 2003.
Martin Cauchon Liberal
Not active, as of Nov. 5, 2003
(This bill did not become law.)
November 5th, 2003 / 5:25 p.m.
The Acting Speaker (Mr. Bélair)
It being 5:29 p.m., the House will now proceed to the taking of the deferred division at third reading stage of Bill C-46.
Call in the members.
(The House divided on the motion, which was agreed to on the following division:)
November 5th, 2003 / 4:20 p.m.
Peter Stoffer Sackville—Musquodoboit Valley—Eastern Shore, NS
Madam Speaker, it gives me great pleasure to rise on behalf of the federal New Democratic Party to discuss Bill C-46, capital markets fraud and evidence gathering.
I admit this file is not my area of expertise, but I have been following it quite closely because of media events around the world and what is going on in our own country.
The reality is that we are a market based economy. We do have government assistance in that regard, but the markets will be tainted if there is any perception of insider trading through white collar crime.
These corporations and businesses hire many thousands of employees throughout the entire country. That is good because it assists our economy; however, we must ensure that these companies are on the up and up and are not siphoning off, for example, profits and investments, and employee pension funds from within. A classic example of that is what happened at WorldCom, ImClone and Enron in the United States.
They were apparently going well, life was good and the next thing we know they crashed. Thousands of employees lost their savings and pension funds. What do these people do now? There are thousands of people who invested in the companies, had pension funds and their life savings with these companies. What do they get to do now? They are out on the lam. They will have to turn to government assistance. All the other taxpayers in the country will have to assist them.
We saw what happened in our own country with Bre-X. It was the darling of the stock market. A lot of people made a lot of money on Bre-X and what happened? It is that old adage, if it is too good to be true, it probably is, and thousands of people lost an awful lot of money being scammed on that particular issue.
That is something that the bill should address. I sure hope my hon. colleague for Lethbridge did not lose too much money on that particular issue.
By the way, Madam Speaker, just for the record, Saskatchewan will defeat Edmonton in the final game on the weekend and go on to win the Grey Cup because even though I am from Nova Scotia, I do have Rider pride. So, go Saskatchewan go.
My colleague from Regina—Qu'Appelle moved a couple of amendments forward which were not adopted because the bill was fast tracked through the committee. In fact, it was presented so quickly that no witnesses from outside the House were heard on the bill.
This is extremely important. Regardless of our viewpoints on particular legislation, we must include the viewpoint of Canadians. We must, in fairness, even afford those corporate directors and businesses the opportunity to speak before a parliamentary committee to address their concerns, whether they support or disagree with the bill. They do have a right in a democracy to present their concerns in person to a standing committee of the House of Commons.
It should not be fast tracked. The legislation is too important to rush through. Eventually, what will happen is that somebody will take it before the courts and it will be tied up for years and years. In the end, nothing will get done.
If we are going to present legislation of this nature, let us take our time with it and see that it is the best legislation that we can bring forth with input from all stakeholders, not only those in the business community but employee groups, and people within the bureaucratic world as well.
Among the biggest things that the New Democratic Party has pushed for over the years is the protection of pensions and whistleblower legislation. We honestly believe, and we stand by it as a party, that if employees of a particular company or agency feel that something is drastically wrong within a corporation, business or government department, and they feel they have no other choice, they should be able to express their concerns.
It may be on a serious health issue. I forget the name right now, but there was an individual in the United States who blew the whistle on the tobacco companies. He was ostracized, threatened and everything else. However, that man showed a lot of bravery and in the end, he probably saved many lives down the road by exposing the tobacco companies in the United States for what they really were.
In Canada, when four scientists, I believe, in our Department of Health expressed serious concerns about the goings-on within the Department of Health, they too were ostracized and shunted to the side. These people are professionals. They have every right to do this. If they feel that in their professional judgment something is seriously wrong and they cannot mitigate the concerns through the proper channels within their own department, they should have the right to be able to express those opinions freely, either to the media or to other members of Parliament for that matter. They should be able to express the serious concerns they have.
They may be saving lives in the end. They should not be threatened with losing their jobs or the loss of the future enhancement of their careers or anything of that nature. If they are wrong, they will be proven wrong, but if they are right, then they will have done justice not only to their employment but also to their bureaucratic concerns as well.
