Debates of Nov. 3rd, 2003
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 c-46.
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Richard Marceau Charlesbourg—Jacques-Cartier, QC
Mr. Speaker, I thought we were debating Bill C-46, not Bill C-20 on child pornography. Consequently, the pace of this debate is a bit surprising. I also marvel at my previous colleague's definition of brief remarks. If he was being brief, I would not want to hear him give a longer speech.
That said, I rise to speak on Bill C-46 with some disappointment as we had supported this bill at second reading and I had spoken in support of it some time ago.
At the time, I expressed the wish, as I did again in committee, that the government would consider possible amendments, including one on a matter I will address later. Unfortunately, the government has been inflexible, perhaps in the belief that it is the keeper of absolute truth and the ruler by divine right. No matter what the reason, the government's rigidity, inflexibility and closed-mindedness mean that today I invite my Bloc colleagues to vote against Bill C-46, which contains, however, numerous important provisions and clauses that we support.
There is, however, one basic provision in this bill which we in the Bloc Quebecois cannot support and on which we cannot agree with the government. It is the reason we will be voting against Bill C-46.
I felt it was important to make this clear right from the start. Given the inflexibility of the government, I will explain why our position has changed.
Bill C-46, which we have before us today, amends the Criminal Code and creates two new offences: prohibited insider trading and threatening or retaliating against employees for disclosing unlawful conduct. It increases the maximum penalties and codifiesaggravating and non-mitigating sentencing factors for fraud and certainrelated offences and provides for concurrent jurisdiction for theAttorney General of Canada to prosecute those offences.
Bill C-46 also creates a new procedural mechanism by which persons will be required to produce documents, data or information in specific circumstances.
Let us place all of this in context. The recent financial scandals in the United States, the Enron affair for instance, have made us all aware of the fragility of our financial system and, unfortunately, of how dependent we are on it.
Although we may think at first that only major investors are affected by a financial crisis, that is not the case. The biggest players on the stock market, in fact, are the pension funds. If a pension fund suffers major losses, therefore, the little investors are the ones who can end up losing their life's savings and watching their retirement plans go up in smoke. That is what is so worrisome.
As well, according to the financial analysts, there has been a trend recently for retirement trust funds to go more for stocks than for fixed income securities. A financial crisis in Canada would have a direct impact on the retirement income of millions of households. Those households are the ones we, as parliamentarians elected to represent the population, have a duty to protect.
Fortunately—and we do not yet know the reason for it—Canadian stock markets have so far been relatively free of wrongdoing, with the exception of Nortel and CINAR. I raised the latter issue again today in oral question period.
We can feel that something is not clear in this CINAR affair, and the Bloc Quebecois is determined to uncover what may be hidden, particularly what may lie behind the CINAR affair.
It is the opinion of the Bloc Quebecois that, while several of the experts we consulted believe that our securities regulatory systems are much more comprehensive than the ones the U.S. had before the financial crisis I referred to earlier, it is important to send the clear message that financial wrongdoing is a serious crime that will not be tolerated in our society.
This is what prompted my hon. colleague from Joliette and myself, in the fall of 2002—more than one year ago—to call for major amendments to the Criminal Code of Canada to provide the appropriate authorities with better tools to fight financial crimes.
Let us take a brief look at these proposed changes to the Criminal Code I put forward back in the fall of 2002. In our press briefing, we proposed adding a section that would make insider trading a criminal offence, in order to send a clear message to company directors that the use of confidential information obtained in the performance of their duties for the purpose of making profits or avoiding losses would not be tolerated. The fact is that making profits or avoiding losses in this manner impacts negatively on other investors who do not have access to the same privileged information.
This provision would have been added after section 382 of the Criminal Code. It would have created an offence of insider trading, which would have carried a maximum sentence of ten years' imprisonment. As we can see, the government accepted our suggestion and included a new offence of insider trading in the bill.
The Bloc Quebecois also proposed that a new offence be created for securities fraud. This offence was patterned on the measure adopted in the United States. We say so freely and without fear. It would carry a ten-year prison sentence and prohibit fraud when selling or buying securities
We had also proposed two amendments to section 397 of the Criminal Code. This section clearly stipulates that fraud is committed by someone who:
(a) destroys, mutilates, alters, falsifies or makes a false entry in, or
(b) omits a material particular from, or alters a material particular in,a book, paper, writing, valuable security or document.
In our opinion, this provision could have applied to falsified financial statements.
Furthermore, subsection 2 of this section makes it a specific offence if documents are falsified with the intent to defraud the creditors.
Currently, both offences carry a five-year prison term. We felt that this sentence was not dissuasive enough. Consequently, we proposed increasing the maximum term of imprisonment to ten years.
Finally, we proposed adding a third subsection to section 397 of the Criminal Code to specifically target the falsification of financial documents with the intent to defraud shareholders. We believe that shareholders are a more vulnerable category since—unlike the majority of creditors—their investments are not guaranteed. Therefore, we do not see why it is an offence to defraud creditors and not shareholders.
In committee, we suggested very specific amendments incorporating the elements that I just listed. Unfortunately, although as always, the Bloc Quebecois put forward these amendments, changes and proposals in a constructive manner, the government rejected them.
I would like to make a small digression to mention, or rather to deplore, the lack of respect the government has shown lately to the members of this House, particularly to those who sit on the Standing Committee on Justice.
Bill after bill comes before us. It is top speed and full steam ahead on the bill to decriminalize marijuana. The committee is also studying soliciting and prostitution. The government, when it sets the schedule for committees or the House, does not pay any attention to the fact that for many of us it is extremely difficult to be here in the House to debate government bills, and at the same time, to sit on committees. Even though, every Christmas, when asked what I want most, I always say I would like the gift of ubiquity, no one ever gives it to me.
