Information & Ethics Committee on Dec. 11th, 2020

[The Chair, Conservative, David Sweet]

Okay, colleagues, we're going to go to our third panel. We have with us Denis Gallant, who's a lawyer. He is testifying as an individual. We have Mark Blumberg from Blumberg Segal LLP. We also have Jeramie Scott, senior counsel for the Electronic Privacy Information Center.

I have you in the order in which I just introduced you.

Monsieur Gallant, are you okay to go ahead as the first presenter?

[Denis Gallant, Lawyer, Roy Bélanger Avocats S.E.N.C.R.L., As an Individual]

Yes, I'm ready, Mr. Chair.

[The Chair, Conservative, David Sweet]

I believe that our clerk has advised you that five to seven minutes would be the maximum.

[Denis Gallant]

That's right.

[The Chair, Conservative, David Sweet]

You have the floor.

[Denis Gallant]

Good afternoon, distinguished members of the Standing Committee on Access to Information, Privacy and Ethics.

First, I want to make it clear that I'm not an ethicist or an ethics expert. I'll leave it to much more qualified individuals to shed the proper light on this matter. I don't claim to have a thorough understanding of the rules for awarding public contracts at the federal level. However, I believe that my experience in various fields could help you with your work.

I was the assistant chief prosecutor of Quebec's commission of inquiry on the awarding and management of contracts in the construction industry, also known as the Charbonneau commission. The commission lasted almost three years. It was chaired by the Honourable Justice Charbonneau of the Superior Court. I was also the first inspector general of the City of Montreal, with a mandate to promote integrity and to prevent and combat any fraudulent practices in the awarding and fulfillment of City of Montreal contracts. Lastly, I was president and chief executive officer of the Autorité des marchés publics, an organization created as a result of the landmark recommendation of the Charbonneau commission. The mission of this organization is to oversee all public contracts in Quebec.

In Canada, both at the federal level and in all Canadian provinces, the awarding of public contracts is strictly regulated by various laws or regulations. The principles underlying the enforcement of these rules are to ensure the best product or service at the best price for all Canadians; to guarantee freedom of competition; and to give equal opportunity to all individuals who want to obtain a government contract. These goals have been enshrined in our legal system for a long time. They're often reiterated by courts across Canada.

To meet these goals for awarding a public contract for a certain amount, such as $100,000 in Quebec, a public call for tenders is mandatory, unless there are exceptional circumstances. The public call for tenders basically aims, for a public contracting authority, to simultaneously reach all the interested parties that can enter into a contract and that have the skills and expertise required to fulfill a public contract. The purpose is to encourage more competition. However, the various pieces of legislation regarding government contracts in Canada state that a contract may be entered into because of an emergency or another exceptional situation.

No one is calling into question the exceptional global situation that we've been facing since the end of last winter. No one is disputing the urgent need for our leaders to take action. They must invest massive amounts of money to help Canadians deal with the disastrous effects of the pandemic, particularly on the economic front. However, the urgency must not become a reason to circumvent the mandatory rules governing public contracts. The urgency shouldn't also contribute to a lax approach to monitoring and overseeing taxpayer dollars.

As a former inspector general of the City of Montreal, and also as a Canadian taxpayer, I'm very concerned about the safeguards in place to prevent price gouging, possible fraud and waste. I also wonder whether we've obtained the best products and services at the best price from those companies or organizations that have dealt with or that continue to deal with the government by mutual agreement, citing the urgency of the situation.

As a starting point for discussion, we could draw inspiration from the work of some inspectors general offices in the United States. By the way, I'm a certified and trained inspector general. I'm also a member of the board of directors of the Association of Inspectors General in the United States. I'm the only Canadian member of the board. I'll also be a member of the executive until the end of December.

These offices have live integrity monitoring and oversight programs. We know that hurricanes and other natural disasters are common in the United States. In the event of a massive influx of federal or state money following a natural disaster, integrity monitoring is always carried out to prevent price gouging, waste and possible fraud. I can tell you more about these integrity monitoring programs, if you have any questions.

