Doug Hyndman Cannot Shift Blame for Canada's Broken
White Collar Crime Enforcement onto the RCMP IMET Police
The National Post, Toronto Star and www.Advisor.ca published the attached articles on the attached speech made by Doug Hyndman, Chairman of the B.C. Securities Commission, to the Economics Club of Toronto on September 19, 2007.
Doug Hyndman is simply blowing smoke when he says the Canadian securities regulators cannot be blamed for Canadian white collar securities fraudsters not be prosecuted and sent to jail.
He wants us to believe that Canada's malfunctioning white collar securities crime enforcement is the fault of the Canadian RCMP IMET and other police forces.
This is not so on two counts:
(a) the provincial securities regulators have the authority to lay quasi criminal charges and seek court approval for jail sentences to be applied for violations of provincial securities laws; and,
(b) the provincial securities commissions are directly integrated with the RCMP Integrated Market Enforcement Teams and the Joint Securities Intelligence Unit. The RCMP IMET does not have direct intake of criminal securities complaints from the investing public, taking referrals for criminal securities investigations only from their participating agencies, the investment industry SRO's (IDA, MFDA, MRS) and the provincial securities commissions.
On point (a):
the Ontario and B.C Securities Acts clearly state securities commission powers to seek court approvals for jail sentences.:
Ontario Securities Act:
122. (1) Every person or company that,
(a) makes a statement in any material, evidence or information submitted to the Commission, a Director, any person acting under the authority of the Commission or the Executive Director or any person appointed to make an investigation or examination under this Act that, in a material respect and at the time and in the light of the circumstances under which it is made, is misleading or untrue or does not state a fact that is required to be stated or that is necessary to make the statement not misleading;
(b) makes a statement in any application, release, report, preliminary prospectus, prospectus, return, financial statement, information circular, take-over bid circular, issuer bid circular or other document required to be filed or furnished under Ontario securities law that, in a material respect and at the time and in the light of the circumstances under which it is made, is misleading or untrue or does not state a fact that is required to be stated or that is necessary to make the statement not misleading; or
(c) contravenes Ontario securities law,
is guilty of an offence and on conviction is liable to a fine of not more than $5 million or to imprisonment for a term of not more than five years less a day, or to both.
British Columbia Securities Act:
155 (1) A person who does any of the following commits an offence:
(a) fails to file, provide, deliver or send a record that
(i) is required to be filed, provided, delivered or sent under this Act or the regulations, or
(ii) is required to be filed, provided, delivered or sent under this Act or the regulations within the time required under this Act or the regulations;
(b) contravenes any of section 29 (6), 34, 39 (6), 49 to 57, 57.1, 58, 59, 61, 70 (1), 85 (b), 86 to 87.1, 100 to 112, 121, 122, 124, 125, 127, 128, 143 (7), 148, 153 (3) or 168.1 (1) of this Act;
(c) fails to comply with a decision made under this Act;
(d) contravenes any of the provisions of the regulations that are specified by regulation for the purpose of this paragraph;
(e) contravenes any of the provisions of the commission rules that are specified by regulation for the purpose of this paragraph.
(2) A person that commits an offence under this Act is liable to a fine of not more than $3 million, or to imprisonment for not more than 3 years, or both.
On point (b):
of the Provincial Securities Commissions being directly integrated and controlling the RCMP IMET and Joint Intelligence Units:
§ All the provincial securities commissions are participating partners with the Royal Canadian Mounted Police Integrated Market Enforcement Teams Unit (RCMP IMET), which is a division of the Royal Canadian Mounted Police.
This is a picture of the RCMP Integrated Market Enforcement Team (IMET) reception area in Toronto. Notice the OSC, MFDA, IDA, MRS logos in the window. RCMP IMET has stated that they will not accept criminal complaints directly from the public, only from private industry SROs, or the provincial securities commissions.
§ May 18, 2005: Senate Committee on Banking, Trade and Commerce testimony from RCMP Chief Supt. German said: "The commissioner has been personally involved with the IMET initiative from the beginning. Once we knew that the federal government was interested in pursuing this initiative, he was prepared to risk manage the setup of the program, which is what we did. …The securities commissions are not only cooperating; they have seconded people to be on our IMET teams. In fact, the Ontario Securities Commission was the first place we went when we put the IMET strategy together, and they embraced it. "
§ June 13, 2003: David Brown, Chairman of the OSC at the time, said in his speech to National Press Club, "I'm very pleased with the details of the program announced just last week by Justice Minister Martin Cauchon, to strengthen enforcement action and legislation against serious capital market fraud. The Government of Canada will spend up to $120 million over the next five years to create nine investigative units strategically located across the country… I am pleased at the collaboration that is already well established between OSC enforcement staff, federal officials and the RCMP - this partnership will now only grow."
§ The RCMP Website http://www.rcmp-grc.gc.ca/fio/imets-faq_e.htm says: "Due to the IMET program’s very focused and dedicated investigative resources, there is not one specific office where the public can file complaints/request investigations. Instead, those complaints that are more demanding of a team approach to any subsequent investigation are referred to the IMET's for consideration by key stakeholder agencies."
§ May 9, 2005: Letter from Craig Hannaford, RCMP IMET says: "Unless the matters you are concerned about are referred to the RCMP IMET through one of our participating agencies (OSC, IDA, MFDA, MRS) it will not be considered for investigation."
§ Monday, April 16, 2007: Former RCMP Commissioner Guiliano Zaccardelli gave the following sworn testimony to the House of Commons Public Accounts Committee in response to a question from MP Judy Sgro on whether he knew David Brown: "I have met him. I know him by his reputation as Chairman of the OSC. We handled a lot of crime investigation files, where we worked with the OSC. I do not recall whether we personally sat down to discuss these files, although we may have."
§ The RCMP, OSC, Market Regulation Services Inc. and the former Investment Dealers Association also have an alliance in the Joint Securities Intelligence Units (JSIU's) that were created in 2001. RCMP Website "http://www.rcmp-grc.gc.ca/fio/accountability_e.htm - Intelligence" says: "The Integrated Market Enforcement Teams contribute to the securities enforcement community through Joint Intelligence Units (JIUs). We are another spoke in the intelligence wheel comprised of the Investment Dealers `Association of Canada (IDA), the various provincial securities commissions and the Market Regulation Services Inc. (RS). "
§ November 1, 2004: From David Brown's Speech - Dialogue with the OSC, "Four years ago, the OSC took a big step forward. We decided to get ahead of fraud, rather than simply clean up the mess afterwards. We set up an intelligence unit. And we entered into a strategic alliance with the RCMP, putting together a Joint Securities Fraud Unit. The Unit's mandate? To detect and disrupt criminal activity in the capital markets. The Unit targets criminal activity, especially organized crime activity in the stock market. And it works cooperatively with the securities industry. Working together, we can connect the dots."
§ September 25, 2006: David Wilson, the current OSC Chairman, said in his speech to the Joint Securities Intelligence Unit Conference, "The OSC’s partners in the JSIU are represented here on stage with me by RCMP Commissioner Guiliano Zaccardelli and Investment Dealers Association President Joe Oliver."
The heads of the partner organizations in the Joint Securities Intelligence Unit, (from left) former RCMP Commissioner Giuliano Zaccardelli, OSC Chair David Wilson (ex-Scotiabank) and former Investment Dealers Association President Joe Oliver.
§ Two men in Canada have excessive control on what white collar securities crime investigations are done, who is charged and how the system works - the Chairman of the OSC and the Commissioner of the RCMP.
(i) The current Chairman of the OSC, David Wilson, supervises both the OSC's investigations and adjudications. The dual role of the OSC Chair position is considered to be the cause of the malfunctioning of the OSC in the 2004 Osborne Report.
(ii) David Wilson is also Chairman of the Canadian Securities Administrators Policy Coordination Committee, the Canadian Public Accountability Board Council of Governors and the Federal-Provincial Justice Ministers Securities Enforcement Working Group
How do we fix the mess in white collar crime enforcement:
(1) The RCMP IMET Unit must have its own system for intake of criminal securities complaints from the public and internal whistleblowers, where the intake process is integrated with the provincial and municipal police forces, acting as equal partners. The investment industry SRO's and the provincial securities commissions must be removed as the only sources for referral of securities criminal cases to the RCMP.
(2) the RCMP IMET must conduct its securities criminal investigations and prosecutions independently of the investment industry SRO's and the provincial securities commissions, collaborating only with international police agencies, and the provincial and municipal police forces of Canada.
(3) Both Federal and Provincial Governments need to ensure there is adequate budgets and expert resourcing for the RCMP IMET and the collaborating provincial and municipal police white collar crime units, who need to be brought in as full partners with the RCMP. There needs to be a new Pan Canadian White Collar Crime Police Committee comprising senior police representatives to manage the protocols for distributing the securities criminal complaint intake and investigations to the various participating police forces across Canada.
(4) Stop the provincial securities commission chairmen and their political bosses from presenting false information to the general public about their role in white collar crime policing.
(5) Proper civilian oversight put in place over the RCMP. David Brown, former OSC Chairman and current Chairman of the RCMP Restructuring Committee, says in his June 15, 2007 RCMP investigative report:
7.3.3 The Need for Oversight:
The management function of this complex enterprise clearly could have benefited from the oversight of a body performing the functions of a board of directors." It is highly unlikely this proposed Board of Directors would be a civilian oversight agency with sound statutory tools and resources to do its job. Brown's Board of Directors will not look like any of Canada's municipal and provincial police civilian oversight agencies, but be like the provincial securities commissions stacked with corporate lawyers, executives and other friends of the financial industry.
(6) The whole investment industry self regulatory and provincial securities commission enforcement system is totally lacking in civilian oversight and accountability to the public too. There is no evidence that the investment industry SRO's (IDA,MFDA,MRS) and provincial securities commissions have any right to shift the blame for Canada's malfunctioning white collar crime enforcement system onto the RCMP and the other white collar fraud police units in Canada.
Everyone involved needs to face the truth about the rampant white collar crime in Canada and that every level of investor protection enforcement and white collar crime policing is malfunctioning. If you wish additional information, please do not hesitate to call me.
Diane Urquhart
Independent Consulting Analyst
Mississauga, Ontario
E-mail: urquhart@rogers.com
visit breachoftrust.ca for BREACH OF TRUST film info
E-MAIL us at investoradvocate@shaw.ca
Do the RCMP get their man if he is white collar?
Doug Hyndman for six figure salary, or for Canadians?
by admin » Thu Sep 20, 2007 7:34 pm
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by admin » Thu Sep 20, 2007 7:37 pm
Thursday » September
20 » 2007
B.C. Securities chair blasts RCMP's white-collar
offensive
Wednesday, September 19, 2007
The RCMP offensive designed to combat white-collar crime in Canada has "achieved
almost nothing," the chairman of the British Columbia Securities Commission said
today.
In a speech aimed at critics of Canadian securities enforcement, Doug Hyndman
dismissed claims that the country's 13 securities regulators are to blame for a lack
of white-collar criminal convictions in this country.
Rather, the justice system doesn't take these crimes seriously, something that a
much-talked-about national regulator would not change, he told the Economic Club
of Toronto.
And there have been almost no tangible results from a $100-million Federal
government investment in the Mountie's Integrated Market Enforcement Teams
(IMET), Mr. Hyndman said.
"The major problem we face is that Canada relies too heavily on regulatory
enforcement to deal with serious fraud," he said. "We need to mobilize our criminal
justice system to attack securities fraud.
"Although the commitment [to IMET's] was welcome, the results have been
disappointing. Despite spending about $100-million on this program, the federal
government has achieved almost nothing...Our focus should be on changing the
dynamics in the criminal justice system, not on blaming provincial regulation."
Mr. Hyndman argued that critics often fail to understand regulators don't have the
authority to send people to jail, something he called "the job of police, prosecutors
and courts."
Because the police lack expertise in white-collar crime, Canada might benefit from a
"civilian agency," similar to the FBI, that could specialize in investigating complex
crimes, he added.
Regulators are mainly restricted to imposing financial sanctions although they can
charge people with securities act violations, which allow for relatively short jail
terms. Former Bre-X Minerals Ltd. geologist John Felderhof was facing that prospect
before the was acquitted of insider trading this summer.
When it comes to punishing securities law violations with financial penalties and
other sanctions available to regulators, Canadian watchdogs have done a
"comparable" job to that of the United States Securities & Exchange Commission,
Mr. Hyndman said.
Meanwhile, the BCSC chairman argued in favour of the passport system being
adopted across the country, except in Ontario, which is calling for a single national
regulator.
The new model, which allows companies to register with only their provincial
regulator rather than all 13 jurisdictions, is a step in the right direction, Mr.
Hyndman said, warning that single-regulator proponents have embarked on a
campaign of misinformation.
Peter Brieger
CanWest News Service
http://www.canada.com/components/print. ... 778ac686ee 9/20/2007
Specifically, Mr. Hyndman disputed claims that Canada is the only major G7 country
without a single securities regulator.
Also, he noted that industry players often complain that the pace of securities
reform is too fast, not too slow, as critics suggest.
Mr. Hyndman challenged claims that the provincial regulatory system puts Canada
at a competitive disadvantage, warning that no one really knows how the single
regulator system would work.
"We often hear that foreigners think Canadian securities regulation is weak and
ineffective," he said. "Why do you suppose that is so? Maybe it has something to do
with Canadians running off to New York and London to criticize our system, spinning
the same misinformation abroad that they do at home.
"It's fine to propose and argue for structural or other changes to make our system
better... But it's irresponsible to promote an alternative by using misinformation to
denigrate our regulatory system."
Financial Post
http://www.canada.com/components/print. ... 778ac686ee 9/20/2007
20 » 2007
B.C. Securities chair blasts RCMP's white-collar
offensive
Wednesday, September 19, 2007
The RCMP offensive designed to combat white-collar crime in Canada has "achieved
almost nothing," the chairman of the British Columbia Securities Commission said
today.
In a speech aimed at critics of Canadian securities enforcement, Doug Hyndman
dismissed claims that the country's 13 securities regulators are to blame for a lack
of white-collar criminal convictions in this country.
Rather, the justice system doesn't take these crimes seriously, something that a
much-talked-about national regulator would not change, he told the Economic Club
of Toronto.
And there have been almost no tangible results from a $100-million Federal
government investment in the Mountie's Integrated Market Enforcement Teams
(IMET), Mr. Hyndman said.
"The major problem we face is that Canada relies too heavily on regulatory
enforcement to deal with serious fraud," he said. "We need to mobilize our criminal
justice system to attack securities fraud.
"Although the commitment [to IMET's] was welcome, the results have been
disappointing. Despite spending about $100-million on this program, the federal
government has achieved almost nothing...Our focus should be on changing the
dynamics in the criminal justice system, not on blaming provincial regulation."
Mr. Hyndman argued that critics often fail to understand regulators don't have the
authority to send people to jail, something he called "the job of police, prosecutors
and courts."
Because the police lack expertise in white-collar crime, Canada might benefit from a
"civilian agency," similar to the FBI, that could specialize in investigating complex
crimes, he added.
Regulators are mainly restricted to imposing financial sanctions although they can
charge people with securities act violations, which allow for relatively short jail
terms. Former Bre-X Minerals Ltd. geologist John Felderhof was facing that prospect
before the was acquitted of insider trading this summer.
When it comes to punishing securities law violations with financial penalties and
other sanctions available to regulators, Canadian watchdogs have done a
"comparable" job to that of the United States Securities & Exchange Commission,
Mr. Hyndman said.
Meanwhile, the BCSC chairman argued in favour of the passport system being
adopted across the country, except in Ontario, which is calling for a single national
regulator.
The new model, which allows companies to register with only their provincial
regulator rather than all 13 jurisdictions, is a step in the right direction, Mr.
Hyndman said, warning that single-regulator proponents have embarked on a
campaign of misinformation.
Peter Brieger
CanWest News Service
http://www.canada.com/components/print. ... 778ac686ee 9/20/2007
Specifically, Mr. Hyndman disputed claims that Canada is the only major G7 country
without a single securities regulator.
Also, he noted that industry players often complain that the pace of securities
reform is too fast, not too slow, as critics suggest.
Mr. Hyndman challenged claims that the provincial regulatory system puts Canada
at a competitive disadvantage, warning that no one really knows how the single
regulator system would work.
"We often hear that foreigners think Canadian securities regulation is weak and
ineffective," he said. "Why do you suppose that is so? Maybe it has something to do
with Canadians running off to New York and London to criticize our system, spinning
the same misinformation abroad that they do at home.
"It's fine to propose and argue for structural or other changes to make our system
better... But it's irresponsible to promote an alternative by using misinformation to
denigrate our regulatory system."
Financial Post
http://www.canada.com/components/print. ... 778ac686ee 9/20/2007
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by admin » Mon Sep 24, 2007 3:23 pm
I do not agree with Doug Hyndman's blast of the police for ebing lax on white collar crime. He is finger pointing, and he is trying to lay blame elsewhere. His Securities commission is evidenced to have as large a role as any player in deflecting and deferring how canadians are protected. The securities commissions have for years delegated enforcement of the securities act of each province down to "self regulatory" agencies, which it turns out are little more than trade and lobby groups posing as rent-a-cops for their various members.
More on that later, but for now, see the next post which does a good job of explaining the shortcomings in the RCMP IMET program that has cost Canadians over $100 mil and found only one man so far. Not a pretty sight.
More on that later, but for now, see the next post which does a good job of explaining the shortcomings in the RCMP IMET program that has cost Canadians over $100 mil and found only one man so far. Not a pretty sight.
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- Site Admin
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- Location: alberta
by admin » Mon Sep 24, 2007 3:26 pm
A GOOD COUNTRY FOR CROOKS
Welcome to La-La land.
John Gray
September 24, 2007
Canadian Business Magazine
They were top cops on the RCMP's elite IMET squads. Now Bill Majcher and Craig Hannaford are blowing the whistle on a justice system that is losing the war on white-collar crime
CANADA ISN’T HAVING MUCH LUCK CLEANING UP ITS IMAGE AS A COUNTRY THAT IS SOFT ON WHITE - COLLAR CRIME.