So, while we were debating a government bill here in the House and I was scheduled to speak on behalf of my political party, the Standing Committee on Justice was meeting at the same time, and going about its business, despite the fact that several members of that committee were in the House. I could not defend the amendments I had put forward.
I think that is quite deplorable from a government that, probably sensing the end of its regime approaching, wants to get all its bills passed as quickly as possible, and therefore the work is not done well, because the members who follow the issues—on both sides of the House, in fact, because my Liberal colleagues are in the same situation—cannot contribute as much as they should to improving the legislation before them.
The government shows little consideration for its own legislation, its own bills, as seen in the fact that it does not give the members the time they need to properly examine the bills before them, and this will count against it.
When we are talking about such essential things as Bill C-46, commonly called the Westray bill, which is now before the House, or Bill C-20, the child pornography bill, or Bill C-36 on decriminalizing marijuana, in my opinion it is essential to proceed at a pace that allows the members to be here in the House and in committee at the proper times, but also to digest, assimilate, and understand the many suggestions made by the witnesses who come before us.
In fact, why spend thousands of dollars calling witnesses to appear and why ask them to come before the committee to explain their point of view and suggest amendments and improvements if the members opposite cannot digest the information provided.
All this to say that the constructive, intelligent, consistent and non-partisan amendments I moved in committee should have been moved by a member from the other side of the House. I am not questioning the hon. member's competency. I am in no way accusing him of bad faith. However, the fact remains that the amendments could not be moved, debated and defended by the member who sponsored them.
That concludes this essential digression to explain the current environment in which the members are working. Now I want to get back to Bill C-46 itself.
The Criminal Code would create a new offence prohibiting insider trading, with a maximum ten-year prison sentence.
Although insider trading is currently prohibited under provincial legislation regulating the sale of securities within Canada and under the Canada Business Corporations Act, this new offence under the Criminal Code will apply for cases requiring harsher sentencing.
Since this new offence was directly inspired by the proposal my hon. colleague from Joliette and I made over a year ago, we are pleased to see its inclusion in Bill C-46.
Employees who disclose to or assist law enforcement officers investigating capital markets fraud also need protection against intimidation. These employees often have a key role to play in disclosing scandals in companies, but they may be intimidated or threatened, including through measures against their job or their livelihood.
Creation of a new offence of threat or retaliation relating to employment would encourage people with inside information to co-operate with law enforcement officials and would punish those threatening or making use of reprisals. This offence would be punishable with up to five years' imprisonment. The Bloc Quebecois is in favour of this provision.
To strengthen penalties in cases of fraud on financial markets, and to make sure that the punishment fits the crime, the proposed reforms would increase maximum sentences for existing fraud offences, and would establish aggravating circumstances, which the courts should take into consideration in sentencing.
Maximum prison sentences would rise from 10 to 14 years for the present fraud offences under the Criminal Code, and for those affecting the public market. Maximum sentences for market manipulation offences would increase from 5 to 10 years.
The proposed reforms would also include a list of specific aggravating circumstances allowing the courts to impose stiffer sentences for the most serious offences. Factors such as the extent of the economic impact or any negative impact on investor confidence or market stability could lead to increased sentences. Moreover, a person's reputation and standing in the community or work environment, which have always been considered mitigating factors that can reduce penalties, could not apply in such a case. Those guilty of serious market wrongdoing are often able to get away with their crimes precisely because of these factors.
We feel these are interesting proposals, but we regret that the government did not consider our suggestions with respect to increasing the sentences under section 397 of the Criminal Code.
I will conclude by explaining why we are against Bill C-46: the involvement of federal prosecutors. As members know, financial market regulation comes under the jurisdiction of Quebec and the other provinces, as does the administration of justice. Under Bill C-46, the Attorney General of Canada would have concurrent jurisdiction with the provinces and the territories to prosecute certain criminal fraud cases, including the proposed new offence of illegal insider trading.
Federal involvement in this area would supposedly be limited to cases that threaten the national interest in the integrity of capital markets. According to information released by the federal government, the Government of Canada will collaborate—that is always a key word with the Liberals, but we know what it means—with the provinces to ensure proper and efficient concurrent jurisdiction by establishing prosecution protocols.
We absolutely cannot support these new provisions. They all seem to confirm the federal government's desire to infringe upon yet another area of Quebec and provincial jurisdiction, the securities market.
In committee, I proposed an amendment to the bill that was constructive and would deny federal prosecutors the right to prosecute in these cases. The government rejected it.
Knowing the federal government's penchant for interfering in the regulation of securities markets, we are opposed to Bill C-46, because the Bloc Quebecois would never consent to the federal government's meddling, however minimally, in provincial jurisdictions.
Because of the government's inflexibility and desire to intrude in the jurisdictions of Quebec and the provinces, the Bloc Quebecois is voting against Bill C-46.
Jocelyne Girard-Bujold Jonquière, QC
Mr. Speaker, I want to congratulate my hon. colleague from Charlesbourg—Jacques-Cartier on his excellent speech.
With all the details he has provided, I understand now why the Bloc Quebecois is opposed to this bill. I wonder if my hon. colleague would elaborate on the impact of insider trading.
Much reference is made in this bill to insider trading. Since the hon. member is a lawyer and a legal expert, I would appreciate it if he could provide those listening with information about what constitutes insider trading.
