House of Commons Hansard #149 of the 37th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was first.

Topics

Criminal Code
Government Orders

5:35 p.m.

Bloc

Odina Desrochers Lotbinière—L'Érable, QC

There are still people wearing masks who have a hard time telling the truth when they are asked real questions.

I would like my colleague from Jonquière, since she too has been here since 1997, to sum up the numerous instances where the federal government has meddled in Quebec's jurisdictions.

Criminal Code
Government Orders

5:35 p.m.

Bloc

Jocelyne Girard-Bujold Jonquière, QC

Mr. Speaker, I thank my colleague from Lotbinière—L'Érable for his question. It would take all night to list all the times, since this government came to power, that it has gotten involved in Quebec's areas of jurisdiction.

The future prime minister of Canada hiding behind the curtain and hon. member for LaSalle—Émard has, in every measure he introduced since he was the finance minister, always encroached on provincial jurisdiction. He says that when he becomes Prime Minister of Canada, he will get involved in the jurisdictions of municipalities. He will bypass the provinces, when everyone knows that municipalities come under provincial jurisdiction. He intends to negotiate and conclude agreements directly with the municipalities.

This is an insult. Municipalities in Quebec exist because they were created by legislation passed by the National Assembly, which has responsibility for them. No matter what else people say, he is preparing to do this.

This is not playing fair. It is not right for the future prime minister to tell all the provinces in Canada—and I am not talking solely about Quebec, but also about Ontario, British Columbia and all the rest—that their representatives were elected democratically by the people and that they have areas of exclusive jurisdiction, but that they will not be recognized and that attempts will be made to encroach on their jurisdiction. This is a slap in their face.

The Bloc Quebecois will never allow this to happen. The government has huge powers of taxation, and there is a fiscal imbalance in Canada. The federal government must understand that it is not the one administering public services. It must return the money. Once this is done, we can negotiate as equals.

The excess funds that the government took always came from the same place, the taxpayers, and always the same taxpayers. The money I give the federal government is mine, because I am the one giving it. The money my constituents in Saguenay—Lac-Saint-Jean pay to the federal government is theirs and must be returned to Quebec, just as the money from the residents of other provinces must be returned to them.

This debate is just beginning. The future prime minister will stand before us; I hope that he will answer our questions, because I cannot wait to ask him some.

Criminal Code
Government Orders

5:40 p.m.

NDP

Pat Martin Winnipeg Centre, MB

Mr. Speaker, I am very pleased, on behalf of the NDP, to enter into the debate surrounding Bill C-46 at report stage.

By way of introducing the subject, I note that the bill is meant to address the pressing problems associated with what we call white collar crime. However, I want to develop the case, as I speak on this bill, that this is in fact very much a blue collar issue. In fact white collar crime is a blue collar issue and a working person's issue.

It is very difficult to even hear myself think with the amount of debate that is going on across the room.

Criminal Code
Government Orders

5:40 p.m.

The Deputy Speaker

With the cooperation of the House, I believe we will allow our colleague from Winnipeg Centre to make his comments. If other discussions need to be held, I would ask your cooperation in taking them out to the lobbies or elsewhere.

The hon. member for Winnipeg Centre.

Criminal Code
Government Orders

5:40 p.m.

NDP

Pat Martin Winnipeg Centre, MB

Mr. Speaker, the point I was beginning to make was there comes a time when white collar crime becomes a blue collar issue, a working class issue, a working person's issue. Even if most ordinary working people in Canada do not invest in the stock markets or the financial markets, almost all of us are indirectly involved through our employee pension plans and our health and welfare plans. Even the Canada Pension Plan is now privately invested on the open market.

Therefore, Canadians have to wake up frankly, and realize that there is a serious problem of confidence in our financial marketplace. We have to be able to trust the financial statements of the companies in which our retirement income is invested. Therefore, many Canadians have been horrified to watch the meltdown on Wall Street and an equal crisis in confidence on Bay Street, as they watched in horror WorldCom, Enron, Nortel, ImClone, Tyco. We could go on and on because there has been an absolute epidemic of unethical practices revealed on the financial markets of North America, which has created a genuine crisis in confidence.