We in the NDP support the proposed legislation, although with reservations. We do wish that the government had accepted the amendments we proposed on insider trading and of course on whistleblower protection.
There is also one concern I have on a personal level. If we set out maximum sentences of 10 years or 14 years, that really means maximum. A judge can offer the minimum, which could be anywhere from no time in jail to a fine or house arrest. The judge has that leniency.
I believe that if we want to send a strong signal to these people we should tell them what minimum sentence they are going to get, similar to the outrage we expressed in the House a couple of weeks ago when we discussed concerns about child pornography or pedophilia. There is no sense in stating a maximum sentence if we are never going to do it. We should make it a minimum sentence of 10, 15, 20 or 25 years and make sure the offenders serve every single day of that sentence. There should be none of this good behaviour nonsense.
A classic example of that is a person in my riding--and I refuse to use the word gentleman--who had eight previous impaired convictions. On the ninth impaired charge, he got it right: he killed a young girl of 18 years of age. He was sentenced to eight years in jail. He served only two years and was released.
What signal are we sending people when a person who has nine impaired convictions kills a young 18 year old girl on the ninth conviction, only gets an eight year sentence and serves just two years of that sentence? What are we telling the victim and the victim's family? It is an outrage.
There is no difference in terms of corporate crime. If we are going to send people to jail, we must send them to jail for the length of their time and ensure that they serve every single day so they know that if they commit this white collar crime they indeed will face serious consequences if they are caught.
I have another concern. We have to ensure that our government, our police forces and all the agencies have the manpower and the financial resources to follow up on the investigations and tips they receive. Many times our police forces and the RCMP are underfunded and undermanned. They simply do not have the resources to do the job effectively.
The proposed legislation sounds good. We can put it into law and on paper, but if we do not provide the tools and the teeth to back it up, it means absolutely nothing.
With that, we give cautious support for the bill. We wish that members on both sides would have the opportunity to speak to it. We would like to see further dialogue happening when it gets to the Senate. We are definitely in support of the proposed legislation, although it is not as strong as we would like it to be.
November 5th, 2003 / 3:55 p.m.
Claude Bachand Saint-Jean, QC
Mr. Speaker, it is a pleasure for me to speak today on Bill C-46, which, as you know, establishes new offences under the Criminal Code with regard to capital markets fraud, particularly when it concerns employee pension funds.
People tend to think that only large investors will be affected by the kind of legislation before the House today.
However, when it comes to investment interest rates, those investing the most in the stock markets and even banks are often big companies investing their employee pension funds.
On a daily basis, public sector funds even undergo a certain number of operations to leverage the savings of both private and public sector employees. As a result, when they retire, these people will get a decent pension. So it is extremely important for us to ensure that we protect these small investors.
Recently, there have been major scandals that Quebec and Canada have so far managed to escape. However, it is feared that what has happened in the United States might happen here.
Everyone remembers the infamous Enron scandal. Several U.S. companies had misappropriated funds, but Enron, in particular, truly created a crisis in the retirement fund of its own employees, who had been convinced to invest their retirement money in Enron shares or the like.
Consequently, when Enron started to take on water and sink, the entire employee retirement fund sank with it. People who had worked there for several years are now without a pension.
I have here some data on Canadian trusteed pension funds. For instance, Canadian trusteed pension funds have over $500 billion in assets. It is easy to understand the importance of the bill before the House today.
It must be said that $500 billion is a lot of money. Some day, these funds will be used for retirement; they are already being used for that purpose today. Indeed, when people retire and stop working today, they are often at retirement age and want the company they have worked for to pay their pension beneifts.
It is the same thing in the public sector in Quebec and in Ottawa. There are procedures. People are entitled to a retirement pension. They apply and receive their pension; in the public sector it is no different. However, the public sector is somewhat protected by the government.
In the private sector, the Criminal Code must be very clear on punishing people, especially people who commit fraud, which can have extremely harmful consequences for private sector pension funds. It is important to tighten up the Criminal Code to try to prevent such a thing from happening.
There is also the example of Singer, in my riding. Not only did the company not pay into the fund, but it took off with the rest of the fund. Instead of improving this fund over the years, it stopped paying premiums, often without the workers' knowledge. Some former employees in Saint-Jean receive a pension of roughly $20 a month.
