Bill C-21 (Historical)

Standing up for Victims of White Collar Crime Act

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

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

Standing up for Victims of White Collar Crime Act

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

Mr. Speaker, I think my friend, as the neutral arbiter as chair of the committee, does not get enough occasions to be raucous as he just was and I will let it slip like water off my back the fact that I was disingenuous or that I am misleading Canadians.

We support the bill. I said that at the beginning. It is too little and too late. Sorry for the criticism, but the member should get used to it.

His community of Abbotsford has not been at the bottom of crime statistics in Canada. Whether it was auto theft or murder, it has been at the top. So I would think he has a very deep interest in doing something more quickly than five years to get to a white collar crime bill that does very little.

I said that very clearly. It does very little about getting money back to victims of white collar crime, about resourcing police officials to detect white collar crime; and how about dealing with federal prosecutors who are under contract and cannot get enough money to staff the courts? How about that to fight white collar crime?

The parts that are good in the bill talk about section 380.1, which allow more sentencing principles that already exist but give a very clear direction to the judges that they should take into account the amount and degree of trust, fiduciary-wise, that an investor, or an embezzler or a fraudster has, when sentencing

As I said, it is mild and it is good, and we can support it. We are voting for it wholeheartedly. We would have voted for Bill C-52 had the government not prorogued. I just wish the member would not say that I was disingenuous. I have always been too blunt for my own good.

[Shawn Murphy, Liberal, Charlottetown, PE]

Mr. Speaker, talking about the victims of white collar crime, I submit that the biggest victim of white collar crime is me, it is you, and it is every other Canadian taxpayer.

We have a situation in Canada now where there are thousands upon thousands of rich Canadians who are taking their money offshore for the sole purpose of not paying Canadian income tax and there is absolutely no mechanism to go after these rich individuals. In fact, if or when they are caught, there is total immunity granted to them. All they have to do is walk into the nearest CRA office, their income for the last three years is assessed, there are a few penalties, a bit of interest, and they go to their next cocktail party. There is total immunity, and as a result, you and I and every other Canadian taxpayer pay more taxes.

Therefore, my question for my friend whether he is as disturbed about this issue as I am.

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

Mr. Speaker, I am disturbed by the issue. I am disturbed more by the inaction of the government, as I said in my speech, towards the culprits and the whereabouts of the money.

This is a very interesting justice debate because there is an ability to offer restitution, to restore a person almost in the civil litigation sense or the civil sense to where he or she was before. With so many other crimes, that is impossible.

Why is the government not cracking down, with the provinces, because there is a division of powers in the Constitution, to do something provincially, territorially, nationally, and as my friend said, internationally with respect to getting the money back to the people from whom it has been taken?

That is the objective here. We would all agree with that. Can the government come up with better measures to do so? We hope so.

Mr. Speaker, 2011 is a whole new year. Many people are asking for various things under the Christmas tree this year. I am hoping that the government comes up with effective legislation in the new year.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, the speeches today have dwelt on what this bill does not do. It is pretty clear from the objective input that members have had that this is a sentencing bill that is going to deal with fraud cases of over $1 million, but it is a mandatory minimum sentence. In fact, the name of the bill says that it is “An Act to amend the Criminal Code (sentencing for fraud)”.

The real fraud in the bill is the short title, which says this is “Standing up for Victims of White Collar Crime”, but the evidence is that it deals with only a small portion of white collar crime. The bill does not deal with fraud of $900,000. It does not deal with fraud under $1 million. That is already in the legislation. This is a bill about sentencing.

So I am asking the hon. member, why is it that the short title does not reflect what the legislation in fact does?

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

Mr. Speaker, the short title of the bill is the “Standing up for Victims of White Collar Crime Act”. I suppose it more accurately should be “Standing up for Some Victims in Some Cases of White Collar Crime”.

I think we should pick the right battle to confront the Conservatives with respect to how they are short-titling everything. It is clear that they are very short on substance, and they are confusing the public, because in this case, the long title of the bill is accurate. It says, “An Act to amend the Criminal Code (sentencing for fraud)”. It alludes to the fact that there are other sections in the code that deal with fraud, and we are amending it. We are going to vote for it, so we are amending it to buttress that.