Richard Marceau Charlesbourg—Jacques-Cartier, QC
Mr. Speaker, I will start by thanking my hon. colleague from Jonquière for her question.
I will try to put in simple terms a somewhat complex legal concept. The offence of insider trading is designed to prevent someone who is privy to information he or she would not have access to if it were not for the position he or she is holding in a company, for instance, from using this information to make money for themselves or someone close to them on the financial markets.
We can think of the head of a mining company, for example, who is aware of a new development that will increase the value of the said company and uses this information, perhaps communicating it to someone else so that this person may make money outside what is prescribed in the regulations on the securities market.
The idea is to create a level playing field and to ensure that no one can take advantage of his or her position in an organization to get rich at the expense of ordinary people.
The Deputy Speaker
It is my duty pursuant to Standing Order 38 to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Acadie—Bathurst, The environment; the hon. member for Lotbinière—L'Érable, Auditor General's report; the hon. member for Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques, Softwood lumber.
Inky Mark Dauphin—Swan River, MB
Mr. Speaker, it is a pleasure to represent the Progressive Conservative Party on third reading of Bill C-46, which is a response to the recent spate of corporate scandals that have plagued the United States and weakened investor confidence in capital markets around the world. Scandals associated with companies, such as Enron, WorldCom and ImClone, have precipitated calls to strengthen corporate governance standards and to better enforce laws governing capital market activities.
Governments have responded to the fall-out from these events by moving to improved corporate governance, enhanced auditor independence, increased corporate accountability, facilitate and ensure holder oversight of corporate activities, and increased penalties for wrongdoing.
The United States was first off the mark with the Sarbanes-Oxley act of 2002. Signing the law on July 30, 2002, Sarbanes-Oxley introduced far-reaching measures designed to heighten corporate disclosure and accountability, improve auditor oversight and independence, create new offences, and increase penalties for corporate fraud.
The question I raise is why it has taken this government so long to put in place legislation. The Americans have been at least a year ahead of us.
Let me read the key amendment to the Criminal Code in Bill C-46, clause 2, subsection 380. This is the focus of the legislation. Part 2 states:
Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, with intent to defraud, affects the public market price of stocks, shares, merchandise or anything that is offered for sale to the public is guilty of an indictable offence and liable to imprisonment for a term not exceeding fourteen years.
Fourteen years is a long time; only if it is implemented. Again we have heard in the debate today that the government of the day certainly make all kinds of legislation but when it comes to enforcing penalties that is a totally different issue. Until the track record on the enforcement side changes, obviously the confidence in this government and its legislation will certainly be questionable.
For most people who work hard for a living and who contribute to a pension on a weekly or monthly basis, their pension contribution is very important. Most Canadians are not in control of their pension funds. They rely on agencies or brokerage houses to ensure that there is some security for the money that has been put into pension plans.
As a former teacher, I have invested 26 years of hard labour into my pension plan, and I, like most Canadians, would like some sense of security that our pension money will not be stolen.
Most Canadians work hard, believe in pension savings and somewhere down the road, whether at 50 or 60 years old when they retire, they want to know there will something there for them. They do not want to worry that someone took their pension money and lost it, and that there was no recourse for the people who took the money.
That is why we should have had this legislation in place, certainly after the Enron scandals in the U.S. Canadians expect that. It is not good enough for the government to say that it is a provincial mandate and authority.
The federal government gets involved in all kinds of issues, health care being one example. As members know, the government only contributes 15¢ on the dollar, yet it wants to set standards for the country. Canadians agree that there needs to be national standards but that the government should be paying its share.
In Canada, the federal and provincial governments, as well as security regulators, share responsibility for enforcing laws pertaining to corporate and securities activities. Consequently, both levels of government have been moving to confront the governance and regulatory issues raised by these recent corporate scandals and their concomitant impact on investor confidence.
Ontario, for example, has enacted new legislation and the Ontario Securities Commission has issued draft rules relating to the role and the composition of audit committees, certification of corporate financial statements by chief executive officers and chief financial officers, and requirements for the financial statements of publicly traded companies are to be audited by a firm in good standing with the Canadian Public Accountability Board.
There are many changes in the bill and hopefully they will have an impact in terms of developing a regime of greater security for the money that is put into the investment business. Canadians expect that.
The bill would amend the definition of attorney general in the Criminal Code to give the Attorney General of Canada concurrent jurisdiction with provincial attorneys general to prosecute certain capital market fraud cases, including those currently outlined in section 380 of the code, fraud; section 382, market manipulation; and section 400, distributing false prospectuses, statements or accounts; as well as the proposed new offences of illegal insider trading.
The federal government should work to coordinate activities with the provinces in relation to such cases by establishing prosecution protocols. Furthermore, federal involvement in this area is expected to be limited to cases that threaten the national interest and the integrity of capital markets. As I said, it should be and hopefully it will be so that we have a greater sense of cooperation between the federal government and the provincial governments.
As we have heard many times in the House, there is too much conflict in this country between the federal government and provincial governments. Certainly, in the interest of Canadians, which is why we are here and which is the intent of this place, the federal government should work closely with the provincial governments. At the same time it should realize that it should not intrude into provincial jurisdictions without sitting down and working through the process with a sense of cooperation.
Bill C-46 would increase the maximum prison sentences for the existing offences of fraud and fraud affecting the public market under section 380 of the Criminal Code from 10 to 14 years. Again, as has been alluded to in the House, it is not the numbers on the paper, it is about the enforcement and the application, so that we do not bargain away, in a judicial process, the penalties that are in the legislation.