Compare Bill C-46, as we have it today, which is to deal with capital markets fraud and evidence-gathering, with the Sarbanes-Oxley act in the United States. Compare the difference between the protection of pension incomes in that country compared to Canada. The Prime Minister of Canada essentially ignored and was silent on the issue of the crisis of confidence. Our finance minister was virtually silent. His reaction in fact was to strike a wise person's committee and to ask Bay Street and the Institute of Chartered Accountant to get into a voluntary compliance with ethical standards.

Compare that with the United States when the President stood up and said that if companies were defrauding the American people, the administration would hound them down, find them, catch them and put them in jail. Whether they were members of a corporate board of directors or CEOs of companies, they would pay big time. That was the difference, the contrast in the approach.

As a representative of working people in my former life as a trade unionist, who has sat on the pension plans of the union movement and have some knowledge of how that money is managed on behalf of working people, believe me, I take no comfort in the reaction of the Canadian government to this crisis in confidence compared to the very legitimate efforts made in the United States.

The bill is silent on a number of issues. I do not see a lot of reference to it in the recommendations put forward in the proposed amendments, rather than the amendments that we now see. We were hoping to see a serious crackdown in some very glaring, obvious and easy to fix shortcomings of the current securities marketplace.

The first, to which I would like to speak, is the idea of the complete independence of auditors. What happened at Enron, what happened at WorldCom, what happened at Tyco is that the same chartered accounting firm, in this case, Arthur Anderson, which was keeping the books, doing tax consultation and database design, was also hired as the auditor.

How can we trust the financial statements of a company, if the same company is asked to keep the books and audit the books? That same situation exists in Canada today. Even with the voluntary measures undertaken by the Institute of Chartered Accountants, it sees nothing wrong with the company that is the auditor also doing the tax consultation, et cetera. Can it not see this glaring conflict of interest? I should mention that this could be remedied by a simple change to the Canada Business Corporations Act. It has been brought to the attention of the government and it has chosen not to act.

Another glaring issue that is quite easy to fix is the idea of expensing of stock options, that is, having these costs show up in the expense column of the company's financial statements.

If a company is going to use stock options as part of the executive compensation of the company, then investors should know. The liability of outstanding stock options often exceeds the net worth of the company. Even as a blue collar socialist, I know the danger signals associated with that.

If a person is going to use--

Criminal Code
Government Orders

5:45 p.m.

The Deputy Speaker

Order, please. The Minister of State and Leader of the Government in the House of Commons on a point of order.

Specific Claims Resolution Act
Government Orders

November 3rd, 2003 / 5:45 p.m.

Glengarry—Prescott—Russell
Ontario

Liberal

Don Boudria Minister of State and Leader of the Government in the House of Commons

Mr. Speaker, my apologies first to my hon. colleague for interrupting his speech.

An agreement could not be reached under the provisions of Standing Orders 78(1) or 78(2) with respect to the stage of consideration of Senate amendments of Bill C-6, an act to establish the Canadian Centre for the Independent Resolution of First Nations Specific Claims to provide for the filing, negotiation and resolution of specific claims and to make related amendments to other acts.

Under the provisions of Standing Order 78(3), I give notice that a minister of the Crown will propose at the next sitting a motion to allot a specific number of days or hours for the consideration and disposal of proceedings at the said stage.

I regret the filibuster which has been going on for the last few days.

The House resumed consideration of Bill C-46, an act to amend the Criminal Code (capital markets fraud and evidence-gathering), as reported without amendment from the committee.

Criminal Code
Government Orders

5:45 p.m.

NDP

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.

Criminal Code
Government Orders

5:55 p.m.