That should be enough for us. Justice issues should not be showboat items for the six o'clock news. We should be quietly and efficiently doing our work at justice committees and in this House to modernize the Criminal Code, to make the laws more effective.

What it really comes down to is that the Conservatives would stand up for victims of white collar crime a whole lot more outside the short or long title of this act if they resourced police officers, if they co-operated with their provincial and territorial partners and if they got out on the international scene, and in an effective way, instead of embarrassing Canada as they have on other fronts, this is a chance for them to be real leaders with respect to money laundering, the opening of bank accounts at offshore sites, and doing what is best in terms of restitution for the victims of white collar crime who are without their savings this Christmas.

For example, there are the people who have been the victims of Earl Jones. I have read many stories about how they have moved from large houses to little apartments. They probably do not have anything but a lump of coal to put under their Christmas tree. How would you feel, Mr. Speaker, if it were you who was denuded of your savings and I told you we were making four or five amendments after five years to the Criminal Code that really will not affect that? I do not think you would feel very good.

[Brent Rathgeber, Conservative, Edmonton—St. Albert, AB]

Mr. Speaker, does my hon. friend agree with the member from Mississauga South that the real fraud in this act is the title? Why does he not agree that Canadians want this legislation passed and are tired of quibbling over semantics and the titles of these bills?

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

Mr. Speaker, semantics, that is rich coming from the Conservatives. A lot of them do not know what the word means, but my friend over there does. I am a little shocked that he would say that we are all about battling semantics over here. The Conservatives are the ones who bring semantics up by using silly titles for bills.

I do not have a huge objection to titling a bill so Canadians can understand it. However, I think the member insults Canadians by suggesting that they would not understand a bill that says, “an act to amend the Criminal Code, sentencing for fraud”. I think they would get the idea.

As I said earlier, we can fool some of the people some of the time, but not all of the people all of the time. The people on the other side think they can fool all the people all of the time. They think that if they get on the six o'clock news and say, “standing up for victims of white collar crime”, that people in Canada think, eureka, it is done.

The people of Canada are smart enough to know that they have been denuded of their savings and that this bill to amend the Criminal Code, the proper title, “sentencing for fraud”, is a step along the way, but it is not the cure.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

Mr. Speaker, I am pleased to speak to Bill C-21. I believe I was fortunate enough to speak to it earlier and I do not think I had enough time.

I want to point out for my friends across the way that this is our job. We are not trying to hijack the process. We are doing our job in opposition. A lot of the time we will suggest the glass is half empty and the government members will suggest it is completely full, but that is okay. We still have a job to do and we want the record to show our concerns and misgivings. No bill is perfect. Every bill will get criticized usually in some way. That is my job and that is what I will do today.

Reflecting on some of the earlier comments, there is an air of pretense surrounding the bill. There is a sense that the bill will do a whole lot more than it really does. One of my colleagues said that this was just a sentencing bill, that it did nothing to stop crime. The sentencing occurs after a conviction. The conviction occurs after the criminal act. It has done nothing to deter or prevent that particular criminal act. By pretending a bill that has a whole lot to do with sentencing will have a whole lot to do with crime prevention is pretentious and we in the opposition have spotted that pretense. Whether or not the pretense is on the six o'clock news, as my colleague from Moncton just suggested, or whether it is in the short title of the bill, it is our job to identify it as pretense, which allows me to speak about the short title of the bill.

For the last couple of years, the government has consistently hijacked the short title of these bills. Not everyone knows the short title is section 1 of the bill, which tries to describe what the bill is about, but the government has hijacked that for a commercial. Conservatives want to spin what is in the bill. In fact, some of the time, as has been pointed out, they are spinning something that is not even in the bill. Therefore, members of the House have taken objection to some of the bills that go to committee.

