Debates of Sept. 29th, 2003

An Act to Amend the Criminal Code (Cruelty to Animals)

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Acting Speaker (Mr. Bélair)]

All those in favour of the motion will please say yea.

[Some hon. members]

Yea.

[The Acting Speaker (Mr. Bélair)]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Acting Speaker (Mr. Bélair)]

In my opinion the yeas have it. I declare the motion carried.

(Motion agreed to, amendments read the second time and concurred in) )

Criminal Code

[Paul Devillers, Liberal, for the Minister of Justice and Attorney General of Canada]

moved that Bill C-46, an act to amend the Criminal Code (capital markets fraud and evidence-gathering), be read the second time and referred to a committee.

[Paul MacKlin, Liberal, Parliamentary Secretary to the Minister of Justice and Attorney General of Canada]

Mr. Speaker, investor confidence is crucial to the life of Canada's capital markets and to our economy as a whole. American corporate scandals shook the credibility of global capital markets in 2001 and 2002. Multi-billion dollar accounting deceptions and other corporate scandals dominated international business media headlines during this period. Because of their far-reaching effect, these scandals have damaged investor confidence well beyond the American borders.

A survey conducted in 2002 revealed a dramatic drop in investor confidence following the collapse of WorldCom, with the majority of those surveyed believing that both the American and Canadian economies will continue to suffer as long as similar corporate misdeeds impact as they do on investor confidence.

In addition, a public survey in 2002 suggested that the majority of Canadians have lost confidence in the stock market and that Canadians show support for initiatives that are aimed at boosting financial transparency and stiffening penalties for those who transgress.

Currently, in partnership with provinces, regulators and law enforcement, the Government of Canada is working very hard to ensure the integrity of Canada's financial markets, although in the wake of recent American corporate scandals, the Government of Canada wants to make certain that this work will not only continue but is strengthened.

On September 30, 2002, the Speech from the Throne committed the Government of Canada to:

reviewing and where necessary changing its laws and strengthening enforcement to ensure that government standards for federally incorporated companies and other financial institutions remain of the highest order.

The Government of Canada has committed to constructing a response that is tailored to investor and law enforcement needs. One aspect of Canadian law that had to be addressed was criminal legislation dealing with serious capital markets fraud.

The government has come forward with legislative enforcement measures to deter the would-be perpetrators from committing serious capital markets fraud offences, to facilitate the gathering of evidence against those who have committed serious fraud offences, and to ensure that those who are convicted of such offences are punished appropriately.

I am pleased today to debate Bill C-46, an act to amend the Criminal Code, dealing with capital markets fraud and evidence gathering. This bill represents the government's response to the criminal law dimension to market misconduct, a very important step toward restoring investor confidence in our capital markets and in our economy generally. As members will soon hear, and which will become plainly obvious, those who engage in capital markets fraud will face a significantly increased risk of being caught, charged, convicted and punished.

The key to deterrence is greater certainty of detection and prosecution and the prospect of appropriately severe punishment. We can therefore also hope and expect that an enhanced criminal justice response to market fraud will serve to dissuade many who might otherwise contemplate such unlawful conduct.

I would like to turn to the IMETs part of the bill. First, to strengthen the national enforcement presence pertaining to serious capital markets fraud offences, budget 2003 included $30 million in funding to create up to nine integrated market enforcement teams, or what we refer to as IMETs. These are composed of RCMP investigators, forensic accountants, and federal prosecution service legal advisers and prosecutors in Toronto, Montreal, Vancouver and Calgary.

These teams would investigate serious Criminal Code capital market fraud offences that are of national significance and involve publicly traded companies whose actions have posed a genuine threat to investor confidence and economic stability in Canada. These teams will make use of existing Criminal Code provisions and those in new measures in Bill C-46 once the bill is passed into law.

Bill C-46 addresses four key areas in particular: first, new offences; second, sentencing measures; third, concurrent federal jurisdiction to prosecute certain offences; and fourth, enhanced evidence gathering tools.

Our review of the Criminal Code in the light of the American response to the crisis in investor confidence showed that we already have strong and effective laws to deal with capital markets fraud, including an effective fraud offence and offences of obstruction of justice and for filing a false prospectus and so on.

What we did find was that there appeared to be two gaps. Bill C-46 would effectively fill those gaps. In particular, Bill C-46 would create new offences for, first, prohibited insider trading and, second, employment related intimidation aimed at deterring corporate insiders from reporting illegal conduct and assisting the authorities.

When insiders of corporations use their special access to material inside information that is not available to other investors in order to benefit themselves, the investor confidence that is required in order to sustain the credibility of our vital capital markets can be seriously undermined. This activity can cause significant economic harm to individual investors, firms and the integrity of the Canadian economy as a whole.

Improper insider trading is currently prohibited under the provincial securities laws and under the Canada Business Corporations Act. However, the use of the criminal law is a necessary additional instrument for deterring this kind of corporate malfeasance because of its symbolic value and because of the more severe penalties available.

The addition of an offence to the Criminal Code to prohibit and punish improper insider trading as a criminal offence would provide an additional tool to deal with those cases that merited a more severe response and ultimately would help stabilize investor confidence.

Members may recall how insiders who disclosed illegal conduct played an important role in uncovering the recent American scandals. Our Criminal Code does contain certain offences that prohibit intimidation, which basically means trying to stop someone from doing anything they would otherwise have a right to do, such as talk to the police, by threatening them with violence or harm. The Criminal Code also prohibits attempts to obstruct the course of justice, which relates to interference with investigations and the prosecution of crime.

Threats and actions directed at a person's employment, done with the purpose of preventing them from cooperating with law enforcement or to punish them where they have done so, are not adequately covered by these existing offences.

Once again, the Government of Canada has responded. The addition of a targeted offence in Bill C-46 will help to deter this kind of inappropriate conduct on the part of employers and will consequently help encourage insiders to cooperate with law enforcement. This new offence will send a strong message that this form of intimidation will not be tolerated. I would like to point out to members that this offence will apply to efforts to stop employees from speaking to a law enforcement body about any kind of illegal conduct, not just securities fraud.

Encouraging those with knowledge of wrongdoing to cooperate with the authorities will facilitate the detection of capital markets fraud and other forms of corporate malfeasance, as well as aid in the enforcement of federal and provincial offences under securities regulatory laws and other laws governing corporate actions.

