Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 1 - Evidence - Meeting of February 26, 2004
OTTAWA, Thursday, February 26, 2004
The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill C-13, to amend the Criminal Code (capital markets fraud and evidence gathering), met this day at 11:05 a.m. to give consideration to the bill.
Senator Richard H. Kroft (Chairman) in the Chair.
[English]
The Chairman: Today we will be continuing our consideration of Bill C-13, to amend the Criminal Code, capital markets fraud and evidence gathering.
Our witnesses today are, from the Canadian Council of Criminal Defence Lawyers, Mr. William Trudell, Chair; and from the Criminal Lawyers' Association of Ontario, Mr. Michael Lomer, Treasurer.
Welcome, gentlemen, it is nice to have you here.
Mr. William Trudell, Chair, Canadian Council of Criminal Defence Lawyers: Mr. Chairman and honourable senators, on behalf of the Canadian Council of Criminal Defence Lawyers, which is a council with representatives from across the country, I am honoured and pleased to be given the opportunity to be here on this very important bill. Bill C-45, the corporate criminal liability bill, which was passed recently, is almost a companion bill, and we were concerned that there was not a great deal of consultation on that bill, but are very pleased to be asked to appear and, perhaps, assist in relation to this bill.
You may not be surprised to hear me say this, but the Canadian council feels this bill is unnecessary. Now that it is in the Senate, I will not suggest that it not be passed, but perhaps some of the detailed provisions should be looked at. However, we feel, in tracking this bill and some of the changes that the government introduced, that it is a response to capital market fraud in the United States, and the government says that in its background paper. That is not a secret. This is a Canadian response, in our respectful submission, to what has been an American problem. This is the Canadian response, with great respect, to Sarbanes-Oxley. We feel that if there were a single securities regulator in this country, the provincial regulators can cover, and are covering and prosecuting vigorously insider trading and some of the provisions that you find in this criminal legislation.
We are saying — although as a criminal lawyer, it would be surprising for me to say that we do not want any more business — this area is covered. My friend Mr. Lomer will talk about the federal government being involved in prosecutions of a criminal nature as opposed to overseeing criminal legislation. We feel — and I am sorry Mr. Atkinson was not able to be here today — that the provincial regulators cover this area of insider trading and this bill is not necessary, but is an optic response, in our respectful submission, to what seems to be occurring throughout the world in terms of issues of corporate governance.
Having said that, the bill itself — and we will perhaps talk about certain provisions — is very vague. There is a lack of definition, for instance, in the term ``security'' that is quite different from securities regulations. We are very concerned about the ``whistle-blower,'' in search of a better term, clauses in this bill. For the first time, this is being criminalized, which is quite unique, and we would request that you seriously look at this because it does not even have the same protections as Sarbanes-Oxley. That is because the information of the complainer, for instance, does not even have to be truthful. It does not have to be reliable. It is just information. We certainly hope you will look at that.
We are very concerned about the vagueness of some of the terms in the bill. We are very concerned about particular clauses. The government, in its working paper, talked about this type of legislation only being used perhaps in unusual cases, where the alleged offence has the potential to adversely affect the stability of the Canadian economy. Distinguished representatives of the government may have said to you yesterday, I do not know, that this will not be used except in exceptional circumstances, but I would like to point out that where the Canadian economy is put at risk is one of the factors listed in clause 380.1, which is an aggravating factor. Therefore, it will not be used just for those unusual alleged offences that affect the economy, the Canadian marketplace. It is proposed legislation that once introduced, in our respectful submission, will be used almost exclusively, in contrast to the provincial prosecutions that cover this area at this time.
I would like to say, and I say it with all sincerity, that this proposed legislation is not necessary. If this proposed legislation did not get passed, what would be left in this country? What would be left are provincial regulators, who can and are pursuing offences under provincial regulations and statutes. This, in my submission, and I say it with respect, is an optic piece of proposed legislation that is not necessary and is very invasive.
The last point I would make before I pass it on to my friend, Mr. Lomer, is this: It is a very troublesome piece of proposed legislation, because you see a particular clause that says that when someone with stature in the community, someone who has achieved a reputation and then uses that reputation for the purposes of committing an offence, it is almost looked upon as an aggravating factor. In other words, people can no longer use their reputation in the community in terms of discussing what sentence they should receive for an offence.
In our respectful submission, that targets a particular class of persons. When someone is convicted of fraud, if they are prominent in the community, that prominence is really a neutral factor; they will be prosecuted, and courts say all the time, ``You are in a position of trust.'' However, to single out, in my respectful submission, a certain person or class of persons is unfair, uncalled for and quite unique. Who else but persons who have established some kind of reputation in the community are going to be involved in trading in securities? We are concerned about the breadth and vagueness of this proposed legislation.
I thank you very much. I will try to answer any specific questions you may have at a later point.
Mr. Michael Lomer, Treasurer, Criminal Lawyers' Association of Ontario: On behalf of the Criminal Lawyers' Association of Ontario, I want to thank you for the invitation to be here, although I must admit that it still seems a little curious that I am before the Standing Senate Committee on Banking, Trade and Commerce. Normally, we appear before the Standing Senate Committee on Legal and Constitutional Affairs. In any event, I understand that proposed criminal legislation is before your committee.
What I would like to speak on in general terms has to do with what we normally would call the division between when a state authority can intervene or interfere in the private affairs of an individual and when it cannot. That has been defined in our Supreme Court from a case going back as far as Hunter v. Southam, that there are certain prerequisites before the state can interfere with the private affairs of the individuals who live in this country.
That has tracked its way through legislation that we have now. For example, the general search warrant power, which is the power of the ``basket'' clause, if you will, for search warrants, is found at 478.01, a section of the code that is in the same part of the Criminal Code as the provisions at which you are looking today — or some of them anyway. That provides the basis on which we will allow the state to interfere by way of executing search warrants on third parties or individuals and get material with respect to criminal offences. It clearly sets out what is required.
The first thing required in 487.01 is that a judge — it has to be a judge — finds that there is, in information on oath and in writing, reasonable grounds to believe, not, I point out, to suspect; a reasonable suspicion is not reasonable grounds to believe. Suspicion is suspicion. The phrase, ``grounds to believe,'' means that you have some factual basis. I emphasize that point because this proposed legislation talks about ``suspicion.'' In my submission to you — I do not mind the work — you will have to litigate that clause, because frankly, I do not think it will pass constitutional muster. The Supreme Court has set out the ground rules. The ground rules have been in place now for going on 25 years, and they talk about reasonable belief, not suspicion. Suspicion is a step toward what I would characterize as a state that gives too much power to the police and not enough protection to individual civil liberties and an individual's right to be free from the power of the state.