This goes to show that it would be very useful to tighten up criteria and warn fraudsters and inside traders—I will explain what insider traders are in a moment—that they will have to answer for their actions, probably face severe fines and even a prison sentence.
Out of the $500 billion I mentioned earlier, $115 billion is invested in Canadian stocks. Once again, if a group of companies tampers with or benefits from specific information to make money or sell stocks before their price declines, we can see how this can affect the little guy.
The little guy goes to work every day. He relies on his employer, his union and his pension fund to see to it that his money is invested properly. We must be confident that the companies in which the funds invest are protected against such fraud.
Also, $57 billion is invested in foreign stocks. More than 4 million workers contribute to these funds. Clearly, when 4 million Canadian workers are affected by these kinds of funds, it is important that the lawmaker step in to ensure that everything is above board.
I want to congratulate my colleague from Charlesbourg—Jacques-Cartier on the excellent work he has done. I must admit, however, that we are not happy with the bill as it stands. Several of our recommendations and amendments have been incorporated into the bill, but the main one, with respect to duplication or interference by the federal government in Quebec's areas of responsibility—once again—was not. For that reason, we will not be supporting the bill.
Nevertheless, we did win on some points. We should be proud of that and recognize that it was thanks to the Bloc Quebecois that the amendments were accepted. We have improved the bill. Even though, on the whole, we are not in favour of this bill, some of the provisions we have suggested have been accepted.
Among others, there is the whole issue of insider trading. What is insider trading? One hears or reads this term often in the business and financial press. For example, we see that someone is going to be sentenced by a court for insider trading. It is not complicated. Insider trading is a situation where someone is in a position to give friends and family an unfair advantage. Having received privileged information, this insider will pass it on to someone else, who will become richer because of this privileged information.
For example, the chairman of a large company might see in the financial statements he receives that there is a serious operating deficit for the current year. He will also realize that, as soon as this information becomes public, it may have a negative impact on the value of the company's shares on the stock market. Therefore, he might say to people he knows, who have many shares—often family members and friends—that there is a report forecasting a serious operating deficit in the quarter. He warns them in advance that it would be wise to sell their shares because when the news comes out, they will drop in value by 20, 30 or 50%. That is insider trading.
The opposite is also true. If the president of a different company sees in the statements that earnings are very high and that the stock will probably rise in value, once again, he may engage in insider trading. He may say to his friends and family that perhaps they should—say, tomorrow morning—buy some company stock. He has an excellent financial statement and he believes that the value of the stock will rise as soon as the news is known.
Currently, Quebec legislation prohibits this. The securities commission prohibits this kind of behaviour. In Quebec, such acts carry consequences.
It is also understandable that such behaviour often has a negative impact on the funds. This is important. If I am a former employee of the Quebec government, I know I am entitled to the government and public employees pension plan. I am entitled to a pension at age 65, based on my years of service. My pension will be 2% per year of service based on my best five-year average salary. I know that the Quebec government has money and this means I am sure of getting paid.
However, if the government or governments do not take an interest in capital market fraud in relation to the funds that have been invested, there could be a negative impact on the overall amount in the fund, meaning that it could decrease.
There is also the danger of retired workers being told, “Sorry, you were entitled to certain benefits, but we can no longer maintain them, because the fund is no longer able to pay and so we are going to impose restrictions”.
As a result, it is important for us to be able to control this, throughout the business world, and ensure that those guilty of insider trading realize that, from now on, they will be subject to prosecution and heavy fines and even prison time, if convicted.
Thanks to the Bloc Quebecois, we managed to improve protection for whistle blowers in this bill. This occurs more and more frequentlty. We also asked the President of the Treasury Board to apply this to the federal public service. When a federal government employee, a Quebec government employee or a company employee learns of insider trading, they should be entitled to protection.
It is a difficult situation for an executive secretary, for instance, who attends a company board meeting and finds out the CEO is guilty of insider trading, telling those present at the meeting to buy or sell shares because they are going to increase in value. This secretary is often bound by confidentiality, but could perhaps give a warning by saying that some people are considering insider trading.
All those who currently work in business know that there are many pressure tactics that can be used on employees or officials. They can be asked to keep quiet, and warned that otherwise their lives could be made difficult.