Now I would like to talk about the sentencing that the bill encompasses. In keeping with the Government of Canada's commitment to ensuring that those convicted of capital markets fraud and white collar crime in general are punished appropriately for their wrongful conduct and the harm they cause to Canadians, Bill C-46 contains significant sentencing proposals.

In addition to the 10 year maximum sentence for the proposed insider trading offence and the 5 year maximum sentence for the proposed employment related intimidation offence, Bill C-46 also would increase the maximum sentence for fraud from 10 years to 14 years and double the maximum sentence for fraudulent manipulation of the stock market transactions from 5 years to 10 years. It should be noted that a maximum prison term of 14 years is the highest term of imprisonment in the Criminal Code short of imprisonment for life.

These sentencing initiatives therefore raise the maximum sentences for capital markets fraud to a level that recognizes their serious nature and crippling effects that they can have on our economy.

In addition, as a direction to our courts, Bill C-46 includes a codification of aggravating and non-mitigating sentencing factors for fraud and other market related offences, ensuring that the sentences the courts hand down for these offences will reflect the seriousness of the economic and social damage that such offences can inflict on our society. The government believes these codified factors will also improve the sentencing of white collar crime in general.

Let me deal with the area of concurrent jurisdiction. The partnership is a key and breathes life into Bill C-46. As such we propose to use concurrent prosecutorial jurisdiction over fraud to supplement provincial jurisdiction and provincial resources in regard to the major cases of capital markets fraud that are the focus of integrated market enforcement team initiative.

Federal involvement would be limited to a narrow range of cases that threaten the national interest in the integrity of capital markets.

Let me be clear. We do not intend to replace or overtake provincial prosecutorial jurisdiction but rather to compliment it. To this end officials within the Department of Justice have been engaged in a dialogue with provincial prosecutorial authorities on the development of joint protocols that would protect provincial jurisdiction while allowing for supplementary application of federal prosecutorial resources where necessary and desirable.

To ensure proper coordination, the Government of Canada will work with the provinces to establish prosecution protocols that will ensure a coordinated and effective implementation of the concurrent jurisdiction. The concurrent jurisdiction proposal responds to an immediate national concern of investor confidence in Canadian financial markets. Through effective partnerships with our provincial colleagues, we can strengthen investor confidence and bring those who threaten it to justice. I look forward to continuing this relationship.

We also have to look at how we gather evidence in situations of this type. I would turn to the provisions of Bill C-46 that relate to this evidence gathering.

In the Speech from the Throne the government committed itself to creating better tools to enhance the evidence gathering capabilities of investigators. Bill C-46 does just that with Criminal Code amendments that create production orders. Production orders are similar to search warrants. Whereas a search warrant allows police to search a certain place for evidence, a production order compels a person to produce the relevant information to the police.

Although this investigative tool is new to the Criminal Code, it already exists in Canadian law, notably under the Competition Act and in limited circumstances under other statutes. Further, it could also be characterized as a codification of current practices. For example, today when a police officer enters a bank with a warrant to seize records, he does not usually shut down the bank to get those records. Nor will he seize the bank's computer system.

What generally happens is that the holder of the information sought in the warrant will generally produce that information to the police himself. The reason for this is twofold: first, it is more convenient for the bank, since its business operations are not being interrupted; and second, it is more cost effective and less time consuming for the police.

The production orders in Bill C-46 have been introduced in the context of the capital markets fraud, however, as crafted they will not only apply to capital market investigations but also to all Criminal Code offences where a regular search warrant could be obtained. Because the new production orders have this broad scope, we thought it was necessary to include the same judicial safeguards required by the Criminal Code search warrant provisions.

Law enforcement agencies and crown prosecutors have been asking for a new investigative tool for some time and with the proliferation of the Internet and the widespread adoption of new communications technologies, the timing is right for this form of investigative tool.

The production orders will solve a number of nagging issues for investigators including extraterritorial searches and timing issues. Under these new orders, persons who have possession or control of documents, data or information will have to produce that information whether it resides in Canada or abroad. Thus, as long as they have possession or control over the relevant information, they will be required to produce it no matter where it is located. This solves the problem that has in part been created by inexpensive overseas data warehousing.

Second, the new production orders will be time sensitive so that the third party served with the order will either have to produce the information within the time specified in the order or report back to the court within the specified time as to why he or she cannot comply. This solves the problem of the inherent nature of informal arrangements which is they are informal and they often lack specific mechanisms such as timing mechanisms.

In some cases police have had to wait for up to a year to obtain information from a third party holder of that information. This bill introduces two types of production orders to the Criminal Code to enhance the general evidence gathering capabilities of the investigators. The general production order will require a person other than the individual under investigation to produce documents, or data or to create a document based on the existing documents or data and produce it.

For example, a production order served on a bank could require the bank to compile existing but non-related information on a client and give it to the police. Before issuing the order, the judge or justice must be satisfied that there are reasonable grounds to believe an offence has been committed, that the specific documents or data will afford evidence relating to the commission of the offence and that the recipient of the order has possession or control of these documents or data. These are the same basic judicial safeguards as required by the existing Criminal Code search warrant provisions.

The second type of production order is the specific production order. It has been designed to be a first step investigative tool and is limited to specific types of information for which there is a lower expectation of privacy. A judge or justice will have to be satisfied that there are reasonable grounds to suspect that the information will assist in the investigation of an offence. This type of order, with a narrower scope, would only apply to financial institutions and other organizations specified in the legislation.

Therefore, the general details relating to bank accounts such as the name of an account holder, or type and status of an account could be obtained through a specific production order.

I am pleased to have spoken to this bill today. The bill reflects the government's criminal law response to serious securities fraud that poses real risk to investor confidence in the stability of our markets and economy.

[The Acting Speaker (Mr. Bélair)]

Before we go to questions or comments, it is my duty pursuant to Standing Order 38 to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Windsor West, Automobile Industry; and the right hon. member for Calgary Centre, Member for LaSalle—Émard.

[Brian Masse, NDP, Windsor West, ON]

Mr. Speaker, it is a pleasure to speak to Bill C-46. I have concerns about whether it will get through the House business and provide the confidence which is so required. Nevertheless hopefully that will happen.