Once again, I would like to thank you for inviting me to appear before the committee today. I hope to be able to contribute in some small way to the work of this committee.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Gallant.

Now we will go to Mr. Blumberg. You have up to seven minutes.

[Mark Blumberg, Partner, Blumberg Segal LLP]

Thank you for the opportunity to speak to the committee today.

My name is Mark Blumberg, and I'm a lawyer at a small firm in Toronto that has 10 lawyers. We focus exclusively on non-profits, charities and philanthropy.

I'm going to talk today about the scandal involving the Canada student service grant and WE Charity, and the fact that it isn't, unfortunately, over. These comments are a point in time, and the saga is continuing.

There's a lot we don't know about the scandal. Having various committees and the House of Commons looking at these issues in the past was helpful, but it was quite inefficient. Also, there are a lot of complicated issues at play, such as charity compliance issues. I would say that in my opinion, these committees are not ideally equipped to deal with these types of investigations. That's why I've suggested in the past that a public inquiry be launched into this particular scandal, and then the various committees could go back to focusing on their regular work in these difficult COVID times.

There are essentially three somewhat interlinked components to the scandal.

First, the design of the CSSG program itself was problematic. Then there's the federal government's decision-making process. I'm not an expert in conflicts of interest, but it appears to be conflicted.

Then there were many concerns about the choice of WE Charity to deliver this particular program. This is not just about a $543-million program; it's about the federal government—during COVID, when the charity sector was under tremendous strain, as it continues to be—giving almost nothing to the charity sector. Certainly it was almost nothing when one thinks of the tens of billions being spent, and then the government proposes to give $543 million to one organization that has a checkered past. In a sense, it's a contrast in the way this one charity was treated, with a $543-million grant, compared with how the federal government dealt with the rest of the charity sector, which has largely been silence and providing absolutely nothing to most charities. That's one major facet.

Another big issue is this. Was there tremendous influence by the finance department on Employment and Social Development Canada, ESDC, or did ESDC think that the WE Charity was a great charity and uniquely able to deliver this program?

If it's the first case—the pressure from finance—then Mr. Morneau has resigned, and perhaps that influence will stop. That's a particular circumstance.

If it's the second—the possibility that ESDC actually thought WE Charity was a great charity—then it's a much more serious issue. It would really call into question the capacity of ESDC to undertake due diligence on charities and its decision-making. If this is really an ESDC decision, as many Liberals have claimed, then significant changes may be needed at ESDC, or tens of billions in funds could be equally poorly allocated over the next few years. Assuming the finance department was not pressuring ESDC, how ESDC could have gotten this so wrong is mind-boggling. That is one of the many reasons I think a public inquiry into the CSSG WE scandal is worthwhile.

Many compliance issues have been raised by the whole WE Charity scandal, including—but not limited to—using multiple corporations, some of which are Canadian registered charities, and a lack of clarity among the different corporations; treatment of employees during employment and post-employment; reporting and transparency; lobbying of government officials without registering; partisan activities; social enterprise and business activities; government grant-making processes and fairness; owning large amounts of real estate; corporate sponsorship and access to children; compensation of founders; governance; and having founders involved in the charity for a long period of time. These are some of the many issues that have been floating around over the last few months.

Trust in the charity sector is vital. Public trust is like oxygen: You only really notice a problem when it's in short supply. Will Canadians trust charities less because of the WE Charity scandal? Will they think the problems of WE Charity are reflective of the broader charity sector and trust the sector less?

WE Charity was quite a unique organization, but it wasn't completely unique. Therefore, its indiscretions may affect the reputation of the charity sector. It may take years to see the full impact of the scandal, but we are already seeing significant declines in public trust of charities, despite huge gains in public trust at the beginning of COVID for the heroic work done by some in the charity sector in response to COVID. The biggest concern for the charity sector is that the WE Charity scandal will hurt the reputation of the sector, undercut donations and undercut government funding.

