Finance Committee on May 6th, 2021

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Ms. Iacovelli, I would remind you that the act that gives the committee its powers overrides the professional secrecy of accountants. You can consult section 48 of the Code of Ethics of Chartered Professional Accountants of Quebec if you want to verify this.

I will now refer to the CBC website article published on April 27 by two journalists, Mr. Cashore and Mr. Zalac, who reported having found, through the Paradise Papers leak, internal emails written by Sandra Georgeson, an administrator for several shell companies incorporated in the Isle of Man for KPMG's Canadian clients.

Here's what it says:

In an email dated Dec. 16, 2015, with the subject line “Canadian Tax Investigations,” a manager asked Georgeson "who was [the] promoter of the scheme/product"? She answered that it was “KPMG in Canada”...

Do you acknowledge that as true?

[Lucia Iacovelli]

I'm sorry; I'm not sure that I fully understood. Was it with respect to the offshore structure?

I'm not sure that the translation is coming through clearly.

[The Chair, Liberal, Wayne Easter]

Do you want to just quickly summarize that again, Gabriel?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

In the Paradise Papers leak, journalists reported finding internal emails written by Sandra Georgeson, an administrator for several shell companies incorporated in the Isle of Man for Canadian clients.

She said that KPMG in Canada was the promoter of the scheme/product.

Do you acknowledge that as true?

[Lucia Iacovelli]

I think we've always been forward about the fact that we created the offshore structure, but with respect to the Isle of Man, there are other offshore structures that were available at the time that were not KPMG offshore structures.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

In the email of December 16, 2015, Sandra Georgeson attached a spreadsheet with the names of four companies related to the KPMG scheme, which may have been used by the fraudsters in the Cinar, Norshield and Mount Real case. Those were Katar, Sceax, Spatha and Shashqua.

Once again, I understand that you are distancing yourself from that, and that, although those four sword companies were associated with KPMG in Canada, you are telling us that you are not connected to them in any way, shape or form. Is that correct?

[Lucia Iacovelli]

That's correct. We are not in any way connected to the “sword” companies. There are a few emails in which Ms. Georgeson actually contradicts herself. In one email she says that Cordery was only the service provider for KPMG, when we know that Cordery was also the service provider for nine other non-KPMG OCSs and was also the service provider for the “sword” companies, which we had no involvement in.

She also goes on to indicate that the service provider provided other services and not just the OCS services. She contradicts herself in saying that was the only service that she provided. She also goes on to say that the OCS was unique to KPMG. We know for a fact that it wasn't unique to KPMG. There are all sorts of OCSs that are provided within the Isle of Man.

With respect to Ms. Georgeson, I'm not suggesting she is lying; I'm suggesting that she is an administrator who was doing her job but really didn't provide the same level of due diligence that we would have in terms of searching out who was included within the KPMG offshore companies.

We've done extensive searches within our databases, Mr. Ste-Marie. We've spent hours upon hours searching our databases, including forensic reviews. We've involved external legal counsel as well. We've interviewed everybody involved with the offshore structure.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

I have to interrupt you. That's all in the article.

I have one last question.

Has KPMG Canada ever had Norshield and Mount Real as clients?

[Lucia Iacovelli]

With respect to Mount Real, it was not a client of KPMG. With respect to Norshield, we were the auditor of a fund that is in a chain of funds with respect to Norshield. That fund was Olympus. When we were the auditors, there was a sophisticated fraud that was undertaken at Olympus, and unfortunately we didn't uncover that. The fraud involved an inflation of asset values, which in my understanding is different from the fraud that was undertaken with respect to Cinar and the “sword” companies.

That—

[The Chair, Liberal, Wayne Easter]

Okay—

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Ms. Watson, we will not give up.

[The Chair, Liberal, Wayne Easter]

We'll let you finish, Madam Iacovelli.

[Lucia Iacovelli]

Thank you.

RSM International were the receivers with respect to that Olympus United Funds Corporation, and their view was that we should have caught the fraud. Unfortunately, we did not catch the fraud and we did settle with respect to Olympus. We paid $7.5 million to the receiver. RSM International were also the receivers when there was no redemption reimbursed with respect to the funds.

We have looked very carefully at this. There is no connection that we see between the Olympus fund and Cinar.

[The Chair, Liberal, Wayne Easter]

Okay, we are going to have to go to Mr. Julian.