I would like to ask the hon. member specifically about the commitment to have prison time set forth. The sentences are weaker than in the United States. My concern which are Canadians, be they pensioners or investors or businesses, affected by these scandals. We have individuals who might eventually walk away with a minimum sentence or a sentence that does not have prison time and this could virtually have an effect on someone's life for 10, 20 or 30 years as well as the assets of their family.

I want to ask specifically about that part of the bill and what else could be looked at in committee stage to increase the enforcement. Right now I see this as using kid gloves in dealing with corporate crooks, and that will not build confidence.

[Paul MacKlin, Liberal, Northumberland, ON]

Mr. Speaker, that is a very good question to raise. One part of the bill, which goes to the bottom line of the sentencing process, is very positive. That is the section that deals with setting out the aggravating circumstances that will be taken into consideration. These are very important. Sometimes we look at what factors are taken into consideration when someone is being sentenced for this sort of crime and generally and historically one might look at the reputation of the accused and how he or she has been seen in the community.

In the bill we turn that upside down and we say that it should not be taken into consideration. The clause states:

The court shall not consider as mitigating circumstances the offender's employment, employment skills or status or reputation in the community if those circumstances were relevant to, contributed to, or were used in the commission of the offence.

It is very important to ensure we bring to bear in the courtroom those things that we believe ought not to be considered as mitigating and diminishing sentences. It is important that we send the message, and we are sending a strong message in the bill through the doubling of some sentences and increasing others. We are being very clear and direct that we want to maintain the integrity of the market system in Canada and we will do everything that is reasonably possible to ensure that is so, to protect all of the citizens of the country.

[Vic Toews, Canadian Alliance, Provencher, MB]

Mr. Speaker, I am pleased to participate in today's debate on Bill C-46, an act to amend the Criminal Code dealing with offences related to capital markets fraud. This legislation has been developed in reaction to corporate scandals that have surfaced in the United States and weakened investor confidence in capital markets worldwide. Similar American legislation was passed last July, the Sarbanes-Oxley Act of 2002.

As we have heard from the Parliamentary Secretary to the Minister of Justice, Bill C-46 proposes a number of changes that are intended to strengthen confidence in the markets, and protect investors from fraud and other unlawful conduct.

Under the new legislation we would find a new Criminal Code offence prohibiting insider trading which would carry a maximum penalty of 10 years imprisonment. A second new Criminal Code offence would prohibit employment related threats or retaliation which would protect so-called whistle-blowers, carrying a maximum sentence of 5 years imprisonment. The maximum sentences for existing fraud offences in the Criminal Code would be increased up to 14 years imprisonment from the current 10 years, while the penalty for fraudulent manipulation of stock exchange transactions would be increased to 10 years from 5 years.

The parliamentary secretary indicated that there would be specific aggravating factors for sentencing which would now include the extent of the economic damage done by the offence. Current mitigating factors, as he indicated, such as reputation or status, would be inapplicable to those committing serious capital market frauds if they were to rely on those very factors to commit the offence.

These are the concerns that I have in respect of this bill and they do relate to the sentencing provisions. This is a government that has consistently stated that it will get tough on crime. If we go to the Youth Criminal Justice Act or to the dangerous offenders legislation, there have always been those nice, colourful catch phrases designed to lead people from the truth of what the legislation was all about.

Last week we saw the Supreme Court of Canada correct the former minister of justice, who said he was bringing in legislation to protect Canadians from dangerous offenders. In fact, when the legislation was analyzed, as it was by the courts and confirmed by the Supreme Court of Canada, the legislation that was passed in 1997 made it easier for criminals to avoid staying behind bars. The option of a long term offender status now allows these dangerous offenders to apply under long term offender status and receive community based sentences or a form of parole.

The other point that the government has consistently stated when it talked about getting tough dealt with increasing maximum sentences. However, everyone knows it is not serious about taking steps to prevent crime by putting meaningful consequences in place because in fact what it does is never put minimum sentences in place. Whether a sentence is 10 years or 14 years, we have seen what the courts have done. They have simply applied the other avenues to allow individuals to escape responsibility through the use of conditional sentences, suspended sentences or other types of alternatives to incarceration.

I have seen that happen in the legal profession that I used to be a part of. When I started out in the practice of law, it was not uncommon for lawyers who defrauded clients to receive substantial penitentiary sentences.

Over the last number of years, of course, those lawyers who defrauded individuals, who caused incredible damage to people's savings and to the reputation of the law society, have been receiving conditional sentences. They have been able to avoid going to prison because of the tendency of the courts now, as directed by the legislation, to consider alternatives other than incarceration.

Here we see again the same kind of pattern. We hear the government say it will get tough on people who defraud investors, and yet it puts no minimum sentences in place. What the government is doing is simply winking to the judges and telling them not to worry about what it is saying about tough sentences, they can do whatever they like.

Given the direction that judges are required to follow in other parts of the Criminal Code, we will see the same kind of sentencing patterns and the alternatives to incarceration with Bill C-46. It has happened in the context of dangerous offenders and young offenders. It has happened in virtually every so-called sentencing reform that the government has brought forward. My concern is that if we want to get tough on individuals who defraud investors in the markets, minimum sentences must be put in place.

The parliamentary secretary indicated that additional investigative and prosecutorial resources would be provided in the most serious cases of capital markets fraud, including up to $120 million of federal money over the next five years. That amount is a joke. We have recently seen in the context of the Alberta gang trial where over $20 million was spent just to defend individuals, and the trial ultimately collapsed. The tens of millions of dollars that was spent in that trial is all gone. The sum of $120 million will go absolutely nowhere if we want to be serious about prosecuting this kind of fraud.

I noted the parliamentary secretary stating that the government would make some kind of agreement with the provinces. All I can say to the provinces is to beware. We have seen these kinds of agreements with the federal government before. Let us recall the medicare partnership of fifty-fifty. Now the federal government pays about 15%. Let us recall the deal on legal aid of fifty-fifty partners. Now the federal government is at about 15% or 20%.

[An hon. member]

The young offenders act.

[Vic Toews, Canadian Alliance, Provencher, MB]

My colleague from British Columbia is reminding me of the young offenders act.