Transparency is vital for maintaining public trust. We are concerned that there's not nearly enough transparency in the Canadian charity sector. Over the last 10 years, the CRA, for various reasons, including maybe pressure from certain special interest groups, has actually been reducing the amount of information they publicly collect and provide about charities. Other countries, meanwhile, have been increasing transparency on charities.

Having inadequate transparency on registered charities in Canada means that there's not enough information on WE Charity available and very little on ME to WE, the for-profit arm. It's hard to understand the full picture when you can only see half the story.

I've submitted to the finance committee 10 recommendations for improving the regulation of charities in Canada. I'll just mention three ideas that I'm going to bring to this committee.

Currently, if the CRA is aware that a charity is involved in very problematic activities, they are not allowed to disclose that information—not to the public or even to members of Parliament. The federal government should amend the confidentiality provisions of the Income Tax Act, section 241, to allow the CRA, at its discretion, to disclose serious non-compliance of registered charities.

Second, with registered charities there is some public information available from the public portion of the T3010, but when it comes to non-profits that are not charities, which is 80,000 to 100,000 organizations, the CRA discloses nothing, and there is very little information available on many groups. We have proposed that non-profits—as many already do, and certainly the bigger ones—file the form called the T1044 every year. They're filed with the CRA, where they are input into a database by the CRA. These should be disclosed. It's no extra effort or burden for either those non-profits or the CRA, but it would give us at least a little bit of an idea about that other part of the non-profit sector.

We've also proposed that the federal government provide funding to the Charities Directorate to increase the amount of information collected and distributed on charities.

Those are three proposals out of the 10 that we had made. We essentially want to balance the regulatory approach to charities appropriately to their importance and to the tax subsidy provided to charities.

The WE Charity scandal raised a number of very important questions about the regulation of registered charities. Either regulation of the charity sector will be enhanced or the reputation of the sector and public trust in the sector may decline.

I've publicly provided detailed comments on—

[The Chair, Conservative, David Sweet]

Mr. Blumberg, I gave you an extra 30 seconds, but I'll have to end it right there. If there's any other point you want to make, you can certainly make it as we get into the question period.

[Mark Blumberg]

No problem.

[The Chair, Conservative, David Sweet]

Mr. Scott, you're up, sir, for up to seven minutes.

[Jeramie D. Scott, Senior Counsel, Electronic Privacy Information Center]

Thank you very much, Mr. Chairman and members of the committee. My name is Jeramie Scott, and I am senior counsel at the Electronic Privacy Information Center, also known as EPIC.

EPIC is a public interest research centre in Washington, D.C. It was established in 1994 to focus public attention on emerging privacy and civil liberties issues and to protect privacy, freedom of expression and democratic values in the information age.

As part of EPIC's open government work, EPIC makes frequent use of the Freedom of Information Act to obtain information from the United States government about surveillance programs. Public disclosure of this information improves government oversight and accountability. It also helps ensure the public is fully informed about the activities of the government.

EPIC routinely files lawsuits to force disclosure of agency records, and it is my understanding that the committee is interested in EPIC's Freedom of Information Act lawsuits related to the U.S. government's use of Palantir software.

EPIC has litigated two Freedom of Information Act cases that might be of interest to the committee. The first was a case against U.S. Customs and Border Protection to obtain records related to the analytical framework for intelligence, which is used to assign risk assessments to travellers.

The more recent lawsuit was against U.S. Immigration and Customs Enforcement, and it sought records pertaining to systems built on Palantir software. That system is the Falcon system, and the Falcon systems are built on Palantir's Gotham platform, a proprietary software product that allows users to search, visualize and analyze complex datasets. Falcon serves as Immigration and Customs Enforcement's primary data storage and analysis system.

The Falcon system pulls data from several government databases and contains numerous categories of sensitive information, including biographical information like dates of birth, places of birth and social security numbers, and financial data such as bank account numbers and transaction numbers. The Falcon systems also contain data from commercial databases and open-source information publicly available on the Internet, including information from social media sites.