I think it is important to provide some protection in the bill for what I would call the guardian angels, those who are not necessarily involved in the scam, but are witness to it and could, at some point, say they do not accept what is happening and denounce it to the appropriate people.
That is not what is happening; the code of silence applies. People have to live with a situation that they know poses a problem and they cannot say anything about it because they would become victims of repressive measures.
Again, I must commend my colleague from Charlesbourg—Jacques-Cartier, who insisted that this measure be included in the bill. The problem is what happens when the case goes to court.
The major problem with this bill—and there have already been indications of this—is that the federal government wants to interfere in the entire securities issue, while it is very clear in the Canadian constitution that this comes under the jurisdiction of Quebec and the provinces.
The same is true for administering the law. The administration of justice is Quebec's responsibility. Yet, this bill would allow federal prosecutors to take cases to court. I wish to point out that there already are provisions in Quebec's legislation and the provinces' legislation with respect to insider trading.
In fact, we did put forward amendments to prevent the government from interfering in fields of provincial jurisdiction. I mentioned the index. I was elected in 1993. Quebec has a securities commission, which does a fine job and checks, in a very proper fashion, any propsectus put out by a company. Before investors buy stocks, the companies should normally provide them with a prospectus. There had been abuse in the past, and Quebec's securities commission corrected this abuse.
I remember that in 1993-94, the federal government wanted to create a Canadian securities agency. Once again, this was in direct contradiction with the jurisdictions of the provinces and of Quebec, of course. Nation building had probably started, but that may not have been evident at the time. Today, it is increasingly evident, with massive intrusions in Quebec's jurisdictions.
In those days, the Bloc Quebecois was already the guardian of the jurisdictions of Quebec and the provinces; we had formally opposed the creation of this Canadian securities agency, which would have overseen the provincial commissions, including the Commission des valeurs mobilières du Québec.
Such an agency would have had some control over Quebec's commission. Again, it would not have minded its own business and would very obviously have intruded in an area of responsibility that belongs to Quebec.
From now on, federal prosecutors will be allowed to prosecute, to lay charges, and to do so under national terms and conditions. We are familiar with these kinds of national terms, which are often in contradiction with the ones in Quebec. Often, whatever program is developed in Ottawa will be imposed on Quebec.
In Quebec, we see things differently. We have a very distinctive way of doing things within our own jurisdictions. We often hear that federal legislation takes precedence over provincial legislation. We have seen what that led to in the case of the Young Offenders Act, which is probably the best example we have seen in this House. In Quebec, we had a very good rehabilitation rate. Our young offenders policy was based on reintegration into society, while the government's bill sought to break the young people, to send them to them to crime school and even to lock them up before they were adults. That is one example.
The bill we have before us is more or less the same. They want federal prosecutors to take to court cases that fall within an area of jurisdiction that does not belong to them. We have asked for many amendments, but unfortunately to no avail. Consequently, we will be forced to vote against the bill.
Overall, I believe the Quebec securities commission works well. It is equipped with the means to correct situations in its area of jurisdiction, and so there are fewer insider trading offences. There are fewer in Canada than in the U.S., but likely even fewer in Quebec than in the rest of Canada.
I feel it is important for governments to get involved, but the problem here is that the federal government is getting involved in something that is not its own business but that of Quebec. This is the fundamental reason for the Bloc Quebecois' opposition to this bill.
Even though it is likelihood that this bill will be passed, because as usual the Liberal majority will side with the minister who is sponsoring the bill, we will at least have the consolation of knowing that there have been improvements made as far as insider trading and whistle blower protection are concerned. This is a very important measure which, incidentally, ought to be extended to the entire federal structure, the entire federal public service. That way, by providing protection to people who witness abuse, a system that is cannot readily be improved could eventually be improved.
Overall, given federal interference in areas of Quebec jurisdiction, the Bloc Quebecois will be forced to oppose this bill. We will at least have the consolation of having improved certain aspects of it.
November 3rd, 2003 / 6:25 p.m.
Paul Crête Kamouraska—Rivière-Du-Loup—Témiscouata—Les Basques, QC
Mr. Speaker, I fully agree with you that it is not a point of order. I will close my speech with one question.