I was a provincial minister of justice in Manitoba, and I remember arguing with the federal government. It gave us a few million dollars, but its contribution fell short of the implementation costs of the young offenders act. The provinces were then stuck with the prosecutions.

In order to administer its own legislation, the federal government is probably paying somewhere in the range of 10%, 15% or 20%. I say to those provinces that might be charmed with $120 million to get exactly what they are getting in writing. They should not take the word of those guys. We have seen them fail in honouring their word time and time again.

Under Bill C-46 the Attorney General of Canada would be permitted to prosecute a narrow range of cases that threaten the national interest and the integrity of capital markets. Frankly, I would say to the provinces to let the federal government prosecute them all. Then the federal government will find out how expensive, cumbersome, and complicated it is to prosecute these cases. There are thousands of justice department lawyers who draft all this legislation, lawyers who do not have to go into court to defend that legislation and prosecute under it.

We have seen these lawyers draft gang legislation that is absolutely worthless because it is so complex. We are fighting a 21st century problem in terms of gangs with 19th century legislation. We have lawyers in the justice department who are more concerned about what the courts will say about the charter of rights than actually prosecuting criminals and telling the courts why it is important to put these criminals away.

We have turned the system on its head and now the Attorney General of Canada says he would prosecute a narrow range of these crimes. I say to the provinces to let the federal government prosecute all of these cases. It will see that the $120 million will maybe last one year, not over five years.

Generally speaking, however, with the exception of the resourcing issue and with the failure of the government to place minimum sentences, I am in support of the general thrust of the legislation. Canadians agree that confidence in our nation's corporate sector and stock markets must be retained. However, it is difficult for Canadians to take the justice minister and his parliamentary secretary seriously when they say it is important to be tough on corporate abuse of money invested by the public when nothing is being done to prevent the abuse of taxpayers' dollars by the Liberal government.

Just two weeks ago, the member for St. Albert revealed that a former assistant to the heritage minister spent over $50,000 on food and travel in just under two years and had not provided adequate information for most of the bills. Last week, or the week before last, concerns over $600,000 in questionable expense accounts by the director of the National Gallery of Canada added to this growing list of waste and mismanagement. The list is not limited to staff or appointed officials. It extends all the way up to the upper echelons of government.

Last year, private companies such as Groupe Everest and Lafleur Communications came under criminal investigation after intense pressure from the Canadian Alliance. The Auditor General's report said that senior bureaucrats broke every rule in the book by awarding contracts to these Liberal Party contributors.

Corruption in the sponsorship program has led to revelations of waste in $230 million of government advertising spending. Several Liberal ministers have been forced to resign after even the Prime Minister could no longer defend their actions.

The former public works minister, Alfonso Gagliano, was implicated in questionable advertising contracts and was conveniently shuffled out of cabinet into a Liberal patronage position as ambassador to Denmark.

The former defence minister was fired following the revelation he gave an untendered contract to a personal friend. The former solicitor general came under investigation by the ethics counsellor and resigned after he was found to have breached ethical guidelines in giving contracts to party friends.

This is the government that now says we have to get tough on the private sector and the abuse of the money that the public invests in capital markets. Yet this is a government that has taken absolutely no steps to clean up its own House. It is another example why government members do not want to see minimum sentences in place.

They simply want, as I said earlier, to wink at the judges and say that this is just business as usual and that the government must up the end of the sentences, but the judges should not worry because they can do whatever they want on the bottom end.

The justice minister is quick to point out that 55% of Canadians have lost confidence in the stock market as a result of recent corporate scandals. It is funny how he forgot to mention that the 2002 poll showed that 69% of Canadians viewed the federal political system as corrupt.

Here the justice minister is motivated to act in respect of the private sector when 55% of Canadians want to see changes in the stock market. Yet when 69% of Canadians say that the federal system is corrupt, there is an absolute silence coming from the justice minister and his parliamentary secretary in respect of this very important issue.

Canada's federal Liberal government needs to get busy cleaning up its own house if it is to have any credibility in enforcing any new laws designed to deter corporate crime.

Having said that, I think it is important for members to follow the legislation closely, bring forward appropriate amendments and support legislation that indeed deters fraud in capital markets. This is an important bill and at this point it should be advanced.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I am a little disappointed with some of the comments my friend made in his speech about the former minister of public works and government services and insinuating that he was implicated with regard to some activity. The member did not say implicated by whom. The facts are that the former minister has not been implicated by the Auditor General, who has reported on the activity of two bureaucrats, or by any charges or referrals to the RCMP. I think the member may want to clarify what he meant by implicated.

Similarly, in the same breath he made a comment on the former minister of defence. The member knows that this was not a matter of legality or corruption. It was a matter of whether or not under the ethical standards it was appropriate, the optics of it. Certainly there was no illegality. I am sorry that the member had to go there.

Even the example that 69% of Canadians feel that the federal government is corrupt is not a direct quotation of that survey. It was federal members of Parliament. It was all of us. It was not the government. The member is incorrect in his statement. I guess this place is situation normal.

Having said that, the member is quite knowledgeable on this matter. I know of his background and his work here, as well as his work as a provincial member. Some of the questions that he has raised concern me, particularly the concern about not being sufficiently tough on this kind of crime.

We have passed legislation in this place wherein for people who are in breach of trust, such as those who are found guilty of spousal abuse, the Criminal Code now prescribes tougher sentencing for them because of that special relationship that exists. We have shown this pattern.

To the extent that the member has experience in this matter, does he believe that the experience that we have had in the courts so far is reflective of a condition of inadequate resources within the court system to properly enforce the laws of Canada as they relate specifically to this or similar matters? Or is it a matter that the courts choose not to deal with these things in the manner that was intended by the crafters of the legislation?

[Vic Toews, Canadian Alliance, Provencher, MB]

Mr. Speaker, let us deal very briefly with some of the peripheral matters with respect to the former minister of public works.

My party has asked for that individual to come back and explain his conduct. It was the Liberal government and the committee members who refused to allow him to testify in front of that committee. I stand by what I said. He has been implicated in some very shady deals and he should be given the opportunity to come here and clear his name. I would welcome that opportunity. I am sure that the member would also like to see that individual come before the House and be given an opportunity to clear his name if there is nothing that associates him with those shady deals.