The other thing that was tracked in the case law and is reflected in this general warrant provision is that there has to be an offence against an act of Parliament or some other act, which makes sense. You cannot investigate when you do not know what it is you are investigating, and you have to know that the information concerning the offence will be obtained through the use of the technique or the search warrant. That is the information concerning the offence. This proposed legislation talks about something that will assist the police investigation. That comes back to what Mr. Trudell said about the vagueness of this bill. This is not an area in which to be vague. You can use legislation that is already in existence and have it reflect the same language. There is no need to create new, more vague language in the hope that somehow you will create a police power where it is unnecessary to do so.
The police presently know where the limits are in terms of getting their search warrants and that sort of thing. In my submission, the provision in 487.12 is nothing more or less than another search warrant power. It is an odd one because it actually not only allows the police to execute a search warrant, but it orders the people who have the search warrant executed upon them to prepare the material. Be that as it may, I can understand how that can happen, given complex computer systems.
However, in my submission to you, section 487.01, the general warrant powers, should be tracked, through the language there, into the powers that are presently being looked at. It should not be any different.
There is no lower threshold level of state investigation into the private affairs of individuals other than what is provided for in Hunter v. Southam, other than what is provided for in the general warrant.
My submission to this committee is that you look carefully at the parts of the bill where ``suspect'' versus ``believe'' is discussed. I will give you the references. They are found in the proposed sections 487.0121(3(a) and 487.012(4), both of which relate to these production orders. I also point out that the use of similar types of invasive state actions, such as wiretaps, requires evidence of the offence. In other words, you cannot get a wiretap if it does not afford evidence of the offence; or you cannot get a search warrant unless, in the words of the section, you ``give information concerning the offence.'' In this proposed legislation, it is ``will assist in investigation.'' In my submission, that is way too vague, and unnecessarily so.
It is an important area. In our submission, there is no reason why you should have differing standards that may or may not pass constitutional muster in situations where this has already been litigated. We have a standard. The Supreme Court has set it. It was then reflected in legislation. Why now in this proposed legislation are we resiling from that and saying, ``Well, we can have suspicion. Anything that will assist in an investigation, you are entitled to go for''?
I ask this committee to seriously consider that, and if necessary, ask the justice officials why it does not follow the same track as all the other search warrant provisions. Make no mistake; this is a search warrant provision. It is nothing less. It requires and compels, on pain of punishment by fine or imprisonment, the party being searched to comply and do certain things. It is clear state intervention.
I would now like to make a historical observation. In 1867, when the Fathers of Confederation set up the division of powers, they gave to the federal government the criminal law power. They gave to the provinces the administration of criminal justice. That worked very well. That was the way it went until we had this problem with narcotics in the community, which came up, I would venture to say, probably as far back as the 1920s and the 1930s of the previous century. When that happened, the federal government took over the prosecution of narcotics offences. If you take a look at the bill before you, you will see that the federal government has arrogated to itself the ability to at least share in the prosecutorial responsibility, in the sense that they can step in at any time to prosecute offences under the capital markets fraud bill that is before you.
In my submission, it was never meant to be such. It was always the best of all possible worlds to have the policymaker separate and apart from the prosecutor. They were able to give what the Senate gives to legislation generally, namely, sober second thought.
With the advent of narcotics prosecutions in the Department of Justice, and now since they have become involved in war crimes and other things, we have a tilting of the prosecutorial powers that you find in the Criminal Code toward the federal government and the legislation. In fact, it would have been better if they had stood back, created the policy and allowed the provinces to do the prosecuting, which is what they would do under the administration of criminal justice.
In some ways, I agree with Mr. Trudell. My view is that the Government of Canada certainly has the power to legislate in the area. However, I would ask — and I suppose this is a little like tilting at windmills — that they not be the ones who do the prosecuting. That makes them too close to the action in the courts and does not give them the ability to take an overview.
There are a number of issues in the proposed legislation that I would ask you to consider. However, I know there will be questions from members of the committee because I have talked to the clerk with respect to some of the aspects of the bill. Therefore, I turn it back to you, Mr. Chairman.
The Chairman: Let me take the prerogative of the Chair for a moment and mention a couple of things that went on yesterday. In that way, you will connect with some of the evidence we heard yesterday.
On your latter point, about the intrusion or the movement of the prosecutorial side of the federal justice authority into provincial areas, we had a fair amount of discussion yesterday with Department of Justice officials. I can be corrected by any of my colleagues here, but I will sum up the impression I was left with so you will know where our minds are.
It is true that today, in the context of business, commerce and things that can come within the ambit of this proposed legislation, there seemed to be the need for a broader national authority. Having said that, the officials made it clear that they are not looking at this as a frequent or aggressive intrusion into the provincial level. They stressed, first, their sensitivity to that point and their intent to consult carefully and regularly with provincial authorities, in recognition that, for the most part, that continues to be, I think in support of your view, the best place for prosecutorial activity to take place.
I was not left — and this is my own interpretation — with any sense that they are doing anything other than responding to what is perceived to be a need in this new world in which we are living. However, it was not seen as a grab of the prosecutorial function by the federal government. That was the position, and they showed a great deal of sensitivity to it.
Concerning the point you raised with regard to the production orders, or the search warrants, we had considerable discussion on that issue. I invite which ever of my colleagues who was pursuing that point to jump in. They were suggesting that this is in fact a limited authority. They talked about only being concerned with what exists now and not what might be in the future. It really came down to: Do you have a bank account and what is the number of that bank account? It was of very limited scope.
I encourage any of the senators who were engaged in that line of conversation to pick it up. I know that Senator Baker was so engaged. As a matter of fact, he led off in that area. I am not sure what his level of satisfaction was by the time we reached the end of the discussion.
Senator Baker: I was not very satisfied, you are absolutely correct. I will pursue what the department said after because it seemed to have some logic to it.
The Chairman: I invite you to do that. I wanted to cover that ground so that you do not think that we let the officials out of here without raising those points.
Senator Prud'homme: Speaking for the Canadian Council of Criminal Defence Lawyers, would you consider this to be a major piece of criminal legislation?
Mr. Trudell: There is absolutely no doubt about it.
Senator Prud'homme: I will lead you to a second question. I do not want to take much time.
You say here in your paper, which I read very attentively, that since its inception in 1992, your organization has intervened in the Supreme Court of Canada and has been invited by the federal government to consult on every major piece of criminal legislation.
Have you been invited, to your satisfaction, to be involved in this major piece of proposed criminal legislation?
Mr. Trudell: Regretfully, no. I mentioned in the opening that we were invited to testify before the House committee on the Westray mine bill, which led to Bill C-45. I can also speak for the criminal justice subsection of the Canadian Bar Association here today. We have all been waiting to be consulted on Bill C-45 and Bill C-46. That consultation really has been timid, until today, and that is why we are so happy to be here.