While Conrad Black faces up to 15 years in prison after his recent conviction in a Chicago courtroom. Canadian authorities are still licking their wounds after the recent acquittal of former Bre-X chief geologist John Felderhof on civil charges of insider trading.
It wasn't supposed to be this way. Four years ago, the RCMP launched its Integrated Market Enforcement Teams, or IMETs, elite squads of investigators who were supposed to work together to crack down on white-collar crime. The results have been disappointing, to say the least. While the U.S. Justice Department has racked up more than 1,200 convictions against high-level executives and scammers in the past five years, the IMETs have managed just two-against the same person.
Canadian Business senior writer John Gray talked with Craig Hannaford and Bill Majcher - two IMET officer who recently left the force - about the problems cops face in getting their man, and what can be done about them. Both have spent their careers trying to protect investors from fraudsters. Hannaford, now a private consultant in Toronto, oversaw the investigation into the collapse of Livent Inc. Majcher is best known for his work in the Bermuda Short sting, a joint RCMP-FBI undercover operation that nabbed corrupt Canadian lawyers Martin Chambers and Simon Rosenfeld in 2002, Majcher is now managing director at the Baron Group, a Hong Kong-based investment bank.
Their message:
When it comes to white-collar crime, it's worse than you think.
--------------------------------------------------------------------------------
Canadian Business: How would you describe the state of Canada's justice system when it comes to dealing with white-collar crime?
Bill Majcher: The system is pretty much non-existent. You can fix something that is hemorrhaging, but if the body is already lifeless, you have to start fresh. We need politicians to admit that the system is broken from the top to the bottom. Canadians have to understand that we have a two-tiered justice system, where people with money can play the system. Show one a person who has gotten any sort of satisfaction from going to the authorities after being victimized by a white-collar fraud...who got their money back in a timely fashion and didn't go through a lot of grief. I can't think of a single person like that.
Craig Hannaford: This is not a quick fix. File delays in these cases are just terrible. There is no reason why it should take 10 years to get a resolution in the Bre-X case. Can someone please tell me why Livent has dragged on for so long? Charges in that case were laid in 2002. Here we are, five years later, and there is still no resolution.
Does Canada deserve its reputation as a haven for white-collar crime?
Majcher: Canada is seen as a haven for criminals. We have strong trust laws, a strong and stable banking system, strong privacy legislation and weak enforcement. But don't take my word for it. When I was undercover in the Martin Chambers case, he told me I should move my [fake] criminal operations to Canada. There is far less risk, and you don't spend time in a U.S. prison. When I asked him how much safer it was, he said it was 20 times safer. Simon Rosenfeld [a Canadian lawyer convicted of money laundering in 2005] said it was 100 times safer. Rosenfeld called Canada "la-la land."
Canada is seen as a soft touch. In a global criminal or terrorist organization, it's very useful to have a Canadian nexus. Then the whole network has the protection of the Canadian charter. If you can show that the Canadian police are involved in an international investigation, you can serve a disclosure application and the Canadian police can be compelled to disclose all the investigation information - even the information given by other law enforcement or intelligence agencies. Canada is absolutely an Achilles heel for international criminal and terrorist investigations.
That’s making it harder for Canadian police to work with investigators from other jurisdictions because they view us as a big sieve of information.
I worked with the FBI on the Bermuda Short case, and they brought charges against Jack Purdy [a Canadian stock promoter who was charged with money laundering, but later acquitted in a U.S. court]. Purdy was never charged with anything in Canada, but his lawyer demanded that the RCMP give up all its documents in that case. The court ordered us to turn over all our documents, including the FBI's operation plan on the case - which the FBI never gives out.
The FBI was livid. One FBI guy said that maybe they have to start treating Canada like a Third World country: if they need our help on a case, they will tell the RCMP to go to the U.S. embassy to read the file. You can't take notes or take it with you so the courts can't force you to disclose it later and maybe compromise other investigations.
How do you think that reputation is affecting Canada?
Majcher: I’m in the investment industry now and I see how this hurts Canada. I have talked with money managers and investors, who have told me they will not invest in Canada. One millionaire I met recently, who has extensive private holdings in Canada, says he won't invest in Canadian public companies because there is no recourse if anything goes wrong. Canadians believe this Pablum we are fed that we have a trade surplus and our economy is doing great, but it’s doing so well because the world wants our raw materials. Where is the investment in research and development, biotech, manufacturing and other things that make a diversified economy? What happens when the commodity boom starts to bust?
Money is the greatest coward in the world. There are money managers out there looking at Canada and wondering about Bre-X or Livent. They are wondering why did that Canadian bank pay US$2 - billion penalty in the Enron case to the U.S. while Canada still did nothing? They look at Conrad Black convicted in the U.S.. They wonder about Nortel.
What tools do the police lack that would help improve our track record on white-collar crime?
Majcher: One thing that would certainly help would be administrative subpoenas that would compel witnesses to talk. I think Canadians would be scandalized to learn that foreign police have more power over Canadian citizens than the RCMP in that regard. Under the Mutual Legal Assistance Treaty [MLAT], U.S. law enforcement can force Canadians to give sworn testimony in an investigation, but we don’t have that power.
Hannaford: The inability to compel witnesses to give us a sworn statement is a big problem. I served some of those orders under the MLAT and dragged people into a court reporter’s office where they were sworn-in and forced to give a deposition on a U.S. criminal investigation. I didn’t have tools like that, and it would really frost me. It’s not right. There is no comparable power in Canada for white-collar crime – there is for terrorism investigations, that’s a recent addition to the Criminal Code. We would go to an accountant or other professional that we thought had knowledge of a crime and they would say, “I won’t talk to you because I have client confidentiality.” Or we would go to a high-level executive and their in-house counsel would tell them not to talk to us because they are worried that what they told we would get out and hurt them in a civil suit.
"FOREIGN POLICE HAVE MORE POWER OVER CANADIAN CITIZENS THAN THE RCMP"
Under the Canadian Charter of Rights and Freedoms, doesn’t everyone have the right to remain silent?
Hannaford: The Charter is for people who are accused of a crime, not witnesses. There is no Charter implication here.
Could you charge uncooperative witnesses with obstruction of justice?
Hannaford: No, it would he nice, but it doesn't work that way.
Majcher: This is what is so frustrating. We would go to a stock promotion that is really just an illegal share distribution and try to talk to the seed investors - the victims - and they would say, “Oh, you have to talk to my lawyer”. So we are stymied right out of the gates.
Does the fact that most fraud investigations are so complicated and involve so many documents make them harder to complete?
Hannaford: In a lot of cases, we now have disclosure paralysis. Most times a fraud case comes down to a few key documents, but you still have thousands of other documents that have to be processed. Now, that has some investigative value, but it’s primarily done so that at the end of the day we can provide an electronic copy of every bit of paper to a defence lawyer and head off a challenge that the big, bad police have suppressed evidence. A lot of the IMET budget went to build a disclosure system, an electronic major case management system that would computerize all that stuff.
How does Canada's lackluster record of obtaining white-collar crime convictions affect the morale of cops and regulators?
Hannaford: This is hard on morale. Look at the Bre-X case. The OSC worked very hard; they stuck with it for yeas and still lost. What type of reverberations do you think that has within the OSC? Are they going to want to go through that again only to achieve the same results? Maybe they’re thinking: would it be better to spend my time and resources focusing on the regulatory process? You know, levy some fines, suspend some bad guys from the industry and stay away from the big stuff?
Majcher: There is some defeatism. It's easy for investigators to lose heart. From the police point of view, we are taught and trained to gather the evidence, not question the court decisions. But as citizens and as human beings, you want to see some fulfillment and satisfaction for what you do. And when you don't see it, you become disillusioned. You can’t keep the same level of enthusiasm for a system that you know is broken and is not serving the people it is supposed to serve. It’s very disheartening. We know what the bad guys are doing, but we don’t have the tools or resources to go out and get them.
There has been a real loss of talent and experience in law enforcement in the area of conspiracies. All while-collar frauds are essentially a conspiracy, and conspiracy laws and investigations are unique animals. A lot of good people have retired or left the force, and they have not been replaced. And it's hard to recruit the hunters we need in this business. If you are a bright young guy, a job in Canadian securities market enforcement is great for you ... if you have masochistic tendencies.
Does that reputation make it harder to convince witnesses to co-operate with police in their investigations?
Majcher: People in the market are losing confidence. I talk with people involved in corporate compliance with major financial firms. If they find a major fraud they are reluctant to go to the police. They know its going to take years, they will have to keep documents on file and there isn't even a strong probability that it will go to trial.
A few years ago, I met Eliot Spitzer [then New York Stale attorney general and crusading antifraud prosecutor]. I walked right up to him, shook his hand and told him it was a pleasure to meet Canada s top securities regulator. Just ask people on Bay Street who they are afraid of. It's not the cops, it’s not the OSC. It's the U.S. Securities and Exchange Commission because they have real teeth.
Conrad Black faces up to 35 years in prison for his conviction in the U.S. Those kinds of sentences are unheard of in Canada. What effect does that have on Canada's ability to crack down on white-collar crime?
Majcher: Sentences for white-collar crime in Canada are a joke. A non-violent fraudster is going to get a sentence of three or four years ... maybe. Even then, under our system he will usually serve only one-sixth of that sentence. That means he will serve five or six months in a minimum-security Canadian prison that doesn't even have bars. Look at Michael Milton (the only man convicted of fraud by IMET). He was sent to jail this year and could he paroled as early as next year. The guy has 105 criminal convictions. What do you think the chances are that he will be going for 106? The sentences handed down in the U.S. have the power to motivate people to co-operate. If you come clean early, show some remorse and provide evidence, it will go a long way to reduce your sentence.
Canadians, by and large, are not calling for tougher jail sentences, they are not calling for the government to build more prisons. Canadians and the political establishment have accepted that we have these levels of crime, and we seem to be prepared to let it go higher because we are not taking the steps to combat it. There is an acceptance level that is ingrained in the Canadian psyche now.
Hannaford: Getting a criminal conviction still sends a message. The police used to have a saying: "The worst thing we could do to some of these fraudsters is give then a criminal record so they can't cross the border and go down to Florida and enjoy their luxury condos."
"WE KNOW WHAT THE BAD GUYS ARE DOING, BUT DON'T HAVE THE TOOLS TO GO GET THEM"
Why do you think that IMET had such disappointing results?
Hannaford: The IMET model still holds promise, but the police are products of the law. We can only do what the law allows and can only use the tools that we are given. If we had the right tools, then it would be easier to get the job done. The police don't have power over the courts, and they can only do what the law allows them to do. There were some bureaucratic difficulties with IMET. We tried to hire people with some street knowledge of the financial industry but were hampered by our stalling and classification issues.
Majcher: The IMET concept is sound. But even in IMET it became form over substance. We wanted to hire a lawyer to consult with us on a proactive investigation and were told to put the contract out to tender. Can you imagine, putting out a tender to work on a secret investigation. Some fault lies on the shoulders of the people like us in the RCMP, but a big part of it was issues that were outside our control, such as the law and prosecutions. The RCMP can do a million-dollar investigation, but if you get a 10¢ prosecution, what kind of result are you going to get?
The first search warrant that we did was on a company that said it found oil, but it took them 25 press releases to say they actually found salt water. The company went to court to get the warrant tossed and our exhibits back. We notify the lawyers at the Department of Justice a month before the hearing. The day before the court case, they send an environmental lawyer to argue the case. He was a good guy, but he practises environmental law. He doesn't know anything about securities, and he's going up against a top-notch securities lawyer. Of course, the judge tossed the warrant. We ended up doing a search warrant on ourselves to get our exhibits back.
There has been a big push by the federal government to form a national securities regulator. Do you think that will solve the problem?
Majcher: A national securities regulator would be a nice first step, but no one should fool themselves into thinking that will solve all our problems. What a national regulator will do is bring a more streamlined system where there are some more enforcement synergies. It will also help our image for foreign investors, but the underlying issue will still exist. There is no effective deterrence because there is no punishment that fits these crimes, and we just don't have the mechanisms to bring people to justice in a timely and efficient manner.
Hannaford: A national securities regulator is not going to solve this. There are serious structural problems throughout the system. You can't just throw money or bodies at this problem and expect it to go away. I'm not particularly hopeful. We don't seem to have the political will. Politicians get up and say we can solve this with a national securities commission, but the problems are not going to go away. We have the same issues with the courts, the same issues with disclosure, the same issues with sentences and parole. If you don't deal with all of those problems from beginning to end, we will wind up in the same spot-with a national securities regulator that everyone is angry with because it can't seem to do the job. With a national securities regulator, we are still playing the same game, just the teams have changed.
Canadian Business Magazine
(advocate comment, well done CB mag. A great example of a national media willing to do more than puff journalism. Please keep it up until Canadians are protected from financial fraud and abuse. You may well be the only one on the job)
Welcome to La-La land.
John Gray
September 24, 2007
Canadian Business Magazine
They were top cops on the RCMP's elite IMET squads. Now Bill Majcher and Craig Hannaford are blowing the whistle on a justice system that is losing the war on white-collar crime
CANADA ISN’T HAVING MUCH LUCK CLEANING UP ITS IMAGE AS A COUNTRY THAT IS SOFT ON WHITE - COLLAR CRIME.
While Conrad Black faces up to 15 years in prison after his recent conviction in a Chicago courtroom. Canadian authorities are still licking their wounds after the recent acquittal of former Bre-X chief geologist John Felderhof on civil charges of insider trading.
It wasn't supposed to be this way. Four years ago, the RCMP launched its Integrated Market Enforcement Teams, or IMETs, elite squads of investigators who were supposed to work together to crack down on white-collar crime. The results have been disappointing, to say the least. While the U.S. Justice Department has racked up more than 1,200 convictions against high-level executives and scammers in the past five years, the IMETs have managed just two-against the same person.
Canadian Business senior writer John Gray talked with Craig Hannaford and Bill Majcher - two IMET officer who recently left the force - about the problems cops face in getting their man, and what can be done about them. Both have spent their careers trying to protect investors from fraudsters. Hannaford, now a private consultant in Toronto, oversaw the investigation into the collapse of Livent Inc. Majcher is best known for his work in the Bermuda Short sting, a joint RCMP-FBI undercover operation that nabbed corrupt Canadian lawyers Martin Chambers and Simon Rosenfeld in 2002, Majcher is now managing director at the Baron Group, a Hong Kong-based investment bank.
Their message:
When it comes to white-collar crime, it's worse than you think.
--------------------------------------------------------------------------------
Canadian Business: How would you describe the state of Canada's justice system when it comes to dealing with white-collar crime?
Bill Majcher: The system is pretty much non-existent. You can fix something that is hemorrhaging, but if the body is already lifeless, you have to start fresh. We need politicians to admit that the system is broken from the top to the bottom. Canadians have to understand that we have a two-tiered justice system, where people with money can play the system. Show one a person who has gotten any sort of satisfaction from going to the authorities after being victimized by a white-collar fraud...who got their money back in a timely fashion and didn't go through a lot of grief. I can't think of a single person like that.
Craig Hannaford: This is not a quick fix. File delays in these cases are just terrible. There is no reason why it should take 10 years to get a resolution in the Bre-X case. Can someone please tell me why Livent has dragged on for so long? Charges in that case were laid in 2002. Here we are, five years later, and there is still no resolution.
Does Canada deserve its reputation as a haven for white-collar crime?
Majcher: Canada is seen as a haven for criminals. We have strong trust laws, a strong and stable banking system, strong privacy legislation and weak enforcement. But don't take my word for it. When I was undercover in the Martin Chambers case, he told me I should move my [fake] criminal operations to Canada. There is far less risk, and you don't spend time in a U.S. prison. When I asked him how much safer it was, he said it was 20 times safer. Simon Rosenfeld [a Canadian lawyer convicted of money laundering in 2005] said it was 100 times safer. Rosenfeld called Canada "la-la land."
Canada is seen as a soft touch. In a global criminal or terrorist organization, it's very useful to have a Canadian nexus. Then the whole network has the protection of the Canadian charter. If you can show that the Canadian police are involved in an international investigation, you can serve a disclosure application and the Canadian police can be compelled to disclose all the investigation information - even the information given by other law enforcement or intelligence agencies. Canada is absolutely an Achilles heel for international criminal and terrorist investigations.
That’s making it harder for Canadian police to work with investigators from other jurisdictions because they view us as a big sieve of information.
I worked with the FBI on the Bermuda Short case, and they brought charges against Jack Purdy [a Canadian stock promoter who was charged with money laundering, but later acquitted in a U.S. court]. Purdy was never charged with anything in Canada, but his lawyer demanded that the RCMP give up all its documents in that case. The court ordered us to turn over all our documents, including the FBI's operation plan on the case - which the FBI never gives out.
The FBI was livid. One FBI guy said that maybe they have to start treating Canada like a Third World country: if they need our help on a case, they will tell the RCMP to go to the U.S. embassy to read the file. You can't take notes or take it with you so the courts can't force you to disclose it later and maybe compromise other investigations.
How do you think that reputation is affecting Canada?
Majcher: I’m in the investment industry now and I see how this hurts Canada. I have talked with money managers and investors, who have told me they will not invest in Canada. One millionaire I met recently, who has extensive private holdings in Canada, says he won't invest in Canadian public companies because there is no recourse if anything goes wrong. Canadians believe this Pablum we are fed that we have a trade surplus and our economy is doing great, but it’s doing so well because the world wants our raw materials. Where is the investment in research and development, biotech, manufacturing and other things that make a diversified economy? What happens when the commodity boom starts to bust?
Money is the greatest coward in the world. There are money managers out there looking at Canada and wondering about Bre-X or Livent. They are wondering why did that Canadian bank pay US$2 - billion penalty in the Enron case to the U.S. while Canada still did nothing? They look at Conrad Black convicted in the U.S.. They wonder about Nortel.
What tools do the police lack that would help improve our track record on white-collar crime?