According to the documents obtained by EPIC through the Freedom of Information Act, Falcon systems also contain call record data and GPS data, and, through the use of Palantir software, the Falcon systems are capable of linking together this and other data through social network analysis. The Falcon system uses the massive amount of data it contains and analyzes that data with Palantir's software to locate undocumented immigrants to apprehend and deport. Reports indicate that the Falcon system was used in a raid last year in Mississippi that resulted in 680 arrests. The raid was one of the largest in U.S. history. It terrorized the immigrant community in Mississippi and separated hundreds of individuals from their families.

There is an ongoing campaign against tech companies like Palantir that provide the technical tools for ICE to conduct raids like the one that occurred in Mississippi.

Palantir is also linked to the United States Customs and Border Protection's analytical framework for intelligence. It was the documents obtained by EPIC that confirmed Palantir's involvement in Customs and Border Protection's analytical framework for intelligence system. This system uses information from federal, state and local law enforcement databases as well as commercial databases. This information is often sensitive personal information and includes biographical information, personal associations, travel itineraries, immigration records, and home and work addresses. The information is used to generate risk assessments of travellers and to generate intelligence reports. The capabilities of the analytical framework for intelligence include the ability to perform geospatial, link, and temporal analysis of the data.

In addition to Palantir's controversial work with the U.S. government and particularly Immigration and Customs Enforcement, Palantir has been scrutinized for the predictive policing service the company has provided to various law enforcement agencies within the United States. Palantir's predictive policing services include identifying potential offenders and their networks.

Palantir compiles a target list of likely offenders and victims based on an analysis of mass datasets from a variety of sources, including social media, criminal databases, probation and parole information, jailhouse phone calls, automated licence plate reader systems and law enforcement case management systems, among other sources.

Palantir's predictive policing product performs social network analysis to build webs of social connections to identify potential offenders or victims without prior police contacts.

These tools sweep in vast numbers of people who do not have a strong connection to any criminal activity.

A couple of years ago, Palantir's work in predictive policing was scrutinized after it was revealed that the company had been secretly using the city of New Orleans to test its predictive policing technology. Palantir had a pro bono relationship with the New Orleans police that was only known to the mayor and the city attorney. The city council members were unaware of the program until it was made public by news reporting. After the story broke about Palantir's work in New Orleans, the city ended the partnership.

In almost every case, Palantir has sought to implement predictive policing without community knowledge or consent. In general, Palantir has tried to keep secret its capabilities and how the company's services are used by government entities.

With that, I would be happy to answer any questions the committee may have.

[The Chair, Conservative, David Sweet]

Thank you very much for that testimony, Mr. Scott.

We'll move on to our question-and-answer session now. Mr. Barrett, you have six minutes.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

Thank you, Chair, and thank you to the witnesses for your opening remarks. I appreciate your being here today.

My first question is for Mr. Blumberg. I'll roll two questions together so that you can give a comprehensive answer within the limited time that I have.

With respect to due diligence—and, I believe, the lack of due diligence by the federal government in awarding the CSSG contribution agreement to the WE organization—could you comment specifically on the red flags that I believe should have been raised with respect to the state of the WE organization's board, as well as the publicly reported information about the disarray of their financial situation?

Could you give me an answer to that, Mr. Blumberg?

[Mark Blumberg]

The first inkling I had that there was a big problem with WE Charity—and it was very public—was a 2010 Globe and Mail article. It was about two pages in The Globe and Mail. It was very long. I still remember reading it on an airplane a long time ago, and there were lots of questions that came out of it.

From about 2010, then, I think it would have been pretty clear to people. Anyone in the charity sector who's ever spoken to three people who worked at WE would have some interesting stories to tell you. WE was just very much unlike any other group I've ever seen.

Then also Canadaland, which is a news podcast sort of site, did some extensive coverage around 2018-2019 on a number of issues that were very public and very much out there. I would say that even for a $500,000 grant, one would easily have been able to pick up these many issues if one wanted to pick them up.

I don't know if that answers your question, but I would say that there definitely could be some huge improvements. On the one hand, I sort of hope that it was inappropriate pressure by the finance minister, because I'm a big believer in government and governmental action and I think the government in general has done a lot of good things during COVID. I would prefer that it not be a problem of ESDC really thinking this was a great charity, because if it did think that it was a great charity, uniquely able to do this and all that, then I think there have probably got to be some changes there.

