Justice Committee on Nov. 25th, 2009

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

That's fine. Thank you.

Thank you, Mr. Chair.

[The Chair, Conservative, Ed Fast]

Thank you.

We're going to move on to Monsieur Petit for five minutes.

[Daniel Petit, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you.

My question is for Mr. Dubin and Mr. Prouse. I don't know which one may be able to answer.

When you are a lawyer and you practice both criminal law and civil law, which is what I did for nearly 30 years, and I am still a lawyer in good standing with the Barreau, you know that quite often, in fraud cases, there is insurance that covers the fraud; that is, the insurance companies have to pay the client, unless the client was a party to the fraud.

There are also the cases we have seen recently. To explain the problem, let's say that a lot of people work in securities, and there are brokers who have mutually reinsured themselves precisely to prevent potential frauds. For example, in the case of Vincent Lacroix, there was one group that was reimbursed and one group that was not. It depended on the types of contracts or companies that were behind it.

I may have been out at the point when you might have talked about this, but this is how I understand the main point in this regard. In most of these cases, as Mr. Roy said, when a person, an individual, for example a retired person, is a victim of fraud, they aren't covered because the person who allegedly sold a contract of some sort didn't have a licence, etc. So they are on their own with their problem.

In your case, at the Insurance Bureau of Canada, what are the total losses, for your clients, that you insure?

I understand that you support us, and I am very glad of that, but what order of grandeur are you talking about when you say you are losing money? I know that in Quebec you have lost a lot in recent times, but in Alberta, there is a $100 million fraud, and in other provinces, it is even... Can you give me an order of grandeur, when we're talking about fraud?

[Richard Dubin]

Yes, I can. First of all, in what we were talking about here—they're conservative numbers—we estimate fraud is costing Canadians at least $3 billion because it's passed on to them in premiums. The project I'm talking about, only one project out of an average of 30 big ones a year that we investigate, has a potential cost of between $20 million and $25 million, passed on to the consumers.

What we're finding is that, if we take the example of these staged accidents, they were not only claiming for false damage to the vehicles that may not have even actually been in a real collision, so you have specific body shops repairing those vehicles over and over again, replacing the panels with good ones; those individuals involved are loading up their vehicles and making claims for accident benefits for loss of income, attendant care, home maintenance, and it just goes on and on. Plus there's a whole ton of assessments that have to take place between doctors and the insurance companies, and it just adds up and adds up.

So the amount we're talking about is significant.

[Dennis Prouse, Director, Federal Government Relations, Insurance Bureau of Canada]

I could add, Mr. Chairman, that the 10% to 15% number comes from a study of closed claim files. A few years ago they took closed claim files—claims that had been paid—did a forensic study of them, and discovered that indeed 10% to 15% of these claims were fraudulent.

I always want to point that out in case people think it's just a number we're grabbing out of thin air.

[Richard Dubin]

Actually, the 10% to 15% is considered an extremely conservative number by us. In Canada there really hasn't been an effective substantial study of the full impact of fraud. I know Statistics Canada has been working with us and many other large organizations, banking and so on, to try to get a handle on how big this is. With what we're seeing, the 10% to 15% can very well be opportunistic fraud and not necessarily even taking into consideration this huge animal of organized insurance fraud that's actually taking place in Canada.

I have to say it is taking place here and we see it growing, not reducing, because there is no deterrent, no real punishment. They're not getting jail time, they're getting conditional sentences. We're not seeing the courts order substantial restitution for them.

[The Chair, Conservative, Ed Fast]

Thank you.

Now we'll open it up to anybody who still wants to ask questions.

Mr. Comartin, Mr. Murphy, and then maybe one question over here.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

Mr. Kube, on the incident rate, in the work you have done, have you seen any studies analyzing whether there is identifiable growth in white-collar crime?

[Arthur Kube]

We're only concerned with seniors. The evidence we have is people telling us and hearing from different sources. There haven't been any comprehensive studies to put a number figure on that, but as I said, the great difficulty is that a great number of people just don't report them.

We need to somehow have preventive measures. I think Parliament should look much more closely at the issue of regulatory framework to stop these things from happening.

[The Chair, Conservative, Ed Fast]

Is there anybody else?