Is Bill C-46 not a clear manifestation of the fact that the federal govenment would like to get its paws on the securities commission? What it has not managed to do by the front door, it will manage to do by the back, by involving federal prosecutors. This is a role they ought not to have. The government ought to be respecting the jurisdictions involved here.
November 3rd, 2003 / 6:25 p.m.
Paul Crête Kamouraska—Rivière-Du-Loup—Témiscouata—Les Basques, QC
Mr. Speaker, I want to thank my colleague for his speech. He has certainly shown that, in each and every bill, we can see that the federal government tries to encroach more and more on provincial jurisdictions.
The same thing goes for this bill, which deals with the whole issue of corporate fraud. I would ask my colleague to tell us if he does not see anything insidious in the fact that the federal government is trying to allow federal prosecutors to play a role in an area under provincial jurisdiction.
We know that the idea of creating a national securities commission has been around for several years. When he was finance minister, the member for LaSalle—Émard raised this issue on several occasions and wanted this project to become a reality. However, he met with all kinds of obstacles, particularly from provincial governments, since they have a system that works.
For the government, is Bill C-46 not—
November 3rd, 2003 / 6:20 p.m.
Odina Desrochers Lotbinière—L'Érable, QC
If the trend continues. We know that in this House—pardon me but they did provoke me to some extent, and they will pay for it—there is the front row, which I call the row of those on their way out. I think that soon there will be so many ministers without any responsibilities that this row will go all the way to the Prime Minister. They are kept either in the front or in the back. It will be up to the whip, I hope, the new whip, the minister of this or that. No one knows where we are going.
I can tell the hon. members one thing: the Bloc Quebecois knows where it is going with respect to Bill C-46. It reiterates its opposition to this bill because it interferes with provincial jurisdictions. If you want to help Quebec, do so within your jurisdictions, and let us act within ours.
November 3rd, 2003 / 6:15 p.m.
Odina Desrochers Lotbinière—L'Érable, QC
Once again, they are trying to get me off track. I have no problem telling them that Bill C-46 does not offer a response to the problems we are experiencing with people likely to run into situations like those that have occurred in the States.
The only thing that Bill C-46 does is to give the Canadian government more leeway. I am repeating myself over and over again, because that is how parents sometimes have to talk if they want to be heard. If we want to convince the Liberals over there, who have been acting like kids for the past few minutes, then I will have to keep saying the same thing over and over again. I want to convince them that Bill C-46 addresses an area that is under provincial jurisdiction, not federal.
November 3rd, 2003 / 6:15 p.m.
Odina Desrochers Lotbinière—L'Érable, QC
Mr. Speaker, as for what I am hearing in this House, I will never allow an adversary to crush Quebec once more. Never. That is, I think, perfectly clear.
The purpose in life of the members of the Bloc Quebecois is to defend the interests of Quebec, and in so doing to promote the fact that one day we shall have our own country, Quebec.
Returning to Bill C-46, as hon. members are aware, the Bloc Quebecois was putting pressure on the federal government as long ago as the fall of 2002 to take steps to tighten up the provisions of the Criminal Code—their responsibility— in order to better equip the authorities to deal with corporate fraud.
Everyone will remember the sad events in the U.S., the scandals with Enron and other companies, in which people lost their fortunes, lost every cent they had, because there were no provisions in place, no laws to protect them. We in the Bloc Quebecois therefore called upon the Canadian government to pass legislation in this area. Since the fall of 2002, moreover—and now here we are in the fall of 2003—the bill has not yet been passed. There is a lot of foot-dragging going on, but all we know is that we are being rushed headlong toward the end of this week.
If that does happen, we will be able to talk about the democratic deficit. It will mean that we will barely have sat at all in 2003. Virtually nothing will have been accomplished here because, once again, we are dealing with the two leader phenomenon. With that going on, there is constant tension between the two people involved, and Canada and Quebec are the ones who are paying for it.
Odina Desrochers Lotbinière—L'Érable, QC
Mr. Speaker, I would appreciate it if the members opposite would take the time to listen to me. It does not upset me; I will just raise my voice. I am used to controversy; it does not bother me one bit.
If these people think they can distract me and get me off topic, we will be talking for a long time, because I do not need notes to speak about nation building and all the interference of the federal government in provincial jurisdictions. I could talk about it for a long time. They will cut me off and tell me my 20 minutes are up. If it bothers the members opposite when I tell the truth, that is their problem.