In respect of the ethical standards, I will not comment any further on the issue of the former minister of defence. Whether we call it an illegality or a breach of ethical standards, I think we are all bound by a higher standard in this House that we need to comply with and I will not quibble about the words.

In respect of my statements about 69% of Canadians, what I said, I think very clearly, and what the polls said, is that the federal political system is corrupt, and I am part of that political system, and that reflects adversely on all of us as members of Parliament.

In respect of the specific questions on the inadequate resourcing or inadequate laws, in fact there are serious problems with the resourcing of various laws.

One of the most important areas that the Toronto police have stated over and over again is their inability to deal effectively with child pornographers. They are overstretched in terms of dealing with the challenges of technology. In some of the cases, the police have to sift through a half a million pictures, categorize and catalogue the pictures and send them off to defence counsel. It creates all kinds of resource implications.

Certainly the federal government has not been doing its fair share. The chief of police in Toronto has indicated the problem that they simply do not have the resources and has indicated areas and programs from where those resources could be taken. One example is the gun registry which the chief of police again criticized as a colossal waste of money.

There are inadequate resources and there are inadequate laws.

One of the issues that I was very hopeful the present Minister of Justice and the previous minister would address was that preliminary inquiries. With these kinds of trials, preliminary inquiries will last for years. The provincial attorneys general said that there is no need for these preliminary inquiries.

In recent cases that the Supreme Court has come out with, such as the Stinchcombe and other cases, the crown has virtually been told that it has to produce every scrap of material. Preliminary inquiries have become meaningless. They are being used as a delaying process. That aggravates the resource issue.

If the government had real guts to change the law to make the legal system more effective, many of the resource issues would be addressed simply by changing the law to reflect the 21st century technology.

It is a combination of both. Let us change the law to eliminate those anachronisms and increase resources from programs that simply are not meeting a legitimate justice need.

[Brian Masse, NDP, Windsor West, ON]

Mr. Speaker, one of the interesting parts is the creation in this bill of a new public service. We have seen over the last 10 years an orgy of cleansing of all public services, ensuring that those features or structures are eliminated from the actual governing structures that we have. We now see the creation of a new body, an entity, being the teams that have to go out and police corporate crime. It is an indication in itself of the failure of the model to just hand everything over to those in the corporate sector and rely upon them for goodwill, rely upon them for our needs and to trust them.

What we now have is the creation of another bureaucratic structure which, it is being suggested at the moment, would take $120 million to start, over five years.

The member has identified that it is a joke. What type of resources should this new structure, this new body, receive? How can we arrive at the features that would make it successful to police that area?

[Vic Toews, Canadian Alliance, Provencher, MB]

Mr. Speaker, the member's question is a good one. How do we appropriately use resources in order to tackle what is a very serious problem? Do we give it directly to the police? Do we give it to the existing regulatory agencies? Do we simply pass more laws?

I would like to hear, as this debate continues, how this is going to enhance the detection of criminal activity. My own view is that there are actually good aspects of self-regulatory bodies because they have that insider knowledge which allows them to act efficiently and effectively.

[Richard Marceau, Bloc, Charlesbourg—Jacques-Cartier, QC]

Mr. Speaker, on behalf of my colleagues in the Bloc Quebecois, I am pleased to take part in this debate at the second reading stage of Bill C-46, sponsored by the Minister of Justice, which deals with capital markets fraud and evidence-gathering.

Members will remember that this bill was introduced just before summer recess last spring, after months of waiting and pressure from all sides. The gigantic financial scandals that we have seen over the last 24 months, such as Enron, Arthur Anderson and WorldCom just to name a few, have shown how urgent it is for the government to legislate in that area in order to protect not only investors but also the whole economic system.

But the government was dismally slow to react, being too busy, no doubt, managing the leadership crisis within the Liberal Party of Canada. The bill was finally introduced, very late unfortunately, but we can nevertheless be pleased that we do have it before us now. I will take this opportunity to say that the Bloc Quebecois will support speedy passage of this bill so that we finally have legislation that will effectively regulate financial transactions and ensure the accountability of business auditors. To this end, the Bloc Quebecois will propose certain amendments to specify both the scope and the spirit of the bill. I will be more specific about these amendments later in my speech.

I would remind members that, in the fall of 2002, the Bloc Quebecois urged the federal government to tighten the provisions of the Criminal Code so that the authorities would have better tools at their disposal to fight corporate fraud. In fact, several elements of the bill stem from our party's contribution to the debate, but we find it unfortunate that some of our suggestions were not accepted.

We still have major concerns about one particular aspect of the bill. We find it difficult to understand that this bill could provide that a federal attorney also has jurisdiction to prosecute Criminal Code offences concerning capital market fraud. This is especially worrisome to us since the federal government publicly announced, or at least suggested, its intention of establishing a Canadian securities regulator.

As you know, and this is an aspect that is particularly important to the Bloc Quebecois, securities regulation clearly falls under the jurisdiction of the governments of Quebec and the provinces. We must therefore ensure that the various jurisdictions are respected, thereby countering the federal government's designs in this respect.

This will be discussed further at committee stage, and I believe we ought to focus on the principle of the bill for the time being. So, the bill amends the Criminal Code and creates two new offences, namely insider trading and threats and retaliation against employees who may have revealed corporate misdeeds. At the same time, the maximum sentence for some offences, including fraud, is increased, and certain rules relating to aggravating and mitigating factors will be codified to facilitate interpretation at the time of sentencing. In addition, the bill gives the Attorney General of Canada jurisdiction to prosecute these offences.

The enactment also provides for new mechanisms whereby certain persons will be compelled to produce documents, data or information that will often be specific. As I said in my introduction, there is a very specific context requiring legislation in the financial sector today.

Corporate scandals in the United States have made us aware of how fragile our financial system is and how much were collectively rely it. Some might think that only major investors can be affected by a financial debacle and that the small savers who make up the most part of the population are therefore relatively safe. The fact is that this is totally untrue.

In fact, the biggest and most powerful financial players are represented by the whole familiar panoply of pension funds, and this inevitably means that part of these funds consists of our fellow citizens' savings. Thus, if a pension fund were to suffer substantial losses, it would be the small investors who would pay the heaviest price, even to the point of losing their life savings and seeing their retirement plans go up in smoke.