All right, Mr. Murphy.

[Brian Murphy, Liberal, Moncton—Riverview—Dieppe, NB]

Pardon me for missing some of the testimony. I was in the House giving a speech on child pornography, which may not seem to be related to this, but in New Brunswick, a provincial act is going to be brought in by the government envisioning civil forfeiture for crimes in the realm of child pornography.

According to my colleague,

Mr. Roy said something about the role of the province, in that case.

Do you see a need for better and more provincial statutes harmonizing with the federal Criminal Code—which is pretty weak on restitution, to be blunt—to get into the idea of forfeiture, not just restitution but freezing of assets pending lawsuits? You may all know that there are such remedies in civil law when applied for. You can pay a lawyer $5,000 or $10,000 to get an injunction to tie up assets.

Do you all agree there has to be some vehicle to make that more ready? Because often you get judgments against straw men.

That's to anyone.

[Arthur Kube]

Look, I think it's really necessary to have a broad federal view of that. These characters move from province to province. They con all kinds of people in one province, and if the thing gets hot, they move to another province.

I think there is a federal role to be played. I mean, surely the administration of justice is federal legislation, but the provinces can enforce it.

[William Nichol]

I would add that the civil courts are, for the most part, cost-prohibitive. Unless you're talking about a huge claim, most of the people my friend would be representing suffer claims of less than $100,000 and you simply cannot go to a civil court for those kinds of amounts. So you don't report it or you look for an alternate remedy.

What a lot of people are looking for in this act is for the federal government to step up to the plate and provide some sort of mechanism for restitution either by seizure...if we are talking about proceeds of crime. There is provincial legislation in various provinces that treat deadbeat dads in a manner that forces them to make support payments, and you could look at something similar in this regard.

[The Chair, Conservative, Ed Fast]

Mr. Prouse, very quickly, and we'll move over to the other side.

[Dennis Prouse]

We would just add that it is cost-prohibitive on civil actions. There is no question about that. We're running into that where we have opportunities to try to get individuals involved to join together and bring civil actions. That hasn't worked well because of the huge expense involved.

The reason this should be federal is that we're finding, when we shut the door in one region on part of the activities of organized crime, that they then move to another jurisdiction. We've done certain things in Quebec to make it more difficult at times to get away with auto theft, and we've seen at times an increase of that organized activity move directly into Ontario. There does need to be a lot of consistency by the government, such as in the Criminal Code, so that the same approach can be taken right across the country.

[The Chair, Conservative, Ed Fast]

Monsieur Petit, do you have a question?

[Daniel Petit, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Mr. Dubin, I am going to ask you a question.

You spoke earlier about a $3 billion loss. We have met with people working in banking who talked about bank frauds committed using credit cards and debit cards, and so on, totalling $8 billion a year; you are talking about $3 billion.

The $3 billion you are talking about, I had actually considered that from the bank standpoint. In banking, it is essentially the same system: someone organizes a fraud to get money using false credit, a false name, false references, and so on.

Do you think that the response from bank representatives, that there are frauds on the order of $8 billion, is plausible? If I add your $3 billion, it comes to $11 billion, which is really an enormous amount.

To your knowledge, as a representative of the Insurance Bureau of Canada, are there other areas where there might be other types of fraud? I am talking about bank fraud; you talked about another type of fraud that you estimate at $3 billion. Are there others? That is what I want to know. What are we talking about? Because this bill will also apply to various commercial frauds.

[Richard Dubin]

Thank you for that question.

Yes, there are. You know, when we talk about the 10% to 15%, which is an estimate, and I think a very conservative one, of reaching $3 billion a year representing insurance fraud, you're correct; that doesn't take into consideration other areas where organized crime also attacks, such as the banking institutions. As you mentioned, they would be involved in mortgage fraud, in real estate transactions, in securities, etc.

The problem of organized fraud in Canada is substantially more, I would suggest, than anything we're even aware of at this point in time.

[The Chair, Conservative, Ed Fast]

Thank you.

That will bring to an end our session. Unfortunately we're out of time. We have to go to vote.

I want to thank all of our witnesses for appearing. Your testimony is now part of the public record. We'll consider it as we move forward in our consideration of Bill C-52.

Again, thank you.

We are adjourned.