Justice Committee on Dec. 9th, 2009

[Joanne Klineberg]

I can only repeat again that, as drafted, the mandatory minimum penalty, which would be proposed subsection 380(1.1), clearly states, “When a person is prosecuted on indictment and convicted of one or more offences referred to in subsection (1)”, which is the general fraud offence. That is how the bill is drafted, that the mandatory minimum applies. I can explain the rationale as to why it was that way--

[Marlene Jennings, Liberal, Notre-Dame-de-Grâce—Lachine, QC]

Let me go back to my question, then.

I was informed by the chair that the RCMP witnesses were asked if they were aware that the mandatory minimum of two years being proposed under government legislation--the bill that is before us--did not appear to apply to a number of criminal acts that we find as separate fraudulent offences in the Criminal Code. One of them is a representative of the integrated market enforcement team, the IMET. They were surprised and told me and the committee that they would like to see the mandatory minimum apply to those other offences.

The chair then informed me that during a short period where I was absent from the room, he asked for clarification and was told by the officers that as a general rule, if someone is charged, for instance, with false prospectus, which is found under a separate section of the Criminal Code, they also would have been charged with general fraud, which is found in section 380, and therefore would be convicted of both, and therefore the minimum mandatory would apply.

Is that in fact the way in which criminal prosecutions take place, where if someone is charged with a fraudulent offence, which is not described in subsection 380(1), they would automatically also be charged under section 380, the general fraud offence--

[The Chair, Conservative, Ed Fast]

Ms. Jennings, I think she understands the question.

We do have bells at a quarter after the hour. I want to get an answer from her.

[Marlene Jennings, Liberal, Notre-Dame-de-Grâce—Lachine, QC]

I know, and I apologize, but I do want clarification.

[The Chair, Conservative, Ed Fast]

Ms. Klineberg.

[Joanne Klineberg]

Unfortunately, I'm not in a position to speak to charging practices necessarily across the country. My understanding would be that it would depend on the evidence. The evidence would dictate what charges would be laid.

[Ed Fast, Conservative, Abbotsford, BC]

Wasn't she going to tell us the rationale?

[The Chair, Conservative, Ed Fast]

Yes, you were going to give the rationale as to why sections such as subsection 380(2) weren't attracting the mandatory minimum sentence under the bill.

[Joanne Klineberg]

I can; unfortunately, it's somewhat complex. It basically boils down to the fact that if we leave aside the insider trading offence for a moment and focus on subsection 380(2), section 382, and section 400—section 400 concerns the false prospectus—each of those offences is essentially what you could call a preparatory offence. It's conduct that is preparatory to a fraud. If you look at the wording of all of those offences, it contains language such as: any person who includes a false statement in a prospectus “with intent to” defraud someone; “with intent to” induce someone.

That is conduct before the fraud actually happens. By analogy, we have an offence in the Criminal Code, section 351, which is possessing instruments for the purpose of housebreaking, which is a preparatory offence that takes place in advance of the housebreaking.

The reason this is relevant is that for those offences, other than subsection 380(1), there isn't actually going to be money to count up, because the fraud hasn't happened yet. It's conduct that is designed to get people to hand over their money, but they haven't actually handed the money over. The moment the money is handed over, that's when you see—in addition, possibly, to these charges—the fraud charge, which does attract the mandatory minimum penalty.

Another consideration that is relevant is that most of those other offences, the one exception being subsection 380(2), contain maximum penalties of 10 years instead of 14. If you were to impose a two-year mandatory term of imprisonment for offences with a 10-year maximum penalty, relative to the two-year mandatory sentence for fraud, there might be some disproportionality.

The insider trading offence—I'm sorry to go on here—is slightly different. That is an offence wherein you could conceive of there being a monetary amount that you could calculate. But the reason the insider trading offence was created by Parliament about five years ago is that it isn't actually fraud. There isn't a deception; what there is, is exploitation of inside information.

Many academics consider that insider trading is actually a victimless crime. The shareholders in general may suffer and investors in general may suffer a loss of confidence, but it's a bit difficult to point to a person, because all those innocent people who traded were going to trade regardless of whether the person on the other end of the transaction was using insider information.

In the case of insider trading, the only thing I would bring to your attention is that you might want to consider whether there may be some disproportionality or unfairness in a maximum penalty in that case, in which you can't really point to victims whose lives have been destroyed in the same way you can for fraud.

[The Chair, Conservative, Ed Fast]

Mr. Ménard, you have the floor.

[Serge Ménard, Bloc, Marc-Aurèle-Fortin, QC]

I would like to take this opportunity with you here to get some clarification.

Will section 21, which identifies the parties to the offence, apply and to what extent? We heard from the victims of Vincent Lacroix from Quebec, Vincent Lacroix who had created a number of companies. He was found guilty and was sentenced to a number of years in prison. I wonder about the employees working for those companies, who initially didn't know that they were working for a company committing fraud, and who discovered it at some point.

Do you believe that they become accomplices and that, therefore, they run the risk of a two-year minimum sentence?

[The Chair, Conservative, Ed Fast]

Make it a very quick answer.

[Joanne Klineberg]

Again, it would depend on the evidence, but the general rule is that a person who does something with knowledge that they're aiding or abetting in a crime is guilty of the crime that they're aiding and abetting. If the evidence was there that these employees had become aware that they were facilitating the commission of the crime and they continued to do so, they could be found guilty of the fraud.

[Serge Ménard, Bloc, Marc-Aurèle-Fortin, QC]

That is exactly what I want to ask you questions about.

[The Chair, Conservative, Ed Fast]

All right.

Monsieur Ménard, the bells are ringing.

[Serge Ménard, Bloc, Marc-Aurèle-Fortin, QC]

There is a difference between an accountant and a secretary.

[The Chair, Conservative, Ed Fast]

Monsieur Ménard, please, we need to have some order.

Unfortunately, we have another vote. I really apologize that we can't ask you questions today. We have heard all of your testimony. It's pretty compelling. It's forming part of the public record, and if there is further information that we need from you, our members will get in touch with the clerk and we'll communicate that to you.

I want to thank you all for appearing. This is a very serious matter to all of you; all of your lives have been touched. Hopefully, as we move forward with this bill, as well as perhaps with other initiatives in the future, we'll be able to cut down the amount of fraud that people have to suffer through. Thank you to all of you.

Before members leave—we're not going to go in camera—Mr. Murphy, Mr. Ménard, we circulated the steering committee report to all of you. You've had a chance to look at it. It doesn't appear to be controversial. Could we have a motion to approve it?

(Motion agreed to [See Minutes of Proceedings])

The meeting is adjourned.