Senator Massicotte: I want to talk more conceptually. Mr. Trudell, in your opening comments you said you are not sure there is a need in our society that justifies this proposed legislation. I would like to talk about your perception of ``need.'' Obviously, the debate is an issue of balance between the need to make sure things are right and the need for civil liberties. Will you talk about what your perception of ``need'' is? You commented that the solution is one securities commission. Would your opinion change if that was not achievable, as it may not be?
Mr. Trudell: I will say two things. When this bill originated, and the government said that it was a response to cases like Enron, it was clearly motivated by cases in the United States. Then the government went on to say that it has to protect the global market in which Canada operates.
Clearly, this was not a response to something that happened in this country. We can pick up the paper on any day now and see the aggressive prosecutions by securities regulators throughout this country.
This was a response to what the Bush administration did in the United States, and the government is clear about that. What the government said to you yesterday, with great respect, causes us some concern. The government said that it will only use this in limited cases. However, once the horse is out of the barn there will be no control over when this is used. When the government introduced Bill C-45 and Bill C-46, it also said that it would put a lot of money into specific offices, where it will hire RCMP investigators and designate prosecutors to capital fraud cases.
This is a major advance and intrusion by the federal government into the capital market. I did not explain it very articulately in the beginning, but if you look at the sentencing provision in clause 380.1, with regard to aggravating circumstances, it reads:
(a) the value of the fraud committed exceeded one million dollars.
As Mr. Lomer said to me on the airplane coming down this morning, a million dollars in a capital market is a drop in the bucket.
The bill continues:
(b) the offence adversely affected, or had the potential to adversely affect, the stability of the Canadian economy...
They put that in as just one of the factors to be considered on sentencing. Therefore, we are not just talking about that type of prosecution.
Look at the third one:
(c) the offence involved a large number of victims.
What does that mean, in capital fraud terms?
Next:
(d) in committing the offence, the offender took advantage of the high regard in which the offender was held in the community.
If you couple that with protection for whistle-blowers — it does not have to be a reasonable whistle-blower; it could be someone who is just on a frolic — this bill is intrusive proposed criminal legislation. After the government said to you yesterday, ``We will only use it in limited circumstances,'' I hope that there is not another hearing in a year or two from now when we will hear, ``but wait a minute.'' We ran into this with Bill C-36, the antiterrorism bill. We are now looking at how that is being used.
The government may be well-meaning when it says that this is a response to the American scandals. It does not say that we have a particularly unique problem in Canada. In my respectful submission, the Criminal Code provides the tools to prosecute frauds. It has tools to prosecute market manipulation. Why do we need this?
If people act fraudulently, they will be prosecuted, whether they are traders or companies. Surely, the securities regulators in this country are aggressively prosecuting. It seems to me there has been some difficulty in the securities industry in agreeing on whether there should be a single regulator, but there are insider trading task forces operating in this country. We do not need this proposed legislation. If you withdrew this bill, if you said, ``Sorry, we will not continue because it is too vague,'' prosecutions will not stop. When we pick up the financial papers tomorrow, we will see another company prosecuted or insider trading prosecutions or traders prosecuted in this country. It is happening every day. Why do we need this?
Senator Massicotte: I am probably coming from the wrong starting point, as I am a business person. I still see too frequently people trying to pass on insider information, which, without this proposed legislation, is not even a criminal offence. If you look at the wise committee report, their solution was one commission, but they note in that report that there is a problem in capital markets with that kind of activity.
Perhaps my starting point is different from yours. I thought there was urgency. I think it is important for the credibility of capital markets to be firm about it. I am not convinced the status quo is acceptable. Maybe the solution is not the same.
Mr. Trudell: If you decide that the status quo is not acceptable and that this may be the vehicle, then we have to go to the next step. How far does this vehicle go? Is it too vague?
Do you understand what a ``security'' is when you look at this document? I do not. It is not defined. Do you understand what ``insider information'' is when you look at this document? It is not defined. You have to go to the securities statutes to find more detail.
What does the word ``advisable'' mean, as in ``where a court considers it advisable''?
If we are to move into the capital markets with criminal prosecutions, and set up and fund the organizations to do it, surely the criminal legislation has to be held to a very high standard. I just express an opinion. I think that insider trading, capital market fraud, is a problem. I think it is being addressed on a daily basis by aggressive prosecutions. However, if the government feels that there are cases where the Canadian economy is at such risk that they have to get on board, and this is the bill that makes that possible, then say that.
This is very intrusive. The production orders are very intrusive. The production orders talk about acting on suspicion, as my friend Mr. Lomer has said, which we do not act upon, and then it goes on to talk about what the government says are ``protections,'' for instance, for that third party who has been asked to produce things; and the protection is against self-incrimination in 487.016. Those documents, or anything they say, cannot be used against them. There is no derivative use protection. In other words, there is only use protection.
For instance, in responding to an MLAT, a Mutual Legal Assistance Treaty request — that is, the response to some securities legislation — if someone comes forward, they get not only use immunity but also derivative use immunity. That is not in here. You can go in on suspicion and you can force a third party to produce materials, and then you only give them derivative use immunity?
This bill is causing serious problems. Someone said, ``They will ask for a bank account number.'' With the greatest of respect, they will not ask for a bank account number. This is the RCMP, and specific units will be looking for insider trading and capital frauds. They will not just ask for a bank account number. This bill does not just refer to banks. These specific production orders, in the government's background paper, talk about foreign banks, credit unions, caisses populaires, life insurance companies, trust and loan companies, securities dealers, investment counsellors, foreign exchange dealers and casinos — where all the traders hang out, I presume. This is an expansive definition.
When the government says, ``Look, we will not use this legislation to do anything except prosecute those very serious offences because the provincial regulators can do the rest,'' with great respect, I do not think it will happen.
The Chairman: You are identified in our notes as being from the Canadian Council of Criminal Defence Lawyers. Is there a committee whose findings you are speaking about here, or are those your personal comments?
Mr. Lomer: The Canadian Council of Criminal Defence Lawyers is a council of defence lawyers from across the country. Where there is a provincial organization, a strong, respected organization like the Criminal Lawyers' Association of Ontario, a representative sits on the council. Where there is no organization, as in Nunavut, we have representatives across the country. When the government consults us, we are consulted to give a national voice. I am not speaking on behalf of every person who is a defence counsel across the country, but we represent the country from a national point of view.
The Chairman: As a group, you have addressed this particular bill?
Mr. Trudell: As best we can, but I must go back to the earlier comments. We have not been able to look at this bill in great detail, nor were we consulted on it. We offered to consult, in the early stages, on the corporate criminal liability, but we were not consulted.
Senator Angus: I wish to thank the witnesses for coming here this morning. Clearly, you are in love with this proposed legislation! I take it, Chairman, that this is the right debate that we are having here.
You may not know all the background, but you keep saying that this is a reaction to Enron, and situations like that. It is much more complicated than that. In fact, this bill was tabled in the House of Commons on or about the same day as our report, which called for this type of legislation, was issued. I probably speak for most of the members of the committee — though its composition has changed — when I say that we do not think it goes far enough.