The member opposite asked why were we concerned about semantics. It is not about just semantics; it is about hijacking the bill for a political purpose. We did not fire the first shot on this. It was whatever clever bird in the backroom that helped to prepare the bill decided to hijack the title and put something really different and sexy in the short title of the bill. It will get attention and every time people refer to the bill they will repeat this politically torqued short description. Most of my colleagues in the House, not on the government side, are saying no, that we will not do that. If the government wants to have a short title, put it in. Let it describe what is in the bill and do not torque the thing for the six o'clock news.

Also, by dealing with sentencing, I really do not think it will provide a lot of deterrence for future crime: denunciation, yes. However, by standing in this place and talking about the badness associated with any number of criminal acts, by telling the courts that when they process these crimes, when they attempt to address the needs of victims, it will be done in a certain way, shows a very reasonable level of societal denunciation with respect to the crime. I cannot imagine anyone would not be in favour of that. Putting a crime on the front page of the newspaper pretty much does the same thing. Denunciation is there, but deterrence is not.

My experience in this field over the last 20 years, not as a criminal but as a member of the justice committee, has always led me to believe that criminals who commit this type of offence and many other types of offences are not deterred by what is in the Criminal Code. It does not matter what the sentence is, they do not think they will be caught.

Torquing the sentencing in some of these areas, yes, because it reflects increased denunciation. It is like saying that we are really mad at people who commit criminal acts. That is okay, but it will not deter the person because that person does not think he or she will be caught.

In relation to white collar crime, at which this bill is said to be targeted, a lot of those perpetrators really do not think they will be caught. They think they have a really neat scam. Usually these things start small in the beginning and then they become bigger and a lot of people are hurt.

The objective, from a public policy point of view, really ought to be to get out in front with some kind of crime prevention, some early warning system that can intervene and protect the people who are about to be hurt. In almost all of these scams, once the money is in, it is gone. It is down the road somewhere. It is in lifestyle, gambling, whatever.

In some cases, these white collar crimes started off all right. There was an investment in real estate. Maybe the real estate investment was a little wonky, but it was still an investment in real estate. It could be swamp land, but it starts off with something tangible. Then things go sideways. The money gets diverted. The fraud and deceit begin. People are lied to. After a year or two or three, whether it is a Ponzi scheme or something else, the people are hurt, the investment is seen to be bad and lost.

This bill is almost like a fairy tale. It suggests that we will deal with the loss of the money. We will step in and make the court deal with restitution. That sounds great, but so do fairy tales. If restitution had been possible, the bozo who began the scam would have been able to pay back all or most of the money in the first place.

It is because the money is gone. I suppose there might be one case in hundred where the person who is convicted has a restitution order made against him or her may go back to work, or may go back into business, if the individual gets out of jail, and start to work to pay some of those restitution orders.

I wanted to reflect on the pretense, the fairy tale involved in this type of legislation. I do not, for a moment, want to suggest that I am not favour of victims getting restitution. That is the concept, that is the fairy tale and that is the hope.

I suppose we could say that if in one case out of hundred victims received restitution, it was worth it. I would have to agree with that. I just do not want the record to accept the pretense that this legislative solution will solve all of the problems, and there are a lot. Fraud is a very old section of the Criminal Code. It is based on the common law tort of deceit, and it is a criminal offence. It always has been.

However, since the Second World War there has been a huge increase in community interconnectivity in terms of money. We are not just moving dollar bills around. We have credit cards, cheques, money orders, debit cards, ABM cards and cash cards. There is no end to the money or money's worth in all the vehicles we have for spreading it around. We have chequing accounts, savings accounts, RRSPs, home ownership savings plans, RESPs, RIFFs, stocks and bonds, treasury bills, GICs, life insurance and pension plans, some of which are self-administered. However, with all of that financial interconnectivity, there is huge potential for money going sideways or being stolen.

I often think about how lucky we are that with all the billions and trillions of dollars moving around there is not more of it that goes sideways. It is probably because we in Canada and a lot of the rest of the world have at least some financial infrastructure that works. I am reasonably assured that the money I put into my bank I will be able to get back and I can transfer money safely.

There is certainly a whole lot more potential for fraud. Individuals who make one mistake in the beginning when handling people's money, which then leads to a second mistake, and then it escalates. All of this multiplies 1,000-fold when we put it all on the Internet. It can happen with collective amounts. I have to accept that there is a need to update our law on fraud in the Criminal Code provisions.