Majcher: One thing that would certainly help would be administrative subpoenas that would compel witnesses to talk. I think Canadians would be scandalized to learn that foreign police have more power over Canadian citizens than the RCMP in that regard. Under the Mutual Legal Assistance Treaty [MLAT], U.S. law enforcement can force Canadians to give sworn testimony in an investigation, but we don’t have that power.
Hannaford: The inability to compel witnesses to give us a sworn statement is a big problem. I served some of those orders under the MLAT and dragged people into a court reporter’s office where they were sworn-in and forced to give a deposition on a U.S. criminal investigation. I didn’t have tools like that, and it would really frost me. It’s not right. There is no comparable power in Canada for white-collar crime – there is for terrorism investigations, that’s a recent addition to the Criminal Code. We would go to an accountant or other professional that we thought had knowledge of a crime and they would say, “I won’t talk to you because I have client confidentiality.” Or we would go to a high-level executive and their in-house counsel would tell them not to talk to us because they are worried that what they told we would get out and hurt them in a civil suit.
"FOREIGN POLICE HAVE MORE POWER OVER CANADIAN CITIZENS THAN THE RCMP"
Under the Canadian Charter of Rights and Freedoms, doesn’t everyone have the right to remain silent?
Hannaford: The Charter is for people who are accused of a crime, not witnesses. There is no Charter implication here.
Could you charge uncooperative witnesses with obstruction of justice?
Hannaford: No, it would he nice, but it doesn't work that way.
Majcher: This is what is so frustrating. We would go to a stock promotion that is really just an illegal share distribution and try to talk to the seed investors - the victims - and they would say, “Oh, you have to talk to my lawyer”. So we are stymied right out of the gates.
Does the fact that most fraud investigations are so complicated and involve so many documents make them harder to complete?
Hannaford: In a lot of cases, we now have disclosure paralysis. Most times a fraud case comes down to a few key documents, but you still have thousands of other documents that have to be processed. Now, that has some investigative value, but it’s primarily done so that at the end of the day we can provide an electronic copy of every bit of paper to a defence lawyer and head off a challenge that the big, bad police have suppressed evidence. A lot of the IMET budget went to build a disclosure system, an electronic major case management system that would computerize all that stuff.
How does Canada's lackluster record of obtaining white-collar crime convictions affect the morale of cops and regulators?
Hannaford: This is hard on morale. Look at the Bre-X case. The OSC worked very hard; they stuck with it for yeas and still lost. What type of reverberations do you think that has within the OSC? Are they going to want to go through that again only to achieve the same results? Maybe they’re thinking: would it be better to spend my time and resources focusing on the regulatory process? You know, levy some fines, suspend some bad guys from the industry and stay away from the big stuff?
Majcher: There is some defeatism. It's easy for investigators to lose heart. From the police point of view, we are taught and trained to gather the evidence, not question the court decisions. But as citizens and as human beings, you want to see some fulfillment and satisfaction for what you do. And when you don't see it, you become disillusioned. You can’t keep the same level of enthusiasm for a system that you know is broken and is not serving the people it is supposed to serve. It’s very disheartening. We know what the bad guys are doing, but we don’t have the tools or resources to go out and get them.
There has been a real loss of talent and experience in law enforcement in the area of conspiracies. All while-collar frauds are essentially a conspiracy, and conspiracy laws and investigations are unique animals. A lot of good people have retired or left the force, and they have not been replaced. And it's hard to recruit the hunters we need in this business. If you are a bright young guy, a job in Canadian securities market enforcement is great for you ... if you have masochistic tendencies.
Does that reputation make it harder to convince witnesses to co-operate with police in their investigations?
Majcher: People in the market are losing confidence. I talk with people involved in corporate compliance with major financial firms. If they find a major fraud they are reluctant to go to the police. They know its going to take years, they will have to keep documents on file and there isn't even a strong probability that it will go to trial.
A few years ago, I met Eliot Spitzer [then New York Stale attorney general and crusading antifraud prosecutor]. I walked right up to him, shook his hand and told him it was a pleasure to meet Canada s top securities regulator. Just ask people on Bay Street who they are afraid of. It's not the cops, it’s not the OSC. It's the U.S. Securities and Exchange Commission because they have real teeth.
Conrad Black faces up to 35 years in prison for his conviction in the U.S. Those kinds of sentences are unheard of in Canada. What effect does that have on Canada's ability to crack down on white-collar crime?
Majcher: Sentences for white-collar crime in Canada are a joke. A non-violent fraudster is going to get a sentence of three or four years ... maybe. Even then, under our system he will usually serve only one-sixth of that sentence. That means he will serve five or six months in a minimum-security Canadian prison that doesn't even have bars. Look at Michael Milton (the only man convicted of fraud by IMET). He was sent to jail this year and could he paroled as early as next year. The guy has 105 criminal convictions. What do you think the chances are that he will be going for 106? The sentences handed down in the U.S. have the power to motivate people to co-operate. If you come clean early, show some remorse and provide evidence, it will go a long way to reduce your sentence.
Canadians, by and large, are not calling for tougher jail sentences, they are not calling for the government to build more prisons. Canadians and the political establishment have accepted that we have these levels of crime, and we seem to be prepared to let it go higher because we are not taking the steps to combat it. There is an acceptance level that is ingrained in the Canadian psyche now.
Hannaford: Getting a criminal conviction still sends a message. The police used to have a saying: "The worst thing we could do to some of these fraudsters is give then a criminal record so they can't cross the border and go down to Florida and enjoy their luxury condos."
"WE KNOW WHAT THE BAD GUYS ARE DOING, BUT DON'T HAVE THE TOOLS TO GO GET THEM"
Why do you think that IMET had such disappointing results?
Hannaford: The IMET model still holds promise, but the police are products of the law. We can only do what the law allows and can only use the tools that we are given. If we had the right tools, then it would be easier to get the job done. The police don't have power over the courts, and they can only do what the law allows them to do. There were some bureaucratic difficulties with IMET. We tried to hire people with some street knowledge of the financial industry but were hampered by our stalling and classification issues.
Majcher: The IMET concept is sound. But even in IMET it became form over substance. We wanted to hire a lawyer to consult with us on a proactive investigation and were told to put the contract out to tender. Can you imagine, putting out a tender to work on a secret investigation. Some fault lies on the shoulders of the people like us in the RCMP, but a big part of it was issues that were outside our control, such as the law and prosecutions. The RCMP can do a million-dollar investigation, but if you get a 10¢ prosecution, what kind of result are you going to get?
The first search warrant that we did was on a company that said it found oil, but it took them 25 press releases to say they actually found salt water. The company went to court to get the warrant tossed and our exhibits back. We notify the lawyers at the Department of Justice a month before the hearing. The day before the court case, they send an environmental lawyer to argue the case. He was a good guy, but he practises environmental law. He doesn't know anything about securities, and he's going up against a top-notch securities lawyer. Of course, the judge tossed the warrant. We ended up doing a search warrant on ourselves to get our exhibits back.
There has been a big push by the federal government to form a national securities regulator. Do you think that will solve the problem?
Majcher: A national securities regulator would be a nice first step, but no one should fool themselves into thinking that will solve all our problems. What a national regulator will do is bring a more streamlined system where there are some more enforcement synergies. It will also help our image for foreign investors, but the underlying issue will still exist. There is no effective deterrence because there is no punishment that fits these crimes, and we just don't have the mechanisms to bring people to justice in a timely and efficient manner.
Hannaford: A national securities regulator is not going to solve this. There are serious structural problems throughout the system. You can't just throw money or bodies at this problem and expect it to go away. I'm not particularly hopeful. We don't seem to have the political will. Politicians get up and say we can solve this with a national securities commission, but the problems are not going to go away. We have the same issues with the courts, the same issues with disclosure, the same issues with sentences and parole. If you don't deal with all of those problems from beginning to end, we will wind up in the same spot-with a national securities regulator that everyone is angry with because it can't seem to do the job. With a national securities regulator, we are still playing the same game, just the teams have changed.
Canadian Business Magazine
(advocate comment, well done CB mag. A great example of a national media willing to do more than puff journalism. Please keep it up until Canadians are protected from financial fraud and abuse. You may well be the only one on the job)
- admin
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by admin » Thu Oct 04, 2007 2:40 pm
Does this apply to the SFSC, OSC, MFDA SRO and ICAA SRO investigators?
Police liable for inadequate work, Supreme Court rules
Hamilton man's suit loses but sets precedent for negligence in police investigations
KIRK MAKIN
Globe and Mail Update
October 4, 2007 at 10:53 AM EDT
Police investigators can be sued if they conduct an investigation negligently, the Supreme Court of Canada said Thursday in a ruling that will send shudders through police ranks.
”Police officers owe a duty of care to suspects,” Chief Justice Beverley McLachlin said for a 6-3 majority. ”Their conduct during an investigation should be measured against the standard of how a reasonable officer in like circumstances would have acted.
”Police officers may be accountable for harm resulting to a suspect if they fail to meet this standard,” she said, writing on behalf of Mr. Justice Ian Binnie, Mr. Justice Louis LeBel, Madam Justice Marie Deschamps, Mr. Justice Morris Fish and Madam Justice Rosalie Abella.
The court nonetheless dealt a personal loss to a Hamilton man – Jason George Hill – who had argued that he was negligently arrested, resulting in his spending 20 months in jail for a string of robberies that he did not commit.
Mr. Hill was ultimately exonerated when the real robber was found and convicted. He sued investigators, specifically citing an inept police lineup procedure, but the court ruled against his suit.
Mr. Hill's lawyers – Sean Dewart and Louis Sokolov – were exultant about the legal implications of Thursday's ruling but disappointed that Mr. Hill's lawsuit was thrown out.
"This is a bitter day for Jason Hill," Mr. Sokolov said. "The court acknowledges that he was wronged by the justice system, and yet excused the police from liability because their conduct in this case met the very low standards that prevailed more than a decade ago.
"On a happier note, this is a very good day for police accountability in Canada. The Supreme Court stated in resounding language that police are no different from the rest of us, and can be sued if they do their jobs negligently."
Mr. Dewart said that a couple of provinces – notably, Quebec – have permitted lawsuits for negligent investigation for several years. Others, such as Alberta and New Brunswick, have been adamantly opposed to allowing them, lest they compromise police investigations.
Mr. Dewart said that this is an empty argument. Police are far from the only professionals who have to meet an acceptable set of standards, he said, yet the others do not cease doing their jobs for fear of litigation.
"Is there a slippery slope for neurosurgeons, who don't do surgery because they might be sued?" he said.
The lawyers said that as a result of the decision, municipalities and their insurers will likely begin to press for higher police training standards, which will benefit society as a whole.
Notwithstanding Mr. Hill's loss, the ruling constitutes a major victory for the wrongful conviction movement. The court majority said that police owe a duty of care to the people they investigate, given the consequences that can result from faulty techniques.
”The relationship is clearly personal, close and direct,” the majority said. ”A suspect has a critical personal interest in the conduct of an investigation. No other tort provides an adequate remedy for negligent police investigations.”
The dissenting judges took issue on this point, insisting that opening police up to civil liability for their investigations is both unfair and harmful to the public interest.
”A private duty of care owed by the police to suspects would necessarily conflict with an officer's overarching public duty to investigate crime and apprehend offenders,” Madam Justice Louise Charron wrote in dissent. ”The recognition of this tort would have significant consequences for other legal obligations and would detrimentally affect the legal system and society more generally.”
She said that individuals who are acquitted may actually have committed the crime but that police and prosecutors simply could not prove it beyond a reasonable doubt.
”A person who committed an offence may benefit from a botched-up investigation because a negligent investigation will often be the effective cause of an acquittal,” Judge Charron wrote on behalf of Mr. Justice Michel Bastarache and Mr. Justice Marshall Rothstein. ”Whichever approach is adopted, there may be unforeseen and undesirable ramifications in the criminal context.
The majority, however, scoffed at the idea that recognizing a tort of negligent investigation would make police apprehensive about conducting a full investigation or charging suspects without an airtight case against them.
”The record does not establish that recognizing the tort will change the behaviour of the police, cause officers to become unduly defensive or lead to a flood of litigation,” Chief Justice McLachlin said. ”Police officers may make minor errors or errors in judgment without breaching the standard.”
Hamilton police believed they had ended a spate of daring robberies when they clamped handcuffs on Mr. Hill, the man they believed to be the Plastic Bag Bandit.
Having had Mr. Hill identified from photo lineups by so many witnesses that they felt they could make the charges stick, investigators issues a press releasing boasting of having ”bagged” the Plastic Bag Bandit.
The robberies, however, continued.
Worse still, a man who would eventually turn out to be the real Plastic Bag Bandit – Francisco Sotomayer – emerged after a tipster contacted the police. It took two more years before all the charges against Mr. Hill collapsed, but he was ultimately exonerated.
After two years behind bars and two trials, Mr. Hill sued the police for conducting a negligent investigation. His lawyers allege that Mr. Hill had been flattened by a legal bulldozer powered by evidence of the most thin and unreliable variety.
Mr. Hill's lawsuit was thrown out at trial when the judge ruled that police had used valid investigative methods and made decisions that were justifiable. The Ontario Court of Appeal upheld the existence of investigative negligence as a civil cause of action, but voted 3-2 to uphold the trial ruling against Mr. Hill.
Mr. Sokolov and Mr. Dewart claim that the ruling effectively gutted the usefulness of investigative negligence as a civil cause of action.
Police lawyers – backed by the federal Crown – argued in the Supreme Court hearing that police cannot make tough investigative judgment calls if they can easily be found civilly liable for their errors. They warned the court not to throw open the floodgates of litigation to everyone who ends up being acquitted of a crime.
”Studies have demonstrated that fear of lawsuits on the part of police renders them more timid in carrying out their duties,” a police legal brief said.
Mr. Dewart and Mr. Sokolov countered that police must be held accountable when, blinded by tunnel vision or ambition, they use discredited or unreliable investigative techniques.
”It is not the case that the defendants merely overlooked something, but rather that they obstinately blinkered themselves to a large number of things,” they said in a brief to the Supreme Court.
The robberies that spawned the case came in quick succession in late 1994 and early 1995. As the case against Mr. Sotomayer strengthened, the charges against Mr. Hill were dropped one by one.
Besides suing for investigative negligence, Mr. Hill included a far more conventional cause of action – malicious prosecution, which requires the plaintiff to prove actual malice by investigators. An investigative-negligence suit, in contrast, could succeed simply by showing that police were reckless, employed bad practices or blinded themselves to exculpatory evidence.
Mr. Dewart and Mr. Sokolov targeted the photo lineups in particular, noting that the only person depicted who was not Caucasian was Mr. Hill, an aboriginal. Coupled with widespread publicity stating that the bandit was of mixed race or Hispanic, they said, there was a strong chance of Mr. Hill's being erroneously picked out by eyewitnesses.
They also argued that a lead officer in the case ignored information that pointed toward Mr. Sotomayer as the real bandit.
http://scc.lexum.umontreal.ca/en/2007/2 ... scc41.html
Citation:Hill v. Hamilton-Wentworth Regional Police Services Board, 2007 SCC 41
Date:October 4, 2007
Docket: 31227
Police liable for inadequate work, Supreme Court rules
Hamilton man's suit loses but sets precedent for negligence in police investigations
KIRK MAKIN
Globe and Mail Update
October 4, 2007 at 10:53 AM EDT
Police investigators can be sued if they conduct an investigation negligently, the Supreme Court of Canada said Thursday in a ruling that will send shudders through police ranks.
”Police officers owe a duty of care to suspects,” Chief Justice Beverley McLachlin said for a 6-3 majority. ”Their conduct during an investigation should be measured against the standard of how a reasonable officer in like circumstances would have acted.
”Police officers may be accountable for harm resulting to a suspect if they fail to meet this standard,” she said, writing on behalf of Mr. Justice Ian Binnie, Mr. Justice Louis LeBel, Madam Justice Marie Deschamps, Mr. Justice Morris Fish and Madam Justice Rosalie Abella.
The court nonetheless dealt a personal loss to a Hamilton man – Jason George Hill – who had argued that he was negligently arrested, resulting in his spending 20 months in jail for a string of robberies that he did not commit.
Mr. Hill was ultimately exonerated when the real robber was found and convicted. He sued investigators, specifically citing an inept police lineup procedure, but the court ruled against his suit.
Mr. Hill's lawyers – Sean Dewart and Louis Sokolov – were exultant about the legal implications of Thursday's ruling but disappointed that Mr. Hill's lawsuit was thrown out.
"This is a bitter day for Jason Hill," Mr. Sokolov said. "The court acknowledges that he was wronged by the justice system, and yet excused the police from liability because their conduct in this case met the very low standards that prevailed more than a decade ago.
"On a happier note, this is a very good day for police accountability in Canada. The Supreme Court stated in resounding language that police are no different from the rest of us, and can be sued if they do their jobs negligently."
Mr. Dewart said that a couple of provinces – notably, Quebec – have permitted lawsuits for negligent investigation for several years. Others, such as Alberta and New Brunswick, have been adamantly opposed to allowing them, lest they compromise police investigations.
Mr. Dewart said that this is an empty argument. Police are far from the only professionals who have to meet an acceptable set of standards, he said, yet the others do not cease doing their jobs for fear of litigation.
"Is there a slippery slope for neurosurgeons, who don't do surgery because they might be sued?" he said.
The lawyers said that as a result of the decision, municipalities and their insurers will likely begin to press for higher police training standards, which will benefit society as a whole.
Notwithstanding Mr. Hill's loss, the ruling constitutes a major victory for the wrongful conviction movement. The court majority said that police owe a duty of care to the people they investigate, given the consequences that can result from faulty techniques.
”The relationship is clearly personal, close and direct,” the majority said. ”A suspect has a critical personal interest in the conduct of an investigation. No other tort provides an adequate remedy for negligent police investigations.”
The dissenting judges took issue on this point, insisting that opening police up to civil liability for their investigations is both unfair and harmful to the public interest.