It concerns restoring investor confidence generally in the wake of a big meltdown. I heard you talking about corporate governance as I arrived slightly late this morning. Canada has been trying, not only in the federal forum but also in other fora — legislatures and so on — to find a way to deal with those people who are constantly beating the system. We all agreed unanimously in our report that one of the problems is that there is too much hanky-panky going on and we do not have the tools in legislation to deal with it. Furthermore, what tools we have are not really harsh enough. As Senator Massicotte said, it was not even a crime. It is a joke in Canada. We have had people from the IDA and the self-policing bodies of the securities industries themselves coming here and saying it is a joke. We have to put some teeth into it. The proposed legislation was not a response to our report because it was already in the works, namely, with Bill C-47 in Ontario, and its predecessor, of which it is an amendment. Basically, there is a need for tougher penalties and for deterrence.
I think you will find we are all basically on the same page in this committee on that. I am hearing things like, ``Well, this is much too vague. If you are going to legislate, this is the wrong way to go. It may be unconstitutional.'' That comment gets my attention. If we are to do it, we should get it right.
Do you not agree that it is a legitimate area for the government to legislate in, but in a Canadian way? If you want to talk about tough legislation, the penalties in Sarbanes-Oxley are 20 years. They are much more severe. Elliot Spitzer and the SEC say they still do not have the tools to catch the crooks. This is an effort to give the enforcers an opportunity to do something.
Do you not feel there is a need? I know you are criminal lawyers and you are defence lawyers, and you are defending the accused. Let us assume there will be tougher legislation. Why not this?
Mr. Lomer: When we were invited here, I was certainly aware of the proposed legislation. I looked at the substantive or policy aspects of it as being essentially a fait accompli. It appeared to me that was the direction it was going. There was not a lot that we could say that would influence you, and with some justification. I understand the public policy bases for the reasons and the concerns. However, I came here to try to say, ``Do it right procedurally.'' Do it right with respect to the warrant provision. There is no halfway house of suspicion, as I understand the law. With respect to attempts to get at banking information under the commercial part, you may have problems, even though the government says it is limited. You still have ``suspicion'' being referred to with respect to the general production powers under clause 487.012, as opposed to clause 487.013, which contains the commercial powers.
Clause 487.013 talks about ``assisting in the investigation.'' As I said, there is no halfway house, as I see it. I would be prepared to debate with officials of the Department of Justice as to whether there is one. If there is, it has not evolved. This may be the department's attempt to make it evolve by creating legislation that gets challenged, and eventually either stands or falls.
In response to your question, we understand what is driving this. From a private point of view, I understand that it is not such a bad thing to see insider trading in the criminal law as opposed to just in securities legislation. There is a different perception when it ends up in the Criminal Code, I agree. When you institute a 14-year maximum for frauds, which are, generally speaking, a non-violent crime, you have moved it up to a par with crimes like aggravated assault. Sexual assault is only a 10-year offence.
You have moved it up more than just incrementally; you have cranked it up a notch and I am not sure that it is now in the company of crimes that it should be. You have now moved it to the same level as dangerous driving causing death, which, to my way of thinking, is just another way of saying ``manslaughter.'' That may be where, as a policy, you want to put it. It may be that serious.
If I may just backtrack for a minute, when I was talking about the million dollars as being an aggravating factor, that million dollars will end up being the line between conditional sentences and incarceration at some later stage. That is probably what will happen.
Senator Angus: We will not mind that.
Mr. Lomer: In terms of real aggravating factors, as I commented to Mr. Trudell, a million dollars, if it is the Royal Bank or the Bank of Montreal, is a line item. It may mean a cent or two off the share price. I am not denigrating that. However, if it is a hundred thousand dollars from an individual whose life savings were wiped out, that is a far more serious and aggravating factor to him than the million dollars to the bank.
Senator Angus: I do not want to interrupt your train of thought, but we are all readers of the national newspapers and we finally see it right on the front pages — and it had to be done in the States — a senior executive of one of our major banks, CIBC, being taken off in handcuffs for his role as an individual, albeit as an employee of the bank, in the mutual fund late-trading scandals. That was significant. Whether it is a million dollars or hundreds of millions, it is the device, the scheme, that was perpetrated, and thousands and thousands of widows and orphans who invested in mutual funds — not individually in the equity markets, but in this supposedly safe mutual fund — are wiped out. There is no law in Canada that could have been used to get those people. They had to get them in the States.
Mr. Lomer: I could not agree with you more. That would have been caught under two other aggravating factors, jeopardizing the financial health of the country and the victimization of many individuals.
I am trying to say that the million dollars is just an artificial threshold that may or may not have any application, when you can imagine quite easily cases involving amounts much lower than that that have serious repercussions for the individuals involved, and cases that involve a lot more that do not. As an aggravating factor, it does not have what I would call the policy direction that tells your judiciary what you are thinking. It is an indicia, but it is not that helpful. It almost should be non-mitigating.
Senator Angus: In terms of not doing it right, and accepting that there is a strong appetite here in this town to get some tough laws on the books, I understand there were questions raised yesterday as to the constitutionality. I think one of you raised it. Am I right there? If so, what can we do to fix it so it will not be challenged as being unconstitutional?
Mr. Lomer: The simple thing to do is change ``suspicion'' to ``reasonable grounds to believe.'' That is probably the first and easiest thing. Once you do that, it is bullet proof, because that tracks the language coming out of our Supreme Court.
Senator Angus: I understand there was also a discussion on the whistle-blowing provisions. Again, if you read the national press, this current government has an appetite for pushing this among the list of bills they want to get through quickly before an election. They keep talking about the whistle-blower elements of it as opposed to insider trading. I can see why, in the current context. It would be nice to have an environment where people who know things feel comfortable about blowing the whistle.
Mr. Lomer: Again, I do not disagree, but imagine that you are working in a company where there is a rogue employee who does not have any information but persists in telling the authorities that he does. If you look at the bill as it has been drafted here, if you try to fire him or get rid of him because of his misbehaviour, you are likely to end up being charged. All you have to do to fix that is to say, ``respecting an offence that the employee believes on reasonable grounds has been or is committed.'' In other words, you have some objective lens through which to look at what the employee is saying. If he is really not making sense but just creating havoc for his employer, yes, the employer should be entitled to fire him. If there is real substance to it, it certainly is something the courts litigate all the time. Reasonableness is our meat and potatoes.
Mr. Trudell: Senator, in Sarbanes-Oxley, under retaliation against informants, it has the words ``truthful information.'' That was in the government's working paper. It may be that ``truthful'' was just left out as an oversight, but the word ``truthful'' put in before ``information'' covers it; and Sarbanes-Oxley has obviously covered it to deal with those situations where someone has a vendetta.