I want to look at the process in this bill that governs restitution. I had a question that was never answered throughout the process. I wanted to know what would happen if there were a conviction. The court must ask, under the provision, whether victims have had an opportunity to indicate if they would like a restitution order. It does not mean they get one, but the judge must ask if they have had that opportunity. The prosecutor will then respond yes, no or maybe and there is a form that victims can use. That is a step up. It is more like something in a small claims court but there is a form victims can fill out to describe their losses. That is not a bad thing.

The part that caused me to raise the question is in subclause 380.3(5). This is after there has been a request by a prosecutor or victim for a restitution order. It states:

If...the court decides not to make a restitution order, it shall give reasons for its decision and shall cause those reasons to be stated in the record.

That is in a case where the judge says that for particular reasons, he or she will not give a restitution order because it would be useless. I cannot imagine all of the circumstances that could be involved but the judge has that capacity to make a decision. What I am curious about is what happens if the court does not make a decision. It does not really say that the court has to make a decision. There could be a scenario where the court does not decide yes or no and no reasons are given.

After reading through the section, I got the impression that there was a gap. We have the situation where a judge decides to make a restitution order and the situation where the judge decides not to make a restitution order and those two situations are covered off in the bill. However, there is a third scenario where a decision is not made. The process that is outlined in the bill leaves it rather unclear and that usually causes problems down the road for judges, lawyers, victims or those who are accused.

Quite naturally, the government wants to pretend that this is a great bill but there is no place in this bill to discuss what happens with such things as the impact of a bankruptcy. As well, there may be some who will resist the obvious policy position of the government that, where there has been a theft or a fraud, a criminal court would be turned into a small claims court. I do not think the two fit. The work of a criminal court has a lot of bad stuff reflected in it. It is not the kind of environment where one would think there would be much positive coming out of small claims court atmosphere, which is being imposed in part by this bill.

However, we will see how it works out. If some victims, even a few, are happier to have had the chance to put their loss on the record and a chance, however small it might be, of some restitution, then I am happy about that and I do not want to carp about it. This could be a good change.

I suppose we could look at this from a public policy point of view. For example, let us say that we did have a criminal conviction but that there was no restitution order made for the victim. Let us say that the amount involved was manageable, not one of these $20 million scams, but about $10,000 or $20,000. If there was no restitution order and the person convicted serves a one or two year sentence, whatever it is, the victim in that case would probably need to go to civil court to recover those moneys. This provision would pre-empt that and put them together. The citizen who had been defrauded would not need to go to the civil courts. He or she has the court order and it is good for the sheriff. It is good to go if there are assets that can be seized to pay the debt.

I want to draw attention to another area. Franchise sales are accepted to be a provincial jurisdiction. It is a commercial transaction but it involves someone who has a business concept and he, she or it, as a corporation, will then sell a franchise right to a purchaser. This is a common happening. Many of the large franchise grantors are known and it is a very successful commercial vehicle for a small or medium-sized investor. However, over the last few years I have been made aware of problems in the franchising industry. I represent a riding in Toronto, Ontario and the provincial legislation just was not up to snuff. However, if one can get evidence of fraud, it looks like this legislation would cover it.

We may be solving more problems here than the government has actually advertised. It may be possible to rectify what has been a sad situation involving the sale of weak, non-existent or fake franchises to people who put up the first deposit, and the second deposit might be up to $100,000 or more, just to find out that there is nothing there. The guy who sold it to them could be living in Halifax, Calgary, Moose Jaw or Toronto.

[Ed Fast, Conservative, Abbotsford, BC]

Mr. Speaker, I thank the member for his good work on the justice committee and for his intervention on the bill. He referred to the bill as being a fairy tale bill but then he went on to talk about some of the good aspects of the bill. I hope his support of the bill is because of its substance. I would hope that the Liberal Party would not be on record as voting in favour of fairy tale bills.