”A private duty of care owed by the police to suspects would necessarily conflict with an officer's overarching public duty to investigate crime and apprehend offenders,” Madam Justice Louise Charron wrote in dissent. ”The recognition of this tort would have significant consequences for other legal obligations and would detrimentally affect the legal system and society more generally.”
She said that individuals who are acquitted may actually have committed the crime but that police and prosecutors simply could not prove it beyond a reasonable doubt.
”A person who committed an offence may benefit from a botched-up investigation because a negligent investigation will often be the effective cause of an acquittal,” Judge Charron wrote on behalf of Mr. Justice Michel Bastarache and Mr. Justice Marshall Rothstein. ”Whichever approach is adopted, there may be unforeseen and undesirable ramifications in the criminal context.
The majority, however, scoffed at the idea that recognizing a tort of negligent investigation would make police apprehensive about conducting a full investigation or charging suspects without an airtight case against them.
”The record does not establish that recognizing the tort will change the behaviour of the police, cause officers to become unduly defensive or lead to a flood of litigation,” Chief Justice McLachlin said. ”Police officers may make minor errors or errors in judgment without breaching the standard.”
Hamilton police believed they had ended a spate of daring robberies when they clamped handcuffs on Mr. Hill, the man they believed to be the Plastic Bag Bandit.
Having had Mr. Hill identified from photo lineups by so many witnesses that they felt they could make the charges stick, investigators issues a press releasing boasting of having ”bagged” the Plastic Bag Bandit.
The robberies, however, continued.
Worse still, a man who would eventually turn out to be the real Plastic Bag Bandit – Francisco Sotomayer – emerged after a tipster contacted the police. It took two more years before all the charges against Mr. Hill collapsed, but he was ultimately exonerated.
After two years behind bars and two trials, Mr. Hill sued the police for conducting a negligent investigation. His lawyers allege that Mr. Hill had been flattened by a legal bulldozer powered by evidence of the most thin and unreliable variety.
Mr. Hill's lawsuit was thrown out at trial when the judge ruled that police had used valid investigative methods and made decisions that were justifiable. The Ontario Court of Appeal upheld the existence of investigative negligence as a civil cause of action, but voted 3-2 to uphold the trial ruling against Mr. Hill.
Mr. Sokolov and Mr. Dewart claim that the ruling effectively gutted the usefulness of investigative negligence as a civil cause of action.
Police lawyers – backed by the federal Crown – argued in the Supreme Court hearing that police cannot make tough investigative judgment calls if they can easily be found civilly liable for their errors. They warned the court not to throw open the floodgates of litigation to everyone who ends up being acquitted of a crime.
”Studies have demonstrated that fear of lawsuits on the part of police renders them more timid in carrying out their duties,” a police legal brief said.
Mr. Dewart and Mr. Sokolov countered that police must be held accountable when, blinded by tunnel vision or ambition, they use discredited or unreliable investigative techniques.
”It is not the case that the defendants merely overlooked something, but rather that they obstinately blinkered themselves to a large number of things,” they said in a brief to the Supreme Court.
The robberies that spawned the case came in quick succession in late 1994 and early 1995. As the case against Mr. Sotomayer strengthened, the charges against Mr. Hill were dropped one by one.
Besides suing for investigative negligence, Mr. Hill included a far more conventional cause of action – malicious prosecution, which requires the plaintiff to prove actual malice by investigators. An investigative-negligence suit, in contrast, could succeed simply by showing that police were reckless, employed bad practices or blinded themselves to exculpatory evidence.
Mr. Dewart and Mr. Sokolov targeted the photo lineups in particular, noting that the only person depicted who was not Caucasian was Mr. Hill, an aboriginal. Coupled with widespread publicity stating that the bandit was of mixed race or Hispanic, they said, there was a strong chance of Mr. Hill's being erroneously picked out by eyewitnesses.
They also argued that a lead officer in the case ignored information that pointed toward Mr. Sotomayer as the real bandit.
http://scc.lexum.umontreal.ca/en/2007/2 ... scc41.html
Citation:Hill v. Hamilton-Wentworth Regional Police Services Board, 2007 SCC 41
Date:October 4, 2007
Docket: 31227
- admin
- Site Admin
- Posts: 1506
- Joined: Fri May 06, 2005 9:05 am
- Location: alberta
by admin » Thu Oct 04, 2007 2:45 pm
Does this apply to the SFSC, OSC, MFDA SRO and ICAA SRO investigators?
Police liable for inadequate work, Supreme Court rules
Hamilton man's suit loses but sets precedent for negligence in police investigations
KIRK MAKIN
Globe and Mail Update
October 4, 2007 at 10:53 AM EDT
Police investigators can be sued if they conduct an investigation negligently, the Supreme Court of Canada said Thursday in a ruling that will send shudders through police ranks.
”Police officers owe a duty of care to suspects,” Chief Justice Beverley McLachlin said for a 6-3 majority. ”Their conduct during an investigation should be measured against the standard of how a reasonable officer in like circumstances would have acted.
”Police officers may be accountable for harm resulting to a suspect if they fail to meet this standard,” she said, writing on behalf of Mr. Justice Ian Binnie, Mr. Justice Louis LeBel, Madam Justice Marie Deschamps, Mr. Justice Morris Fish and Madam Justice Rosalie Abella.
The court nonetheless dealt a personal loss to a Hamilton man – Jason George Hill – who had argued that he was negligently arrested, resulting in his spending 20 months in jail for a string of robberies that he did not commit.
Mr. Hill was ultimately exonerated when the real robber was found and convicted. He sued investigators, specifically citing an inept police lineup procedure, but the court ruled against his suit.
Mr. Hill's lawyers – Sean Dewart and Louis Sokolov – were exultant about the legal implications of Thursday's ruling but disappointed that Mr. Hill's lawsuit was thrown out.
"This is a bitter day for Jason Hill," Mr. Sokolov said. "The court acknowledges that he was wronged by the justice system, and yet excused the police from liability because their conduct in this case met the very low standards that prevailed more than a decade ago.
"On a happier note, this is a very good day for police accountability in Canada. The Supreme Court stated in resounding language that police are no different from the rest of us, and can be sued if they do their jobs negligently."
Mr. Dewart said that a couple of provinces – notably, Quebec – have permitted lawsuits for negligent investigation for several years. Others, such as Alberta and New Brunswick, have been adamantly opposed to allowing them, lest they compromise police investigations.
Mr. Dewart said that this is an empty argument. Police are far from the only professionals who have to meet an acceptable set of standards, he said, yet the others do not cease doing their jobs for fear of litigation.
"Is there a slippery slope for neurosurgeons, who don't do surgery because they might be sued?" he said.
The lawyers said that as a result of the decision, municipalities and their insurers will likely begin to press for higher police training standards, which will benefit society as a whole.
Notwithstanding Mr. Hill's loss, the ruling constitutes a major victory for the wrongful conviction movement. The court majority said that police owe a duty of care to the people they investigate, given the consequences that can result from faulty techniques.
”The relationship is clearly personal, close and direct,” the majority said. ”A suspect has a critical personal interest in the conduct of an investigation. No other tort provides an adequate remedy for negligent police investigations.”
The dissenting judges took issue on this point, insisting that opening police up to civil liability for their investigations is both unfair and harmful to the public interest.
”A private duty of care owed by the police to suspects would necessarily conflict with an officer's overarching public duty to investigate crime and apprehend offenders,” Madam Justice Louise Charron wrote in dissent. ”The recognition of this tort would have significant consequences for other legal obligations and would detrimentally affect the legal system and society more generally.”
She said that individuals who are acquitted may actually have committed the crime but that police and prosecutors simply could not prove it beyond a reasonable doubt.
”A person who committed an offence may benefit from a botched-up investigation because a negligent investigation will often be the effective cause of an acquittal,” Judge Charron wrote on behalf of Mr. Justice Michel Bastarache and Mr. Justice Marshall Rothstein. ”Whichever approach is adopted, there may be unforeseen and undesirable ramifications in the criminal context.
The majority, however, scoffed at the idea that recognizing a tort of negligent investigation would make police apprehensive about conducting a full investigation or charging suspects without an airtight case against them.
”The record does not establish that recognizing the tort will change the behaviour of the police, cause officers to become unduly defensive or lead to a flood of litigation,” Chief Justice McLachlin said. ”Police officers may make minor errors or errors in judgment without breaching the standard.”
Hamilton police believed they had ended a spate of daring robberies when they clamped handcuffs on Mr. Hill, the man they believed to be the Plastic Bag Bandit.
Having had Mr. Hill identified from photo lineups by so many witnesses that they felt they could make the charges stick, investigators issues a press releasing boasting of having ”bagged” the Plastic Bag Bandit.
The robberies, however, continued.
Worse still, a man who would eventually turn out to be the real Plastic Bag Bandit – Francisco Sotomayer – emerged after a tipster contacted the police. It took two more years before all the charges against Mr. Hill collapsed, but he was ultimately exonerated.
After two years behind bars and two trials, Mr. Hill sued the police for conducting a negligent investigation. His lawyers allege that Mr. Hill had been flattened by a legal bulldozer powered by evidence of the most thin and unreliable variety.
Mr. Hill's lawsuit was thrown out at trial when the judge ruled that police had used valid investigative methods and made decisions that were justifiable. The Ontario Court of Appeal upheld the existence of investigative negligence as a civil cause of action, but voted 3-2 to uphold the trial ruling against Mr. Hill.
Mr. Sokolov and Mr. Dewart claim that the ruling effectively gutted the usefulness of investigative negligence as a civil cause of action.
Police lawyers – backed by the federal Crown – argued in the Supreme Court hearing that police cannot make tough investigative judgment calls if they can easily be found civilly liable for their errors. They warned the court not to throw open the floodgates of litigation to everyone who ends up being acquitted of a crime.
”Studies have demonstrated that fear of lawsuits on the part of police renders them more timid in carrying out their duties,” a police legal brief said.
Mr. Dewart and Mr. Sokolov countered that police must be held accountable when, blinded by tunnel vision or ambition, they use discredited or unreliable investigative techniques.
”It is not the case that the defendants merely overlooked something, but rather that they obstinately blinkered themselves to a large number of things,” they said in a brief to the Supreme Court.
The robberies that spawned the case came in quick succession in late 1994 and early 1995. As the case against Mr. Sotomayer strengthened, the charges against Mr. Hill were dropped one by one.
Besides suing for investigative negligence, Mr. Hill included a far more conventional cause of action – malicious prosecution, which requires the plaintiff to prove actual malice by investigators. An investigative-negligence suit, in contrast, could succeed simply by showing that police were reckless, employed bad practices or blinded themselves to exculpatory evidence.
Mr. Dewart and Mr. Sokolov targeted the photo lineups in particular, noting that the only person depicted who was not Caucasian was Mr. Hill, an aboriginal. Coupled with widespread publicity stating that the bandit was of mixed race or Hispanic, they said, there was a strong chance of Mr. Hill's being erroneously picked out by eyewitnesses.
They also argued that a lead officer in the case ignored information that pointed toward Mr. Sotomayer as the real bandit.
http://scc.lexum.umontreal.ca/en/2007/2 ... scc41.html
Citation:Hill v. Hamilton-Wentworth Regional Police Services Board, 2007 SCC 41
Date:October 4, 2007
Docket: 31227
Police liable for inadequate work, Supreme Court rules
Hamilton man's suit loses but sets precedent for negligence in police investigations
KIRK MAKIN
Globe and Mail Update
October 4, 2007 at 10:53 AM EDT
Police investigators can be sued if they conduct an investigation negligently, the Supreme Court of Canada said Thursday in a ruling that will send shudders through police ranks.
”Police officers owe a duty of care to suspects,” Chief Justice Beverley McLachlin said for a 6-3 majority. ”Their conduct during an investigation should be measured against the standard of how a reasonable officer in like circumstances would have acted.
”Police officers may be accountable for harm resulting to a suspect if they fail to meet this standard,” she said, writing on behalf of Mr. Justice Ian Binnie, Mr. Justice Louis LeBel, Madam Justice Marie Deschamps, Mr. Justice Morris Fish and Madam Justice Rosalie Abella.
The court nonetheless dealt a personal loss to a Hamilton man – Jason George Hill – who had argued that he was negligently arrested, resulting in his spending 20 months in jail for a string of robberies that he did not commit.
Mr. Hill was ultimately exonerated when the real robber was found and convicted. He sued investigators, specifically citing an inept police lineup procedure, but the court ruled against his suit.
Mr. Hill's lawyers – Sean Dewart and Louis Sokolov – were exultant about the legal implications of Thursday's ruling but disappointed that Mr. Hill's lawsuit was thrown out.
"This is a bitter day for Jason Hill," Mr. Sokolov said. "The court acknowledges that he was wronged by the justice system, and yet excused the police from liability because their conduct in this case met the very low standards that prevailed more than a decade ago.
"On a happier note, this is a very good day for police accountability in Canada. The Supreme Court stated in resounding language that police are no different from the rest of us, and can be sued if they do their jobs negligently."
Mr. Dewart said that a couple of provinces – notably, Quebec – have permitted lawsuits for negligent investigation for several years. Others, such as Alberta and New Brunswick, have been adamantly opposed to allowing them, lest they compromise police investigations.
Mr. Dewart said that this is an empty argument. Police are far from the only professionals who have to meet an acceptable set of standards, he said, yet the others do not cease doing their jobs for fear of litigation.
"Is there a slippery slope for neurosurgeons, who don't do surgery because they might be sued?" he said.
The lawyers said that as a result of the decision, municipalities and their insurers will likely begin to press for higher police training standards, which will benefit society as a whole.
Notwithstanding Mr. Hill's loss, the ruling constitutes a major victory for the wrongful conviction movement. The court majority said that police owe a duty of care to the people they investigate, given the consequences that can result from faulty techniques.
”The relationship is clearly personal, close and direct,” the majority said. ”A suspect has a critical personal interest in the conduct of an investigation. No other tort provides an adequate remedy for negligent police investigations.”
The dissenting judges took issue on this point, insisting that opening police up to civil liability for their investigations is both unfair and harmful to the public interest.
”A private duty of care owed by the police to suspects would necessarily conflict with an officer's overarching public duty to investigate crime and apprehend offenders,” Madam Justice Louise Charron wrote in dissent. ”The recognition of this tort would have significant consequences for other legal obligations and would detrimentally affect the legal system and society more generally.”
She said that individuals who are acquitted may actually have committed the crime but that police and prosecutors simply could not prove it beyond a reasonable doubt.
”A person who committed an offence may benefit from a botched-up investigation because a negligent investigation will often be the effective cause of an acquittal,” Judge Charron wrote on behalf of Mr. Justice Michel Bastarache and Mr. Justice Marshall Rothstein. ”Whichever approach is adopted, there may be unforeseen and undesirable ramifications in the criminal context.
The majority, however, scoffed at the idea that recognizing a tort of negligent investigation would make police apprehensive about conducting a full investigation or charging suspects without an airtight case against them.
”The record does not establish that recognizing the tort will change the behaviour of the police, cause officers to become unduly defensive or lead to a flood of litigation,” Chief Justice McLachlin said. ”Police officers may make minor errors or errors in judgment without breaching the standard.”
Hamilton police believed they had ended a spate of daring robberies when they clamped handcuffs on Mr. Hill, the man they believed to be the Plastic Bag Bandit.
Having had Mr. Hill identified from photo lineups by so many witnesses that they felt they could make the charges stick, investigators issues a press releasing boasting of having ”bagged” the Plastic Bag Bandit.
The robberies, however, continued.
Worse still, a man who would eventually turn out to be the real Plastic Bag Bandit – Francisco Sotomayer – emerged after a tipster contacted the police. It took two more years before all the charges against Mr. Hill collapsed, but he was ultimately exonerated.
After two years behind bars and two trials, Mr. Hill sued the police for conducting a negligent investigation. His lawyers allege that Mr. Hill had been flattened by a legal bulldozer powered by evidence of the most thin and unreliable variety.
Mr. Hill's lawsuit was thrown out at trial when the judge ruled that police had used valid investigative methods and made decisions that were justifiable. The Ontario Court of Appeal upheld the existence of investigative negligence as a civil cause of action, but voted 3-2 to uphold the trial ruling against Mr. Hill.
Mr. Sokolov and Mr. Dewart claim that the ruling effectively gutted the usefulness of investigative negligence as a civil cause of action.
Police lawyers – backed by the federal Crown – argued in the Supreme Court hearing that police cannot make tough investigative judgment calls if they can easily be found civilly liable for their errors. They warned the court not to throw open the floodgates of litigation to everyone who ends up being acquitted of a crime.
”Studies have demonstrated that fear of lawsuits on the part of police renders them more timid in carrying out their duties,” a police legal brief said.
Mr. Dewart and Mr. Sokolov countered that police must be held accountable when, blinded by tunnel vision or ambition, they use discredited or unreliable investigative techniques.
”It is not the case that the defendants merely overlooked something, but rather that they obstinately blinkered themselves to a large number of things,” they said in a brief to the Supreme Court.
The robberies that spawned the case came in quick succession in late 1994 and early 1995. As the case against Mr. Sotomayer strengthened, the charges against Mr. Hill were dropped one by one.
Besides suing for investigative negligence, Mr. Hill included a far more conventional cause of action – malicious prosecution, which requires the plaintiff to prove actual malice by investigators. An investigative-negligence suit, in contrast, could succeed simply by showing that police were reckless, employed bad practices or blinded themselves to exculpatory evidence.
Mr. Dewart and Mr. Sokolov targeted the photo lineups in particular, noting that the only person depicted who was not Caucasian was Mr. Hill, an aboriginal. Coupled with widespread publicity stating that the bandit was of mixed race or Hispanic, they said, there was a strong chance of Mr. Hill's being erroneously picked out by eyewitnesses.
