Justice Committee on Nov. 25th, 2010

[Joseph Groia]

Certainly, under the existing sentencing guidelines and the factors to be considered, that is correct. One of the concerns you've heard expressed by the Canadian Bar Association is that this provision, with the mandatory minimum, would result in that secretary being sent to jail for at least two years.

[The Chair, Conservative, Ed Fast]

Thank you.

We'll move on to Mr. Comartin for seven minutes.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

Thank you, Mr. Chair.

Thank you, gentlemen, for being here.

I was the one who asked to have you come in. I did so because of the CBC news article a week and a half ago, which was talking about the Ponzi scheme in Toronto. I realize that neither one of you was directly involved in that, but coming out of that story was the message that you've recounted again today about the lack of resources in terms of ability to prosecute.

I'd like to ask both of you if you've had clients in your offices who have been victims of that type of scheme. Have you had cases in which it appeared to you that prosecution should have gone ahead, but did not, simply because the crown and/or the police did not have the necessary resources to prepare the case?

[Lincoln Caylor]

I can answer that. Clearly, yes, we have. I have had a number of corporate clients with large-scale losses well in excess of $1 million. We're talking about tens of millions of dollars. Financial institutions have lost large amounts of money. They've hired us to go after the money, put together briefs, and brief the crowns, and the crowns have been unable to prosecute the cases because of the lack of resources and/or lack of priority given to cases of white-collar crime.

It's a bit about how the crown is forced to allocate the resources they have. Are they going to pursue a particular white-collar criminal or are they going to pursue assault or other physical crimes? They typically go for the latter.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

Do they say that to you?

[Lincoln Caylor]

No. All we hear is that the case is not being prosecuted and that the charges will be withdrawn because too much time has gone by. They don't proceed with the case.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

Have any white-collar crime cases actually been thrown out by the courts because of a lack of timely prosecution?

[Lincoln Caylor]

I can't think of any. Maybe Mr. Groia can think of some.

[Joseph Groia]

No. I think a filtering process goes on and the real roadblock is between the regulatory or investigatory side and the prosecutorial side.

The example that the CBC reported on is a relatively extreme example. As you know, the Attorney General has said that he's looking into it.

I can say from my experience, although I won't reveal my sources, that I've had a number of police agencies, regulatory agencies, and investigators express frustration to me. I can tell you that in my practice, when I'm on the side of the investors, I've been frustrated not in getting the cases investigated, but in getting a prosecutor to take them on.

When they do take them on, my experience generally has been that they see them through. When the 2004 amendments came in and IMET was created, I was personally encouraged by that initiative, because what I've seen since I was at the securities commission 20 years ago is a need for a specialized commercial crime prosecution agency. Somewhere between the national IMET, which is funded by the federal government, and the provincial attorneys general, there is a disconnect. I am seeing a difficulty in getting prosecutors to take cases forward that are brought to them by the Ontario Securities Commission, for example.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

Let me pursue that with you. I'm not in favour of the national securities commission, but setting that aside, I also have a very clear understanding of how long it will take, given the opposition from Alberta and Quebec and the likelihood that it will end up before the Supreme Court. We're five or six years down the road, even if the government proceeds with it, and I'm not sure they're going to.

That five- or six-year time period seems to be an inevitable delay, given the constitutional litigation that will come. Is there anything you can recommend that the government do with regard with IMET to in effect make them efficient?

[Joseph Groia]

Leaving aside the issues that relate to the administration of criminal justice and the historic separation between the provinces and the federal government, I know of no reason IMET could not have attached to it a prosecution agency dedicated to prosecuting the cases they bring forward, and to do so using experienced securities and commercial prosecutors, people who understand the way the stock market works.

I want to be clear that I'm not denigrating my friends in the Attorney General's office. Until very recently, the prosecutors I dealt with would go from a drunk driving case, to a break and enter, to a securities market manipulation case. That's a terribly ineffective way of dealing with it. As a result of that, our experience in Ontario has been that the securities commission has tended to prosecute those matters under the provincial statute rather than under the criminal statute.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

With regard to this legislation--and this question is for either one of you or both of you--do you see anything in it that will facilitate the prosecution of these types of crimes and the Ponzi scheme in particular?

[Joseph Groia]

I have to say I see just the opposite. What I see happening is that there are some other smaller aspects to the bill that I'm not going to really comment on, but the experience in the United States shows and all the academic literature says that the effect of mandatory minimum jail sentences is that you significantly increase the number of trials and significantly reduce the number of guilty pleas. That will add strain to the system.

And where we're already hearing that the system is being overloaded, to put into it a requirement such that this secretary mentioned by the vice-chairman would now be looking at a jail sentence is going to result in one of two things. Either she's going to have to defend--at her life savings and peril--or the prosecutor will say, “I'm just not going to go ahead with this case”.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

What about some of the duties we're imposing on the prosecution here? I'm looking at things like proposed subsection 380.3(2), where the crown is now obligated to explain to the court what they've done in the way of seeking out whether a restitution order should be sought.

So there's an additional investigative role, I guess, for them to play there--for whoever their investigators are, police or otherwise--and there's the role the prosecutors themselves will have to undertake to analyze that evidence. Is that another discouragement?

[Lincoln Caylor]

A lot of that already goes on. As Mr. Groia said, when a crown is on the case, they're cooperating and dealing with the victims, so already a lot of that is happening. Some cases do fall through the cracks, if the law enforcement investigator or the crown has not been in touch with all of the victims, say, or with enough of them, but typically this already occurs.

