Mr. Speaker, basically the motions in Group No. 3 relate to the concept of good governance. This large section of Bill C-78 deals with the privatization of the civil service pension plan, out of which the government will take $30 billion. We say that it has no right to that money, but it seems that the government is going to ram this bill through parliament so it can get the cash. That will still leave $100 billion in the plan.
Over the next number of years the money will be converted from where it now sits, which is in government debt. The civil service pension plan carries approximately 25% of the government debt of $579.3 billion. This money will be invested in the private sector through private capital markets on the Toronto stock exchange, as well as around the world if the government continues to relax foreign content rules.
When we have a plan of that magnitude one of the fundamental things we must put in place is the concept of good governance; rules and requirements to ensure that the fund is safe and secure.
Several witnesses appeared before the committee from the capital markets and the equity markets, professional people of great repute. They told us about good governance and how to manage this money to get a reasonable return on behalf of the investor without rolling the dice and perhaps losing the lot.
The concept of good governance ensures that the proper checks and balances are in place so that no one can run away and bet the bank.
I raise the issue of the pension fund in Orange County, California, which was a very large pension fund of about $9 billion, only one-tenth the size of this plan. One manager of the fund thought he was so smart that he could play the futures market, he could play hedge funds, he could make a great career for himself by getting a phenomenal rate of return on the investment. One day he woke up and found he had bet the wrong way and had broken the bank. He had pushed the whole pension plan straight into bankruptcy because he had the authority to make investment decisions without the proper checks and balances and supervision to ensure that did not happen.
I think of Barings Bank, one of the great venerable banks of London, England. It had been around for the better part of 200 years, perhaps longer. It had been around a long time by ensuring good governance, respectability, and not assuming too much risk as the order of the day. Two hundred years is a good long time to thrive, prosper and to continue to do business. That bank expanded around the world. We remember the rogue dealer in Singapore who single-handedly destroyed the institution in a matter of weeks because he bet the wrong way and senior management, the auditors, the board of directors and the shareholders were not supervising him closely enough. He broke the bank all by himself through lack of good governance.
Last year in New York there was a capital hedge fund which just about upset the entire capital markets of the free world because it found it had bet the wrong way on Italian bonds versus Russian bonds and so on, trying to grab that extra one-tenth of 1% or maybe one-hundredth of 1%, which would be big bucks when dealing with tens and hundreds of millions of dollars. They bet the wrong way and it just about broke them.
I want to ensure that this plan has good governance and the witnesses before the committee said it is absolutely imperative that we have good governance.
I recall one witness who said that his company had a large client. They were handling a very significant amount of cash and investments on behalf of this large client and had been given almost unfettered rein and authority to invest any way they wanted on behalf of the client. He felt that good governance was so important that he imposed upon himself a semi-annual audit; not an annual audit, a semi-annual audit; not just of the funds under his administration, but of the procedures, the processes, the checks and balances that he had in place to ensure that decisions were sound, reasonable, rational and could be defended.
We are putting in place a board of managers which will be nominated by various people. I suggested that the auditor general be the auditor for the special audits that this bill requires once every six years; not every six months as the witness before the committee imposed upon himself, but once every six years. A lot of money could be lost in six years. Once every six years there is to be a special audit; not just a financial audit, but an audit of procedures. Who better in this country has the resources than the Auditor General of Canada who does value-for-money audits of large government departments and so on? Who better than he to do the intense analyses of procedures, processes, checks and balances to ensure that this fund has the integrity to handle $100 billion? What did the government say? “We do not want to hear about motions that introduce better governance”.
When I said “Let us take some time to talk about governance and understand what kind of processes have been built in”, the government was not interested. It said “Let us move on. Let us vote this through. It is a done deal. Next clause, please”.
A great deal of supervision will be required for $100 billion of taxpayers' money and civil service employees' money which will be invested in capital markets. I have very serious concerns about whether we will have the proper governance procedures in place. What can I say? One day we may wake up and, like the Barings Bank or the Orange County pension fund, find out it is gone.
Then we will ask: What happened? Who is to blame? The government will point its finger at some manager, the board of directors, the auditor or the internal accountant and say “You are to blame” and he will lose his job. I submit that the blame lies here if that ever happens because we were not prepared to examine the governance issues and put them in place to guarantee that we have the best possible governance for one of the largest pension funds in North America. We have abdicated our responsibility.
I was speaking a few minutes ago on the issue of morality and now I am talking about financial accountability. The government is not prepared to put the processes and the rules in place to do the best it can with money which rightfully belongs to the people. What can I say?
I would like to be able to debate this all day. I would like to be able to talk to the auditor general and the investment community, ask them what we should be doing and incorporate that into the bill, but the government will not give us that opportunity.