I'm not hoping that's the right answer, but I unfortunately don't know and I think that's why we need a public inquiry to actually look deep into these issues, because it involves not just this money but lots of other money. The charity sector, the non-profit sector and many parts of society are very reliant on ESDC, and we want to make sure there's great decision-making going on there.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

With respect to the claim you referenced, the idea that the WE organization was the only organization that could deliver the CSSG, what do you make of that? Why do you think that it's not a credible claim?

[Mark Blumberg]

One issue is the $543 million. That was very problematic for many people in the charity sector, but the claim Trudeau made that this was the only organization that could handle this was phenomenal and angered many people, because it is just incredibly ridiculous. It's demeaning to the charity sector. The charity sector has huge capacities in people, expertise and other things, so for something like to be said was just offensive to the charity sector.

On the plus side, Trudeau did cancel the program very quickly, which I want to give him credit for, and the money that was given was brought back. However, there are a lot issues, including detailed information on 30,000 or 40,000 people, including some who might be minors. I don't know what happened to that information and to other very detailed information WE has been collecting over the years. I would be certainly a little worried about that, if this is a committee tasked with privacy, because it could involve hundreds of thousands of youth and young adults in this country.

In terms of the decision-making, the actual decision-making and the conflict issue is a big issue in Ottawa. Within the charity sector, the biggest concern was that this program was very poorly constructed. That's an ESDC issue and not a WE issue. Second was the choice of WE. The exact details of what the cabinet did are of less interest to the charity sector, I would think, but certainly so little has been done for the charity sector, yet so much money was going to be given to WE. It was a $60-million organization getting $543 million to spend on all this stuff.

While the charity sector usually gets 12% overhead costs with government grants, this was much higher overhead, potentially, depending on how the framework worked out in terms of the number of people involved and things like that.

I would certainly not see this as a good situation, and hopefully we'll get more answers in the future.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

I appreciate that.

You made reference in your opening comments to organizational structure. For the WE organization, it's hard for most people to take a look at where it begins and where it ends, and you referenced reporting by Canadaland as one group that has done a bit of a dive into that.

Do you think that type of structuring is intentional? Is creating a new legal entity specifically to deliver on this massive government program done to make it more difficult for people to understand? Why do you think it was structured in such a complex and hard-to-follow way?

[The Chair, Conservative, David Sweet]

Mr. Blumberg, keep that question in mind, because we ran out of time. You might be able to squeeze in an answer on it in another round.

We'll go to Ms. Lattanzio for six minutes.

[Patricia Lattanzio, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chair, and thank you to the witnesses who are before us today.

I'm going to direct my questions to Mr. Denis Gallant. I worked with the inspector general back in the day in my function as a municipal councillor for the City of Montreal. I was actually vice-chair of that committee, so I can attest to the excellent work that was done by the committee and Mr. Gallant. Mr. Gallant, I'm pleased to see you here today.

Mr. Gallant, do you believe the federal government could benefit from adopting Quebec's public procurement integrity provisions, and if so, would you provide this committee with details and examples?

[Denis Gallant]

Thank you for the question and for your kind words, Ms. Lattanzio.

Yes indeed, the federal government could learn a lot from what is going in Quebec. That scandal is now behind us, but it wasn't so long ago.

To motivate myself and to prepare for the meeting today, I reviewed the report by the honourable Justice Gomery, which was released in 2005 following the sponsorship scandal. Some things have changed in the federal government; we have goodwill and good laws, but no continuous oversight. You can have the best laws in the world, but if no one is watching over the process, issues of waste or fraud can arise.

Through the Office of the Inspector General or, now, the Autorité des marchés publics in Quebec, it is possible to ensure that, when over-the-counter contracts are awarded, a neutral and independent body provides continuous oversight. A similar body, which could be appointed by the House of Commons, would be able to raise a red flag in record time to indicate an issue and that the contract should not have been awarded by mutual consent.