They also argued that a lead officer in the case ignored information that pointed toward Mr. Sotomayer as the real bandit.
http://scc.lexum.umontreal.ca/en/2007/2 ... scc41.html
Citation:Hill v. Hamilton-Wentworth Regional Police Services Board, 2007 SCC 41
Date:October 4, 2007
Docket: 31227
- admin
- Site Admin
- Posts: 1506
- Joined: Fri May 06, 2005 9:05 am
- Location: alberta
by admin » Sun Dec 02, 2007 11:41 am
TORONTO STAR
Why white-collar crime team fizzled
COLIN MCCONNELL/TORONTO STAR FILE PHOTO
The media were out in force when IMET raided downtown offices in February, 2005.
THE SERIES
YESTERDAY: How regulators have failed to crack down on stock market miscreants while developing an international reputation for inaction and ineffectiveness. http://www.thestar.com/Business/article/281645
TODAY: How a big-budget police squad set up to take on corporate crime degenerated into a bureaucratic mess with few results. http://www.thestar.com/Business/article/281772
TOMORROW: An interview with the head of securities watchdog, Ontario Securities Commission chairman David Wilson.
COMING UP: What’s needed to fix the mess.
Launched four years ago to clean up markets,
police squad is now best known for its failures
December 02, 2007
Madhavi Acharya-Tom Yew
Business reporter
It was designed for show, an in-your-face warning in the heart of Canada's financial centre.
Two dozen police, followed by a swarm of reporters and television crews, swept into the Bank of Nova Scotia at King and Bay armed with a search warrant. The bank itself was not under suspicion. It had been caught up in a probe surrounding another company, Royal Group Technologies Ltd.
It was the first operation of IMET – the Integrated Market Enforcement Team – set up 14 months earlier to tackle white collar crime in Canada. The idea was to make headlines.
"They're sending a message to investors ... `We're going to clean up the markets and you can depend on us,'" Richard Powers, professor at the University of Toronto's Rotman School of Management, said at the time.
Yet after four years of operation, only five charges have been laid – one in Vancouver and four in Toronto. In the Vancouver case, broker Kevin Steele was jailed six years for bilking investors out of $10.3 million.
The four Toronto cases – accounting fraud, stock market manipulation, theft and fraud over $5,000 – are still working their way through the courts. IMET's investigation into Royal Group is continuing. To date, no charges have been filed.
Today when the enforcement team makes the news, it's usually because of its dismal track record. Instead of reaping glory, the vaunted police squad is becoming a public whipping boy in the debate about Canada's perceived tendency to let white-collar crime go unpunished.
Even the man in charge admits to shortcomings.
"There's a lot of stakeholders unhappy and I think justifiably so," said John Sliter, the head of IMET in Ottawa.
But he's quick to deflect blame: "Yes, justice is taking a long time, but I don't want to put the full responsibility for that on [IMET's] shoulders. In that sense, it's the Canadian system."
Interviews with former officers and other observers show IMET started with much hope, but soon felt the burden of a weighty RCMP bureaucracy and territorial bickering.
Former team leaders in Toronto and Vancouver talk of their frustration and "disappointment across all boundaries." Investigators complain of legal roadblocks in increasingly complicated cases, leading to delays in investigations and charges being laid.
The federal government commissioned a report last May to look into IMET's failings. It's recommendations are expected to be released this week.
The Integrated Market Enforcement Team was formed in 2003, when stock markets and regulators around the world were still smarting from the effects of U.S. scandals like Enron and WorldCom.
Canada's own high-profile debacles – Bre-X Minerals Ltd. and YBM Magnex Ltd.– were still fresh, and the federal government wanted to set investors' minds at ease. For the first time, an elite team of regulators, police and legal experts was being brought together to investigate and prosecute big stock market crimes.
"Helping protect Canadian capital markets, that's what this announcement is all about," Canada's solicitor-general, Wayne Eaton, told reporters at the time.
Ottawa dedicated $120 million over five years to set up nine units across Canada, in Vancouver, Calgary, Toronto and Montreal.
The Toronto units were to be led by Detective Inspector Craig Hannaford. A veteran white-collar crime officer, Hannaford headed up the RCMP's probe of Livent, the Toronto theatre company that imploded under charges that Garth Drabinsky and other former principals had falsified corporate statements. A trial is expected to begin in the spring.
Setting up the teams took upwards of a year, a complex process that involved getting secure sites and staff. Territorial issues emerged early on.
Prosecutors from the federal department of justice were deemed essential to help guide the complex investigations.
According to an internal planning document, obtained by Canadian Press in March, 2006, federal lawyers were needed to give "advice and assistance regarding aspects such as wiretap applications, search warrants and disclosure advice to the IMETS during the course of investigations."
The justice department had been given $17 million to make the lawyers available, but it initially failed to do so.
"We are at a point in our implementation where we are in dire need of legal advisers to work alongside of our investigators. They were to form an integral part of our integrated teams," Sliter wrote to the department almost a year after the launch. Delays, as well as the lingering feeling that neither provincial nor federal prosecutors were willing to step up, hurt morale, said Bill Majcher, former head of IMET's Vancouver team.
"For the better part of the time I was there, we didn't have either the provincial or federal Crown (prosecutor) willing to take responsibility for dealing with us. We were already running, and then things start falling apart ..." Today, lawyers from the department are assigned to IMET teams in Toronto, Vancouver, Calgary and Montreal.
Despite the program's well-funded start, it could be difficult to get beyond established RCMP procedures when it came to hiring and pay, former insiders say.
In Toronto, Hannaford wanted a stock market expert on the team, a career Bay Streeter who knew the big players, the market mechanics, and what was ordinary trading activity and what was not – credentials, he knew, would command a six-figure salary. The government's standard checklist for qualifications, however, put the pay scale in the middle five digits.
"We just couldn't get the classification process in the government to recognize that this person had to be paid fairly well," Hannaford said.
Another frustration was the RCMP's habit of pulling officers off projects when it was short-staffed in other areas. Need more security for visiting world leaders? Get an officer from IMET. A big drug or immigration case needs more manpower? IMET.
IMET officers also complain that the Canadian legal system is too easily bogged down by procedural sideshows such as stringent disclosure requirements – the prosecutor's legal responsibility to give the defence access to all evidence it has gathered during an investigation.
In a complicated stock market fraud or investment scam, disclosure can amount to hundreds of thousands of documents that have to be gathered, sorted, organized, and copied so they can be given over to the defendant and his lawyers as soon as charges are laid in a case.
By some estimates, 30 per cent of the cost of an investigation goes to cataloguing, tracking, and duplicating information to make sure copies will be available for the defence.
Even so, prosecutors may only rely on 100 documents or so to present their case; the defence, about the same when putting alternate theories forward. "The rest is just sort of filler," says Majcher, "but if somehow one box of nothing didn't get stored properly, in many cases that's the basis for having a case tossed."
Another hurdle, they say, is the issue of compelling witnesses to speak to investigators.
In the U.S., prosecutors can issue subpoenas, forcing witnesses to provide testimony before a grand jury once charges are laid.
Under Canadian law, members of the public are under no obligation to speak to law enforcement officers. When trying to piece together a securities fraud case, the accountants, consultants, and other office staff who may have information invariably consult their lawyers, then tell investigators they don't want to give a statement.
If officers can convince a witness to talk to them, it's strictly voluntary. "It's basically, we're totally open to their schedule and their lawyer's schedule," Hannaford said.
To add insult to injury, under the Mutual Legal Assistance Treaty, authorities from other countries who come to Canada to conduct investigations can legally compel witnesses to provide statements. "So you have a funny situation where foreign law enforcement have more power to collect evidence from witnesses in Canada than our own domestic police," Hannaford said.
All this leads to investigations dragging on, and on. Add historically light sentences into the mix, and it's a recipe for plummeting morale.
In the meantime, white collar crime in Canada festers – along with a growing reputation for being soft on stock market and financial crime. Majcher saw the devastating effect Canada's disclosure law can have on international investigations first-hand in 2002 when he went undercover as part of a joint RCMP-FBI sting that nabbed two corrupt Canadian lawyers.
The sting included Jack Purdy, a Canadian stock promoter who was charged, but later acquitted of money laundering.
Even though the charges were filed in Florida, Purdy's lawyer was able to convince a judge that the RCMP should be forced to turn over all its documents in the case, including those that actually came from the FBI.
"The defence lawyer says he's a Canadian citizen and protected by the Charter,'" Majcher recalled. " `He's entitled to everything in that (RCMP) file, including FBI intelligence reports, their operational plans, and other notes.'"
The judge agreed, and the FBI officers involved were completely furious, threatening to cut Canadian law enforcement out of subsequent investigations.
Majcher says that now he's on the investment side, he's a managing director with Hong Kong-based investment bank Baron Group, he sees the impact on Canada's reputation in a new light.
"I remember meeting a fellow in New York. He said, `Bill, what's your area code. I said 604. He said, `Oh, that's one of the area codes that I don't answer.'"
Why white-collar crime team fizzled
COLIN MCCONNELL/TORONTO STAR FILE PHOTO
The media were out in force when IMET raided downtown offices in February, 2005.
THE SERIES
YESTERDAY: How regulators have failed to crack down on stock market miscreants while developing an international reputation for inaction and ineffectiveness. http://www.thestar.com/Business/article/281645
TODAY: How a big-budget police squad set up to take on corporate crime degenerated into a bureaucratic mess with few results. http://www.thestar.com/Business/article/281772
TOMORROW: An interview with the head of securities watchdog, Ontario Securities Commission chairman David Wilson.
COMING UP: What’s needed to fix the mess.
Launched four years ago to clean up markets,
police squad is now best known for its failures
December 02, 2007
Madhavi Acharya-Tom Yew
Business reporter
It was designed for show, an in-your-face warning in the heart of Canada's financial centre.
Two dozen police, followed by a swarm of reporters and television crews, swept into the Bank of Nova Scotia at King and Bay armed with a search warrant. The bank itself was not under suspicion. It had been caught up in a probe surrounding another company, Royal Group Technologies Ltd.
It was the first operation of IMET – the Integrated Market Enforcement Team – set up 14 months earlier to tackle white collar crime in Canada. The idea was to make headlines.
"They're sending a message to investors ... `We're going to clean up the markets and you can depend on us,'" Richard Powers, professor at the University of Toronto's Rotman School of Management, said at the time.
Yet after four years of operation, only five charges have been laid – one in Vancouver and four in Toronto. In the Vancouver case, broker Kevin Steele was jailed six years for bilking investors out of $10.3 million.
The four Toronto cases – accounting fraud, stock market manipulation, theft and fraud over $5,000 – are still working their way through the courts. IMET's investigation into Royal Group is continuing. To date, no charges have been filed.
Today when the enforcement team makes the news, it's usually because of its dismal track record. Instead of reaping glory, the vaunted police squad is becoming a public whipping boy in the debate about Canada's perceived tendency to let white-collar crime go unpunished.
Even the man in charge admits to shortcomings.
"There's a lot of stakeholders unhappy and I think justifiably so," said John Sliter, the head of IMET in Ottawa.
But he's quick to deflect blame: "Yes, justice is taking a long time, but I don't want to put the full responsibility for that on [IMET's] shoulders. In that sense, it's the Canadian system."
Interviews with former officers and other observers show IMET started with much hope, but soon felt the burden of a weighty RCMP bureaucracy and territorial bickering.
Former team leaders in Toronto and Vancouver talk of their frustration and "disappointment across all boundaries." Investigators complain of legal roadblocks in increasingly complicated cases, leading to delays in investigations and charges being laid.
The federal government commissioned a report last May to look into IMET's failings. It's recommendations are expected to be released this week.
The Integrated Market Enforcement Team was formed in 2003, when stock markets and regulators around the world were still smarting from the effects of U.S. scandals like Enron and WorldCom.
Canada's own high-profile debacles – Bre-X Minerals Ltd. and YBM Magnex Ltd.– were still fresh, and the federal government wanted to set investors' minds at ease. For the first time, an elite team of regulators, police and legal experts was being brought together to investigate and prosecute big stock market crimes.
"Helping protect Canadian capital markets, that's what this announcement is all about," Canada's solicitor-general, Wayne Eaton, told reporters at the time.
Ottawa dedicated $120 million over five years to set up nine units across Canada, in Vancouver, Calgary, Toronto and Montreal.
The Toronto units were to be led by Detective Inspector Craig Hannaford. A veteran white-collar crime officer, Hannaford headed up the RCMP's probe of Livent, the Toronto theatre company that imploded under charges that Garth Drabinsky and other former principals had falsified corporate statements. A trial is expected to begin in the spring.
Setting up the teams took upwards of a year, a complex process that involved getting secure sites and staff. Territorial issues emerged early on.
Prosecutors from the federal department of justice were deemed essential to help guide the complex investigations.
According to an internal planning document, obtained by Canadian Press in March, 2006, federal lawyers were needed to give "advice and assistance regarding aspects such as wiretap applications, search warrants and disclosure advice to the IMETS during the course of investigations."
The justice department had been given $17 million to make the lawyers available, but it initially failed to do so.
"We are at a point in our implementation where we are in dire need of legal advisers to work alongside of our investigators. They were to form an integral part of our integrated teams," Sliter wrote to the department almost a year after the launch. Delays, as well as the lingering feeling that neither provincial nor federal prosecutors were willing to step up, hurt morale, said Bill Majcher, former head of IMET's Vancouver team.
"For the better part of the time I was there, we didn't have either the provincial or federal Crown (prosecutor) willing to take responsibility for dealing with us. We were already running, and then things start falling apart ..." Today, lawyers from the department are assigned to IMET teams in Toronto, Vancouver, Calgary and Montreal.
Despite the program's well-funded start, it could be difficult to get beyond established RCMP procedures when it came to hiring and pay, former insiders say.
In Toronto, Hannaford wanted a stock market expert on the team, a career Bay Streeter who knew the big players, the market mechanics, and what was ordinary trading activity and what was not – credentials, he knew, would command a six-figure salary. The government's standard checklist for qualifications, however, put the pay scale in the middle five digits.
"We just couldn't get the classification process in the government to recognize that this person had to be paid fairly well," Hannaford said.
Another frustration was the RCMP's habit of pulling officers off projects when it was short-staffed in other areas. Need more security for visiting world leaders? Get an officer from IMET. A big drug or immigration case needs more manpower? IMET.
IMET officers also complain that the Canadian legal system is too easily bogged down by procedural sideshows such as stringent disclosure requirements – the prosecutor's legal responsibility to give the defence access to all evidence it has gathered during an investigation.
In a complicated stock market fraud or investment scam, disclosure can amount to hundreds of thousands of documents that have to be gathered, sorted, organized, and copied so they can be given over to the defendant and his lawyers as soon as charges are laid in a case.
By some estimates, 30 per cent of the cost of an investigation goes to cataloguing, tracking, and duplicating information to make sure copies will be available for the defence.
Even so, prosecutors may only rely on 100 documents or so to present their case; the defence, about the same when putting alternate theories forward. "The rest is just sort of filler," says Majcher, "but if somehow one box of nothing didn't get stored properly, in many cases that's the basis for having a case tossed."
Another hurdle, they say, is the issue of compelling witnesses to speak to investigators.
In the U.S., prosecutors can issue subpoenas, forcing witnesses to provide testimony before a grand jury once charges are laid.
Under Canadian law, members of the public are under no obligation to speak to law enforcement officers. When trying to piece together a securities fraud case, the accountants, consultants, and other office staff who may have information invariably consult their lawyers, then tell investigators they don't want to give a statement.
If officers can convince a witness to talk to them, it's strictly voluntary. "It's basically, we're totally open to their schedule and their lawyer's schedule," Hannaford said.
To add insult to injury, under the Mutual Legal Assistance Treaty, authorities from other countries who come to Canada to conduct investigations can legally compel witnesses to provide statements. "So you have a funny situation where foreign law enforcement have more power to collect evidence from witnesses in Canada than our own domestic police," Hannaford said.
All this leads to investigations dragging on, and on. Add historically light sentences into the mix, and it's a recipe for plummeting morale.
In the meantime, white collar crime in Canada festers – along with a growing reputation for being soft on stock market and financial crime. Majcher saw the devastating effect Canada's disclosure law can have on international investigations first-hand in 2002 when he went undercover as part of a joint RCMP-FBI sting that nabbed two corrupt Canadian lawyers.
The sting included Jack Purdy, a Canadian stock promoter who was charged, but later acquitted of money laundering.
Even though the charges were filed in Florida, Purdy's lawyer was able to convince a judge that the RCMP should be forced to turn over all its documents in the case, including those that actually came from the FBI.
"The defence lawyer says he's a Canadian citizen and protected by the Charter,'" Majcher recalled. " `He's entitled to everything in that (RCMP) file, including FBI intelligence reports, their operational plans, and other notes.'"
The judge agreed, and the FBI officers involved were completely furious, threatening to cut Canadian law enforcement out of subsequent investigations.
Majcher says that now he's on the investment side, he's a managing director with Hong Kong-based investment bank Baron Group, he sees the impact on Canada's reputation in a new light.
"I remember meeting a fellow in New York. He said, `Bill, what's your area code. I said 604. He said, `Oh, that's one of the area codes that I don't answer.'"
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New approach needed to fight securities fraud: Le Pan
Members of the RCMP's Integrated Market Enforcement Team
walk outside their mobile command post in Toronto in this file
photo from Feb., 2005.
Canadian Press
December 3, 2007 at 2:28 PM EST
OTTAWA — Canada has to rethink its approach to investigating and prosecuting securities fraud or continue to be outwitted by the smartest and best equipped white collar criminals in the country, says a new report.
The long-awaited report by former financial institutions superintendent Nick Le Pan is critical of the way the RCMP has overseen the creation of the Integrated Market Enforcement Teams (IMET) four years ago at the cost of $30-million a year.
The teams were meant to improve the investigation and prosecution of major securities fraud after a series of scandals, beginning with the Bre-X gold swindle a decade ago that cost investors billions of dollars and shook Canada's financial markets.
But Mr. Le Pan, whose appointment was part of Finance Minister Jim Flaherty's spring budget announcement of additional funding for IMET, found the teams have yielded disappointing results and are unlikely to be more successful unless changes are made.