In this regard, and without getting too entangled in numbers, in order to understand the factors at stake here, it is important to note that in Canada in 1998, Canadian trusteed pension funds held assets of more than $500 billion. Statistics Canada, in a 1998 report entitled “Trusteed pension funds, financial statistics,” estimated that of the $500 billion held in pension fund assets, about $115 billion was invested in Canadian stocks and some $57 billion in foreign stocks.

These sums, which appear astronomical to ordinary mortals but are commonplace in the financial world, represent the contributions of four million Quebec and Canadian workers to these funds. As an illustration, only the financial assets of the chartered banks exceed the capital held by the pension funds.

There is another important fact that illustrates the need to regulate the integrity of administrators. It has to do with the propensity of trusteed pension funds to favour investment in stocks rather than in fixed interest securities. As such, and in light of the previously mentioned figures, it is clear that a financial crisis as serious as the one suffered by our neighbours to south, would be devastating to Canada. The consequences to the retirement incomes of millions of households would be immeasurable and it is precisely those households that we have to protect.

Fortunately, to date, Canadian markets have been relatively spared from large-scale professional misconduct, except for the scandals involving the former directors of Cinar and Nortel. However, we feel that despite the fact that our securities regulation systems are, in the opinion of many experts, much more comprehensive than that which existed in the United States before the financial crisis, it is nonetheless important to send a clear message to corporate directors that financial misconduct constitutes a serious crime and that the punishment will fit the crime.

This is what prompted the Bloc Quebecois, in the fall of 2002, to call for significant changes to the Criminal Code in order to provide the appropriate authorities with better tools to fight crimes of a financial nature.

A year ago, my colleague from Joliette and I proposed adding a section to the Criminal Code that would make insider trading a criminal offence in order to send a clear message to company directors that the use of confidential information obtained within the scope of their duties for the purpose of making profits or avoiding losses would not be tolerated. This is essentially a question of fair play since making profits or avoiding losses in this manner impacts negatively on other investors who do not have access to the same privileged information.

We had suggested amending the Criminal Code by adding, after section 382, a specific reference to insider trading as a criminal offence punishable by a maximum prison sentence of ten years. We are quite pleased at the interest the government has shown in our proposal by including it in its bill.

Additionally, the Bloc Quebecois proposed that a new offence could be created for securities fraud. This offence, which would be patterned on the measures adopted in the United States, could carry a ten-year jail term. It would prohibit fraud when selling or buying securities. The Bloc had also proposed two amendments to section 397 of the Criminal Code. This section clearly stipulates that fraud is committed by someone who:

—destroys, mutilates, alters, falsifies, makes a false entry in or omits a material particular from, or alters a material particular in a book, paper, writing, valuable security or document.

In our opinion, this provision could have applied to falsified financial statements. Furthermore, subsection 2 of this section makes it a specific offence if documents are falsified with the intent to defraud the creditors.

Currently, both offences carry a five-year prison term. We believe that this sentence is so light that it might not deter unscrupulous individuals from committing fraud for millions of dollars. Consequently, we had proposed increasing the maximum term of imprisonment to ten years.

Finally, we proposed adding a third subsection to section 397 of the Criminal Code to specifically target the falsification of financial documents with the intent to defraud shareholders. We believe that shareholders are a more vulnerable category since, unlike the majority of creditors, their investments are not guaranteed. Furthermore, although the information they are provided with is accessible, it is not easy to understand.

I would remind hon. members that these small investors are included in the major pension funds, and few such investors know exactly what is in their portfolio. We therefore have trouble seeing the reason why there would be a specific offence relating to fraud of which creditors are victims, and yet where shareholders are concerned a similar provision would not be included in the Criminal Code. This is precisely the flaw the Bloc Quebecois wants to correct, and we are hopeful that the government will realize the singular nature of this situation.

As I have said, the government plans to add to the Criminal Code a provision defining insider trading and its criminal nature, subject to up to ten years in prison. Although insider trading is banned at this time under provincial legislation on the sale of securities, and the Canada Business Corporations Act, this new Criminal Code offence is intended for the most egregious offences that merit stiff criminal penalties.

This new proposal for an offence being directly modelled on the Bloc's proposal, we cannot be anything but pleased that it is included in the bill. It seems, for once, that the government has heeded the opposition and bowed to our arguments.

The same thing goes for threats of reprisal against employees. It is necessary, indeed vital, for there to be special protection for employees who blow the whistle on fraud, or contribute information that leads to its discovery by assisting law enforcement officers in the investigation of such situations. The purpose of this is both to reveal such financial frauds and to protect employees from the intimidation which might occur in such circumstances.

Often these people play key roles in the disclosure of corporate scandals, but as a result are at risk of intimidation or threats, including action affecting their employment or means of livelihood. Creation of a new offence of threat or reprisal relating to employment would encourage people with inside information to cooperate with law enforcement officials and would punish those threatening or making use of reprisals. Let us note in passing that this offence would be punishable with up to five years' imprisonment if Bill C-45 is passed with this provision.

Overall, prison sentences would be increased to reflect the gravity of the crime and its repercussions. The proposed reforms would establish aggravating circumstances, which the courts should take into consideration in setting sentences. Thus the bill calls for maximum sentences to rise from 10 to 14 years for the present fraud offences under the Criminal Code, and for those affecting the public market. Maximum prison sentence for market manipulation offences increase from 5 to 10 years.

Factors such as the extent of the economic impact or any negative impact on investor confidence or market stability, defined as aggravating circumstances, could lead to stiffer sentences.

It is also of particular interest that, under these provisions, the accused or convicted person cannot invoke a reputation in the community or work as an attenuating factor for sentencing, This is precisely because these qualities are, more often than not, used to defraud and commit crime. We do acknowledge that these proposals are highly interesting, but regret that the government has not chosen to make use of our suggestions on stiffer sentencing for offences under section 397 of the Criminal Code.

I wish to call the attention of the House to the fact that Bill C-46 will force professionals to breach their duty of confidentiality.

Under certain circumstances, the government's legislative proposal would force a professional to produce information or documents, which could result in the disclosure of confidential information infringing on an individual's privacy.