NDP

Bev Desjarlais Churchill, MB

Mr. Speaker, I want to thank my colleague for reminding us here in the House today as well Canadians that at one time the Canada pension plan funds were used to guarantee or to give loans to municipalities and cities throughout the country at a very affordable rate. That allowed them to build or support their infrastructure.

One of the serious lackings we have seen over the last decade has been the failure to put enough dollars into infrastructure. We have heard from municipalities, cities, people and first nations throughout the country of the shortfalls in the infrastructure budgets.

Does the member think it might be beneficial at this point in time to re-evaluate where Canada pension funds are going? I am sure that people who are investing in those funds want to be supportive of their communities. Does he think municipalities would like to see that happen again as well, where there is an investment in Canada rather than an investment in corporate leaders who were misusing funds.

Criminal Code
Government Orders

6 p.m.

NDP

Pat Martin Winnipeg Centre, MB

Mr. Speaker, this is a serious problem. A couple of years ago, when the dot com craze was happening, investors were getting a return of 15% to 18%. I guess the Government of Canada had a look at the Canada pension plan and said that if it only invested that on the open market, it could get a better rate of return. The results have been catastrophic. The government lost 20% of the money it was given. That is $4.2 billion that we will never get back. That was in the most recent fiscal year.

During that period of time, the government gave the CEO a $100,000 raise and a 20% bonus for doing such a great job. Imagine the kind of bonus he would get if he actually made money. The other members on the board of directors got 50% bonuses for losing $4.2 billion. That is the 11 person Canada Pension Plan Investment Board, made up not with people of necessarily any expertise. One of the people on that board is the Liberal MP whom I beat when I won my seat in Winnipeg Centre. We never really beat Liberals, we just make them rich because they get these fallback positions, such as this scandalous situation of the Canada Pension Plan Investment Board.

The past practice was that we would use the Canada pension plan to finance, fund and lend to municipalities and provinces, at a low rate of interest, large amounts of money to capitalize necessary infrastructure projects. That no longer happens. Granted we were only getting 2% interest when we loaned money to build sewage treatment plants or any number of things in the communities, but getting 2% interest is a heck of a lot better than losing 20%. It is better than rolling the dice and gambling our pension fund money away.

I would like to know just how this happened because it happened under the radar. The Government of Canada put together this Canada Pension Plan Investment Board. It started out with $17 million, of which it promptly lost $2 million. When the rate of contribution went to 9.9%, all of a sudden the money really started to flow in. The board got it up to $22 billion. Now it has lost $4.2 billion of that, and it predicts it will have $70 billion to invest on the open market within 10 years.

Imagine the amount of money the board will lose if it continues at the current rate of loss. Imagine the amount of necessary infrastructure work that could be done across the country not only in terms of the infrastructure deficit that most communities face, but also in terms of the green infrastructure, the very necessary retrofitting infrastructure that needs to be done in the coming years.

The hon. member could not be more bang on in terms of the best use for this Canada Pension Plan Investment Board money.

Criminal Code
Government Orders

6 p.m.

Bloc

Jocelyne Girard-Bujold Jonquière, QC

Mr. Speaker, I have listened attentively to my colleague from the NDP, whose speech contained so many negative comments on this bill that I was obliged to ask his colleague whether the NDP was for or against it. She told me they were in favour. I therefore found this rather odd.

I have two little questions for him. I would like to know his views on proposed section 487.013, which allows banks to disclose such confidential information as the account number of an account holder, the status and type of account and the date on which the account was opened or closed, the person's social insurance number and date of birth.

Does the hon. member not feel this bill encroaches on an individual's right to privacy? I would like his comments on this.

I would also like to hear his comments on the fact that federal attorneys may prosecute, when we know that financial markets fall under provincial jurisdiction.

I am asking these questions because I have not heard any of his colleagues address these clauses of the bill.

Criminal Code
Government Orders

6:05 p.m.

NDP

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.

Criminal Code
Government Orders

6:10 p.m.

Bloc

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”.

Criminal Code
Government Orders

6:10 p.m.

Some hon. members

Oh, oh.