Mr. Blumberg stated that, after the Autorité des marchés publics was established, amendments were made to Quebec's Act Respecting Contracting by Public Bodies. He is absolutely right. Now, to award a contract by mutual consent, the electronic tendering system must send a notice of intent. The notice indicates that a charity or business is about to be awarded a contract worth such and such an amount by mutual consent, and that is why no tendering process is taking place. This public request for proposals allows people who are interested and able to provide a service to the government in a tight 15-day timeframe.

Let me go back to the example of WE Charity. I know it was urgent, but was granting scholarships to students so urgent that no survey or call for interest was necessary? From now on in Quebec, due to the amendments made to the Act Respecting Contracting by Public Bodies, these must be done. Otherwise, a complaint could be filed with the Autorité des marchés publics, which has the power to cancel any contract in violation of the rules. I believe that the federal government could learn from this approach.

[Patricia Lattanzio, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you for your answer.

My next question is directed to Mr. Blumberg.

Mr. Blumberg, in an article that's posted on your website, canadiancharitylaw.ca, you note there are three components, as you discussed, that you see fit to address the issue involving the WE charity. You also note that different people are interested in different parts of the story—mainly the opposition parties, as they are only interested in part of the story because it makes the government look bad and benefits them.

Can you perhaps expand on the comment that you made on your website?

[Mark Blumberg]

Sure. In the WE Charity scandal, I could criticize the government and the opposition parties for how they're dealing with it, but I'm not totally shocked that each is dealing with it that way. There are some partisan Liberals who have told me a hundred times that there is no scandal, nothing was wrong and there's absolutely no issue here, so if you don't register off and you have 65 meetings, it's no issue. I've heard that from Liberals and I find it shocking.

I find some of the commentary by some of the opposition at times is not correct or is partisan. As it comes across to me, some of it doesn't make a lot of sense, but some of it is very good.

I think both sides, in the way this has been handled.... In fairness, these are politicians handling a very complicated, difficult story. That's why I think it would be better to put it to a public inquiry so that someone can really look at these issues closely and come to a determination.

As I said, I probably know about 20% of the story, based on watching this very closely for many years and certainly for the last six months. There is so much information that unless there is a public inquiry, we probably won't be able to find it out.

There was an earlier question about whether it was sort of an accident that WE had these different structures. I think you can't say it was an accident. You don't accidentally have a charity. However, what I find very weird is that.... It's very clear from the public record why, for example, the WE Charity Foundation was set up, because we have a copy of the charity application, which says it was being set up to be a real estate holding company. When people are saying that's incorrect or something, I'm scratching my head, because this is a document that WE provided to the Canada Revenue Agency.

[The Chair, Conservative, David Sweet]

I'm sorry to interrupt you again, Mr. Blumberg, but the committee's time is always our enemy. I have to adjudicate to some level of fairness. I tried to stretch it a bit to allow you to finish your answer, but this is as far as I can stretch it in this case.

Ms. Gaudreau, you have the floor for six minutes.

[Marie-Hélène Gaudreau, Bloc, Laurentides—Labelle, QC]

Good afternoon, gentlemen.

I don't know if you heard what I said earlier. I was explaining that I am new here and that I have learned a lot. You just said out loud what we are silently thinking or perceiving, given the 20% or so of the story available to us. I had a series of very specific questions, but you have answered almost all of them.

People say that there is partisanship on both sides and that it's a political game. Please! We are managing a pandemic that by far transcends those excuses, whether it suits us or not.

I want to get your opinion. Are we looking at the way we do things and realizing that we really missed the boat in 2020 when it came to protecting public funds and privacy? What countries should we looking to as models on these issues? Why not take the opportunity now to review the integrity process rather than dragging things out and filibustering?

Christmas is here and not a moment too soon, because I am totally discouraged. My children have no faith in the government and are asking me to step in and show people that it is possible to have that faith. I need your help and I would like to hear what each of you has to say about it. I apologize for being so intense.

Mr. Gallant, do you have any comments?