Bill C-52 (Historical)

Retribution on Behalf of Victims of White Collar Crime Act

An Act to amend the Criminal Code (sentencing for fraud)

This enactment amends the Criminal Code to
(a) provide a mandatory minimum sentence of imprisonment for a term of two years for fraud with a value that exceeds one million dollars;
(b) provide additional aggravating factors for sentencing;
(c) create a discretionary prohibition order for offenders convicted of fraud to prevent them from having authority over the money or real property of others;
(d) require consideration of restitution for victims of fraud; and
(e) clarify that the sentencing court may consider community impact statements from a community that has been harmed by the fraud.

Retribution on Behalf of Victims of White Collar Crime Act

[Gordon O'Connor, Conservative, Carleton—Mississippi Mills, ON]

moved that Bill C-52, An Act to amend the Criminal Code (sentencing for fraud), be read the second time and referred to a committee.

Mr. Speaker, this is the real beef. This is what they have all been talking about and now they are going to get it.

I am very pleased to have the opportunity to speak on the subject of Bill C-52, An Act to amend the Criminal Code (sentencing for fraud). This bill contains a number of provisions that are designed to ensure that people who devise and carry out serious fraud offences receive tougher sentences.

The objective of this bill is clear and simple. It would amend the Criminal Code to improve the justice system's response to the sort of large-scale fraud we have been hearing about so much lately. The bill would send a message to those who think they can outsmart Canadians and dupe them into handing over their hard-earned savings. On the contrary, the bill would make clear that fraud is a serious crime for which there are serious consequences.

It is also designed to improve the responsiveness of the justice system for victims of fraud. These proposed measures would send a strong message to the victims of fraud that the crimes committed against them are serious and the harms they suffer will be taken into account and addressed to the greatest degree possible. Overall, the measures in this bill would do much to increase Canadian's confidence in the justice system.

Before I describe the measures in the bill, it is worthwhile to consider the current state of the law. The Criminal Code already addresses all known forms of white collar crime, from security related frauds, such as insider trading and accounting frauds that overstate the value of securities issued to shareholders and investors to mass marketing fraud, theft, bribery and forgery, to name a few of the offences that may apply to any given set of facts.

The maximum penalties set out in the code are high. In particular, for fraud with a value over $5,000, the maximum term of imprisonment is 14 years. This is the highest maximum penalty in the code, short of life imprisonment.

Also, mandatory aggravating factors for fraud offences are already in place. They require sentencing courts to increase the penalty imposed to reflect, for example, where the value of the fraud exceeds $1 million, the offence involves a large number of victims and, in committing the offence, the offender took advantage of the high regard in which he or she was held in the community.

Our courts have clearly stated that for large scale frauds, deterrents and denunciation are the most pressing objectives in the sentencing process. The courts have been clear that a serious penitentiary sentence must be imposed in large scale frauds. We routinely see sentences in the four to seven year range for large scale frauds. Most recently, of course, Vincent Lacroix was given a 13 year sentence for the massive security fraud he perpetrated in Quebec just a few years ago.

The courts are starting to take these frauds seriously but this government believes that still more can be done to strengthen the Criminal Code's responses in these cases to send a clear message that Parliament is in agreement with this trend toward tougher sentencing. To this end, Bill C-52 proposes reforms that are designed to ensure that sentences imposed in these cases adequately reflect the severe impact they have on the lives of the victims, many of whom have lost their life savings or retirement savings.

One measure in this bill that is particularly significant is a new mandatory minimum penalty of two years for large scale frauds. As I mentioned, more and more courts across the country are recognizing the devastation that can be caused by large scale frauds and have emphasized that deterrents and denunciation must be front and centre in sentencing offenders in these cases. The government wants to carry this message forward and clearly establish a minimum penalty for frauds with a value over $1 million.

Many frauds cheat Canadians out of significantly more than $1 million. We have read recently of frauds in the hundreds of millions, but the line must be drawn somewhere and this government believes that if a person orchestrates and carries out a fraud of at least $1 million, this is a very serious crime that demands a term of imprisonment of at least two years.

Of course, this two year mandatory jail term is a floor, not a ceiling. If Parliament declares that a $1 million fraud must result in at least two years in prison, then, naturally, larger frauds will result in even higher sentences. The application of aggravating factors to the sentencing process will also help guide the process for determining the ultimate sentence. The Criminal Code already contains several aggravating factors that can be applied to a fraud conviction to enhance the sentence.