As was said today by a lawyer who attended the hearings on Bill C-46, “it is not what is on paper, it is what it is in reality”. Unless we put on paper mandatory requirements, mandatory sentencing, and certainly in cases of jail time, then it will not apply. We can send these folks away for 50 years but that does not mean it will happen.
Maximum terms of imprisonment for market manipulation offences would increase from five to ten years. Market manipulation involves practices that create a market for securities that have little or no bearing on their actual value, which is obviously fraud. It includes activities such as washed sales, where there is a purchase and sale but no change in the beneficial ownership of a security; and match orders, where a purchase order or a sale order for a security are substantially the same size, at substantially the same time and the same price, and are entered by either the same person or two different persons.
Also in the act are new sections establishing four aggravating circumstances that a court can consider when imposing a sentence for market fraud offences. These are as follows: the amount involved in the fraud exceeded $1 million or the offence has adversely affected or had the potential to adversely affect the stability of the Canadian economy or financial system or any financial market in Canada, or investor confidence in such a market. Another new add-on is that large numbers of victims were involved and that the perpetrator took advantage of his or her elevated status or reputation in the community in committing the offence. The presence of these facts will enable courts to impose tougher penalties.
There are also new offences under the heading of insider trading. Bill C-46 creates new criminal offences with respect to prohibited insider trading and tipping information. That is really the key function of the bill. Improper insider trading is already prohibited under the Canada Business Corporations Act and under provincial securities laws.
The new Criminal Code offences are intended to deal with the more egregious cases that merit stiff criminal penalties. Insider trading is commonly referred to in respect of the purchase or sale of securities when using material non-public information that could affect the price of such securities. It also covers tipping such information, that is, providing inside information to a third party for that party's benefit or the benefit of the insider.
The bill defines inside information as information about a company or security that “has not been generally disclosed” and “could reasonably be expected to significantly affect the market price or value of a security”. Persons subject to prosecution include those who: possess inside information because they are shareholders of the company issuing the security, referred to as the issuer; have a business or professional relationship with the issuer; obtain the information in the course of a proposed merger, takeover or reorganization of the issuer; obtain the information in the course of their employment duties or in the office of the issuer or an entity referred to above; or receive the information from a person who obtained it by virtue of the positions or relationships mentioned above. The offence will carry a maximum term of imprisonment of 10 years.
Under the heading of tipping, which means to knowingly convey inside information to another person when one knows there is a risk that the person may use the information to buy or sell a security, or to convey that information to another person who will trade in a security, we see that it can be treated as an indictable or summary conviction offence. Under the indictable offence, tipping carries a maximum prison term of five years.
I do not have a lot of time, so I will move on. There are changes in the whistleblowing area as well as in evidence gathering production orders. The government is playing catch-up with United States lawmakers, who have already passed legislation not just to strengthen criminal sanctions but also to reform the way corporations are governed. Boards of directors, auditors and auditor committees all have key roles to play in protecting the interests of shareholders. Indeed, the scandals that rocked the capital market in 2001-02 are widely seen to be the result of poor corporate governance, lax auditing and accounting standards and oversight, and incentives provided by executive compensation arrangements.
In spite of this, the government's background information on Bill C-46 does not once mention the role of good corporate governance legislation. Shortly after the government tabled Bill C-46, the Senate banking committee completed a year long study of the circumstances that resulted in the American corporate scandals. The committee was particularly interested in whether these circumstances might occur in Canada with similar results and, if so, how they might be avoided. The committee called for tougher sanctions, whistleblowing protection for those who report irregularities and increased resources to investigate wrongdoing.
It also recommended legislative measures: to require that a majority of board members be independent; to require the development of a code of ethics to be followed by all board members; to require that audit committee members be independent and financially literate; to limit the non-audit services that auditors can provide to their audit clients; to require an organization's chief executive officer and chief financial officer to certify that the annual financial statements fairly represent the organization's results and financial condition; and last, to prohibit compensation committee members from being a member of management and require them to have expertise in compensation and human resources.
I will close by saying that the Progressive Conservative Party will support the bill.
Darrel Stinson Okanagan—Shuswap, BC
Mr. Speaker, I listened to the member's speech in which he said that in the bill the government is playing catch-up to the Americans, but I have a problem with part of proposed section 425.1 with regard to the whistleblower protection.
Proposed subsection 425.1(1) states:
No employer or person acting on behalf of an employer or in a position of authority in respect of an employee of the employer shall take a disciplinary measure against, demote, terminate or otherwise adversely affect the employment of such an employee, or threaten to do so,
(b) with the intent to retaliate against the employee because the employee has provided information referred to in paragraph (a) to a person whose duties include the enforcement of federal or provincial law.
(2) Any one who contravenes subsection (1) is guilty of
(a) an indictable offence and liable to imprisonment for a term not exceeding five years;--
That brings up a question for the member who just spoke in regard to people who come forward in whistleblowing. In many cases, it is a very tenuous situation. When we are dealing with corruption within corporations or even in government, we are looking at some pretty serious retaliation that could be put upon the employee. This bill gives absolutely no incentive to anybody to come forward with this information. An offender may get up to five years. The interpretation of that has been left wide open for the judges.
There is nothing in here about a financial side benefit to compensate for a whistleblower's lack of earnings during the time this is taking place, nor is there anything saying that these people would be under some sort of protection if it came down to that. I think this section of the bill is very weak if we want whistleblowers to come forward. It is very weak when it comes to addressing these concerns. As we know, most of our law enforcement agencies and regulatory authorities get most of their information from whistleblowers. I think they have been sadly neglected in this act.
What is the hon. member's opinion?