While the clauses in question provide that the production order may contain terms and conditions to protect a privilegedcommunication, particularly between a lawyer and theirclient, the fact remains that confidential information might be disclosed in certain circumstances. We must therefore ask ourselves if forcing a professional to provide confidential information could undermine the professional-client relationship of trust.

However, a person named in an ordermade under these provisions may apply to a judge for an exemption from therequirement to produce any document, data orinformation referred to in the order. It remains to be seen what bases judges will use to prohibit the disclosure of confidential information.

Before I conclude, I would like to come back to an issue I raised at the beginning of my speech about the involvement of federal prosecutors. In fact, this includes some irritants that would need to be alleviated for the bill to be passed quickly.

As you know, financial market regulation comes under the jurisdiction of Quebec and the other provinces, as does the administration of justice.

Under this bill, the attorney general of Canada would have concurrent jurisdiction with the provinces and the territories to prosecute certain criminal fraud cases, including the proposed new offence of illegal insider trading. Federal involvement in this area would supposedly be limited to cases that threaten the national interest in the integrity of capital markets.

According to information released by the federal government, the Government of Canada will work with the provinces to ensure proper and efficient concurrent jurisdiction by establishing prosecution protocols.

We cannot support such a deliberate encroachment by the federal government in provincial areas of constitutional jurisdiction. What is even worse is that all of this goes to prove the federal government's intent to infringe upon yet another area of Quebec and provincial jurisdiction, the securities market.

Lastly, we are now debating the principle of the bill and we look forward to having the opportunity in committee to examine some of these issues in greater detail. Therefore, at this time, the Bloc Quebecois will support Bill C-46 in principle.

[Inky Mark, Canadian Alliance, Dauphin—Swan River, MB]

Mr. Speaker, I am pleased to rise today to speak to Bill C-46. For our viewers this evening, let me begin by reading a summary of Bill C-46:

This enactment amends the Criminal Code by creating a new offence of prohibited insider trading and creating a new offence to prohibit threatening or retaliating against employees for disclosing unlawful conduct. The enactment increases the maximum penalties and codifies aggravating and non-mitigating sentencing factors for fraud and certain related offences and provides for concurrent jurisdiction for the Attorney General of Canada to prosecute those offences.

That indeed is a tall order.

The Progressive Conservative Party supports Bill C-46 in principle.

Why have we seen this legislation come into being? Recent major accounting deceptions and other corporate scandals, such as those of Enron and WorldCom in the United States, have resulted in multi-billion dollar losses and have devastated investor confidence. The United States has already responded with the Sarbanes-Oxley Act of 2002 and with increased resources for investigations and prosecutions.

The Canadian government is now acting to increase the resources available for enforcement of existing Canadian laws and to strengthen existing criminal sanctions. What we gather from that statement is the government wants to be seen and perceived as being tougher on crimes, certainly capital market crimes. Yet at the same time we see the government being really soft on criminals. It is easy to say one thing but, as the old saying goes, to walk the talk is something else.

Even in the field of immigration enforcement, Ontario has a total of eight immigration enforcement officers. That is in a province the size of the Ontario. It just does not make any sense.

The Youth Criminal Justice Act has created a lot of problems from coast to coast to coast. Communities are dealing with vandalism and youth crime and their hands are tied. They really do not know how to deal with it. In fact I have spoken to attorneys general of the provinces and they have the same problem. They really question why the new Youth Criminal Justice Act is the way it is. It is actually worse than the Young Offenders Act which it supposedly replaced.

In the field of immigration, which I am very familiar with, I am told that staffing levels are not up to 1994 levels. When the Liberals came into power, they made all those big cuts, like $24 billion in health care. They also did the same thing in immigration even though the work probably tripled or quadrupled from 1993 to today. It is easy for the government to say it will be tough on crime, and now we are looking at a new bill. However to be tough on crime, it has to put in the resources.

Some members spoke today about mandatory sentencing. On my way back to Ottawa, I read in the paper that the attorney general of Manitoba, Gord Mackintosh, was asking the federal government to change the Criminal Code so that no bail would be granted to repeat offenders. It is creating a problem in the field. There is a huge disconnect with what we believe should taking place and what is actually taking place out in the real world.

There are new offences under this act. Insider trading is already illegal under the provincial securities laws and the Canadian Business Corporation Act. In instances that merit a more severe response, Bill C-46 creates the new criminal offence of inside trading with a maximum prison term of 10 years.

Bill C-46 also provides whistleblowing protection for employees who expose wrongdoing under federal or provincial law. A new criminal offence of employee related threats or retaliation would carry a maximum prison term of five years.

Bill C-46 is really about making the private sector and the capital market sector more accountable. Governments and certainly this government should eat their own words. If they really want to be accountable, they should demonstrate that by the way they spend taxpayer money. How accountable are they?

The bill talks about capital market fraud. The Auditor General has criticized the government for keeping the House of Commons in the dark when it comes to the way it has spent the money on the failed gun registry. It is fraudulent how it spends billions of taxpayer dollars. If it wants to tell taxpayers, the citizens of the country, how things should operate, then it should set the example.

When we examine the long gun registry from the fraudulent point of view and the waste of taxpayer money, this is really what we are trying to do here today. Bill C-46 is about the capital market, people's money being used in a fraudulent manner or in misleading investments in the private sector. With the long gun registry, even today the government still has not reported to Parliament what the total cost of the program has been so far. The government still has not reported to Parliament what the total cost will be to implement the firearms program.

The Treasury Board officials finally admitted that even they will not know the total cost of the firearms program until the fall. The government has been hiding the truth from Parliament and the public for seven years and has not been any more forthright in the last five months, over this past summer, or even this fall. Even when we ask questions about the new estimates of the Department of the Solicitor General, the Solicitor General refuses outright to say that there is a new $10 million in his account for the long gun registry.

The government estimates are still grossly under reported because of the justice department's plans and priorities report for 2003-04, which was tabled this past March, has 111 blanks. We are talking about the government's use of taxpayer money.

The government also refuses to reveal the cost of enforcement compliance as recommended by the Auditor General. The government refused to release a cost benefit analysis on the firearms program by declaring it a cabinet secret.

When we talk about accountability, it leaves a lot to be desired in the way the government handles taxpayer dollars.