The bill would add several more aggravating factors, such as: if the fraud had a particularly significant impact on the victims taking into account their personal characteristics such as age, financial situation and health; if the fraud was significant in its complexity or duration; if the offender failed to comply with applicable licensing rules; and if the offender tried to conceal or destroy documents which recorded the fraud or the disbursements of the proceeds.

These aggravating factors reflect various aspects of fraud that are deeply troubling. The clearer Parliament can be with the courts about what these factors are, the more accurately sentences will reflect the true nature of the crime.

Another important measure in the bill is the introduction of a power which would enable the sentencing court to order that a person convicted of fraud be prohibited from having control or authority over another person's money or real property. This prohibition order can be for any duration the court considers appropriate. Violating a prohibition order will be an offence. This measure is aimed at preventing future crime. The idea is to prevent the offender from having the opportunity to commit another fraud.

There are several prohibition orders already in the Criminal Code, such as the one which can be imposed on individuals convicted of sexual offences against children, prohibiting them, among other things, from working in schools or other places where they would be in a position of trust or authority over young people.

I would like to devote a few minutes to the proposals in the bill which address the specific concerns of victims of fraud. Consideration of, and support for, victims of crime has been a hallmark of this government, and this legislation is no exception.

There are two measures in the bill that touch directly on the interests of victims: our proposals on restitution and on community impact statements. Let me begin with restitution.

Restitution is defined as the return or restoration of some specific thing to its rightful owner. It is distinct from compensation which, in the Canadian legal system, is a scheme of payments managed and made by provincial or territorial governments to assist victims of crime.

Restitution is the payment by the offender of an amount established by the court. The Criminal Code currently provides for restitution for criminal offences including: damages for the loss or destruction of property, bodily or psychological harm, bodily harm or threat to a spouse or child.

An order for restitution is made during the sentencing hearing of a convicted offender. It is part of the overall sentence provided to an offender as a stand-alone measure or as part of a prohibition order or a conditional sentence.

Restitution orders may be particularly appropriate in the case of fraud offences. In several recent high profile cases, we hear from media accounts of thousands of dollars taken by offenders. These shocking cases of duplicity have deprived many innocent Canadians of hard-earned savings, and in truly awful cases, of retirement funds. It will be the decision in each trial as to whether restitution will be appropriate.

Our proposals provide that, in the case of fraud, the sentencing judge must consider an order of restitution as part of the overall sentence for the offender. The court shall inquire of the Crown if reasonable steps have been taken to provide victims with the opportunity to indicate whether they are seeking restitution. This step will ensure that sentencing cannot happen without victims having had the opportunity to speak to the Crown and establish their losses.

The courts have found that it is not possible to make an order when the amount is not readily ascertainable or when it is difficult to apportion the amount among several victims.

To further assist victims, our proposals include an optional form to assist victims in setting out their losses. The form identifies the victim, their losses and clarifies that the victim needs to provide receipts, bills or estimates in order to assist the court in making the restitution order. In all cases, these losses must be readily ascertainable.

Put together, these proposals would increase the likelihood of orders of restitution being made. It is our hope that these proposals will increase the responsiveness of the legal system to victims of fraud.

I would note that the Federal Ombudsman for Victims of Crime recommended improvements to the restitution scheme in one of his first recommendations to the Minister of Justice. These proposals, while not as exhaustive as the ombudsman urged, are steps along the road of improving the experience of victims in the justice system.

The second element of the bill relating to victim issues is the proposal to create community impact statements.

The Criminal Code currently provides that judges may consider a statement made by a victim of a crime known as a victim impact statement. The purpose of this provision is to provide the sentencing judge with additional information on the harm or loss suffered as a result of the offence. This statement is delivered in the context of a hearing on sentencing of a convicted offender.

Jurisprudence has indicated that the victim impact statement serves three purposes: to educate the offender on the consequences of her or his actions with some rehabilitative effect, to provide a sense of catharsis for victims, and to provide sentencing judges with the information on the impact or effect of the offence. The provisions in this bill to create a community impact statement provision for fraud offences share these three purposes: education, catharsis and information.

The Criminal Code indicates that the victim impact statement should describe the harm done to or loss suffered by the victim. The Criminal Code details the procedure for presenting the victim impact statement, which includes a requirement that the statement be in writing and be shared with the Crown and defence. The victim impact statement provisions of the Criminal Code also provide that the court shall consider any other evidence concerning the victim for the purpose of determining the sentence.

The courts have given the term “victim” a broad interpretation, so the people other than the direct victim, including communities, have been permitted to provide victim impact statements. Victim impact statements made on behalf of communities that have been considered by the courts include: a victim impact statement made by a synagogue on behalf of the members in an arson case and a victim impact statement from a first nations band describing the impact of the theft of band money, and the murder of a first nations child on a first nations community. These cases and others offer examples of the courts' recognition that communities are affected by crime.