However, to get to the substance of the member's comments, he referred to the issues of denunciation and deterrence, which are some of the principles of sentencing that our courts apply. He attacked the bill because of its mandatory minimum sentence of two years and said that it would do nothing to deter crime.

The one principle of sentencing that he did not refer to, hopefully not deliberately, was the whole issue of incapacitation, in other words, the prophylactic effect of mandatory minimum sentences on criminals. In other words, taking serious criminals out of society for longer periods of time so that during their period of incarceration they do not continue to commit those crimes and hopefully get some help.

I would invite the member's comments on the whole issue of incapacitation and the impact that mandatory minimum sentences have on ensuring that serious criminals are taken out of society in order to protect society against their ongoing crimes.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

Mr. Speaker, the member has quite properly raised a whole lot of issues and has managed to cover them fairly quickly. I am not so sure I can do it so quickly.

The bill would create what the member calls a prophylactic effect, but the bill has a procedure where if someone were convicted, he or she would be prohibited from doing certain things and maybe a lot of things in the commercial environment. Those prohibition orders can go a long way to keeping someone who has been convicted from engaging in that type of fraudulent activity. Therefore, there would be fewer victims. It is true that bill would do that. I am not saying that the bill does nothing. I am saying that the bill does a whole lot less than it is being held out as doing.

The deterrence does not do anything as far as I can see. The denunciation has some value. The prevention of people from continuing to engage in crime is real, but before that even happens the guys must get caught. There needs to be a criminal act and then an investigation, which is very expensive stuff, and then the conviction and the sentencing. I think we get way more bang for our buck public policy-wise if we were to look for ways to get out in front of some of this stuff.

I will accept the member's comment as a good one. The bill, while not as much as it is held out to be, does have some positive contributions.

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

Mr. Speaker, I am pleased to hear the member talk about the whole area of franchises. I did some work on this about 20 years ago and I found that conservative Alberta was the only province in the country to have actual franchise legislation. It was excellent legislation. I believe it was brought in during Peter Lougheed's time but, unfortunately, it was removed under Ralph Klein. I believe there is still no franchise legislation in any provinces other than what we saw in Alberta at the time.

The beauty of that legislation was that it required, among other things, that all deposits had to be in trust until promises were kept by the franchisors. Let us say that the franchisors promised advertising. An Ontario company would promise advertising in Saskatchewan if people signed up. However, when people signed up, the franchisors would not provide the advertising. The rule in Alberta was that if franchisors promised something like advertising, that unless and until they delivered, they were not to transfer those fees. I think that is a burgeoning area of interest right now.

Does the member think this bill might impact that franchise area? Does he not think there is room in the federal government for franchise legislation, at least with regard to federally registered companies? I know the provinces hold jurisdiction over provincial franchises, provincially regulated companies, but there are many federally regulated franchisors out there and I wonder whether they could be picked up by federal franchise legislation. In addition, I would like the member to expand on how he sees this bill being applicable to franchises.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

Mr. Speaker, the answer to the last question is that this bill is related to franchises. A fraud is a fraud is a fraud. The problem is getting in on a franchise scenario after the thing goes bad, getting the evidence of the deceit, of the fraud.

The biggest reason why I think we do not have provincial legislation governing franchises is the big boys. We all know who the big boys are: huge multi-billion dollar enterprises that properly use franchises in food service, restaurants, retailing, doughnuts. I will not mention any names. The big boys say please do not over-regulate this business area, because it would clog the thing and give rise to all kinds of problems and it would be worse off after the governments legislate. The provinces have said that they would leave it there. The problem is that the little guy is getting hurt and defrauded from time to time.

The federal government would have difficulty legislating in relation to franchises, because I think it is pretty much accepted to be a provincial jurisdiction, but in the meantime, there are smaller investors who are getting hurt. It is really sad when we see it. Then we look back with 20:20 hindsight and ask how they could be so dumb to leave $100,000 with this guy when they never got to see what their real estate location looked like. They might say that it was their brother-in-law or somebody who knew somebody else and they came from their home town. It is really sad, and there is an incapacity of government on a public policy basis to provide solutions to that. It is an unresolved issue, as my friend points out.