Peter, you are muted.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

I'm sorry, Mr. Chair.

We certainly need more time to question the witnesses. There's a lot of important testimony, particularly on KPMG's actions following the revelations that aired at the end of February on Enquête and The Fifth Estate.

I want to come back to this issue from your own testimony, Ms. Iacovelli. You have stated on the record that shell companies, client companies, were not offered after 2003. In the past, KPMG has validated that the Montreal office was behind the incorporation of Parrhesia on December 17, 2001, at the same time as the “sword” companies.

Since this wasn't offered since 2003, imagine my surprise when we went online to find out when Parrhesia was actually dissolved. It was dissolved 43 days ago, on March 24, 2021, just three weeks after the bombshell revelations from The Fifth Estateand Enquête. How can KPMG pretend they weren't offering that after 2003 when the corporate registry says very clearly that it was only after Enquête and The Fifth Estate came forward that the company was dissolved?

[Lucia Iacovelli]

I don't have any information on that entity.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

You understand that it contradicts all the testimony you have given us today. When you say that it's a product that hasn't been offered since 2003, but we can look on the corporate registry and see that it was just after revelations came forward that the company was actually dissolved.

There are a whole host of unanswered questions, Mr. Chair, so I would like to move that we extend our witness time until the end of the meeting so that we can continue to ask these questions.

[The Chair, Liberal, Wayne Easter]

Okay, it is a motion on the floor.

As Chair, I am going to speak on this. You can rule me out of order.

We had a meeting scheduled for two hours, and we're over that. If anyone thinks that we're going to solve this problem with another 20 minutes, we're not. We have the opportunity to call another meeting.

It's my judgment call and I try to be fair, but we agreed as a committee that we would do the budget implementation act and we would turn to it when it was tabled in the House. We now know that we have to farm out about 12 divisions of part 4 to other committees.

I've tried to get a steering committee meeting for Monday, but we couldn't get it. I asked the clerk to check if we could get any other time next week, but we can't get it.

Now honestly, folks, if we cannot deal with this motion on the BIA today, then we can't do anything until Tuesday at a regular meeting when we're really going to try to see if we can get the minister there on the budget implementation act. The issues in the budget implementation act are important to Canadians.

In fairness to other committees, if we don't allocate to them the work they have to do, I don't know when they're going to get time to do it. We've got 24 hours booked on the break week for this committee.

That's what we're up against. I hear your motion and I know that as chair, I shouldn't talk against it, but based on my judgment, I think we're being unfair to other committees. I think we're being unfair to other Canadians if we don't deal as a committee with the issue of the budget implementation act today. I think we can call another meeting on this present issue as soon as we get the BIA out of the way.

That's where I'm at on your motion, Peter. I know you could fire me as chair for that, but that's my view and I feel fairly strongly about it.

There's a motion on the floor.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

I'll just briefly speak to it and hopefully we can get back to the witnesses, Mr. Chair.

I don't question your wisdom. This is a very complex motion that was given just a few minutes before the meeting. Not even every member of this committee has read it. We have to consult as well with our caucus and with our critics. It's simply unfair to try to ram this through when we haven't had adequate notice. Normally it's two nights. I can understand that everybody's busy, but due notice and respect for the committee is important. I think if you try, you will be able to get that Monday steering committee meeting, and that will allow us to bring a recommendation to Tuesday.

I'm not trying to delay anything, but we have important witnesses here. I think we should just spend the rest of our time with the witnesses and deal with this motion when we've actually had time to consider it.

[Sean Fraser, Liberal, Central Nova, NS]

I have a point of order, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Go ahead, Mr. Fraser, and then I have Mr. Fast on my list.

[Sean Fraser, Liberal, Central Nova, NS]

I'm happy to speak to the motion when it's my turn.

On the point of order, I'm just wondering, Mr. Clerk, if we have the technical ability to sit later this evening. Is that something we could do to accommodate additional questions that members may have for witnesses and preserve the ability to discuss committee business today?

[The Chair, Liberal, Wayne Easter]

Go ahead, Alexandre.

[The Clerk of the Committee, Mr. Alexandre Roger]

As I informed the chair before the meeting, the cut-off time before the committee starts impacting other committees that sit later tonight is six o'clock. If we go later, the whips will have to decide which committee is not meeting tonight.

[The Chair, Liberal, Wayne Easter]

Okay.

That's the answer to that one. What's the situation like next week for getting time?