Our proposal would make the recognition clearer in the law. We are proposing that, when a court is sentencing an offender for the offence of fraud, the court may consider a statement made by a community describing the loss or harm to the community. The statement must be in writing, identify the community, clarify that the person can speak on behalf of the community and be shared with the Crown and the defence.

It is our view that these community impact statements will affirm several principles of sentencing that are laid out in the Criminal Code: denunciation, deterrence and rehabilitation. A community impact statement will allow a community to express publicly, and to the offender directly, the loss or harm that has been suffered to allow the community to begin a rebuilding and healing process. It will show the community denunciation of the conduct of the offender. It will assist offenders in their rehabilitation to understand the consequences of their actions.

In sum, this bill would help to improve the responsiveness of the criminal process for victims of fraud. It would require the sentencing court to consider if restitution should be ordered and it would permit the court to receive a community impact statement in cases where a community, in addition to individuals, has suffered from the fraud.

This bill represents an important step forward toward improving the current criminal justice system response to serious fraud. By creating a mandatory minimum sentence for fraud over $1 million, adding aggravating factors for sentencing that highlight the serious consequences of fraud, introducing a prohibition order as part of a sentence, and requiring mandatory consideration of restitution for victims, this bill represents a complete package of reforms to reflect the seriousness of fraud offences for communities and individuals.

For these reasons, I urge that all members support this bill. This bill offers members an opportunity to show their unequivocal support for victims of fraud crimes. Victims of crime deserve no less than the respect of the House. I urge all members to support this bill and send it to committee for study.

[Larry Bagnell, Liberal, Yukon, YT]

Mr. Speaker, I always appreciate the minister's comments and have great respect for him. I will put a concern on the table for the committee to look at and then I will ask a question.

There is always a problem with mandatory minimums. It may or may not apply in this case. It is a tenet of our legal system that we do not provide cruel or unusual punishment or punishment that does not fit the crime. In those cases, judges who we determine to be the best in the country to make these judgments may then not convict if the punishment is not appropriate. A mandatory minimum may have the opposite of the intended effect of having less people in jail. That is something the committee could wrestle with, in this case.

Most people who commit fraud over $1 million are sentenced to two years or more in jail already. Could the minister give us some specific examples of people who have committed fraud over $1 million and have not received at least two years in jail, which is the basic tenet of this bill?

[Gordon O'Connor, Conservative, Carleton—Mississippi Mills, ON]

Mr. Speaker, the matter of the minimum two year sentencing is justifiable in the case of fraud over $1 million. As somebody said yesterday, we have great respect for our judges, but our judges are bound by the system. They are also bound by precedents. At this moment, I cannot pull out an example of somebody who has been found guilty of fraud over $1 million who has received less than a two year sentence, but I am pretty darned certain that if I spend a few minutes, I could find many examples.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Mr. Speaker, I will have a chance to speak to this bill on behalf of the Bloc Québécois in a few minutes, but I am extremely surprised by the minister's response. The real minister, in other words the Minister of Justice, was asked the following question: can he name one case where someone committed fraud over $1 million and was sentenced to less than two years in prison? We are talking about $1 million or more and the minister was unable to give an example.

I will ask him the question again. They held a press conference on Monday. We may not have had all the information on Monday because the bill was secret, but perhaps today they might have some information for us. Can the minister tell us whether he knows of a single case where there was a sentence of less than two years for fraud over $1 million?

[Gordon O'Connor, Conservative, Carleton—Mississippi Mills, ON]

Mr. Speaker, to address the issue, it is our government's contention that if a person carries out a fraud of $1 million or more, the minimum sentence is two years. We believe that is a reasonable benchmark. We are saying basically that if it is $1 million or so, the punishment will be two years. If it is many more millions, the punishment will be greater. In our judgment a two year minimum is satisfactory.

[Dennis Bevington, NDP, Western Arctic, NT]

Mr. Speaker, I thank the minister for presenting the bill, but to my mind the bill is basically, as pointed out by the questions of other hon. colleagues, a bill that would not change much in the legal system. I would like to see the government put forward regulations that would reduce the volume of the fraudulent opportunities in the economic system, and we have not seen that.

With this bill the government is continuing to appear to be making it tougher on criminals, but not looking at the root cause of fraudulent behaviour in the marketplace where the regulations are not sufficient to ensure that people's entry into that market is protected.