A new report Monday called for a wholesale makeover of the way the RCMP investigates major crimes in Canada's capital markets, saying the current system is inadequate to catch big white-collar criminals. (Reuters)
RCMP document: The Le Pan IMET report
“The program is ‘playing in the big leagues' and needs to act that way,” the report states.
“The IMET program is operating in a very challenging environment that it needs to be better equipped to succeed in ... Those being investigated or charged will understandably bring substantial high-quality resources to bear to defend themselves.”
Mr. Le Pan said the teams are under-staffed, poorly supervised and beset with a high vacancy rate and turnover of key staff.
Some of the problems are systemic, said Mr. Le Pan, but he blamed many on the way the RCMP has implemented the program and the low priority given to white collar crime by the national police force and the federal Public Prosecution Service of Canada.
“Legitimate criticisms centre on the lack of results and questioning whether the program and its partners have the sense of urgency needed to succeed,” the report says.
“Nor has IMET demonstrated the leadership, tone from the top, results focus, nimbleness or consistent cohesion of action or communication among the players.”
After the collapse of U.S. energy trader Enron Corp. about five years ago in one the biggest white collar crimes in U.S. history, U.S. enforcement officials have prosecuted, fined and jailed many senior executives for corporate wrongdoing. As well, new laws have required more rigorous corporate financial reporting, while the national stocks regulator, the U.S. Securities and Exchange Commission, has toughened its regulation and enforcement actions.
For example, the U.S. justice system led the prosecution of former Canadian media mogul Conrad Black, who was convicted of fraud and obstruction of justice and awaits sentencing next week in a Chicago court. Canadian regulators also investigated Lord Black but awaited the result of his U.S. trial before deciding what to do next.
Critics of the Canadian system note that it would be easier to police white collar crime in this country if the 10 provincial securities regulators were merged into one national body, with SEC-type powers and resources to crack down on insider trader and corporate fraud.
The Le Pan report, which was issued to the RCMP on Oct. 25 but made public Monday, makes a number of recommendations, including more resources, better leadership, having a more senior officials oversee investigations, and placing more importance both in investigating and prosecuting white collar criminals.
The report's release Monday was accompanied by a statement from RCMP Commissioner William Elliott, who says the police force has already started to implement the recommendations.
Mr. Le Pan cautions that even if all the changes are implemented, catching white collar crime in Canada will continue to be more difficult than in countries such as the U.S. and Britain.
One hurdle police and prosecutors face is that unlike many industrialized countries, Canada lacks a national securities regulator, an issue that Mr. Flaherty has urged provinces to address.
“The existence of multiple securities regulators in Canada can make achieving consensus on issues difficult and time consuming,” Mr. Le Pan writes. “Different provincial regulators have different interpretations of court decisions which has hampered setting up joint securities intelligence units with the RCMP in some provinces.”
Another is with Canada's legal system, which lacks the teeth to compel those not being investigated to turn over data and documents that would help the police, or does not allow charging people in stages due to full disclosure rules.
As well, Canada's legal system does not allow prosecutors to take charge of investigations, as is the case in the U.S.
Given these limitations, Mr. Le Pan says it is unrealistic to expect U.S.-style results on securities fraud in Canada.
“Under-promising and over-achieving should become the watchwords for IMET, not the other way around,” the report says.
Mr. Le Pan says initially, the IMETs should focus on smaller, less complex investigations to get some taste for success.
“Having success in smaller cases adds to credibility of the IMETs and to credibility of capital markets enforcement.”
Members of the RCMP's Integrated Market Enforcement Team
walk outside their mobile command post in Toronto in this file
photo from Feb., 2005.
Canadian Press
December 3, 2007 at 2:28 PM EST
OTTAWA — Canada has to rethink its approach to investigating and prosecuting securities fraud or continue to be outwitted by the smartest and best equipped white collar criminals in the country, says a new report.
The long-awaited report by former financial institutions superintendent Nick Le Pan is critical of the way the RCMP has overseen the creation of the Integrated Market Enforcement Teams (IMET) four years ago at the cost of $30-million a year.
The teams were meant to improve the investigation and prosecution of major securities fraud after a series of scandals, beginning with the Bre-X gold swindle a decade ago that cost investors billions of dollars and shook Canada's financial markets.
But Mr. Le Pan, whose appointment was part of Finance Minister Jim Flaherty's spring budget announcement of additional funding for IMET, found the teams have yielded disappointing results and are unlikely to be more successful unless changes are made.
A new report Monday called for a wholesale makeover of the way the RCMP investigates major crimes in Canada's capital markets, saying the current system is inadequate to catch big white-collar criminals. (Reuters)
RCMP document: The Le Pan IMET report
“The program is ‘playing in the big leagues' and needs to act that way,” the report states.
“The IMET program is operating in a very challenging environment that it needs to be better equipped to succeed in ... Those being investigated or charged will understandably bring substantial high-quality resources to bear to defend themselves.”
Mr. Le Pan said the teams are under-staffed, poorly supervised and beset with a high vacancy rate and turnover of key staff.
Some of the problems are systemic, said Mr. Le Pan, but he blamed many on the way the RCMP has implemented the program and the low priority given to white collar crime by the national police force and the federal Public Prosecution Service of Canada.
“Legitimate criticisms centre on the lack of results and questioning whether the program and its partners have the sense of urgency needed to succeed,” the report says.
“Nor has IMET demonstrated the leadership, tone from the top, results focus, nimbleness or consistent cohesion of action or communication among the players.”
After the collapse of U.S. energy trader Enron Corp. about five years ago in one the biggest white collar crimes in U.S. history, U.S. enforcement officials have prosecuted, fined and jailed many senior executives for corporate wrongdoing. As well, new laws have required more rigorous corporate financial reporting, while the national stocks regulator, the U.S. Securities and Exchange Commission, has toughened its regulation and enforcement actions.
For example, the U.S. justice system led the prosecution of former Canadian media mogul Conrad Black, who was convicted of fraud and obstruction of justice and awaits sentencing next week in a Chicago court. Canadian regulators also investigated Lord Black but awaited the result of his U.S. trial before deciding what to do next.
Critics of the Canadian system note that it would be easier to police white collar crime in this country if the 10 provincial securities regulators were merged into one national body, with SEC-type powers and resources to crack down on insider trader and corporate fraud.
The Le Pan report, which was issued to the RCMP on Oct. 25 but made public Monday, makes a number of recommendations, including more resources, better leadership, having a more senior officials oversee investigations, and placing more importance both in investigating and prosecuting white collar criminals.
The report's release Monday was accompanied by a statement from RCMP Commissioner William Elliott, who says the police force has already started to implement the recommendations.
Mr. Le Pan cautions that even if all the changes are implemented, catching white collar crime in Canada will continue to be more difficult than in countries such as the U.S. and Britain.
One hurdle police and prosecutors face is that unlike many industrialized countries, Canada lacks a national securities regulator, an issue that Mr. Flaherty has urged provinces to address.
“The existence of multiple securities regulators in Canada can make achieving consensus on issues difficult and time consuming,” Mr. Le Pan writes. “Different provincial regulators have different interpretations of court decisions which has hampered setting up joint securities intelligence units with the RCMP in some provinces.”
Another is with Canada's legal system, which lacks the teeth to compel those not being investigated to turn over data and documents that would help the police, or does not allow charging people in stages due to full disclosure rules.
As well, Canada's legal system does not allow prosecutors to take charge of investigations, as is the case in the U.S.
Given these limitations, Mr. Le Pan says it is unrealistic to expect U.S.-style results on securities fraud in Canada.
“Under-promising and over-achieving should become the watchwords for IMET, not the other way around,” the report says.
Mr. Le Pan says initially, the IMETs should focus on smaller, less complex investigations to get some taste for success.
“Having success in smaller cases adds to credibility of the IMETs and to credibility of capital markets enforcement.”
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by admin » Tue Dec 04, 2007 10:29 am
IMET 's are part of a seriously dysfunctional regulatory chain.
Ken K
Fraud squad lacking credibility
DICK LOEK/TORONTO STAR
Nick Le Pan, appointed by Ottawa to probe the RCMP’s Integrated Market Enforcement Teams, says the units are bogged down by bureaucracy.
RCMP teams fighting white-collar crime stymied by
poor leadership and complicated cases: Report
December 04, 2007
Madhavi Acharya-Tom Yew
Business Reporter
The RCMP must make fighting stock market fraud a priority and overhaul the way it investigates these complex cases if it hopes to improve its track record on catching white-collar criminals, according to a report released yesterday.
The much-anticipated report comes from Nick Le Pan, a special adviser appointed by the federal government to get to the bottom of the troubles at the force's Integrated Market Enforcement Teams. The teams, created in Vancouver, Calgary, Montreal and Toronto in 2003, were meant to crack down on high-profile stock market frauds and accounting scandals.
But, as Le Pan noted, the elite teams became bogged down by bureaucracy, staff turnover, lack of leadership and low morale.
"Legitimate criticisms centre on the lack of results and questioning whether the program and its partners have the sense of urgency needed to succeed. Nor has IMET demonstrated the leadership, tone from the top, results focus, nimbleness or consistent cohesion of action or communication among the players that is necessary to succeed," Le Pan wrote.
"Those being investigated or charged will understandably bring substantial high-quality resources to bear to defend themselves. The program is `playing in the big leagues' and needs to act that way."
Many observers have criticized Canadian enforcement as weak, especially when compared to jail sentences handed to those convicted of white-collar crimes in the U.S.
"While expectations of U.S.-style results are unrealistic, given Canada's legal and enforcement environment, the (enforcement teams) should be producing more results, more quickly," Le Pan wrote. "Without enhanced credibility, the existence of the program in its current form in the RCMP will be questioned more than it is today."
In Edmonton yesterday, Federal Finance Minister Jim Flaherty told reporters that he plans to raise the issue when provincial finance ministers meet next week in Ottawa, and adds the report reinforces the need for Canada to have a unified national securities regulator.
In Ottawa, Liberal finance critic John McCallum said stepped-up oversight of securities markets in Canada is a must. "I certainly agree that we should beef up our capacity to fight white-collar crime because I think that's an area where Canada is embarrassingly weak."
Several times in his report, Le Pan addressed the notion that white-collar crimes are not as serious as others. "How can we say that an elderly or unsuspecting person, who is criminally swindled out of their life savings, and lives in penury with lasting, disastrous consequences on their health or lifestyle, is less important than other victims of crime?"
Since 2003, enforcement teams have started 13 large-scale investigations, but have laid only one charge to date. On average, it takes teams 2.8 years to investigate a case. Four cases have been passed on to prosecutors, who are considering laying charges.
Le Pan also wrote that team investigations need to be more focused. "It is better to focus on charging a few key perpetrators with a few offences, reasonably quickly, than going after everyone involved, and ending up with an unmanageable investigation that drags on and may never be finished."
All the officers who started off in charge of team units have left in the past four years, and in three locations the unit will soon be on its third officer in charge, Le Pan found.
He also called for the RCMP, prosecutors and the federal government to develop a simple, formal plan to manage its caseload, and to take on more smaller, less-complex cases.
Accepting more big investigations should not be a priority until the enforcement group has improved its practices, the report said.
Le Pan said that he plans to stay on as special adviser until next October to help implement the recommendations.
--------------------------------------------------------------------------------
With files from Les Whittington and The Canadian Press
Ken K
Fraud squad lacking credibility
DICK LOEK/TORONTO STAR
Nick Le Pan, appointed by Ottawa to probe the RCMP’s Integrated Market Enforcement Teams, says the units are bogged down by bureaucracy.
RCMP teams fighting white-collar crime stymied by
poor leadership and complicated cases: Report
December 04, 2007
Madhavi Acharya-Tom Yew
Business Reporter
The RCMP must make fighting stock market fraud a priority and overhaul the way it investigates these complex cases if it hopes to improve its track record on catching white-collar criminals, according to a report released yesterday.
The much-anticipated report comes from Nick Le Pan, a special adviser appointed by the federal government to get to the bottom of the troubles at the force's Integrated Market Enforcement Teams. The teams, created in Vancouver, Calgary, Montreal and Toronto in 2003, were meant to crack down on high-profile stock market frauds and accounting scandals.
But, as Le Pan noted, the elite teams became bogged down by bureaucracy, staff turnover, lack of leadership and low morale.
"Legitimate criticisms centre on the lack of results and questioning whether the program and its partners have the sense of urgency needed to succeed. Nor has IMET demonstrated the leadership, tone from the top, results focus, nimbleness or consistent cohesion of action or communication among the players that is necessary to succeed," Le Pan wrote.
"Those being investigated or charged will understandably bring substantial high-quality resources to bear to defend themselves. The program is `playing in the big leagues' and needs to act that way."
Many observers have criticized Canadian enforcement as weak, especially when compared to jail sentences handed to those convicted of white-collar crimes in the U.S.
"While expectations of U.S.-style results are unrealistic, given Canada's legal and enforcement environment, the (enforcement teams) should be producing more results, more quickly," Le Pan wrote. "Without enhanced credibility, the existence of the program in its current form in the RCMP will be questioned more than it is today."
In Edmonton yesterday, Federal Finance Minister Jim Flaherty told reporters that he plans to raise the issue when provincial finance ministers meet next week in Ottawa, and adds the report reinforces the need for Canada to have a unified national securities regulator.
In Ottawa, Liberal finance critic John McCallum said stepped-up oversight of securities markets in Canada is a must. "I certainly agree that we should beef up our capacity to fight white-collar crime because I think that's an area where Canada is embarrassingly weak."
Several times in his report, Le Pan addressed the notion that white-collar crimes are not as serious as others. "How can we say that an elderly or unsuspecting person, who is criminally swindled out of their life savings, and lives in penury with lasting, disastrous consequences on their health or lifestyle, is less important than other victims of crime?"
Since 2003, enforcement teams have started 13 large-scale investigations, but have laid only one charge to date. On average, it takes teams 2.8 years to investigate a case. Four cases have been passed on to prosecutors, who are considering laying charges.
Le Pan also wrote that team investigations need to be more focused. "It is better to focus on charging a few key perpetrators with a few offences, reasonably quickly, than going after everyone involved, and ending up with an unmanageable investigation that drags on and may never be finished."
All the officers who started off in charge of team units have left in the past four years, and in three locations the unit will soon be on its third officer in charge, Le Pan found.
He also called for the RCMP, prosecutors and the federal government to develop a simple, formal plan to manage its caseload, and to take on more smaller, less-complex cases.
Accepting more big investigations should not be a priority until the enforcement group has improved its practices, the report said.
Le Pan said that he plans to stay on as special adviser until next October to help implement the recommendations.
--------------------------------------------------------------------------------
With files from Les Whittington and The Canadian Press
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by admin » Fri Dec 07, 2007 2:19 pm
John Sliter, Superintendent
Director, IMET, RCMP
John: Thank you for your letter dated 28nov07 written in response to my letter to Commissioner Elliott dated 29aug07. I spoke to Sgt. Richard Bergman, as per your suggestion.
I am extremely concerned that you have recommended to me that I contact one of the industry created and controlled associations to discuss matters that are within the purvue of a government agency. The fact that you have referred me to this private sector association, with respect, is a significant part of the problem.
As I mentioned to Sgt Bergman, the RCMP and local police forces do not partner with the mafia to gain a better appreciation of the criminal world; instead, each police force has developed its own in-house expertise.
The same is required with respect to the financial services industry. The RCMP and local police forces need their own internal expertise; the fact that this key requirement has been contracted out to industry partners is a major flaw and one of the main reasons, in my opinion, as to why IMET has and will continue to fail Canadians. I believe most of the scams and abuses in the financial sector could be prevented if the leadership in the industry took the matter seriously and if the industry regulator actually took regulation seriously instead of merely focussing its efforts on protecting its members.
Sgt Bergman made reference to the complexity of the financial services industry and the benefit of working with the industry because, for example, you have access to the COMSET database. On the latter point, I would ask that you conduct an immediate investigation of the flawed COMSET database. I can refer you to at least two experts who would expose the systemic flaws of COMSET. I also can brief you personally on the ability of an IDA member firm to use or abuse this supposed reporting system. I briefly discussed this aspect with your colleage Dean Buzza.
I experienced first hand the total lack of integrity of the IDA and I would refer you to the question I raised at the recent Investor Forum which was covered in a recent article in the Toronto Star which is available on the following link:
http://investorvoice.ca/PI/3294.htm
While everyone outside of the industry was shocked when they heard my story, everyone I know in the industry was not at all suprised at all that the IDA simply reported my whistleblowing call back to my employer. No one from the IDA ever contacted me about my call. I personally met with the VP Enforcement of the IDA in January 2007 to discuss this matter and to suggest that many such infractions could be prevented if employees could trust the regulator to regulate. Nothing has been done since that meeting. I just recently met with the new CEO of the IDA, Susan Wolburgh-Jenah and, to-date, the IDA has done nothing to implement such an abuse reporting system. Is the industry controlled regulator really interested in having the abuses of its member firms reported to it? I think not. From time to time it would seem that a public flogging is well communicated in the media to appease the critics. But a regulator regulating with integrity???
I would like to meet with you the next time you are in Toronto either at your IMET Toronto office or at your Newmarket RCMP office. I spent twenty years in the federal public service where leadership and integrity mattered. It is time it mattered in the finacial services industry. Canadians cannot afford for the mess not to be cleaned up.
You need to develop and implement a new strategy. Your strategic IMET partners have, and will continue to let you down. By letting you down, all Canadians are being let down. That is why I stated that if it is status quo that is to be maintained, then Canadians would be better protected if we disband the entire fractious Canadian system and subcontract the work to Elliott Spitzer and the US Securities Exchange Commission.
I look forward to our meeting.
Jim
Director, IMET, RCMP
John: Thank you for your letter dated 28nov07 written in response to my letter to Commissioner Elliott dated 29aug07. I spoke to Sgt. Richard Bergman, as per your suggestion.
I am extremely concerned that you have recommended to me that I contact one of the industry created and controlled associations to discuss matters that are within the purvue of a government agency. The fact that you have referred me to this private sector association, with respect, is a significant part of the problem.