By making it mandatory, in the case where the crown decides to exercise discretion that in this particular case it's not appropriate to go after restitution, you're now taking that discretion away. So in that area, it will burden the system more, because they are then required to take those steps even though, for instance, there's no chance of restitution, there's no money available, or it's unlikely, in their view, that the judge is going to grant restitution as part of the sentence.

[The Chair, Conservative, Ed Fast]

Thank you.

We'll move to Mr. Dechert, for seven minutes.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you, Mr. Chair.

Gentlemen, thanks for being here and sharing your views with us today.

I'd like to start with Mr. Caylor. You mentioned--and I took your point--that in order to properly prosecute white-collar crimes, the courts need more resources. The prosecutors need more resources. The investigators need more resources. We certainly think that is a priority the provinces should focus on. As you know, administration of the courts is their direct responsibility.

Since 2006 our government has increased the provincial transfer payments by $12.7 billion, and in fact in the 2010 budget we increased the transfer payments to the provinces by a further $2.4 billion. Part of the reason for that is to give them the resources to do these sorts of things, which obviously will require forensic accounting, and to give them more resources for the courts. As we've seen in Toronto and other places, these trials take a long time, and there are a lot of cases before the courts.

In addition to the financial assistance to the provinces to help them deal with the increased case burden, you may know that we've also introduced Bill C-53, the Fair and Efficient Criminal Trials Act. It's a list of a number of procedures that will assist judges and case managers to speed up the criminal trial process. There are 14 or 15 different specific procedures. I won't go through them in detail, but this strengthens case management, reduces duplication of processes, and improves general criminal procedures. Our hope is that this law, when passed, will make these kinds of trials more efficient when you're dealing with multiple and similar kinds of cases and a number of victims--for example, in a white-collar crime case involving many victims.

Hopefully, the combination of those things will address the issue you raised. Do you have any comments on Bill C-53?

[Lincoln Caylor]

No.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

All right. Thanks.

Mr. Groia, I appreciate your comments about mandatory minimums. Can you tell me if you're familiar with the following cases? They are R. v. Cioffi, R. v. Toman, and R. v. Campbell.

[Joseph Groia]

I'm familiar with R. v. Campbell. I'm not sure I'm familiar with the other two.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Okay. I have a list. I can go through them: R. v. Campbell, R. v. Coffin, R. v. Dobis, R. v. Leefe, R. v. Massoudinia, R. v. McCarthy, R. v. McCullough, and R. v. Nottingham. These are all cases in which the fraud was over a million dollars and the accused received a sentence of less than two years. This was between 2002 and 2009. I also have a list of another 11 cases in which the accused committed a fraud of between $500,000 and $1 million and received a sentence of less than two years.

Right there are 21 cases in the last eight years in which the accused committed a white-collar crime of the type that we're discussing today and had a sentence of less than two years imposed. You mentioned in your comments that you didn't think it was necessary to have a two-year minimum because you thought that most of these cases resulted in a sentence of more than two years. So how do you explain those cases?

[Joseph Groia]

Well, I'm sorry if that's the impression I left you with. What I want to emphasize is that trial judges, under the current criminal justice regime, are entitled to consider all of the circumstances of the crime and the victim and to consider what the appropriate sentence is.

I have no doubt that if a single mother steals money from her employer in order to feed the drug habit of an abusive husband, she might steal a million dollars. Should she spend two years in a federal penitentiary and put the court in a position of being unable to consider all the particular circumstances? I can't debate those cases, but I accept fully, sir, that they exist.

Maybe you're familiar with the Angelos case in the United States. In this case, under the California three-strikes law, a person received 55 years in jail for selling $90 worth of stolen batteries. As I indicated, the literature in the United States says that they now believe, supported by the Supreme Court of the United States, that the difficulty with minimum requirements is that they are corrupting the way judges try to do their work.

As for me, I'm confident that our judges do their jobs, and I'm confident that they are treating this problem seriously.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

We can have a difference of opinion on this. Obviously our view is that 21 cases are too many. In these cases, a minimum sentence of at least two years should have been imposed. We're drawing a line and going forward. Everyone knows what the law is and they should conduct themselves accordingly.

I want to move on to another point you raised, and I think Mr. Caylor raised it as well. It was with respect to a national securities regulator. You indicated that in your view having a national securities regulator in Canada would be helpful in enforcing securities laws and in investigating and prosecuting these kinds of white-collar crimes. Could you go into more detail on exactly how a national securities regulator would be helpful?

[Joseph Groia]

Absolutely. As I said, I come to this from the enforcement perspective. I come to this as someone who is concerned, as I believe we all are, with the integrity of our capital markets, and there's no more important initiative now being discussed than a national securities enforcement program.

As I say, I'm not here to talk about who should register and regulate brokers and how they do their business. Why we need a national enforcement agency is because our market is increasingly international in scope and we are not at the table with the national regulators of other G countries, and we need to be there. We also need to avoid the enormous duplication that I see in the enforcement programs of the provinces and territories. I can tell you that cases I deal with every day in my practice may involve securities commissions of three different provinces, and those securities commissions are duplicating their efforts, at great cost to all of us. I fully support the initiative that we have on a national enforcement agency to do exactly that, because I think that in an unusual way, I also have to say that I think it's fairer to persons who are accused. because they only have to deal with one agency.

I have been supporting that since I left the commission in 1990, and to the extent that I can commend the work of the committee and the House, that is the most important initiative I've seen in my 25 years as a securities lawyer.

[The Chair, Conservative, Ed Fast]

Thank you.

We're going to move to Ms. Jennings.