Thus, I was saying that the regulation of financial markets comes under the jurisdiction of Quebec and the provinces. That is clear. Sometimes I have the impression that even though they patriated their beautiful Constitution by force in 1982, they are not familiar with it, or if they are, they interpret it badly. The way they interpret it, they can interfere in Quebec's jurisdiction all they want.
This is also true with regard to the administration of justice. I hope that the Minister of Justice is listening. Quebec and the provinces have responsibility for this. Once again, there is an attempt in Bill C-46 to give the federal government responsibilities that do not belong to it. In terms of the proposed reforms, the Attorney General of Canada would be responsible, jointly with the provinces and the territories, for laying charges related to certain kinds of fraud under the Criminal Code.
Here again we have nation building at work. Under the pretext of establishing excellent cooperation between the federal government and the provinces, areas belonging to the Quebec government is being taken over.
Initially, the Bloc Quebecois was in favour of Bill C-46. The Bloc Quebecois tried once again to trust the Liberals. However, once again, the Bloc was forced to change its mind, because every time the Liberal government does something, Quebec suffers. It is always encroaching on Quebec's areas of jurisdiction. Bill C-46 is no exception, on the contrary. It consolidates the Liberal efforts since 1993, and particularly since 1996, when the Minister of Intergovernmental Affairs arrived. He is trying to ensure nation building at Quebec's expense and in order to get involved in Quebec's responsibilities.
As I said when I started, this is not reality Parliament, it is the sad truth. This proves that, day after day, everything this government does is designed to ensure that Quebec is diminished and reduced to being a province like the others.
I remember what the Minister of Agriculture and Agri-Food said. Quebec agriculture has a distinct character. Quebec has vested rights. What did the Minister of Agriculture and Agri-Food say in response? “It will be treated like any other province.”
Clearly, nation building is omnipresent. No one wants to admit it. This leads me back to the motion introduced by my colleague from Trois-Rivières. We asked if Quebec was a nation, and they all said, “No”. Even the 25 federal Liberal members answered no, while the National Assembly unanimously answered, “Yes”. There is no consistency.
My time is running out. I should conclude my remarks. With all the interruptions, could the Chair inform me of how much time I have remaining?
Odina Desrochers Lotbinière—L'Érable, QC
Mr. Speaker, I thank you very much for your kind words about me. You know that I am an experienced parliamentarian and I did have a previous career in radio, so I sometimes like to add a little humour, and mix humour and reality. I was talking about nation building.
I come back to nation building. It is not very complicated. At present there is legislation in Quebec governing this whole issue of the regulation of financial markets, as discussed in Bill C-46.
The government now wants to have federal prosecutors in charge of prosecutions. That annoys us a little, because since 1993, every time there is a crisis, every time there is a world-shaking event, every time there is a conflict between the provinces and the Canadian government, every time something happens between another country and Canada, this government intervenes, legislates, and uses the opportunity to come and encroach on provincial jurisdictions.
The government has acted this way ever since 1993. That is what we mean by nation building. I am coming to the bill now.
The provision that it will be federal prosecutors who prosecute the offences—
November 3rd, 2003 / 6:10 p.m.
The Deputy Speaker
Is there anyone else who wishes to speak on this point of order?
The rule of relevancy is very generous and flexible. However, as we say at home, do not push your luck.
I have no objection to setting the tone, preparing arguments and other things, but we still have to come back to Bill C-46 that is currently under consideration. The member for Lotbinière—L'Érable is probably leading into his arguments, as is common practice among his colleagues from both sides of the House. I am certain that soon, he will start to talk about Bill C-46.
November 3rd, 2003 / 6:10 p.m.
Odina Desrochers Lotbinière—L'Érable, QC
Mr. Speaker, I too will speak on Bill C-46. Everything has been said, but once again, this bill is part of the nation building effort undertaken by this government since the 1995 referendum to try and take jurisdictions away from the provinces and centralize everything in its hands.
My neighbour, the hon. member for Trois-Rivières, who is a staunch advocate for the provinces, condemns nation building and the Liberal government's actions every time he rises in this place. Again, Bill C-46 is a fine example of the federal government's attitude. It is stepping into areas of provincial jurisdiction.