Inky Mark Dauphin—Swan River, MB
Mr. Speaker, my colleague from the Alliance Party is correct about proposed section 425.1. There is no doubt that we need to extend the criminal offence to threats or retaliation against an employee who has already provided information. I agree with him. There is no way that employees will come forth in any circumstances unless they are protected. Perhaps we need to follow the lead of the Sarbanes-Oxley Act in the United States, which also has whistleblowing protection for employees.
Bev Desjarlais Churchill, MB
Mr. Speaker, I am pleased to have the opportunity to speak on the bill for a couple of reasons. First it will give me the opportunity to speak for a bit on the companion legislation that was tabled on the same day as this legislation, and that is Bill C-45, the corporate manslaughter bill, and also on this piece of legislation, which certainly is timely.
To indicate some of the reasons we have the bill before us, I will read out of few of them just in case somewhere along the way someone has forgotten what prompted governments in the U.S. and Canada to finally put in place legislation to address some of the problems we are having in the corporate world and which are having an extremely detrimental effect on the markets. I say extremely because although things have been happening for a number of years it was not too severe and not quite as much money was being lost. Not quite as many people were affected, nor were so many of the pension funds of people we knew. Nothing was being done for a lot of years.
Over the course of the years from the early 1990s and on, we were hit with a number of problems. I will read through them just to remind Canadians of why we are here with the legislation and why it is personally important that the legislation gets support. I would agree with my colleagues on why we should strengthen it. We should be strengthening it in a number of areas.
There was the Enron Corporation. At one time the seventh largest company in the U.S., Enron announced in November 2001 that it had overstated its earnings back to 1997 by about $600 million U.S. Is that not great? It was by about $600 million U.S., give or take $1 million or maybe $100 million. The company camouflaged the huge debt in a web of off the balance sheet partnerships. The company collapsed in the biggest bankruptcy filing in U.S. corporate history. The shares now trade for pennies in the over the counter markets. The bottom line is that people's pension funds, employees' benefit plans and numerous areas are affected as a result of companies doing this type of underhanded businesses.
Tyco, the conglomerate company, abandoned plans to split into four parts when concerns arose over its accounting practices in the wake of the Enron fiasco. In early June, the company announced the resignation of its CEO, Dennis Kozlowski, who was later charged for allegedly avoiding payment of over $1 million U.S. in sales tax on $13.2 million U.S. in artwork. Tyco shares are down 80% since the start of the year.
There was Adelphia Communications. In March, the Pennsylvania based cable company said it had loaned billions of dollars to the founding Riga family. The family relinquished control of Adelphia, which defaulted on a $7 billion U.S. debt and filed for chapter 11 bankruptcy protection on June 25.
Livent, the Toronto entertainment company, collapsed in 1998 amid allegations of financial impropriety that led to its financial results being restated. Soon after the collapse, the new management of Livent filed a $225 million lawsuit against Garth Drabinsky and Myron Gottlieb, the two Canadians who founded the theatre company. Livent then fired Drabinsky and Gottlieb, saying they fraudulently manipulated financial records to hide losses of $100 million. They have countersued for $200 million. Livent also filed for bankruptcy protection, citing debts of $334 million.
When we see companies like this filing for bankruptcy protection, we have to wonder about those involved and whether or not there should be some very strong criminal legislation in place to ensure that they cannot do those types of things that have such a great effect, not just on their employees but on the markets overall and, again, on pension funds and pensioners.
Going on to ImClone and the Martha Stewart affair, the drug company's co-founder and former CEO, Sam Waksal, and his daughter were charged on June 12 with insider trading relating to sales of ImClone stock. In the days leading up to the release of the federal ruling that rejected the company's new cancer drug, Martha Stewart came under investigation after she sold nearly 4,000 shares of ImClone on December 27, a day before the regulator's announcement. She is a friend of Waksal's and shared the same stockbroker. ImClone shares are off more than 90% from the high. As for Martha Stewart, of course her shares are down a little bit these days too.
Then, of course, there is Canada's own Michael Cowpland. The founder and former CEO of the software company Corel Corporation is still involved in the OSC's case over insider trading allegations after a company he controlled sold $20 million worth of Corel shares five years ago, just before it posted poor earnings. The OSC has rejected a proposed settlement that would have seen Cowpland pay a $575,000 fine and his company pay $1 million.
I mentioned those examples for a couple of reasons. The next time someone in the House talks about corporations being good citizens and that we should always trust them and allow them voluntary recognition of certain practices, I want everybody to remember each and every one of those corporations and why we need legislation in place to hold them as well as individuals accountable for their crimes. Just because a corporation has millions of dollars does not mean it is a good corporate citizen unless there is legislation in place that ensures it remains a good corporate citizen.
I indicated the reasons for including capital markets fraud in the bill, but Bill C-46 is an act to amend the Criminal Code as it relates to capital markets fraud and evidence gathering. Evidence gathering relates to whistleblower protection to which a number of colleagues have already spoken today. There have been criticisms that the sanctions in place are not strong enough and will not provide protection for whistleblowers. I have to agree that stronger legislation needs to be in place.
If employees or others know that these kinds of actions are taking place and they do not feel secure and feel that their livelihood will be jeopardized as a result of their evidence, it will be tougher to get these types of actions halted in the early stages. People must be assured that if they disclose this information they will not have to worry about getting another job in their field.
This is not just about being with one employer. We all know what blacklisting can do within business sectors in the world. There is a tendency to blacklist anyone who is seen as a squealer or a whistleblower. It has become a negative thing to squeal or whistleblow even if someone who has been committing a criminal act is caught, especially if that individual is in the corporate world. We have to ensure that we provide strong sanctions so people can feel safe if they whistleblow.