As I mentioned to Sgt Bergman, the RCMP and local police forces do not partner with the mafia to gain a better appreciation of the criminal world; instead, each police force has developed its own in-house expertise.
The same is required with respect to the financial services industry. The RCMP and local police forces need their own internal expertise; the fact that this key requirement has been contracted out to industry partners is a major flaw and one of the main reasons, in my opinion, as to why IMET has and will continue to fail Canadians. I believe most of the scams and abuses in the financial sector could be prevented if the leadership in the industry took the matter seriously and if the industry regulator actually took regulation seriously instead of merely focussing its efforts on protecting its members.
Sgt Bergman made reference to the complexity of the financial services industry and the benefit of working with the industry because, for example, you have access to the COMSET database. On the latter point, I would ask that you conduct an immediate investigation of the flawed COMSET database. I can refer you to at least two experts who would expose the systemic flaws of COMSET. I also can brief you personally on the ability of an IDA member firm to use or abuse this supposed reporting system. I briefly discussed this aspect with your colleage Dean Buzza.
I experienced first hand the total lack of integrity of the IDA and I would refer you to the question I raised at the recent Investor Forum which was covered in a recent article in the Toronto Star which is available on the following link:
http://investorvoice.ca/PI/3294.htm
While everyone outside of the industry was shocked when they heard my story, everyone I know in the industry was not at all suprised at all that the IDA simply reported my whistleblowing call back to my employer. No one from the IDA ever contacted me about my call. I personally met with the VP Enforcement of the IDA in January 2007 to discuss this matter and to suggest that many such infractions could be prevented if employees could trust the regulator to regulate. Nothing has been done since that meeting. I just recently met with the new CEO of the IDA, Susan Wolburgh-Jenah and, to-date, the IDA has done nothing to implement such an abuse reporting system. Is the industry controlled regulator really interested in having the abuses of its member firms reported to it? I think not. From time to time it would seem that a public flogging is well communicated in the media to appease the critics. But a regulator regulating with integrity???
I would like to meet with you the next time you are in Toronto either at your IMET Toronto office or at your Newmarket RCMP office. I spent twenty years in the federal public service where leadership and integrity mattered. It is time it mattered in the finacial services industry. Canadians cannot afford for the mess not to be cleaned up.
You need to develop and implement a new strategy. Your strategic IMET partners have, and will continue to let you down. By letting you down, all Canadians are being let down. That is why I stated that if it is status quo that is to be maintained, then Canadians would be better protected if we disband the entire fractious Canadian system and subcontract the work to Elliott Spitzer and the US Securities Exchange Commission.
I look forward to our meeting.
Jim
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by admin » Sat Dec 08, 2007 11:58 am
Why white-collar crime team fizzled
Launched four years ago to clean up
markets, police squad is now best known
for its failures
December 02, 2007
MADHAVI ACHARYA-TOM YEW
BUSINESS REPORTER TORONTO STAR
It was designed for show, an in-your-face
warning in the heart of Canada's financial
centre.
Two dozen police, followed by a swarm of
reporters and television crews, swept into
the Bank of Nova Scotia at King and Bay
armed with a search warrant. The bank
itself was not under suspicion. It had been
caught up in a probe surrounding another
company, Royal Group Technologies Ltd.
It was the first operation of IMET – the Integrated Market Enforcement
Team – set up 14 months earlier to tackle white collar crime in
Canada. The idea was to make headlines.
"They're sending a message to investors ... `We're going to clean up
the markets and you can depend on us,'" Richard Powers, professor at
the University of Toronto's Rotman School of Management, said at the
time.
Yet after four years of operation, only five charges have been laid –
one in Vancouver and four in Toronto. In the Vancouver case, broker
Kevin Steele was jailed six years for bilking investors out of $10.3
million.
The four Toronto cases – accounting fraud, stock market manipulation,
theft and fraud over $5,000 – are still working their way through the
courts. IMET's investigation into Royal Group is continuing. To date, no
charges have been filed.
Today when the enforcement team makes the news, it's usually
because of its dismal track record. Instead of reaping glory, the
vaunted police squad is becoming a public whipping boy in the debate
about Canada's perceived tendency to let white-collar crime go
COLIN MCCONNELL/TORONTO STAR FILE PHOTO
The media were out in force when IMET raided downtown offices in February,
2005.
THE SERIES
YESTERDAY: How
regulators have failed
to crack down on
stock market
miscreants while
developing an
international
reputation for inaction
and ineffectiveness.
TODAY: How a bigbudget
police squad
set up to take on
corporate crime
degenerated into a
bureaucratic mess
with few results.
TOMORROW: An
interview with the
head of securities
TheStar.com - Business - Why white-collar crime team fizzled Page 1 of 4
http://www.thestar.com/printArticle/281772 12/2/2007
unpunished.
Even the man in charge admits to shortcomings.
"There's a lot of stakeholders unhappy and I think justifiably so," said
John Sliter, the head of IMET in Ottawa.
But he's quick to deflect blame: "Yes, justice is taking a long time, but
I don't want to put the full responsibility for that on [IMET's]
shoulders. In that sense, it's the Canadian system."
Interviews with former officers and other observers show IMET started with much hope, but soon
felt the burden of a weighty RCMP bureaucracy and territorial bickering.
Former team leaders in Toronto and Vancouver talk of their frustration and "disappointment
across all boundaries." Investigators complain of legal roadblocks in increasingly complicated
cases, leading to delays in investigations and charges being laid.
The federal government commissioned a report last May to look into IMET's failings. It's
recommendations are expected to be released this week.
The Integrated Market Enforcement Team was formed in 2003, when stock markets and
regulators around the world were still smarting from the effects of U.S. scandals like Enron and
WorldCom.
Canada's own high-profile debacles – Bre-X Minerals Ltd. and YBM Magnex Ltd.– were still fresh,
and the federal government wanted to set investors' minds at ease. For the first time, an elite
team of regulators, police and legal experts was being brought together to investigate and
prosecute big stock market crimes.
"Helping protect Canadian capital markets, that's what this announcement is all about," Canada's
solicitor-general, Wayne Eaton, told reporters at the time.
Ottawa dedicated $120 million over five years to set up nine units across Canada, in Vancouver,
Calgary, Toronto and Montreal.
The Toronto units were to be led by Detective Inspector Craig Hannaford. A veteran white-collar
crime officer, Hannaford headed up the RCMP's probe of Livent, the Toronto theatre company that
imploded under charges that Garth Drabinsky and other former principals had falsified corporate
statements. A trial is expected to begin in the spring.
Setting up the teams took upwards of a year, a complex process that involved getting secure
sites and staff. Territorial issues emerged early on.
Prosecutors from the federal department of justice were deemed essential to help guide the
complex investigations.
According to an internal planning document, obtained by Canadian Press in March, 2006, federal
lawyers were needed to give "advice and assistance regarding aspects such as wiretap
applications, search warrants and disclosure advice to the IMETS during the course of
investigations."
The justice department had been given $17 million to make the lawyers available, but it initially
failed to do so.
"We are at a point in our implementation where we are in dire need of legal advisers to work
watchdog, Ontario
Securities Commission
chairman David
Wilson.
COMING UP: What’s
needed to fix the
mess.
TheStar.com - Business - Why white-collar crime team fizzled Page 2 of 4
http://www.thestar.com/printArticle/281772 12/2/2007
alongside of our investigators. They were to form an integral part of our integrated teams," Sliter
wrote to the department almost a year after the launch. Delays, as well as the lingering feeling
that neither provincial nor federal prosecutors were willing to step up, hurt morale, said Bill
Majcher, former head of IMET's Vancouver team.
"For the better part of the time I was there, we didn't have either the provincial or federal Crown
(prosecutor) willing to take responsibility for dealing with us. We were already running, and then
things start falling apart ..." Today, lawyers from the department are assigned to IMET teams in
Toronto, Vancouver, Calgary and Montreal.
Despite the program's well-funded start, it could be difficult to get beyond established RCMP
procedures when it came to hiring and pay, former insiders say.
In Toronto, Hannaford wanted a stock market expert on the team, a career Bay Streeter who
knew the big players, the market mechanics, and what was ordinary trading activity and what
was not – credentials, he knew, would command a six-figure salary. The government's standard
checklist for qualifications, however, put the pay scale in the middle five digits.
"We just couldn't get the classification process in the government to recognize that this person
had to be paid fairly well," Hannaford said.
Another frustration was the RCMP's habit of pulling officers off projects when it was short-staffed
in other areas. Need more security for visiting world leaders? Get an officer from IMET. A big drug
or immigration case needs more manpower? IMET.
IMET officers also complain that the Canadian legal system is too easily bogged down by
procedural sideshows such as stringent disclosure requirements – the prosecutor's legal
responsibility to give the defence access to all evidence it has gathered during an investigation.
In a complicated stock market fraud or investment scam, disclosure can amount to hundreds of
thousands of documents that have to be gathered, sorted, organized, and copied so they can be
given over to the defendant and his lawyers as soon as charges are laid in a case.
By some estimates, 30 per cent of the cost of an investigation goes to cataloguing, tracking, and
duplicating information to make sure copies will be available for the defence.
Even so, prosecutors may only rely on 100 documents or so to present their case; the defence,
about the same when putting alternate theories forward. "The rest is just sort of filler," says
Majcher, "but if somehow one box of nothing didn't get stored properly, in many cases that's the
basis for having a case tossed."
Another hurdle, they say, is the issue of compelling witnesses to speak to investigators.
In the U.S., prosecutors can issue subpoenas, forcing witnesses to provide testimony before a
grand jury once charges are laid.
Under Canadian law, members of the public are under no obligation to speak to law enforcement
officers. When trying to piece together a securities fraud case, the accountants, consultants, and
other office staff who may have information invariably consult their lawyers, then tell
investigators they don't want to give a statement.
If officers can convince a witness to talk to them, it's strictly voluntary. "It's basically, we're
totally open to their schedule and their lawyer's schedule," Hannaford said.
To add insult to injury, under the Mutual Legal Assistance Treaty, authorities from other countries
who come to Canada to conduct investigations can legally compel witnesses to provide
TheStar.com - Business - Why white-collar crime team fizzled Page 3 of 4
http://www.thestar.com/printArticle/281772 12/2/2007
statements. "So you have a funny situation where foreign law enforcement have more power to
collect evidence from witnesses in Canada than our own domestic police," Hannaford said.
All this leads to investigations dragging on, and on. Add historically light sentences into the mix,
and it's a recipe for plummeting morale.
In the meantime, white collar crime in Canada festers – along with a growing reputation for being
soft on stock market and financial crime. Majcher saw the devastating effect Canada's disclosure
law can have on international investigations first-hand in 2002 when he went undercover as part
of a joint RCMP-FBI sting that nabbed two corrupt Canadian lawyers.
The sting included Jack Purdy, a Canadian stock promoter who was charged, but later acquitted
of money laundering.
Even though the charges were filed in Florida, Purdy's lawyer was able to convince a judge that
the RCMP should be forced to turn over all its documents in the case, including those that actually
came from the FBI.
"The defence lawyer says he's a Canadian citizen and protected by the Charter,'" Majcher
recalled. " `He's entitled to everything in that (RCMP) file, including FBI intelligence reports, their
operational plans, and other notes.'"
The judge agreed, and the FBI officers involved were completely furious, threatening to cut
Canadian law enforcement out of subsequent investigations.
Majcher says that now he's on the investment side, he's a managing director with Hong Kongbased
investment bank Baron Group, he sees the impact on Canada's reputation in a new light.
"I remember meeting a fellow in New York. He said, `Bill, what's your area code. I said 604. He
said, `Oh, that's one of the area codes that I don't answer.'"
TheStar.com - Business - Why white-collar crime team fizzled Page 4 of 4
http://www.thestar.com/printArticle/281772 12/2/2007
Launched four years ago to clean up
markets, police squad is now best known
for its failures
December 02, 2007
MADHAVI ACHARYA-TOM YEW
BUSINESS REPORTER TORONTO STAR
It was designed for show, an in-your-face
warning in the heart of Canada's financial
centre.
Two dozen police, followed by a swarm of
reporters and television crews, swept into
the Bank of Nova Scotia at King and Bay
armed with a search warrant. The bank
itself was not under suspicion. It had been
caught up in a probe surrounding another
company, Royal Group Technologies Ltd.
It was the first operation of IMET – the Integrated Market Enforcement
Team – set up 14 months earlier to tackle white collar crime in
Canada. The idea was to make headlines.
"They're sending a message to investors ... `We're going to clean up
the markets and you can depend on us,'" Richard Powers, professor at
the University of Toronto's Rotman School of Management, said at the
time.
Yet after four years of operation, only five charges have been laid –
one in Vancouver and four in Toronto. In the Vancouver case, broker
Kevin Steele was jailed six years for bilking investors out of $10.3
million.
The four Toronto cases – accounting fraud, stock market manipulation,
theft and fraud over $5,000 – are still working their way through the
courts. IMET's investigation into Royal Group is continuing. To date, no
charges have been filed.
Today when the enforcement team makes the news, it's usually
because of its dismal track record. Instead of reaping glory, the
vaunted police squad is becoming a public whipping boy in the debate
about Canada's perceived tendency to let white-collar crime go
COLIN MCCONNELL/TORONTO STAR FILE PHOTO
The media were out in force when IMET raided downtown offices in February,
2005.
THE SERIES
YESTERDAY: How
regulators have failed
to crack down on
stock market
miscreants while
developing an
international
reputation for inaction
and ineffectiveness.
TODAY: How a bigbudget
police squad
set up to take on
corporate crime
degenerated into a
bureaucratic mess
with few results.
TOMORROW: An
interview with the
head of securities
TheStar.com - Business - Why white-collar crime team fizzled Page 1 of 4
http://www.thestar.com/printArticle/281772 12/2/2007
unpunished.
Even the man in charge admits to shortcomings.
"There's a lot of stakeholders unhappy and I think justifiably so," said
John Sliter, the head of IMET in Ottawa.
But he's quick to deflect blame: "Yes, justice is taking a long time, but
I don't want to put the full responsibility for that on [IMET's]
shoulders. In that sense, it's the Canadian system."
Interviews with former officers and other observers show IMET started with much hope, but soon
felt the burden of a weighty RCMP bureaucracy and territorial bickering.
Former team leaders in Toronto and Vancouver talk of their frustration and "disappointment
across all boundaries." Investigators complain of legal roadblocks in increasingly complicated
cases, leading to delays in investigations and charges being laid.
The federal government commissioned a report last May to look into IMET's failings. It's
recommendations are expected to be released this week.
The Integrated Market Enforcement Team was formed in 2003, when stock markets and
regulators around the world were still smarting from the effects of U.S. scandals like Enron and
WorldCom.
Canada's own high-profile debacles – Bre-X Minerals Ltd. and YBM Magnex Ltd.– were still fresh,
and the federal government wanted to set investors' minds at ease. For the first time, an elite
team of regulators, police and legal experts was being brought together to investigate and
prosecute big stock market crimes.
"Helping protect Canadian capital markets, that's what this announcement is all about," Canada's
solicitor-general, Wayne Eaton, told reporters at the time.
Ottawa dedicated $120 million over five years to set up nine units across Canada, in Vancouver,
Calgary, Toronto and Montreal.
The Toronto units were to be led by Detective Inspector Craig Hannaford. A veteran white-collar
crime officer, Hannaford headed up the RCMP's probe of Livent, the Toronto theatre company that
imploded under charges that Garth Drabinsky and other former principals had falsified corporate
statements. A trial is expected to begin in the spring.
Setting up the teams took upwards of a year, a complex process that involved getting secure
sites and staff. Territorial issues emerged early on.
Prosecutors from the federal department of justice were deemed essential to help guide the
complex investigations.
According to an internal planning document, obtained by Canadian Press in March, 2006, federal
lawyers were needed to give "advice and assistance regarding aspects such as wiretap
applications, search warrants and disclosure advice to the IMETS during the course of
investigations."
The justice department had been given $17 million to make the lawyers available, but it initially
failed to do so.
"We are at a point in our implementation where we are in dire need of legal advisers to work
watchdog, Ontario
Securities Commission
chairman David
Wilson.
COMING UP: What’s
needed to fix the
mess.
TheStar.com - Business - Why white-collar crime team fizzled Page 2 of 4
http://www.thestar.com/printArticle/281772 12/2/2007
alongside of our investigators. They were to form an integral part of our integrated teams," Sliter
wrote to the department almost a year after the launch. Delays, as well as the lingering feeling
that neither provincial nor federal prosecutors were willing to step up, hurt morale, said Bill
Majcher, former head of IMET's Vancouver team.
"For the better part of the time I was there, we didn't have either the provincial or federal Crown
(prosecutor) willing to take responsibility for dealing with us. We were already running, and then
things start falling apart ..." Today, lawyers from the department are assigned to IMET teams in
Toronto, Vancouver, Calgary and Montreal.
Despite the program's well-funded start, it could be difficult to get beyond established RCMP
procedures when it came to hiring and pay, former insiders say.
In Toronto, Hannaford wanted a stock market expert on the team, a career Bay Streeter who
knew the big players, the market mechanics, and what was ordinary trading activity and what
was not – credentials, he knew, would command a six-figure salary. The government's standard
checklist for qualifications, however, put the pay scale in the middle five digits.
"We just couldn't get the classification process in the government to recognize that this person
had to be paid fairly well," Hannaford said.
Another frustration was the RCMP's habit of pulling officers off projects when it was short-staffed
in other areas. Need more security for visiting world leaders? Get an officer from IMET. A big drug
or immigration case needs more manpower? IMET.
IMET officers also complain that the Canadian legal system is too easily bogged down by
procedural sideshows such as stringent disclosure requirements – the prosecutor's legal
responsibility to give the defence access to all evidence it has gathered during an investigation.
In a complicated stock market fraud or investment scam, disclosure can amount to hundreds of
thousands of documents that have to be gathered, sorted, organized, and copied so they can be
given over to the defendant and his lawyers as soon as charges are laid in a case.
By some estimates, 30 per cent of the cost of an investigation goes to cataloguing, tracking, and
duplicating information to make sure copies will be available for the defence.
