Mr. Speaker, corporate scandals rocked the beginning of this decade, decimated the lives of millions and set in motion a wave of legislative reforms.
Fraud at WorldCom ultimately topped $11 billion and led to the country's largest bankruptcy filing. In 2005, WorldCom former chief executive Bernard Ebbers was sentenced to 25 years in prison for his role in orchestrating the greatest corporate fraud in the nation's history.
Adelphia, Enron, Qwest, Tyco, and the list goes on, but more recently, Bernie Madoff, former non-executive chairman of the NASDAQ stock exchange, pleaded guilty to 11 charges of defrauding investors out of as much as $65 billion over 20 years in a Ponzi scheme. Many victims were working people. One retired couple, 82 and 78 years of age, have been forced to look for work because they lost everything.
Former theatre producer Garth Drabinsky was given a seven-year sentence for his role in a $500 million fraud at Livent. Justice Benotto said:
The business community must be put on notice that deception, dishonest dealing, will be punished severely, whether the victims are the vulnerable and unsophisticated or well resourced financial institutions driven themselves by a desire for profit....The members of the business community...must understand that honesty is the currency in which they trade.
She stated that Drabinsky presided over a corporation whose culture was one of dishonesty and that corporate frauds result in tangible losses to creditors, employees, investors and society. Fraud also erodes public confidence in financial markets and fosters cynicism. Justice Benotto said that the court has a duty to strongly denounce such conduct.
Vincent Lacroix's Norbourg Group swindled 9,200 mutual fund investors, many of them retirees, out of $150 million. Quebec Superior Court Judge Richard Wagner said:
The evidence shows that Vincent Lacroix's acts...shook the structure of financial markets while causing serious moral damages to the victims of this scandal--one without precedent in the annals of Canadian law....This saga has also underlined the weakness of [securities] regulation and nourished a healthy reflection, both on the seriousness of such crimes in our era and on the urgency to clean up financial activity in this country....The court is of the opinion that a clear and dissuasive message must be sent to the population. Economic crimes must be severely punished.
Lacroix was handed a 13-year sentence.
In the meantime, the case of alleged Ponzi schemer Earl Jones has been put off until December. His lawyer says the Crown has told him police have identified over 160 people who allege they were victims of fraud worth a total of $75 million.
While these are high profile cases, the Department of Justice provided a list of 12 cases valued at more than $1 million that received sentences of less than two years.
Fraud takes many forms. The Canadian Institute of Chartered Accountants defines fraud as “an intentional act, by one or more individuals among management, other employees, those charged with governance or third parties, involving the use of deception to obtain an unjust or illegal advantage”. These activities can include misappropriation of cash or inventory, fraudulent financial reporting and money laundering.
White-collar crime is a scourge on Canadians. Sadly, it is often invisible crime. Its damages are done internally in terms of emotional, financial and psychological damage.
I therefore support this bill because we believe the principles behind stricter sentencing rules are very important, but we also know that they are not enough to prevent these frauds from happening. I will come back to this point later.
The bill imposes a mandatory minimum sentence of two years for fraud over $1 million, effectively eliminating conditional sentences and sentences at home. The maximum penalty of 14 years remains.
The bill specifies aggravating factors to be considered at sentencing, including age and health of victims, duration of the fraud, financial and psychological impacts, and what aggravating and mitigating factors were considered relating to the sentence. It also requires judges to consider community impact statements and to consider repayment to victims when possible. It allows the court to prohibit an offender from assuming any position, paid or voluntary, that involves handling other people's money or property.
The question is, does the bill go far enough? A member of the criminal law section of the Canadian Bar Association criticized the proposals as not really making substantive changes. The lawyer pointed out that those who are now convicted of fraud that exceeds $1 million face serious jail time that can exceed the proposed minimum of two years. Judges currently take into account aggravating as well as mitigating factors when sentencing a person who has been convicted of white collar crime.
Important questions remain. Will there be increased support to police fraud squads? If there are not the supports to investigate, it does not matter how strict the sentences are. Should people convicted of serious fraud have been removed from the list of criminals who are eligible for parole after serving one-sixth of their sentence? How much would the new measures cost? How much would they increase prison populations?
Instead of focusing on answering these important questions, the government gave its fourth press conference several blocks from Parliament Hill. How much did the press conference at a rented meeting room at the Lord Elgin hotel cost?
Organizations depend on the individual ethical behaviour of every member and associate of the organization. The most notorious corporate wrongdoers arrogantly rejected this basic concept. In fact, Bernie Ebbers, disgraced WorldCom CEO, called employee efforts to implement such a code a colossal waste of time.
We must go beyond negative incentives for corporations to behave in socially responsible ways. Companies are not islands but rather an essential part of society; that is, they produce goods to satisfy needs and wants. They employ millions, and they have the ability to improve society and the environment.
There needs to be more positive incentives, positive corporate climate, employee motivation, attraction of ethically conscious consumers and investors. With this will come competitive advantage.
Organizations must regain the trust of society on which they so fundamentally depend. Corporate codes of ethics are important. Organizations cannot remain value neutral but must clearly identify acceptable guidelines for behaviour and assume their fundamental responsibility to enforce it at all levels of the organization.
In closing, I am supporting sending this bill to committee because Canadians need protection, but I want to ensure that there is necessary support to enforcing legislation.