A number of my colleagues in the House have tried to bring in whistleblower protection for our own public service employees. Some individuals in the Office of the Privacy Commissioner wanted to mention things that had been going on but because they could not be assured of protection, actions went on for a period of time that ended up costing taxpayers huge amounts of dollars. As a result, huge amounts of taxpayer dollars were spent in that office without proper scrutiny. Had there been whistleblower protection within the public service, I submit that would not have happened.
In spite of the government bringing forward this piece of legislation, we still do not have whistleblower legislation in place that will protect public servants. The minister has stated that she does not think it is necessary because public servants would not do that kind of thing.
I need to remind people again of various situations that have happened in a number of government departments where deputy ministers or assistant deputy ministers have absconded with funds. There have been criticisms about the Indian health branch and a number of other departments. It is crucially important that there be whistleblower protection for the public service as well.
There is one area in Bill C-46 which has not been discussed a lot today and I want to make a point of emphasizing it. In spite of always being concerned about taxpayers' dollars being spent, I know what a tough job it is to ensure that legislation is enforced. Legislation can become just words on paper unless some enforcement mechanisms are in place.
I was pleased to see that the federal government would create a number of integrated market enforcement teams composed of RCMP officers, federal lawyers and other investigators such as forensic accountants to deal with capital market fraud cases. They will be located in cities throughout Canada and are scheduled to become operational over the next two years. They will work with securities regulators as well as provincial and local police forces.
It is crucially important to ensure that these types of mechanisms are in place, otherwise the legislation is not worth the paper it is written on. If there is going to be meaningful action against corporate fraud, there have to be people who are trained in those areas to get to the crux of the problem and do the job that is needed.
I want to take the time to comment on the Office of the Superintendent of Financial Institutions, OSFI, which deals with pensions and keeps track of pension funds in Canada. There has been criticism that there are not enough dollars in pension funds and OSFI is supposed to be keeping tabs on them. The bottom line is that in a good number of instances, OSFI does not have the resources to keep tabs on those pension funds.
As a result, we have ended up with situations like the Air Canada pension fund fiasco where the company did not put enough dollars into the pension fund. By the time OSFI got around to telling the company it had to put in enough money, Air Canada was going bankrupt. We now have a situation where a number of employees are not getting their pension funds. Certainly their families, their communities and Canadians throughout the country are being affected by the failure to properly support a program that is in place to keep tabs on pension funds.
My colleague from Regina—Qu'Appelle had introduced amendments at committee stage to strengthen Bill C-46. One of those was in regard to whistleblower protection. I emphasize again that there was a need to do that. Ideally it would have increased the penalties for employers who intimidated employees who were taking part in whistleblowing. In the other area, it was to have stronger penalties for insider trading.
Quite frankly I want to commend the government for bringing forward this legislation a whole lot quicker than it brought forward the legislation on corporate manslaughter, the corporate liability bill, commonly referred to as the Westray bill, which was introduced at the same time as this legislation. Bill C-45 also addressed corporate responsibility, but it did not address something that seems to hit home so much more with people, which is really too bad.
Bill C-46 deals with the money aspect and it certainly hits home with people, but Bill C-45 dealt with the lives of workers who were injured or killed on the job as a result of gross negligence and disregard by corporations. It took the government almost 11 years to finally come through with the legislation. I am extremely pleased that the House and the other place have seen fit to finally pass that legislation.
I will commend the government on Bill C-46 and indicate that it should be strengthened, but I will also make the point of emphasizing that it took far too long for Bill C-45 to come into place. I personally believe that a number of accidents have happened since that time that may have resulted in corporations being held criminally responsible for the deaths of workers. I am not going to mention specific instances, but I think those corporations out there that have had accidents like that know who they are.
Corporations will know that from the day the Westray bill, the corporate liability legislation, Bill C-45 takes effect, they will not have that freedom any more. At least there is going to be a challenge out there. If that is enough to smarten up corporations to put in place better work processes by not ignoring safety mechanisms, then it has done the job. It is far better to have that legislation in place to ensure that there is a bit of fear.
To this point there has been nothing. Somehow being fined a couple of thousand dollars, whether it be $10,000 or $50,000, because they did not want to fix an unsafe action in the workplace that might cost them $100,000 was no big deal. Somehow the workers' lives were an okay kind of bargain for certain employers to say, “To heck with it. It is more cost effective this way, so if we lose a couple of lives, no big deal”.
That is not going to happen any more, or at least I hope it will not happen any more. I hope corporations recognize that if they take a life, they will be giving up something at least close to a life on their part. Certainly if the legislation does not do the trick, we will be back here ensuring that the legislation is strengthened.
In January 2002 the Canadian Democracy and Corporate Accountability Commission issued a call for the Canadian government and corporations to follow the wishes of the majority of Canadians and to adopt measures to expand corporate accountability.
The commission did not just talk about corporate accountability with respect to the dollars that corporations were making or with regard to lives. It expected that corporations would look at things differently and would take a lot of factors into consideration when they dealt with whether or not they were good corporate citizens. It would consider whether or not they were following good human rights practices, whether they dealt with companies that followed good human rights practices, good labour standards, good environmental standards.
In the same way that people say there is honour among thieves, there was a time when there was honour among business people, that things were done in a certain way because it was beneficial for society. Somewhere in the course of our history not only in Canada but in the U.S. and throughout the world that has been lost. Somehow the bottom line is about making the most money with total disregard for the environment, for lives and for everyone else. Times have changed. People have said they will not accept that any more and if corporations are not good corporate citizens, they will make their lives miserable. That is the way it should be.