Even so, prosecutors may only rely on 100 documents or so to present their case; the defence,
about the same when putting alternate theories forward. "The rest is just sort of filler," says
Majcher, "but if somehow one box of nothing didn't get stored properly, in many cases that's the
basis for having a case tossed."
Another hurdle, they say, is the issue of compelling witnesses to speak to investigators.
In the U.S., prosecutors can issue subpoenas, forcing witnesses to provide testimony before a
grand jury once charges are laid.
Under Canadian law, members of the public are under no obligation to speak to law enforcement
officers. When trying to piece together a securities fraud case, the accountants, consultants, and
other office staff who may have information invariably consult their lawyers, then tell
investigators they don't want to give a statement.
If officers can convince a witness to talk to them, it's strictly voluntary. "It's basically, we're
totally open to their schedule and their lawyer's schedule," Hannaford said.
To add insult to injury, under the Mutual Legal Assistance Treaty, authorities from other countries
who come to Canada to conduct investigations can legally compel witnesses to provide
TheStar.com - Business - Why white-collar crime team fizzled Page 3 of 4
http://www.thestar.com/printArticle/281772 12/2/2007
statements. "So you have a funny situation where foreign law enforcement have more power to
collect evidence from witnesses in Canada than our own domestic police," Hannaford said.
All this leads to investigations dragging on, and on. Add historically light sentences into the mix,
and it's a recipe for plummeting morale.
In the meantime, white collar crime in Canada festers – along with a growing reputation for being
soft on stock market and financial crime. Majcher saw the devastating effect Canada's disclosure
law can have on international investigations first-hand in 2002 when he went undercover as part
of a joint RCMP-FBI sting that nabbed two corrupt Canadian lawyers.
The sting included Jack Purdy, a Canadian stock promoter who was charged, but later acquitted
of money laundering.
Even though the charges were filed in Florida, Purdy's lawyer was able to convince a judge that
the RCMP should be forced to turn over all its documents in the case, including those that actually
came from the FBI.
"The defence lawyer says he's a Canadian citizen and protected by the Charter,'" Majcher
recalled. " `He's entitled to everything in that (RCMP) file, including FBI intelligence reports, their
operational plans, and other notes.'"
The judge agreed, and the FBI officers involved were completely furious, threatening to cut
Canadian law enforcement out of subsequent investigations.
Majcher says that now he's on the investment side, he's a managing director with Hong Kongbased
investment bank Baron Group, he sees the impact on Canada's reputation in a new light.
"I remember meeting a fellow in New York. He said, `Bill, what's your area code. I said 604. He
said, `Oh, that's one of the area codes that I don't answer.'"
TheStar.com - Business - Why white-collar crime team fizzled Page 4 of 4
http://www.thestar.com/printArticle/281772 12/2/2007
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by admin » Fri Dec 14, 2007 5:33 pm
The Highest Priority Solution to Fix Canada's Third World Securities Crime Enforcement
We have to do a complete overhaul of Canada's complaint intake process for white collar
securities crime since the current approach is failing and is designed to fail.
(1) The OSC, RCMP, regional and municipal police forces cannot continue to send all
persons with complaints of wrongdoing in the investment industry to the investment
industry Self-Regulatory Organizations - the Investment Dealers Association and the
Mutual Fund Dealers Association. These SRO's have no legislative authority, nor public
accountability mechanisms, to ensure that wrongdoers are properly investigated and
prosecuted.
(a) the SRO's lack any of the legislative tools necessary to properly investigate and
enforce fines on wrongdoers;
(b) the SRO's have no authority to lay criminal or quasi-criminal charges involving jail
sentence penalties, either directly or by presenting such charges to a court;
( c) the SRO's are private sector organizations that are not required to refer cases with
evidence of criminal offences to the RCMP or any other regional and municipal police
force;
(d) the SRO's interest to protect the reputation of the investment industry usually trumps
investor interests and the public interest, particularly when they have no legislative basis
to conduct their delegated investor protection functions effectively.
(2) The RCMP, regional and municipal police forces cannot continue to send all persons
with complaints of wrongdoing in the investment industry and in public corporations to
the provincial securities commissions.
(a) the provincial securities commissions have legislative tools to investigate and enforce
fines and other remedies, but it cannot conduct proper justice when their investigations
and adjudication functions are both done under one roof and under one chairman, who
makes all the decisions on who is investigated and prosecuted and who supervises the
commissioners that adjudicate all securities law violations;
(b) the provincial securities commissions have authority to lay quasi-criminal charges
involving jail sentences, by presenting such charges to a court; however, the provincial
securities commissions have no authority to prosecute criminal charges under the Federal
Criminal Code;
(c) the provincial securities commissions are crown regulatory agencies, but they are not
required to refer cases with evidence of criminal conduct to the RCMP or any other
regional and municipal police force;
( d) the provincial securities commissions are crown regulatory agencies, but their record
shows bias to protect the reputation of the investment industry and Canada's corporate
and professional elite rather than to protect investors, due to: their investment industry
funding sources; senior executives and commissioners being drawn from the investment
banking, accounting and corporate legal communities; and the lack of public
accountability mechanisms, such as hearings before standing committees of the
provincial legislatures or regular independent audits on the thoroughness and integrity of
enforcement activities.
(3) The RCMP Integrated Market Enforcement Team (IMET) and the regional and
municipal police forces throughout Canada must establish a new co-coordinated
securities criminal complaint intake process. In doing so, the RCMP (IMET) would
eliminate its sole reliance on the investment industry SRO's and the provincial securities
commissions for the receipt and preliminary assessment of complaints from the public
and insider whistleblowers about securities crimes.
(a) A new multi-jurisdiction police co-ordination committee should be established to set
the protocols for assignment of securities criminal investigations to the most logical
police force to do the job.
(b) The public should be able to make a securities criminal complaint at their local police
station, with the knowledge that their complaint will be properly attended to under the
protocols established by the new multi-jurisdiction police co-ordination committee.
(c ) The participating RCMP, regional and municipal police white collar crime units will
need higher budgets, more skilled resources and the new legislative tools sought to
become effective in white collar crime policing. The provinces should be reallocating
budgets away from the securities commissions into the regional and municipal police
white collar crime units. These units will play a larger and essential role in receiving
securities criminal complaints from the public and in criminal investigations that are best
completed at the regional level.
(d) The RCMP IMET, regional and municipal police force white collar crime units,
would conduct investigations assigned to them according to the established assignment
protocols accepted by all the participating police forces and administered by the new
multi-jurisdiction police co-ordination committee.
Prepared by Diane A. Urquhart
Independent Analyst
Mississauga, Ontario
Telephone : (905) 822-7618
Cell: (416) 505-4832
Backgrounder
The OSC fully delegates to the Investment Dealers Association (IDA) and the Mutual
Funds Dealers Association (MFDA) the review of the conduct of the registered
investment dealers and mutual fund dealers and all of their employees.
We have to do a complete overhaul of Canada's complaint intake process for white collar
securities crime since the current approach is failing and is designed to fail.
(1) The OSC, RCMP, regional and municipal police forces cannot continue to send all
persons with complaints of wrongdoing in the investment industry to the investment
industry Self-Regulatory Organizations - the Investment Dealers Association and the
Mutual Fund Dealers Association. These SRO's have no legislative authority, nor public
accountability mechanisms, to ensure that wrongdoers are properly investigated and
prosecuted.
(a) the SRO's lack any of the legislative tools necessary to properly investigate and
enforce fines on wrongdoers;
(b) the SRO's have no authority to lay criminal or quasi-criminal charges involving jail
sentence penalties, either directly or by presenting such charges to a court;
( c) the SRO's are private sector organizations that are not required to refer cases with
evidence of criminal offences to the RCMP or any other regional and municipal police
force;
(d) the SRO's interest to protect the reputation of the investment industry usually trumps
investor interests and the public interest, particularly when they have no legislative basis
to conduct their delegated investor protection functions effectively.
(2) The RCMP, regional and municipal police forces cannot continue to send all persons
with complaints of wrongdoing in the investment industry and in public corporations to
the provincial securities commissions.
(a) the provincial securities commissions have legislative tools to investigate and enforce
fines and other remedies, but it cannot conduct proper justice when their investigations
and adjudication functions are both done under one roof and under one chairman, who
makes all the decisions on who is investigated and prosecuted and who supervises the
commissioners that adjudicate all securities law violations;
(b) the provincial securities commissions have authority to lay quasi-criminal charges
involving jail sentences, by presenting such charges to a court; however, the provincial
securities commissions have no authority to prosecute criminal charges under the Federal
Criminal Code;
(c) the provincial securities commissions are crown regulatory agencies, but they are not
required to refer cases with evidence of criminal conduct to the RCMP or any other
regional and municipal police force;
( d) the provincial securities commissions are crown regulatory agencies, but their record
shows bias to protect the reputation of the investment industry and Canada's corporate
and professional elite rather than to protect investors, due to: their investment industry
funding sources; senior executives and commissioners being drawn from the investment
banking, accounting and corporate legal communities; and the lack of public
accountability mechanisms, such as hearings before standing committees of the
provincial legislatures or regular independent audits on the thoroughness and integrity of
enforcement activities.
(3) The RCMP Integrated Market Enforcement Team (IMET) and the regional and
municipal police forces throughout Canada must establish a new co-coordinated
securities criminal complaint intake process. In doing so, the RCMP (IMET) would
eliminate its sole reliance on the investment industry SRO's and the provincial securities
commissions for the receipt and preliminary assessment of complaints from the public
and insider whistleblowers about securities crimes.
(a) A new multi-jurisdiction police co-ordination committee should be established to set
the protocols for assignment of securities criminal investigations to the most logical
police force to do the job.
(b) The public should be able to make a securities criminal complaint at their local police
station, with the knowledge that their complaint will be properly attended to under the
protocols established by the new multi-jurisdiction police co-ordination committee.
(c ) The participating RCMP, regional and municipal police white collar crime units will
need higher budgets, more skilled resources and the new legislative tools sought to
become effective in white collar crime policing. The provinces should be reallocating
budgets away from the securities commissions into the regional and municipal police
white collar crime units. These units will play a larger and essential role in receiving
securities criminal complaints from the public and in criminal investigations that are best
completed at the regional level.
(d) The RCMP IMET, regional and municipal police force white collar crime units,
would conduct investigations assigned to them according to the established assignment
protocols accepted by all the participating police forces and administered by the new
multi-jurisdiction police co-ordination committee.
Prepared by Diane A. Urquhart
Independent Analyst
Mississauga, Ontario
Telephone : (905) 822-7618
Cell: (416) 505-4832
Backgrounder
The OSC fully delegates to the Investment Dealers Association (IDA) and the Mutual
Funds Dealers Association (MFDA) the review of the conduct of the registered
investment dealers and mutual fund dealers and all of their employees.
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by admin » Thu Jan 10, 2008 3:34 pm
In my opinion, the RCMP is investigating the deceptive cash yields in the marketing materials of income trusts. However, we have become informed about the serious state in which the RCMP is presently operating, under the control of the investment industry Self-Regulatory Organizations and their facilitating provincial securities commissions. The RCMP IMET is completely without accountability to the investing public through proper civilian oversight. The civilian Management Board proposed by David Brown, former OSC Chairman, is not a civilian oversight agency like the police boards governing all other police forces in Canada. David Brown's civilian Management Board seeks to supervise RCMP police operations and this would serve to further consolidate the investment industry's control over white collar securities crime policing operations in Canada. A civilian Management Board dilutes government funding for other effective initiatives to ensure the thoroughness and integrity of white collar securities crime complaints intake and investigations in Canada. We do need a proper civilian oversight agency, or a new federal police commission as proposed by the House of Commons Public Accounts Committee, but this is an independent body not involved in daily policing but in the establishment of budgets and budget priorities, general standards of policing conduct and assurance of anti-corruption.
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by admin » Thu Jan 24, 2008 6:00 pm
The Canadian Center for Justice Study of Seniors as Victims of Crime - 2004 and 2005 compared to the December 2007 Justice Canada EKOS Survey on Seniors Concerned About Fraud suggests that there is about ten times higher victimization of seniors by fraud than by physically violent crimes. This would explain the much higher concerns being expressed by seniors about fraud than about physically violent crimes. Again, the higher % of seniors' fraud victims and higher % of seniors' concern about fraud, does not include the undetected skimming of seniors' and others' investment accounts from massive frauds, like income trusts sold at inflated prices on the basis of deceptive cash yields; toxic derivatives in asset backed commercial paper sold with "no use" bank guarantees; market timing of mutual funds by investment professionals; and, unnecessary transactions in foreign exchange and mutual funds for fee generation only.
"According to the 2004 General Social Survey (GSS), seniors were three times less likely than non seniors to experience a victimization [of crime] in the 12 months preceding the survey (10% versus 31%).
When looking at the risk of violent crime, it was found that seniors were much less likely than their younger counterparts to experience an assault, a sexual assault or a robbery. In 2004, there were approximately 12 self-reported violent incidents for every 1,000 seniors (aged 65 years and over). This rate was almost four times lower than the violent victimization rate recorded for those aged 55 to 64 (45 per 1,000), and almost twenty times lower than the youngest group aged 15 to 24 (226 per 1,000). These findings are consistent with results from the 1999 GSS."
Victimization of crime, in this Canadian Center for Justice Study on Seniors as Victims of Crime, refers to the following offence types. Financial fraud is not in the list of crimes covered in this Canadian Center for Justice Study.
Homicide/attempts
Sexual violations (levels 1,2,3)
Major assault (levels 2 and 3)
Common assault (level 1)
Robbery
Criminal harassment
Uttering threats
Other violent violations
This Canadian Center for Justice Study of Seniors as Victims of Crime - 2004 and 2005 points out another benefit from the proposed securities criminal intake complaints system jointly administered by the RCMP, regional and municipal police forces. Police collect rigorous statistics on the amount and type of violent physical crimes and property theft taking place, whereas the investment industry SRO's and the provincial securities commissions refer very few of the complaints they receive for criminal investigation and prosecution, despite evidence of fraud.
Diane Urquhart
Independent Analyst
"According to the 2004 General Social Survey (GSS), seniors were three times less likely than non seniors to experience a victimization [of crime] in the 12 months preceding the survey (10% versus 31%).
When looking at the risk of violent crime, it was found that seniors were much less likely than their younger counterparts to experience an assault, a sexual assault or a robbery. In 2004, there were approximately 12 self-reported violent incidents for every 1,000 seniors (aged 65 years and over). This rate was almost four times lower than the violent victimization rate recorded for those aged 55 to 64 (45 per 1,000), and almost twenty times lower than the youngest group aged 15 to 24 (226 per 1,000). These findings are consistent with results from the 1999 GSS."
Victimization of crime, in this Canadian Center for Justice Study on Seniors as Victims of Crime, refers to the following offence types. Financial fraud is not in the list of crimes covered in this Canadian Center for Justice Study.
Homicide/attempts
Sexual violations (levels 1,2,3)
Major assault (levels 2 and 3)
Common assault (level 1)
Robbery
Criminal harassment
Uttering threats
Other violent violations
This Canadian Center for Justice Study of Seniors as Victims of Crime - 2004 and 2005 points out another benefit from the proposed securities criminal intake complaints system jointly administered by the RCMP, regional and municipal police forces. Police collect rigorous statistics on the amount and type of violent physical crimes and property theft taking place, whereas the investment industry SRO's and the provincial securities commissions refer very few of the complaints they receive for criminal investigation and prosecution, despite evidence of fraud.
Diane Urquhart
Independent Analyst
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by admin » Thu Jan 24, 2008 6:06 pm
Further to Diane's comments on the previous post
"looking at the figure for financial fraud in Canada............experts agree that it is some number north of $20 billion per year....(my estimate is between $30 bil to $60 bil each year........compare that to the value of blue collar crime (look up property crimes under justice canada for example) which averages $5000 per crime, depending on which numbers you select.........places one in a position to say with a degree of accuracy that the amount of white collar crime in canada is approximately equal to all of the property crime in Canada.
To put into clearer perspective. IF Conrad Black's fraud was $60 mil (he was only caught on $6 mil) and IF the average blue collar property crime is $5000 per victim, then a guy like Conrad Black may be guilty of doing as much damage as 12,000 burglers, muggers and thieves..............................
Does this justify him going to jail for a few years?? In comfort??
second thought
I just found the document I was looking for
it is from govt of canada, victims of crime awareness week on the site
www.victimsweek.gc.ca
it shows crimes of property at $40 bil, the highest of the various categories
with a rate of 248 property related victimizations per 1000 population, this works out to be around 8 million property related crimes in canada each year
if that is true, then white collar crime and victimization financially by professionals is (in my opinion) equivalent to all the property related crimes in canada each year.........about 8 million crimes total
vandalism
theft
break and enter
motor vehicle theft
"looking at the figure for financial fraud in Canada............experts agree that it is some number north of $20 billion per year....(my estimate is between $30 bil to $60 bil each year........compare that to the value of blue collar crime (look up property crimes under justice canada for example) which averages $5000 per crime, depending on which numbers you select.........places one in a position to say with a degree of accuracy that the amount of white collar crime in canada is approximately equal to all of the property crime in Canada.
To put into clearer perspective. IF Conrad Black's fraud was $60 mil (he was only caught on $6 mil) and IF the average blue collar property crime is $5000 per victim, then a guy like Conrad Black may be guilty of doing as much damage as 12,000 burglers, muggers and thieves..............................
Does this justify him going to jail for a few years?? In comfort??
second thought
I just found the document I was looking for
it is from govt of canada, victims of crime awareness week on the site
www.victimsweek.gc.ca
it shows crimes of property at $40 bil, the highest of the various categories
with a rate of 248 property related victimizations per 1000 population, this works out to be around 8 million property related crimes in canada each year
if that is true, then white collar crime and victimization financially by professionals is (in my opinion) equivalent to all the property related crimes in canada each year.........about 8 million crimes total
vandalism
theft
break and enter
motor vehicle theft
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