Senator Angus: This committee has been to Washington, and we have met Senator Sarbanes and Congressman Oxley. We have some understanding of the law and its legislative history. In a nutshell, as we understand it, they were working long before Enron on developing a good set of rules, regulations and punitive provisions to deal with this type of thing. Suddenly, they had to act more quickly. I assume the executive branch said, ``Look, we have to have something that sends a signal,'' and they may have gone too far. I do not know.
My question is, if we had Sarbanes-Oxley here in front of you, would you have the same criticisms?
Mr. Trudell: You mean would I be criticizing Sarbanes-Oxley?
Senator Angus: As being vague, as being too tough, as being not necessary, as being redundant to the criminal laws of the country and so on.
Mr. Trudell: I think that in the United States, those were some of the criticisms made when Sarbanes-Oxley was introduced, and those criticisms are still being made because some of the provisions of Sarbanes-Oxley are being tested, and they may have gone too far.
You were posing a question to us, ``Do not you think we need teeth,'' and at the risk of being asked to leave —
Senator Angus: No, no.
Mr. Trudell: — I say we do not need it. There was a catalyst in the United States, and this bill on corporate governance was being worked on for a long time by the Department of Justice, but the provincial securities regulators have been doing the same. You talk about someone walking out in handcuffs. As soon as a trader or a person of prominence is charged with a securities offence, and we can talk about names right now, they appear prominently in the press. The securities commission, the regulations and the provinces are getting tough. They have their own teeth. Okay, it is coming. I am not going to be the voice that says we do not need it, but I am the voice that says we do not need it.
Senator Angus: A voice of moderation.
Mr. Trudell: No, no. It has to be looked at very carefully to remove the vagueness, because otherwise, any prosecution under this will never come to fruition. The bill, in my respectful submission, is too vague and does not have the necessary protections.
Senator Angus: Meaning that in your mind, it could go much further than it is intended to go?
Mr. Trudell: I do not think it will be successful because it is too vague. It is too open to interpretation.
Senator Angus: It might not go anywhere in that regard.
Mr. Trudell: We talked about the vague clauses, and I do not know whether you want us to point out some.
Senator Angus: Please.
Mr. Trudell: I have already talked about the sentencing, the aggravating circumstances. It talks in (b) about the offence having the potential to adversely affect the stability of the Canadian economy. What does that mean? That is an aggravating factor. It has to be proved beyond a reasonable doubt in a criminal prosecution. In other words, if you as a prosecutor want to introduce an aggravating circumstance on sentence, you have to prove it beyond a reasonable doubt. How will they prove that?
Under non-mitigating factors, it says that the court shall not consider as mitigating circumstances the offender's skills or status or reputation in the community if those circumstances were relevant to, contributed to or were used in the commission of the offence.
It is very vague; what does it mean? Clause 382.1 states:
(1) A person is guilty of an indictable offence and liable to imprisonment for a term not exceeding ten years who, directly or indirectly, buys or sells a security, knowingly using inside information that they...
What is a ``security''? It is not defined. What is ``inside information''? It is not defined.
Senator Massicotte: It is defined.
Mr. Trudell: It is defined in subclause 382.1(4), which states:
In this section, ``inside information'' means information relating to or affecting the issuer of a security or a security that they have issued, or are about to issue,...
That is vague.
(a) has not been generally disclosed; and
That is vague.
(b) could reasonably be expected to significantly affect the market price or value of a security of the issuer.
That is vague.
Senator Massicotte: It is largely the same definition that the security commissions are using.
Mr. Trudell: The Securities Act has specific examples and definitions. I would suggest that this is open to consideration of whether it could be tightened up and the terms we are talking about defined.
My colleague has mentioned the issue of suspicion. I want to refer you to the use of the word in 487.013 (5), which states:
The order may contain any terms and conditions that the justice or judge considers advisable in the circumstances, ...
What does ``advisable'' mean? There is much room for interpretation, and there are others.
The Chairman: I understand that you could point out many areas to us, but we will continue now with the questioning.
Senator Baker: ``Low expectation of privacy,'' were the words of officials yesterday — information obtained via 487.13 had a low expectation of privacy. I am pretty sure those were the exact words. They did not say a ``reasonable expectation of privacy'' or a ``high expectation of privacy,'' but they said ``a low expectation of privacy.''
I would like to ask you about clause 487.013, which states:
(1) ...the account number of the person named in the order or the name of the person whose account number is specified in the order, the status and type of the account, and the date on which it was opened or closed.
It says, ``the status of the account.'' Would you say, in your experience and knowledge of case law, that the status of a bank account, the name, the number, type of account and the date on which it was opened or closed, would have a low expectation of privacy?
Mr. Lomer: It did not used to but it does now, apparently. It seems that from the point of view of the state participants, all of our financial records are an open book, even though, keep in mind, our filings under the Income Tax Act are still supposed to be guarded with a fairly high degree of privacy. When you combine this material with all the other identifiers, such as driver's licence, date of birth, et cetera, that they are entitled to get out of the file at the bank, you could not have a private bank account anywhere in this country, if this were to pass, because it would only require a police officer to say that he has a suspicion, and therefore, the information is no longer private.
Senator Baker: I understand. The explanation given by the officials was that this information would have a low expectation of privacy. As you know, for a warrant to violate section 8 of the Charter, there would have to be a reasonable expectation of privacy on the information that it is attempting to obtain.
Mr. Lomer: Correct.
Senator Baker: The department's explanation is that this information has as low expectation of privacy and therefore would not violate section 8 of the Charter, as you just claimed it would.
Mr. Lomer: I can think of wiretap cases in which the individuals indicate that they think their phone is being tapped and then the Crown attorney argues, ``They have a low expectation of privacy.'' Eventually, if you tap everybody's phone, nobody will have any expectation of privacy with respect to phone calls. If you allow for interference in your private affairs by the state in this manner, then yes, it is a self-fulfilling prophecy. That is my point.
Senator Baker: Is this clause a violation of section 8 of the Charter, in your opinion?
Mr. Lomer: Yes, it is a violation.
Senator Baker: Would it be saved by section 1 of the Charter?
Mr. Lomer: — ``demonstrably justified in a free and democratic society.'' The problem is that the societies where you see it demonstrably justified are not free and democratic.
Senator Baker: Yes or no.
Mr. Lomer: Section 1 is a tough hurdle for anybody trying to justify legislation. It is not in violation 99 per cent of the time. If it were in violation, the justifications would be very difficult.
Senator Baker: I will ask Mr. Trudell about the case of R. v. Hurrell, 2002. Were you the lawyer? The Court of Appeal of Ontario last year struck down section 117.041 of the Criminal Code. I believe, Mr. Lomer, that you, or somebody related to you, were involved when SIT was struck down 15 years ago.
Mr. Lomer: Constructive murder provisions. I only remember the old numbers.