[Francis Scarpaleggia, Liberal, Lac-Saint-Louis, QC]

Mr. Speaker, I would like to ask my hon. colleague two questions. One is about restitution and the other is about tax issues facing victims of financial fraud.

On restitution, is there a way that the bill could be made stronger, such that restitution would be mandatory?

Second, does the bill make it easier in some way, perhaps through a reverse onus, for the government to garnish the assets of the white collar criminal. In other words, does the bill say that the criminal has to prove that his or her assets were not proceeds of crime?

On the tax issue, I have many victims of Earl Jones in my riding. One of the most crushing issues facing them is that they have to repay taxes that they have paid on income that was not really income, but their capital that had been recycled as interest or dividends.

I am just wondering, given that he is an experienced tax lawyer, if the member could give us some insight on how these victims could recuperate the taxes they paid or at the very least, not have to pay more taxes.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

Mr. Speaker, that is a very legitimate question. Certainly the Canada Revenue Agency can go back a few years, but some of these frauds take place over five and ten years and individuals will have paid tax on income from investments that, in some way, were fake. In other words, the income they were told they had never came.

However, being told they did have income, they were good people and they paid income tax on it. Certainly limited adjustment of tax paid going back some years is possible, but individuals have to be able to convince the CRA that the income they thought they had was fake.

These people are unfortunate. In the case referred to by my friend, there actually was an ongoing enterprise. There actually was money moving around, and therefore it is very difficult to dissociate the income that they were advised of from the enterprise that produced the income. A proportion of the income they were told they had was fake, maybe all of it, but because they cannot get at the records, it is very difficult.

My friend also asked about mandatory restitution. I do not believe that helps at all. If there are viable assets or the hope of assets, then a restitution order is an appropriate public policy disposition.

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

Mr. Speaker, I am very pleased to rise today to speak to this bill. Once again at the outset I have to say that we support the bill, as do all of the parties in the House, I believe. I think the bill will eventually achieve success.

To deal with some of the issues as to what the bill actually does and, further than that, what the bill should actually do and what the government should be doing to help with the problem gets the debate expanded a little bit.

The intent of the bill is to crack down on white collar crime and increase justice for victims through measures that include a two-year mandatory minimum sentence for fraud over $1 million, additional specified aggravating factors for the court's consideration at sentencing, a new type of prohibition order, new obligations on the judge with respect to restitution orders, and a new type of impact statement to consider at sentencing.

Those are the nuts and bolts of what this bill does. On that basis, for that purpose, we all support this bill. It has gone through committee at this point.

The problem is that the bill does not do some of the things we would like it to do, and will not put as big a dent in the area of fraud as the government pretends it will. It is really not going to solve a huge part of the problem.

For example, the fraud provisions of the Criminal Code were most recently amended in 2004 in response to the global impact of corporate scandals associated with such companies as Enron, Tyco and WorldCom.

These amendments created a new offence of improper insider trading, increased the maximum sentence for the offences of fraud and fraud affecting the market from 10 to 14 years and established a list of aggravating factors to aid the courts in sentencing.

The federal government also announced it would create a number of integrated market enforcement teams, which were the IMET teams, composed of Royal Canadian Mounted Police officers, federal lawyers and other investigators such as forensic accountants to deal with capital market fraud cases.

Now, that initiative was a positive initiative. That is sort of part of what best practices, as least best practices of the United States, would indicate that we should be doing. Those cases that I referred to, Enron, Tyco and WorldCom, were all American cases. We know that the Americans successfully charged, convicted and put in jail, I believe it was, 1,200 white collar fraudsters, including the executives of these three companies.

We were attempting in 2003, under the previous government, I gather, to come to grips with what would happen if such an experience as Tyco or Enron were to happen here. We had similar cases in Canada, such as Bre-X. I think members are familiar with the Bre-X situation. We adopted what I would think would be a positive initiative in that year, 2003.

The Government of Canada created the IMET program and funded it through the RCMP. Ten IMET operations were set up in four of Canada's major financial centres, and the mandate was to investigate and lay charges for serious criminal activity involving capital markets.