Why is the government moving in this particular direction rather than taking the more useful direction in reducing the opportunities for fraud in our market system?

[Gordon O'Connor, Conservative, Carleton—Mississippi Mills, ON]

Mr. Speaker, I cannot accept the premise from the hon. member.

The bill does add many things to the issue of fraud. We are putting in a minimum sentence for people who are guilty of fraud over $1 million. We are now indicating more aggravating factors, and we are also indicating that judges might take into account these aggravating factors. We are also bringing in prohibition orders and community impact statements. We believe this will have a substantial effect on fraud.

[Jim Maloway, NDP, Elmwood—Transcona, MB]

Mr. Speaker, I am curious as to why the government decided on the $1 million figure. It seems to me that fraud is serious, no matter how big it is. Why would the government draw the distinction at $1 million? Why not half a million? Why not a million and a half?

[Gordon O'Connor, Conservative, Carleton—Mississippi Mills, ON]

Mr. Speaker, when we make a decision about what is large-scale fraud, we must have some minimum number. In the judgment of our government, $1 million, which is a substantial amount of money and more money than I have ever seen, is a serious fraud.

[Brian Jean, Conservative, Parliamentary Secretary to the Minister of Transport]

Mr. Speaker, I sat here and listened with interest. As a person who actually practised law for some period of time in northern Alberta and who has had an opportunity to deal with these cases, I think this is a great step forward by this government.

I was somewhat more interested in the victim impact statement and how judges could utilize that to their benefit, not only to find out exactly what took place and how it affected the family, but how it continues to affect a family. As members know, families affected by these crimes are usually totally innocent of being susceptible to it. As a result, I think that judges now will be able to better utilize the tools necessary to actually see the impact behind the scenes, as sometimes evidence cannot be brought out.

I would like the minister to reflect on that particular issue, how it affects victims and how we stand up for victims instead of criminals.

[Gordon O'Connor, Conservative, Carleton—Mississippi Mills, ON]

Mr. Speaker, the victim impact statement is a very important part of the bill. In too many cases in criminal law, the victims are forgotten and there are no consequences. Having a victim impact statement in the case of large-scale fraud would allow the courts to understand the impact on an individual or a community of the stated fraud. It would affect the judge's determination on what the punishment should be.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Mr. Speaker, I would invite the hon. member to read sections 718 and following of the Criminal Code, which he surely has not done. He would see that under the provisions of the Criminal Code, the court is now required to call before it the victims of criminal acts to get their opinion on the sentence to be handed down.

I have a much more important question to ask. I will come back to it in a few minutes. If he is introducing this bill, will he also eliminate tax havens?

Allow me to explain because I do not think he understood. I will speak slowly. An individual commits several millions of dollars in fraud. What do these white collar criminals, who have spent a great deal of time setting up the fraud and who are very intelligent, do? They invest in tax havens. Would the whip like me to name a few? I think the hon. member knows what I am talking about because his government is already supporting them.

If they are asking us to pass Bill C-52, will they put an end to tax havens while they are at it?

[Gordon O'Connor, Conservative, Carleton—Mississippi Mills, ON]

Mr. Speaker, our government addresses these issues in a wide range of areas, including tax law. However, in this case, we are talking about Bill C-52.

As I said, there are substantial improvements in this bill on the matter of fraud. There are some egregious cases of fraud going on in Canada and some famous ones going on throughout the world. This would help in bringing the fraudsters to justice.

[Kirsty Duncan, Liberal, Etobicoke North, ON]

Mr. Speaker, corporate scandals rocked the beginning of this decade, decimated the lives of millions and set in motion a wave of legislative reforms.

Fraud at WorldCom ultimately topped $11 billion and led to the country's largest bankruptcy filing. In 2005, WorldCom former chief executive Bernard Ebbers was sentenced to 25 years in prison for his role in orchestrating the greatest corporate fraud in the nation's history.

Adelphia, Enron, Qwest, Tyco, and the list goes on, but more recently, Bernie Madoff, former non-executive chairman of the NASDAQ stock exchange, pleaded guilty to 11 charges of defrauding investors out of as much as $65 billion over 20 years in a Ponzi scheme. Many victims were working people. One retired couple, 82 and 78 years of age, have been forced to look for work because they lost everything.

Former theatre producer Garth Drabinsky was given a seven-year sentence for his role in a $500 million fraud at Livent. Justice Benotto said:

The business community must be put on notice that deception, dishonest dealing, will be punished severely, whether the victims are the vulnerable and unsophisticated or well resourced financial institutions driven themselves by a desire for profit....The members of the business community...must understand that honesty is the currency in which they trade.