Senator Baker: It was 15 years ago. You do know what you are talking about when you say ``reasonable grounds to believe,'' Mr. Trudell. You were directly involved in these cases, so I have one last question: This committee is trying to do something and all senators at this table are in support of the intent of the proposed legislation.
Senator Angus: — except that it does not go far enough.
Senator Baker: One second, if I may. We support the proposed legislation. Is one of your major objections that these proposed changes to sections of the code have nothing to do with capital market fraud? For example, section 487.012 could be used for any offence.
Mr. Lomer: That is correct.
Senator Baker: Your objection is that it is not subject-specific? You talked about the federal government and how this is not like the Controlled Drugs and Substances Act, under which you can get a warrant specific to that. This bill has a general application. I ask you the final question: The justice must be satisfied, in the sworn statement, through application, information, oath in writing, reasonable grounds, that an offence is suspected to have been committed. In the information to obtain, a judge can suspect that an offence has been committed and this warrant issued. Do you believe that this clause will be judged to be, or may be, contrary to section 8 of the Charter?
Mr. Lomer: In my view, it certainly is arguable that it is not constitutional because it does not meet the threshold of reasonable belief.
Senator Baker: You will have judges reading that down and substituting ``believe'' for ``suspect.''
Mr. Lomer: Yes, senator, if you are lucky. Otherwise, they may strike it down, because that is not our job. That can happen as well. Reading down is sometimes difficult if it cannot be done in a clear and obvious fashion.
Senator Baker: It was just done one month ago in a case in British Columbia, which we raised yesterday in respect of section 492.2. Justice Halfyard struck down dial number recorder warrants in the British Columbia Supreme Court. Later, he agreed with the defence lawyer to read it down and substitute ``belief'' for ``suspect,'' rather than eliminate the entire section.
Mr. Lomer: That happens, but are the legislators then abdicating the responsibility to pass constitutional legislation and not legislation that is on the cutting edge of prosecutorial benefit?
I ask that question because these are general application warrants that interfere with individuals' right to be left alone, absent an authority believing, on reasonable grounds, that they have committed a criminal offence. If they do not, should we not just say, ``you have the right to be left alone,'' and not keep undermining it or challenging it to see whether the courts will uphold it or not — or read it down to what it should have been in the first place?
The Chairman: I should say that you have touched, at the end, on a point that we grapple with in the Senate — and in both legislatures — that goes far beyond cases of the Criminal Code, where somebody argues, ``Well, we cannot pass this because it may be unconstitutional.''
I think our view collectively, as legislators, is that we pass what we believe should be. If we ran away every time and said, ``What we really want to do is get an opinion from the court'' before we passed a law, we would have reversed our function. We have developed a view as to what is the correct policy response. If, in the course of time, the courts have difficulty with that, then so be it.
If your suggestion is that we should, if we could, get an advisory from the court before we passed it to ensure it was okay, I think that would not be consistent with our responsibility.
Mr. Lomer: I take that as a given. However, I point out that you do have legislation, in the general warrant provision, that has been found to be constitutional, that has passed that test. Why would you not have proposed legislation that is congruent with existing legislation?
Senator Harb: I have two small points. When you were making your remarks, you brought up paragraph 380.1(b), and you were making the point that the offence already affected or had the potential to adversely affect the stability of the Canadian economy. You seemed to have stopped there. I think it is important to read the rest of the clause, because the test is not only ``affecting the economy of Canada''; it is ``or the financial system, or any financial market in Canada, or investor confidence in such a financial market.'' The test is not just the effect on the Canadian economy — there are other elements thereafter. Do you agree with that?
Mr. Trudell: You are absolutely right that it continues. My point was that while the government suggested it will be used sparingly, if you read on, even just in that paragraph, it seems to me it will be used quite a lot.
Senator Harb: If it was ``and,'' then it might be the case. In light of the fact that there is ``or,'' then you have a wider net.
My second point is that you spoke quite a lot about ``suspecting'' and you raised that as a flag. Would you not agree that 487.012(3), which talks about conditions for issuance of an order, clearly states that:
Before making an order, the justice or judge must be satisfied on the basis of an ex parte application containing information on oath in writing, that there are reasonable grounds to believe that
Then you go to (a), which, to a large extent, deals with the notion of ``suspect''; otherwise, you are presuming somebody is guilty before you proceed to prove that.
Mr. Lomer: Senator, with respect, it does not track the language of 487.012, which is the general warrant provision, and which says that the judge must be satisfied by information on oath in writing that there are reasonable grounds to believe that an offence against this or any other act has been committed.
In other words, ``is suspected'' is not in the general warrant provision. The ``is suspected'' is only in this one provision.
Senator Harb: However, this is a by-product of the initial decision made by a judge, because a judge will not turn around and say, ``I have information here coming from a whistle-blower; I do not believe he is coming forward with information.'' Before the information will be considered, that employee will have to make a statement under oath. To that extent, and before you go any further, you have to have a reasonable belief that information is reliable, or ought to be reliable, before you take it to a judge.
I am trying to make the point that this issue came up before — the whole notion of whistle-blowing, whether or not we should have a component of that included in the Criminal Code. The parliamentary committee that dealt with that aspect of the Competition Act decided to include it in the Criminal Code because they felt that by including a penalty — notwithstanding how small it might be — an employer would come to the realization that he or she cannot take measures against an employee for speaking out on what is considered to be illegal in the operation of the business.
It also dealt with the second notion that an employee, at the same time, cannot come forward with information just because he wants to get at his employer; he must make a statement under oath. If you were to review the Competition Act, where this particular element was introduced, I think you would be satisfied that what we have here is not something out of the ordinary. In fact, it is extremely necessary. If it was introduced elsewhere and seemed to be working — and nobody in the community has raised any concerns about it — I believe that aspect of it should work here.
From my perspective as a member of this committee, I think if we were to achieve that component alone, it would be a deterrent. It will not solve the problem, because a crook will commit a crime notwithstanding anything — it does not matter what sort of law you introduce. However, introducing a deterrent will go a little further in restoring some of the confidence that the community so very much needs.
Mr. Lomer: I am not sure I understand exactly; I think there are two different issues.
With respect to the whistle-blowing, the main concern that we are evincing here is with respect to the reasonableness or truthfulness of the material that is being brought forward by the employee. Absent that, you are suggesting — as I understand it — that the oath the employee takes will be a substitution for the reasonableness or truthfulness.
In my submission, you are probably better off, frankly, having an objectively verifiable test as opposed to the fact that an oath was administered. That would be my comment with respect to that.
I am not sure how that relates to your commentary with respect to 487.012, because we are still talking about suspicion of an offence being committed when you have to establish that you have a reasonable belief that there was an offence before you get the warrant.
Senator Harb: That is exactly my point; and that information could have come from an employee who worked for a company, or it could have come from other sources. I gave the example of that information coming from an employee, so I want to hit two birds with one stone and make the case that it came from an employee who worked for a corporation, and who would have to make a statement under oath.