According to the 2007-08 IMET annual report, the program's total budget increased from $13.2 million in 2005 to $18.9 million in 2008, and then the budget decreased to $16.1 million in 2008-09. From December 2003, when the program began, until March 2008, 5 investigations led to 9 individuals being charged with a total of 29 Criminal Code offences.

In fiscal year 2008-09, however, 17 individuals were charged with 979 counts. A total of 5 individuals have been convicted since the IMET program was established, with sentences ranging from 39 months to 13 years.

The issue really becomes why and how the Americans can put away 1,200 white collar criminals in the last 5 years and Canada manages to convict only 5. Clearly it is an issue of resources, an issue of commitment on the part of the government to pursue these sorts of activities in this country.

The fact of the matter is that Conrad Black, while he committed his crimes right here in Canada, which involved the non-competition fees when he sold his newspapers to Izzy Asper and the Canwest organization, was able to pocket $20 million or $40 million in non-competition fees. While common in business, those fees were supposed to go to Hollinger, his company. When the Hollinger shareholders discovered that those fees had been diverted and that Conrad Black and his cohorts had pocketed the fees and made off, they of course went to the authorities to try to get restitution. It was the American system, as imperfect as it is, that actually got results and Conrad Black did get put in jail. I think he is out now, a bit too early, but at least he got put in there.

That to me is the difference between the American system and the Canadian system, in that it actually can show some results against white collar crime, whereas in Canada we have almost no good news on that front.

I gave the most recent IMET results, but I have a quote here from Canadian Business Online, from September 24, 2007. The headline was “Canada's losing war against white-collar crime”. The author was talking about the RCMP's launch of the IMET, the integrated market enforcement team that I spoke about, an elite squad of investigators who are supposed to work together to crack down on white collar crime, but the results are very disappointing. The United States justice department racked up 1,200 convictions against high-level executives, from Enron and other companies in the last 5 years, and at that time, in 2007, the IMET had only managed to get 2 charges and both of those charges were against the same person.

However what is interesting is that the author of the article went on to say:

Just ask people on Bay Street who they are afraid of. It's not the cops, it’s not the...[Ontario Securities Commission].

That is what they should be afraid of or concerned about.

It's the U.S. Securities and Exchange Commission because they have real teeth.

Is that not an irony, that on Bay Street, Toronto, the financial hub of Canada, the players are not the least bit worried about Canadian police? They are not worried about the Ontario Securities Commission. It is a regulator. They are not concerned about that regulator, but it is the U.S. Securities and Exchange Commission that has some real teeth and they are concerned about it.

Clearly we have to upgrade our system to be on par with the American system, and we all know that the Americans are not exactly happy with their system. They are making some changes to their system as well, because there was a lot of abuse during the last five years in the United States. It is just that they seem to be able to catch a lot more of it and they have managed to get results when they take action, as opposed to us.

I feel that part of the problem here, and it is also a problem in the United States, is that there is too cozy a relationship between the regulatory authorities and the people they are regulating. Rather than hire police-oriented people and enforcement-oriented people into these regulatory bodies, what they tend to be is a retirement ground for people from the industry. So if someone works in the insurance business or investment business for a number of years and then a job opening comes up in the Securities and Exchange Commission, they apply, they get the job, and now they are regulating the very company they were just working for the week before.

And so, it presents itself as an extremely cozy relationship when we have the regulators and the regulated companies attending the same Christmas parties, golfing together at golf tournaments, and it is no surprise that when something happens, they do not move quickly enough to deal with the problem.

I want to talk about Harry Markopolos because his is a very interesting case, too, in the United States, because when these schemes, Ponzi schemes and others in the United States, are uncovered, it is often discovered that in fact there is somebody who knew about the scheme, who blew the whistle on the scheme as much as 5 years to 10 years before the scheme actually fell apart.

That was the case with Bernie Madoff's Ponzi scheme. A number of years before, I believe as far back as 10 years before, Harry Markopolos discovered what was going on with Bernie Madoff. He, at the time, was working in the same type of investments that Madoff was. His company, Rampart Investment Management, in Boston, Massachusetts, came to Harry and said, “We have a competitor out there by the name of Madoff”, of whom not that many people were aware at the time although he had been around for many years, “and we have trouble understanding how he is managing to get consistent gains on a month-by-month basis”.