She stated that Drabinsky presided over a corporation whose culture was one of dishonesty and that corporate frauds result in tangible losses to creditors, employees, investors and society. Fraud also erodes public confidence in financial markets and fosters cynicism. Justice Benotto said that the court has a duty to strongly denounce such conduct.

Vincent Lacroix's Norbourg Group swindled 9,200 mutual fund investors, many of them retirees, out of $150 million. Quebec Superior Court Judge Richard Wagner said:

The evidence shows that Vincent Lacroix's acts...shook the structure of financial markets while causing serious moral damages to the victims of this scandal--one without precedent in the annals of Canadian law....This saga has also underlined the weakness of [securities] regulation and nourished a healthy reflection, both on the seriousness of such crimes in our era and on the urgency to clean up financial activity in this country....The court is of the opinion that a clear and dissuasive message must be sent to the population. Economic crimes must be severely punished.

Lacroix was handed a 13-year sentence.

In the meantime, the case of alleged Ponzi schemer Earl Jones has been put off until December. His lawyer says the Crown has told him police have identified over 160 people who allege they were victims of fraud worth a total of $75 million.

While these are high profile cases, the Department of Justice provided a list of 12 cases valued at more than $1 million that received sentences of less than two years.

Fraud takes many forms. The Canadian Institute of Chartered Accountants defines fraud as “an intentional act, by one or more individuals among management, other employees, those charged with governance or third parties, involving the use of deception to obtain an unjust or illegal advantage”. These activities can include misappropriation of cash or inventory, fraudulent financial reporting and money laundering.

White-collar crime is a scourge on Canadians. Sadly, it is often invisible crime. Its damages are done internally in terms of emotional, financial and psychological damage.

I therefore support this bill because we believe the principles behind stricter sentencing rules are very important, but we also know that they are not enough to prevent these frauds from happening. I will come back to this point later.

The bill imposes a mandatory minimum sentence of two years for fraud over $1 million, effectively eliminating conditional sentences and sentences at home. The maximum penalty of 14 years remains.

The bill specifies aggravating factors to be considered at sentencing, including age and health of victims, duration of the fraud, financial and psychological impacts, and what aggravating and mitigating factors were considered relating to the sentence. It also requires judges to consider community impact statements and to consider repayment to victims when possible. It allows the court to prohibit an offender from assuming any position, paid or voluntary, that involves handling other people's money or property.

The question is, does the bill go far enough? A member of the criminal law section of the Canadian Bar Association criticized the proposals as not really making substantive changes. The lawyer pointed out that those who are now convicted of fraud that exceeds $1 million face serious jail time that can exceed the proposed minimum of two years. Judges currently take into account aggravating as well as mitigating factors when sentencing a person who has been convicted of white collar crime.

Important questions remain. Will there be increased support to police fraud squads? If there are not the supports to investigate, it does not matter how strict the sentences are. Should people convicted of serious fraud have been removed from the list of criminals who are eligible for parole after serving one-sixth of their sentence? How much would the new measures cost? How much would they increase prison populations?

Instead of focusing on answering these important questions, the government gave its fourth press conference several blocks from Parliament Hill. How much did the press conference at a rented meeting room at the Lord Elgin hotel cost?

Organizations depend on the individual ethical behaviour of every member and associate of the organization. The most notorious corporate wrongdoers arrogantly rejected this basic concept. In fact, Bernie Ebbers, disgraced WorldCom CEO, called employee efforts to implement such a code a colossal waste of time.

We must go beyond negative incentives for corporations to behave in socially responsible ways. Companies are not islands but rather an essential part of society; that is, they produce goods to satisfy needs and wants. They employ millions, and they have the ability to improve society and the environment.

There needs to be more positive incentives, positive corporate climate, employee motivation, attraction of ethically conscious consumers and investors. With this will come competitive advantage.

Organizations must regain the trust of society on which they so fundamentally depend. Corporate codes of ethics are important. Organizations cannot remain value neutral but must clearly identify acceptable guidelines for behaviour and assume their fundamental responsibility to enforce it at all levels of the organization.

In closing, I am supporting sending this bill to committee because Canadians need protection, but I want to ensure that there is necessary support to enforcing legislation.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Mr. Speaker, I listened quite carefully to my colleague. I have a fairly specific question for her. I know that her party, like ours probably, will support this bill at second reading so that it can be studied in committee.

What will it take for her party to support the bill? What amendments does she see the committee making to the bill? What main points will her party focus on when the bill is studied in committee?