Things are changing in the world. There have been too many Enrons, too many Tycos, too many issues with ships spilling oil into the oceans. The fines have been so limited that they did not worry about cleaning it up because it really did not affect their bottom line. In some cases corporations can deduct the cost of their fines from their income tax. That is unacceptable. Those are the kinds of things we cannot allow to continue.
I mentioned the Canadian Democracy and Corporate Accountability Commission. A good friend and a former leader of the NDP, Ed Broadbent, was very much a part of that commission. He has been involved with others as well.
Members of the commission travelled throughout Canada. They not only talked to a few people here in Ottawa and a few in one province and here and there, they talked to people throughout the country. The message the commission heard was that Canadians want to see good corporate citizens in every aspect, in dealing with the environment, workers' lives, human rights. That is the route we have to take.
The NDP will certainly be supporting the legislation. We want to make it perfectly clear that we would like to see it strengthened in a number of areas, certainly the whistleblower protection and as well the amounts of the fines and penalties that corporations should have to pay in a number of areas.
I cannot think of the countries offhand, but there are countries in the world that actually put in place fines that are commensurate with a person's income or wealth. For a person who is a millionaire and is operating a business that is making millions of dollars, there is a $2,000 fine for some environmental damage or corporate fraud, the fine is a percentage of the person's income or wealth. For someone who makes $200, a fine of $20 has an impact, but a fine of $20 for someone who makes $2 million has no impact.
Maybe it is time we put in place those penalties that are a percentage of the amount of yearly income or profit that someone makes. We would truly see some strong action taken for corporations to improve their actions in this world and penalties that really did fit the crime.
November 3rd, 2003 / 5:15 p.m.
Jocelyne Girard-Bujold Jonquière, QC
Mr. Speaker, I am pleased to rise in the House today to speak on Bill C-46. As my colleague from Charlesbourg—Jacques-Cartier has said, even though the Bloc Quebecois supported this bill at second reading, we must now state that we will be voting against it at this stage.
Why is the Bloc Quebecois going to vote against the bill? As the member for Charlesbourg—Jacques-Cartier and the member for Joliette and Bloc Quebecois public finance critic have said, they have been calling for amendments to the bill throughout the entire parliamentary process. There is no denying that the intent behind the bill was a good one. The Bloc Quebecois has suggested amendments in some very specific areas throughout the process, in order to provide the bill with more teeth in certain very specific situations.
The Bloc Quebecois is also categorically opposed to Canadian government interference in areas that fall under Quebec's jurisdiction over the regulation of financial markets. We have trouble understanding why this bill gives the Attorney General of Canada authority to prosecute certain Criminal Code offences relating to financial market fraud.
This is all the more a concern because the federal government has openly talked about creating a Canadian securities commission. Really now. We already have a securities commission in Quebec which works very well. The Bloc Quebecois is of the opinion that the regulation of securities clearly falls under the jurisdiction of the Government of Quebec, and we therefore disagree with what the federal government has in mind.
Since my election in 1997, I have been hearing about how the federal government should respect provincial areas of jurisdiction. Yet at every opportunity it enacts legislation to trample thoroughly over those areas of jurisdiction. It talks about cooperation, but we know what it means by that. Particularly at present, its idea of cooperation is to invade all possible areas of provincial jurisdiction so it can say “We are the boss, and you are going to have to go along with whatever we decide”.
Right from the word go, the Bloc Quebecois has been opposed to any kind of interference by the federal government in areas of provincial jurisdiction. We will continue that opposition as long as we draw breath.
We also oppose this bill because not a single amendment we proposed in committee has been accepted. Under these circumstances, the Bloc Quebecois cannot agree with the bill.
For the benefit of those who are watching us, I would like to read the summary of the bill:
This enactment amends the Criminal Code by creating a new offence of prohibited insider trading and creating a new offence to prohibit threatening or retaliating against employees for disclosing unlawful conduct. The enactment increases the maximum penalties and codifies aggravating and non-mitigating sentencing factors for fraud and certain related offences and provides for concurrent jurisdiction for the Attorney General of Canada to prosecute those offences.
The enactment also creates a new procedural mechanism by which persons will be required to produce documents, data or information in specific circumstances.
This bill was originally introduced by this government because of the recent financial scandals in the United States. Several hon. members have already talked about this, but it is important to reiterate because that is truly where this all started. These scandals were a wake-up call.
They made us aware of how fragile our financial system was and of our dependence on it.
At first glance, we might think that only major investors are affected by financial market crises, but that is not so. The biggest players on the stock market are those who manage pension funds. Consequently, if a pension fund suffers major losses, it is small investors who might lose their life's savings and watch their retirement plans go up in smoke.
I would like to give some figures from 1998 on Canadian trusteed pension funds. At the time, these funds held assets of more than $500 billion. Of this amount, about $115 billion was invested in Canadian stocks and some $57 billion in foreign stocks. Four million Canadian workers actively contributed to these funds. Only financial assets of the chartered banks exceeded the capital held by the pension funds.
In addition, based on the above-mentioned figures, we can see that a financial crisis in Canada would have a direct impact on the retirement income of millions of households. Those households are the ones we have a duty to protect. Fortunately, Canadian stock markets have so far been relatively free of wrongdoing, with the exception of the Nortel and CINAR affairs.
However, the Bloc Quebecois feels that despite the fact that our securities regulation systems are, in the opinion of many experts, much more comprehensive than what existed in the United States before the financial crisis, it is nonetheless important to send a clear message that financial wrongdoing constitutes a serious crime that is not acceptable in our society.