That is one of the red flags for irregularities and Ponzi schemes, when a fund someone has invested in is giving a positive return month after month when any fund manager, no matter how good he or she is, will have some months where they make a decent return because of selling off some of the assets and buying others. They are going to have some months where they make 20% and they will have some months where they may lose 2% or 3%.

However, in this case, Madoff was showing a positive return consistently, month after month, year after year.

Harry's boss asked him to check into this situation to see how Bernie did it, his thought being, “Whatever Bernie is doing, maybe we should be doing the same thing. We have to learn from what he is doing and follow his pattern”.

It only took Markopolos a half hour to prove that this strategy was not possible, on behalf of Madoff, and he reported it to the Securities and Exchange Commission on several occasions over a 10-year period. He documented his files and sent them in to the investigators and found that the investigators would say, “This man has been around a long time. Nobody else is complaining. You are the only person finding fault with him. Not only that, but you are a competitor, right? So we should not listen to you because you have an axe to grind. You want to find out what his secrets are so you can simply employ them as well”.

The sad part of all of this is that I think perhaps $65 billion has gone missing because of the Bernie Madoff situation.

Yes, he has been put in prison for 150 years and there is some type of restitution taking place but very little.

The fact of the matter is that these types of schemes are not all big ones like the Bernie Madoff scheme. We have them in Manitoba on a much smaller scale of $50,000 to $100,000 being stolen by investment fund people, investors and so on. This is a common problem.

What we will see is during good times these schemes tend to take off, they are very robust and tend to expand during good economic times. It is when the economy turns, whether a sector turns or whether the whole economy turns, flat lines, and drops a bit, particularly in a recession or depression, that these things are exposed

Essentially what happens is a Ponzi scheme is a type of scheme whereby the money that is brought in from the initial investors is paid out to the old investors to keep them in the scheme and no money is actually invested in the market.

There are all sorts of different types of schemes. The Ponzi scheme was developed by Charles Ponzi who has a very storied history in the United States and actually a connection to Montreal. I spoke about that one other time in a previous speech. He had involvement and some training in what later became the Ponzi scheme concept in Canada, in Montreal.

We have other types of frauds that are very common and actually very close to home. We have mortgage frauds. One such mortgage fraud is defrauding essentially the bank. The bank turns the responsibility over to CMHC, so in fact it becomes a CMHC responsibility for most of this. There is one being uncovered right now in Alberta. As a matter of fact, one of the members of the government has been mentioned as having some connection to it. We are talking about millions of dollars that are being defrauded from the mortgage companies.

We had one in Manitoba in 1995. A gentleman came into my office with a box of files and gave us a lot of information on a scheme involving mortgage fraud. Essentially what it boils down to is an individual buys houses. He uses straw buyers, usually people who are just recently out of prison or first-time buyers who are sort of naive. He gives them a couple of thousand dollars cash and buys them some appliances and has them put the cash in the bank to get a receipt that the money is in the bank. That is in order to obtain a mortgage on a house that he has previously bought and now he is selling to them at a much higher price.

Perhaps he bought the house, in today's numbers, for $100,000 and practically the same week he turns around and gets the straw buyer to buy that house from him for $150,000 and he gets an appraiser to give him an appraisal for that amount.

It has to involve a real estate agent, appraisal, a lawyer and so on. In the Winnipeg situation with the RCMP we spent a lot of money uncovering this whole mess. At the end of the day what really happened? The guy that perpetrated the whole thing is still in a business, the window and door business now. I do not know whether anyone was really seriously disciplined, the lawyers, the real estate brokers, the appraisers, and whether anyone lost their jobs. It certainly got a few headlines at the time. However, there are many variations. It is not all just Ponzi schemes.

In the United States, and I know I am running out of time, so I may be able to deal with this issue in questions and comments, but my colleague, the member for Windsor—Tecumseh had some answers to this--