Mr. Lomer: In my view, if you use the words ``or is suspected to have been committed'' in there, you are attenuating the test that has been used, both in the general warrant provisions and as was cited with approval in Hunter v. Southam and many cases since then — that you look at the reasonableness of the official's belief to determine whether or not a warrant should have been issued.
As soon as you start putting in words like ``is suspected to have committed an offence,'' you are not complying with the law, as I understand it, in terms of the execution of search warrants; and every attenuation runs the risk of being a section 8 violation of the Charter. You certainly make it arguable. You then have to ask yourself: Is it that necessary?
The Chairman: If there is nothing further, thank you very much, gentlemen. We appreciate your coming. As you leave, if there is anything that you forgot about, that you wish you had said, get it to our clerk by the end of the day. We always give you that opening.
Mr. Trudell: We are grateful for the opportunity to consult on this bill. If we have been helpful at all with some of the provisions, then that is great.
The Chairman: Thank you. Would someone like to ask questions of Ms. Klineberg or Mr. Wong, who appeared yesterday on this bill?
Mr. Wong, would you comment on what you have heard, and then we can take it from there?
Mr. Normand Wong, Counsel, Criminal Law Policy Section, Department of Justice Canada: I might as well start, since a lot of this discussion surrounded the production orders, clause 487.013 and the lower standard of reasonable grounds to suspect that the information will be helpful in an investigation.
I would have to disagree with my colleague from the Criminal Lawyers' Association of Ontario. Although Hunter v. Southam was the leading case at the time from the Supreme Court 20 years ago, there have been a number of important cases dealing with a person's expectation of privacy that have varied that decision. A sliding scale has developed over the past 20 years. One of the leading cases is Plant. That dealt with hydro records, and the court developed a test that talks about core biographical information. If the information did not contain core biographical information, it did not meet the Hunter v. Southam standard and would not require reasonable grounds to believe. Half a dozen important cases have varied Hunter v. Southam since then.
Also, I think both Mr. Lomer and Mr. Trudell touched upon the standard of reasonable grounds to suspect that a crime has been committed as not being appropriate, and we should look at section 47.01, which is the general warrant scheme in the Criminal Code. When I say ``general,'' I do not mean that that is the one that is usually used. I mean ``general'' in that it is a global provision when no other warrant in the code works. A very high standard has to be met in order to use that because the Parliament has decided that that is the way it should be. If we have not provided for it specifically, then we have to meet this high test if we want to do something different from what is provided for in the code generally.
We likened the standard to a wiretap authorization, which is the absolute highest standard in the Criminal Code.
The production order in subclause .012 mirrors exactly what is in a regular search warrants scheme, which is section 487, and if you read through the provisions of that section, it matches almost word for word what that scheme says.
Those are my comments. If I think of something else, I will jump in after Ms. Klineberg finishes her comments.
The Chairman: Ms. Klineberg, what will you deal with?
Ms. Joanne Klineberg, Counsel, Criminal Law Policy Section, Department of Justice Canada: I will deal with other points.
The Chairman: Are you specific on this point, Senator Baker?
Senator Baker: Yes, I am specific. The witness referred to Plant, and what he has just said about the electricity records is correct. However, I will read one sentence to him from Schreiber v. Canada, 1998, Supreme Court of Canada: ``Banking information, unlike electricity records, does reveal intimate personal details about an individual including financial status...'' Therefore, what we are talking about in Bill C-13 is banking information, the status of a bank account. Would you not agree that whereas you are correct about the electricity records, the expectation of privacy in respect of banking records, according to the Supreme Court of Canada in 1998 in Schreiber, is of a higher order? I realize it is arguable, Mr. Chairman, but I do not think it is correct to say that something has been established in Plant that would affect banking records.
Mr. Wong: Senator Baker, you piqued my curiosity last night, and I did some extra reading on a case called Eddy, the Newfoundland case.
Senator Baker: One phone call to the bank manager, right?
Mr. Wong: Yes. The court held that there was a substantial expectation of privacy on one's individual financial position and the activity in one's bank accounts, including whether financial transactions occurred on a certain day.
This is not what proposed section 487.013 does. When we talk about status, we are not talking about how much money is in the account. ``Status'' indicates whether the account is open or closed.
Senator Baker: Eddy concerned just the bank account number in order to ground a search warrant to get the information from the bank. That is our R v. Eddy.
Mr. Wong: The court had the reasonable expectation of privacy. It is that information, the transactions, and not the information as to whether or not the account existed.
Senator Baker: That is right, but the use of that in grounding the search warrant to get the information, according to the Supreme Court of Canada — Sopinka — is a violation.
Mr. Wong: That is why we need proposed section 487.013, because it is the threshold to get that information, to get the warrant to obtain the information on which you do have an expectation of privacy.
The Chairman: Are there any other questions? I will not invite the witnesses back because we do not have 8 or 10 hours, and that is my minimum estimate of what would be required.
Senator Moore: I have one short question. When we talk about low expectancy or high expectancy, that is in the opinion of whom?
Mr. Wong: Sorry, Senator Moore. I did not catch your question.
Senator Moore: You mentioned yesterday, and today, that there have been questions about low expectancy and high expectancy. In whose estimation would that be?
Mr. Wong: The way we develop laws at the Department of Justice is that we have orders from cabinet on a specific area, as you know. In criminal law we have the prime drafting responsibility, but all laws that are drafted at the Department of Justice are also vetted through our human rights law section. They are the Charter experts. In their estimation, this law meets the standard and has a low Charter risk in terms of being overturned.
That is based on their analysis of all the case law. Because of the case law out there, such as the Plant decision, Wise, Wong, all these other decisions that vary the Hunter-Southam test, this formulation and these provisions are concrete, and the information that we are seeking does in fact have a low expectation of privacy.
Senator Moore: Low expectation in the estimation of the Department of Justice, not the citizen?
Mr. Wong: This is based on case law, too. It is not pulled out of the air, and we say this is what Canadian citizens should agree to. It is what has been developed in the courts over the last 25 years.
Senator Moore: I thought that a Canadian citizen would think that his or her bank account information would be pretty private and not something that would fit into a low-expectancy category. Maybe I am wrong.
Mr. Wong: We are not saying that it does not have an expectation of privacy because it does, but it has a lower expectation of privacy than the actual financial records, your transactions. The fact that you have a bank account at a certain bank has a lower expectation of privacy than all the transactions that occur in that bank account. You can access those transactions through a regular warrant when there are reasonable grounds to believe that a crime has been committed, but to get that information you need the threshold information that will allow you to build your case in order to get that regular warrant.
The Chairman: I am just curious, but every time you write a cheque, you are giving away the fact that you have a bank account, what kind of account it is and where it is, because that is all on the cheque.