I take this opportunity to say that when this government should be taking its responsibilities, it hides. It is not there, and we are left waiting. But it is all there when it comes to encroaching on our provincial jurisdictions.
A case in point is the current farm crisis in Quebec. The money is in Ottawa. This is a federal responsibility since the crisis involves two countries. it is my understanding that when two countries are having bilateral problems, they have to talk, come to an agreement and act to support those going through a crisis. They are not doing their job.
In that respect, I would like to make a small digression. In Quebec, as you know, many television viewers tune in to what is called reality TV. Here we have “Parliament and Reality”.
November 3rd, 2003 / 6:05 p.m.
Pat Martin Winnipeg Centre, MB
Mr. Speaker, Bill C-46 falls tragically short of any meaningful codes of conduct for the financial markets. In fact I refer to an article from the Globe & Mail of September 26, 2002, where it said that the meagre fines contemplated in the bill would give analysts a licence to shill, not to kill but shill.
What I am getting at is the practice of misrepresenting the value of certain stocks by recommending a strong buy. In other words, it is a recommendation to purchase, when in actual fact the analyst knows full well that the stock is not doing well at all. This kind of corruption, this kind of shilling, is simply because an analyst has a vested interest or even shares in a company, and is misrepresenting the value of a certain company or stock to investors. No wonder there is a crisis in confidence if this is the type of thing that is going on.
I can give an example. Scotia Capital treated Royal Group Technologies as a strong buy recommendation on September 13. Three days later Royal issued a profit warning that clobbered the stock. The Scotia report failed to disclose that Scotia itself owned 5.5% of Royal. Imagine small time stock investors. They are simply at a terrible disadvantage. In a situations like that, the government has to step in to regulate these markets.
Here is another example. TD Newcrest had a buy on Telus but its research reports did not disclose that chief executive officer of Telus, Darren Entwistle, was a TD Bank director. Essentially, we have all this incest going on at that level.
All these directors and analysts for the major accounting firms are misrepresenting the value of stocks at the peril of Canadian investors and at the peril even of the institutional investors like the union I represent.
I have a great deal of interest in this because the retirement security of honest working people is being squandered and misused in situations like this.
November 3rd, 2003 / 5:45 p.m.
Pat Martin Winnipeg Centre, MB
Mr. Speaker, it is hard to resume debate on this corporate fraud bill with the disturbing information just brought to our attention by the government House leader, moving closure on the first nations governance act. People have lost count the number of times the government has had to use closure to ram through its legislative changes.
I was outlining some of the shortcomings of Bill C-46 because the pension investments of Canadians are at risk under the current securities regime. We have seen evidence of this with the absolute collapse of Wall Street and the ethical paucity of Wall Street and Bay Street where voluntary compliance to ethical standards has not been enough to provide security to Canadians.
I do not know if it is a coincidence or not that our now privately invested Canada Pension Plan Investment Board has lost $4.2 billion out of $22 billion on the securities market. Certainly, it is cause for alarm for Canadians. They want to have confidence in the people that are investing their money.
Some of us disagreed that the money should have been gambled on the open market to begin with. Our fears have been realized. We would have been better off if we had dug a hole in the ground and put that $22 million into a hole because at least the same amount of money would still be there when we went to dig it up. Instead, $4.2 billion has been lost out of it.
We used to loan that money to municipalities and to provinces at a fairly low interest rate of 2% so that they could do capital infrastructure projects. Even with 2% return on that money, we would still have our equity or the base principal and 2% interest. Instead, it has been lost. As a result, more ordinary Canadians are taking a keen interest in the securities marketplace and financial institutions.
We are more vulnerable because our government has not had the courage to put in place strong regulatory changes such as the Sarbanes-Oxley act. Instead, we find ourselves with Bill C-46 which we are debating today.
I would like to outline some of the things that a true corporate fraud bill would deal with. Ordinary working people right across the country would be pleased to see it.
The independence of auditors is absolutely crucial. Corporate officers should be required to report any time they receive loans from their companies. Investors should know if some of these practices are taking place, but there is currently no requirement to disclose them. We found the CEO of Tyco, a Canadian by the way, with $30 million and $40 million worth of outstanding loans when his company collapsed. There have been examples of hundreds of millions of dollars worth of loans.