These reasons and many others prompted the Bloc Quebecois, in the fall of 2002, to call for major changes to the Criminal Code in order to provide the appropriate authorities with better tools to fight financial crimes.
The Bloc Quebecois called repeatedly for the amendments we had put forward in the fall of the previous year and these would have made things better in many respects. First, we proposed adding a section to the Criminal Code to make insider trading a criminal offence. My hon. colleague from Charlesbourg—Jacques-Cartier described earlier for our benefit what insider trading is all about. This proposal was designed to send a clear message to company executives that the use of confidential information obtained in the performance of their duties for the purpose of making profits or avoiding losses would not be tolerated.
Making profits or avoiding losses in this manner impacts negatively on other investors who do not have access to the same privileged information. We can see this regularly. It has happened in the U.S. and pretty much everywhere. It is important to strengthen this aspect of the Criminal Code.
The Bloc Quebecois also proposed that a new offence of securities fraud be created. This offence, patterned on the measure adopted in the United States, would now carry a 10 year prison sentence and would prohibit fraud when selling or buying securities.
These provisions dealing with insider trading and employment related threats or retaliation are very important. Employees who blow the whistle on fraud in financial markets, or assist law enforcement officials in the investigation of such situations also need protection against employment related intimidation.
In fact, when it comes to money, people sometimes forget that, when fraud occurs, it is not the people who will be reported, but rather the situation.
When this kind of situation is reported, the individuals or employees reporting the crime should be protected. They are just doing their duty. They are being honest. They should not have a sword of Damocles hanging over their heads so that, if they report the crime, they will be subject to retaliation.
Protecting them is extremely important, because honesty must permeate every level of society. Where dishonesty exists, we must recognize the efforts of individuals working to openly and publically report it. These individuals must be congratulated and told that there is legislation to protect them.
Also, section 487.013 allows banks to disclose confidential information. I am perplexed by this section, and the Bloc Quebecois is also very perplexed in this regard.
This section allows banks to disclose confidential information such as a person's account number, status and type of account, the date on which it was opened and closed, the account holder's date of birth, and current or previous address.
First, this information is inherently private.
I would not like others to know all my personal information. This is confidential information. The Charter of Rights and Freedoms must protect this information.
So, when others ask for this information, this necessarily violates individual rights and privacy.
An hon. member
Jocelyne Girard-Bujold Jonquière, QC
Greetings to the Minister of Justice. How are you doing?
I am sorry, Mr. Speaker, but it was because he spoke to me. So I answered him. It is habit. When someone greets me, I greet them. It is a friendly exchange.
The Deputy Speaker
Order please. I will not comment on the quality of exchanges but it would be much wiser to obey the usual parliamentary practices and make your comments through the speaker.
The hon. member for Jonquière
Jocelyne Girard-Bujold Jonquière, QC
Mr. Speaker, I always address you with great respect. All through my speech I addressed you. Just now, however, someone I am very fond of called out to me. So, through you, I say hello to him.
Let us return to Bill C-46. With respect to revealing information that is inherently private, the Bloc Quebecois has questions concerning the extent to which this breach of privacy and human rights is necessary in order to achieve the objective of this bill.
This is an extremely important point. Even if this were the only point at issue, we would have to vote against the bill, because respect for privacy is important. We live in a country where we cultivate liberty. Every aspect of private life ought to be essentially confidential.
The involvement of federal prosecutors is something we have particular difficulty with. The regulation of financial markets comes under the jurisdiction of Quebec and the provinces. I hope that the government will finally take this in and understand that anything having to do with financial markets comes under the jurisdiction of Quebec and the provinces. The same is true for the administration of justice.
We cannot agree to these new provisions. In fact, to us they appear to confirm the federal government's new determination to encroach on the field of securities, which nevertheless comes under the jurisdiction of Quebec and the provinces.
For all these reasons and many others, as my colleagues, the hon. member for Charlesbourg—Jacques-Cartier and the hon. member for Joliette have said, the Bloc Quebecois is opposed to this bill. There are good elements in it, but it is missing many more that should have been included. Moreover, the government ought to have respected provincial jurisdiction and ought also to have respected the Quebec securities commission. We have such a commission and it does its work well.
I am opposed to the creation of a Canadian securities commission. In Quebec we are distinct and I hope that this government will finally understand that. We are a nation and we have acquired the tools we need to develop in a manner consistent with our identity. Never, never would Quebeckers, who have their own distinct character, ever want that used against the other provinces. We respect the other provinces. We ask the government to respect the guidelines, the tools and the jurisdiction that Quebec has developed over the years.
In regard to this bill, it does not. For that reason, the Bloc does not agree and therefore we will vote against Bill C-46.
Odina Desrochers Lotbinière—L'Érable, QC
Mr. Speaker, first I would like to thank my colleague from Jonquière who again was able to define the various elements of Bill C-46. This bill proves once again that the federal government is prepared to interfere in jurisdictions that belong strictly to Quebec.
Since 1997, the year I became an MP, I have seen many bills nibble away at Quebec's jurisdictions. I have also seen the one that Bernard Landry, the Leader of the Opposition in Quebec, so aptly described, at the Bloc Quebecois general assembly on Saturday, as the strangler. The strangler is the former finance minister, the member for LaSalle—Émard, who, since 1993, has been working at cutting funding to accumulate a large surplus. He then goes to the people he penalized, and who were short money, and he acts like Santa Claus.
It is November 3 and far too early to start playing Santa Claus. Halloween has just gone by.
An hon. member
He has not removed his disguise.