Senator Baker: It does not give you the status of the account, though.
The Chairman: No, but they are not seeking the status of the account.
Senator Baker: Oh, yes, it is in the proposed legislation, the status of the account, right?
The Chairman: No. This is what I want to get clear: the information that we all give to the world every time we write a cheque.
Senator Moore: I am giving it to the person to whom I owe the money; I am not giving it to the world.
The Chairman: Your expectation of privacy on that information cannot be too high.
Senator Baker: The status of the account, S-T-A-T-U-S.
Senator Fitzpatrick: What is the definition of ``status''?
Mr. Wong: It is not defined, but ``status'' tends to imply whether it is open or closed. If you write a cheque, the police can assume that you have an open account. It has nothing to do with the amount of money. There is case law out there that says that you need reasonable grounds to believe to get that sort of information — the Eddy case — your financial transactions, the amount of wealth you have.
When you read a bill like this you have to read it in the context of all the other jurisprudence out there. There is case law that says you require reasonable grounds to believe to obtain financial ``status'' as you are referring to it, Senator Baker, that is, your transactions and the amount of money you have, otherwise it has to be read down to say that ``status of the account'' means something other than that. What we intend here is just whether or not the account is open or closed.
The Chairman: Are there other questions?
Senator Baker: In other words, an RCMP officer cannot phone a bank right now and get your account number?
Mr. Wong: Depending on the practices and the relationship with the financial institution, in some jurisdictions they could.
Senator Baker: I understand your answer, because the officials yesterday, who are presumably in a higher position than you, said that you could do that without a warrant, that it is open to everyone.
Mr. Wong: There is other privacy legislation that impacts upon how police run their investigations, and one of them is the Personal Information Protection and Electronic Documents Act, which has put in some stipulations on when private corporations that are federally and provincially regulated can give out information.
Ms. Klineberg: I can deal with some of the vagueness issues raised by the witnesses.
On the insider trading offence, concerns were raised with respect to two terms that were not defined, one being ``security.'' We did contemplate putting in a comprehensive definition of ``security'' along the lines of what was in provincial securities regulations. It was a judgment call, but that was ruled out on the basis that we would end up with a Criminal Code that looked like a securities statute. It would have been a very lengthy definition, quite intricate and complicated, and the view was that the term ``security'' by itself could be interpreted along the lines of what is in securities statutes. Nothing would prevent the court, when it interprets the criminal law, from looking to other applicable statutes to figure out what the term means.
We also believe that there is a definite zone where everyone knows what a security is. There may be a grey area at the borders, but that is also the case under securities regulations, which I think generally have non-exhaustive definitions of ``securities,'' so they will list from A to J what a security is, and then also allow possibly for anything else.
Even if we were to put in a non-exhaustive list along the lines of what is in the provincial regulations, there might still be a grey area that at some point the courts would have to look at. We thought that in this case, it would be simpler to go with the term and let the courts interpret it, as they will.
On the definition of ``insider information,'' as Senator Massicotte pointed out, there is a definition provided right in the offence. It does borrow heavily on the existing insider trading offences in securities statutes. There was no desire to reinvent the wheel. We decided to go with the same concepts that are familiar in these kinds of cases. It is not my understanding that provincial securities statutes do provide examples of what is insider information. I believe that that is something developed by the courts. Our view, in this case, would be that the courts could apply all of that securities jurisprudence to understand more fully the definition of ``inside information'' on each of the separate issues, such as what is generally disclosed, what could be a significant impact on the price of the share and questions such as those.
On the whistle-blower offence, another concern was raised that there is nothing that provides for the allegations to be truthful. I would think that ``truthful'' might be going a little too far, because if an employee does believe in good faith that something has gone on but it happens to not be true, that employee should still deserve the benefit of the protection.
In terms of whether ``reasonable'' should be included, the wording in the offence is that the employee believes an offence has been committed. I would suggest that if you believe an offence has been committed, chances are your belief is going to be based on some reasonable grounds. If it is not based on some reasonable grounds it is still a genuinely held belief, so the wording itself precludes an employee from making something up. That employee does not deserve the protection and does not have the protection under the statute, but the one who believes something has gone on that is unlawful does get the benefit.
The last comment I would make, in terms of the vagueness with respect to the aggravating sentencing factors, I would agree some of these might be difficult to prove, such as whether the offence had a significant impact on the market, but that is not necessarily admitting that no one understands what that concept means. What is intended is fairly clearly understood. If it can be proved or not in a given case will have to be determined, but even if it cannot be proved in a given case, it is not fatal to the proposed legislation.
These are merely indicators that the Crown can argue to try to influence the judge's decision on sentencing. They do not render difficult the prosecution of the offence itself. They are matters that speak to sentencing, and which are after the fact. If there is difficulty related to that, then other aggravating factors can be argued.
Senator Meighen: What about the comment concerning the utility, or the lack thereof, of the million dollars, which struck a chord with me? Where did you get that figure? Why is it not $2 million or $100,000? It really is unnecessary.
Ms. Klineberg: All arbitrary decisions are tough ones.
Senator Meighen: What was the point of putting it in?
Ms. Klineberg: We consulted with law enforcement on that particular issue. We think there is some utility to having a monetary figure there.
It should also be noted that the offence of fraud is split into two categories, under $5,000 and over $5,000. Under $5,000 is a summary conviction offence. Over $5,000 is an indictable offence. The penalties change is already built into the fraud offence, depending on the value of the fraud.
This is sort of another level of fraud. When you get over the next level, it is another indicator to the courts that the sentence should be higher. There is precedent in the code for distinguishing sentences based on value.
Picking that number is another judgment call. We consulted with law enforcement. They thought $1 million was adequate.
Senator Meighen: However, there could be nine people whose life savings of $100,000 could be wiped out and that would not qualify under the million dollars, would it?
Ms. Klineberg: If it defrauds multiple members of the public, and each one loses $10,000, but altogether it is over $1 million, I think that would still fit within the definition.
Senator Meighen: I have nine people, each of whom had savings of $100,000, and they lost it all.
Ms. Klineberg: The other point I would make in terms of these aggravating factors is that it is an indication from Parliament as to what factors are or are not more blameworthy than others. If you are just below the $1-million threshold, it does not in any way prevent the Crown from arguing this was $900,000 and is pretty serious. No argument from the Crown is precluded. No other aggravating factors are precluded from being argued. It is somewhat arbitrary, but these factors are designed for Parliament to send a message to the courts.
Senator Meighen: Could you argue any one of the aggravating factors?
Ms. Klineberg: You can argue any, all, or others that are not codified here. There are a number that are developed in the case law. There are other aggravating factors located in section 718 of the code. Yes, it is definitely a non- exhaustive list.
The Chairman: I am getting the signal from Senator Meighen that he is satisfied.
If there is nothing else, I wish to thank our witnesses. This was helpful.
The committee adjourned.