There are other examples where the stock options being used as part of the executive compensation exceed the net worth of the company, but they does not have to be listed on the expense column of the financial statements. Why not? If somebody is going to roll the dice and gamble with my pension income on the Canada Pension Plan Investment Board, at least we should be going in with our eyes open and know whether these irresponsible CEOs and board of directors are approving a practice that has resulted in catastrophic losses for working people in the United States and in this country as well.
We also need a national securities commission, not 13 separate independent securities commissions. We need one national securities commission with national standards because the operations of these companies are not isolated within the provinces their head office is housed. The operations of these companies are often national, transnational and international. Why does Canada have 13 separate securities commissions with 13 different sets of rules, when even the head of what used to be called the business council on national issues is calling for one single securities commission?
Those are the types of changes we would have expected to see in Bill C-46 if we were serious about cracking down on corporate fraud and white collar crime as it affects blue collar people.
On the compensation packages of directors, I crashed the shareholder meetings of two major institutions recently with some proxy votes. I do not own any shares in these big corporations. I often find that a single director will sit on many boards. In one case, for example, George Cohon, the CEO of McDonald's of Canada sits on 50 boards of directors, each of which meet ten times a year. No one really believes that these guys actually make it to all their directors meetings. In fact, they only attend one meeting per year where they approve the executive compensation for each other. It is an incestuous little pool and it is going on behind the shareholder's back. The shareholder does not know.
Therefore, we would have amended Bill C-46 to require CEOs to justify and defend their compensation packages to stakeholders.
When I crashed the shareholders meeting of the Bank of Montreal, I moved a motion to that effect. Further, we moved a motion that the CEO be limited to a salary 20 times that of the average employee, which seems pretty generous. In actual fact, the compensation package for the CEO of the Bank of Montreal that year was 120 times that of the average employee. The international average is 13 times that of the average employee.
We did the same thing for the Royal Bank of Canada. We moved nine resolutions to democratize and to protect the rights of shareholders from the actions of some of these corporations. One motion that we moved almost passed with 49.6% to 50.4% to have gender parity on the board of directors of the Royal Bank of Canada. I think it surprised them that a motion from the floor would come that close to succeeding.
We would have recommended other changes in the best interests to protect Canadian pension investments on an otherwise irrational marketplace. There is no stability in today's marketplace. This is what is causing the crisis in the confidence of many institutional investors and in fact threatens to bring down the entire system.
I have a number of pieces of information I would like to share with the House today. I prepared a motion back in 2002 which would have given some direction to the Minister of Finance in changing the Canada Business Corporations Act to address some of these serious concerns. The motion is quite simple. It stated:
That, in the opinion of this House, the government should encourage regulatory changes by securities commissions to ensure the independence of financial auditors by: (a) prohibiting accounting firms which provide audit services from providing other accounting or financial consulting services to the same company; (b) requiring companies to disclose to shareholders in their annual report if their auditor has provided other accounting or financial consulting services to them; and (c) requiring companies to disclose to shareholders in their annual report the amount paid in audit fees and the amount paid for other non-audit financial services
I raised this because quite often today the practice is to throw in the audit almost as a loss leader because the real money is in the other financial services that an accounting firm sells. We believe this is a bad practice that puts at risk the pension investment security for many Canadians who rely on an honest system.
We are disappointed that instead of looking at the amendments to Bill C-46 that we are not looking at legislation that has real teeth, such as the Sarbanes-Oxley act in the United States.
Interestingly enough, we are being regulated by American legislation in that many of our companies that do business in the United States find themselves subject to the Sarbanes-Oxley act. We are having the American congress dictate guidelines to Canada that would provide some security, but we are falling far behind.
The amendment replacing subsection 382(1) states that it might reasonably be expected to effect the material value of any of the securities of the corporation. The current legislation only captures fraud that significantly effects the integrity of the system. It contradicts in a way the government's own standard enshrined in the Canada Business Corporations Act. We do not find any comfort in that amendment or in any of the amendments put forward.
In the interests of Canadian working people who have their pension retirement funds invested in the marketplace, the government has an obligation to take concrete steps to ensure that we are not vulnerable to the type of catastrophic meltdown that has taken place in the United States. We are not there yet, and Bill C-46 falls short of giving that security.