Bill C-46 is supposed to be tougher on crime with tougher Criminal Code sentences. The current maximum sentence for fraud affecting the public market will rise to 14 years from 10 years and the maximum term for fraudulent manipulation of stock exchange transactions will rise to 10 years from 5 years.

Perhaps we need tougher minimum sentencing. In other words, we need mandatory minimum sentencing for people who are convicted of capital market fraud.

Bill C-46 also adds a list of specific aggravating factors that would result in harsher penalties such as the extent of economic damage caused or the impact on market stability. A person's reputation and status in the community or workplace can no longer be considered as a mitigating factor to lower penalties in cases where those who commit capital market fraud rely on those very factors to carry out their crimes.

In the area of evidence gathering, Bill C-46 introduces production orders as a tool for criminal investigations. Production orders are already part of the Competition Act. They are also less intrusive alternatives to search orders. They would compel a third party to produce pertinent documents within a specific time period. Failure to comply could result in a jail term of up to six months and a fine of up to $250,000.

Regarding concurrent jurisdiction, currently the Criminal Code gives the provinces responsibility for prosecuting cases that involve capital market fraud. With Bill C-46, either the federal or provincial governments may prosecute such cases. The government says that the federal involvement would be limited to a narrow range of cases that threaten the national interest.

As I mentioned earlier, the provinces need to be wary when the feds promise that they will fund prosecution under the federal courts. We have many examples where funding relationships between the federal government and provincial governments on paper appear to be in order. However in practical terms, in real costs, day to day activity, it just does not work out. Health care is a good example. We all know the problems of health care across Canada. As was mentioned, when it was first started, the cost was shared between provincial and federal government, fifty-fifty. Now we are down to about 15¢, I believe.

Another good example is the long gun registry on the prosecution side. Eight provinces have already indicated that they will not prosecute long gun registration offences and that they will let the federal courts deal with the prosecution of people who have breached Bill C-68, those hunters or firearm users who either do not have the gun registered or do not have a possession certificate. Up to today I know probably hundreds of people who have been stopped and caught for that breach, yet no charges have been laid by the federal government.

I know the reason why no charges are being laid. The government is in no way willing to spend millions of dollars prosecuting innocent Canadians who do not have their family heirloom or some rabbit gun their grandfathers passed on to them registered.

In terms of the financial relationship with Bill C-46 provinces have to tread very carefully.

The government is playing catch-up with the United States lawmakers who have already passed legislation, not just to strengthen criminal sanctions but also to reform the way corporations are governed. Boards of directors, auditors and audit committees all have key roles to play in protecting the interests of shareholders. Indeed the scandals that rocked the capital market of 2001-02 are widely seen to be the result of poor corporate governance, lax auditing, accounting standards and oversight and the incentives provided by executive compensation arrangements. In spite of this, the government's background information on Bill C-46 does not once mention the role of good corporate governance legislation.

Shortly after the government tabled Bill C-46, the Senate banking committee completed a year long study of the circumstances that resulted in the American corporate scandals. The committee was particularly interested in whether these circumstances might occur in Canada with similar results and if so, how they might be avoided.

While the committee called for tougher sanctions, whistleblowing protection for those who report financial irregularities and increased resources to investigate wrongdoing, it also recommended legislative measures to: require that a majority of board members be independent; require the development of a code of ethics to be followed by all board members; require audit committee members to be independent and financially literate; limit the non-audit services that auditors can provide to their audit clients; require the chief executive officer and the chief financial officer to certify that the annual financial statements fairly represented the organization's results and financial conditions; and prohibit compensation committee members from being a member of management and require them to have expertise in compensation and human resources.

The challenge will be to separate jurisdiction between the provinces and the federal government. We must be aware that father does not always know best. The Progressive Conservative Party looks forward to the further hearing process at committee level.

[Rob Anders, Canadian Alliance, Calgary West, AB]

Mr. Speaker, I have some questions for my colleague with regard to the whole concept of capital markets fraud. I think we have a prime example of that in the new Liberal leader and I will enunciate why.

The new Liberal leader has been committing a form of tax evasion for years. Talk about capital markets fraud. Somebody who owns Canada Steamship Lines, plus a total of about 132 other related companies, has been hiding his money and his profits offshore. The hypocrisy of it is that while he served as the finance minister in this place he bragged about how Canadian taxes were so good, but he was hiding his money offshore and not paying Canadian tax. Why? He obviously thought Canadian taxes were awfully high. I would say that is a good example of capital markets fraud, which Bill C-46 is all about. The former finance minister would know capital markets fraud all too well.

What does my colleague think about Paul Martin Sr. having acquired Canada Steamship Lines for pennies on the dollar? This was a crown asset that was sold to Paul Martin for next to nothing. Talk about capital markets fraud and taking money--

[The Deputy Speaker]

Order, please. The Chair is having some difficulty and I will simply ask members for their co-operation. There has been a longstanding practice in the House of not attacking the integrity of each other as members of Parliament. I simply want us to be cautious and aware of this longstanding practice and, to the best of our ability, to uphold it.

[Inky Mark, Canadian Alliance, Dauphin—Swan River, MB]

Mr. Speaker, I am sure the member for LaSalle--Émard will respond to the same question when he returns to the House.

In terms of fraud, I earlier mentioned and compared the whole business of capital markets fraud with the fraudulent attitude of the government toward the billion dollar plus expenditures in the gun registry.

Liberal members need to open their eyes. If they are putting together legislation to make other people accountable then maybe it is time they were accountable themselves in terms of how they spend taxpayer money.

[Rob Anders, Canadian Alliance, Calgary West, AB]

Mr. Speaker, I want to ask the member a fairly specific question regarding a corporation and not an individual.

How much money does the hon. member think was left on the table, was, in a sense, never paid to Canadian taxpayers, never given to general revenue, was never put into tax collection that should have and could have been collected from Canada Steamship Lines if that company had been registered here in Canada, operating here in Canada, employing Canadians rather than foreigners, and basically being a good Canadian company rather than trying to hide its assets offshore? What does the hon. member think? Could he speculate on how much money has been stolen from the Canadian tax coffers by Canada Steamship Lines by it not operating in this country? Could he please give me his thoughts on that?