Proceedings of the Standing Senate Committee on
Legal and Constitutional Affairs
Issue 22 - Evidence for March 3, 2011
OTTAWA, Thursday, March 3, 2011
The Standing Senate Committee on Legal and Constitutional Affairs, to which were referred Bill C-48, An Act to
amend the Criminal Code and to make consequential amendments to the National Defence Act; and Bill C-21, An Act
to amend the Criminal code (sentencing for fraud), met this day at 10:40 a.m. to give consideration to the bills.
Senator Joan Fraser (Chair) in the chair.
The Chair: Colleagues, as you know, this morning's agenda, as agreed upon by the steering committee, calls for us to
begin with clause-by-clause consideration of Bill C-48, An Act to amend the Criminal Code and to make consequential
amendments to the National Defence Act.
Is it agreed that the committee proceed to clause-by-clause consideration of Bill C-48?
Hon. Senators: Agreed.
The Chair: Shall the title stand postponed?
Hon. Senators: Agreed.
The Chair: Shall clause 1, which contains the short title, stand postponed?
Hon. Senators: Agreed.
The Chair: Shall clause 2 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 3 carry?
Hon. Senators: Agreed.
The Chair: It is agreed.
Shall clause 4 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 5 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 6 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 7 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 8 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 9 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 10 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 11 carry?
Hon. Senators: Agreed.
The Chair: It is agreed.
Shall clause 1, which contains the short title, carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall the title carry?
Hon. Senators: Agreed.
The Chair: Shall the bill carry?
Hon. Senators: Agreed.
The Chair: Does the committee wish to consider appending observations to the report?
Hon. Senators: No.
The Chair: Is it agreed that I report this bill to the Senate?
Hon. Senators: Agreed.
The Chair: I shall do that at this afternoon's sitting, at which time Senator Wallace will take the chair of this
As you know, we have a particularly long agenda today. The next element of our proceedings is to continue our
study of Bill C-21, An Act to amend the Criminal Code (sentencing for fraud). Our first witnesses were scheduled to
appear at 11, but I believe they are already here, so we will continue.
We are continuing our study of Bill C-21, An Act to amend the Criminal Code (sentencing for fraud).
As you will remember, yesterday, we heard the statement of the minister, the Honourable Mr. Nicholson. Today we
will hear from expert officials to assist us in our study of the bill. We have, from the Department of Justice Canada,
Ms. Katherine Kane, Director General and Senior General Counsel, Criminal Law Policy Section; and Ms. Joanne
Klineberg, Counsel, Criminal Law Policy Section.
From the Department of Finance, we have Mr. Nicolas Marion, Chief of Capital Markets and International
Affairs, and Joan Monahan, General Counsel, and Kaetlynd McRae, Economist, Securities Policies Division.
Thank you all for being here. As you know, normally, when we have officials, we do not ask for opening statements
unless there is an opening statement that any of you wish to make. Since there is not, we will go first to Senator Poulin.
Senator Poulin: I want to thank Ms. Kane for being here together with her team. I had the pleasure of attending a
meeting at which Ms. Klineberg led the discussion on Bill C-21.
Yesterday I made a speech and was asked questions about this bill to which I did not know the answers. Today I
would like to get the answers that I did not have in the Senate yesterday.
During that meeting, you talked to us about case studies that you had done. Could you summarize the results of
your research into those white collar crime case studies once again?
Joanne Klineberg, Counsel, Criminal Law Policy Section, Department of Justice Canada: Do I have an hour?
Unfortunately, it is not a simple matter to resume. I presume you are speaking about the sentencing.
It is difficult to summarize because there can be any number of differences in the facts involved in a fraud case.
There are cases of fraud in a few hundred thousand dollars and in several hundred thousand dollars and cases of fraud
of a few million dollars and cases of fraud which are over hundreds of millions of dollars.
There are also differences in terms of the level of involvement of the people who are convicted of fraud, whether they
were the mastermind or whether they were an assistant to the fraud. There are also differences in terms of the
motivation for the fraud. In some cases, the fraud is for personal gain. In other cases there is accounting fraud. In the
Livent case, the purpose was to show more money coming into the company so they could put on wonderful theatre
productions. There were no allegations that Mr. Drabinsky personally benefited from the fraud in that case.
There are also differences in terms of whether the people convicted of fraud were in a position of trust relative to the
victims. Not every fraudster is. Someone could come to your house and say they will renovate. They are not in a
position of trust toward you, but they may take the money and disappear without doing renovations.
However, when it comes to people who are allegedly selling securities, they may well be in a position of trust,
depending on their relationship with the person and the level of expertise they say they have.
When you take all those factors into account, and many others, you can see that it is impossible to give a summary
of the sentences.
I can say that, for about the last decade, many courts of appeal have recognized what they call large-scale frauds, in
particular those involving a breach of trust of some kind. For those cases, they say that there ought to be at least a
penitentiary sentence, so at least two years. We do see sentences, when the amounts get higher, of four to seven, or even
much more recently we are seeing cases in the 10- to 12-year range. It will depend on the value of the fraud, the
motivation for the fraud, how long it went on, how many victims there are.
It is really not an easy task to give a summary of what the cases say in general, without explaining that there can be
tremendous variations, depending on the circumstances.
Senator Carignan: My question is for Ms. Klineberg as well and will be similar to that of Senator Poulin. In
sentencing, the court has to identify various aggravating or mitigating factors. It must also identify the statutory
indicators that Parliament has given it in order to consider the severity of the sentence, that is the maximum sentence,
and obviously the minimum sentence, if Parliament felt the need to set one.
Am I wrong in saying that setting a minimum two-year sentence will also send the courts the signal that harsher
sentences will have to be imposed for all these kinds of fraud in view of the fact that the minimum sentence is now two
years? In other words, it cannot just account for the cases by saying, ``In any case, it was already more than two years''.
If a minimum two-year sentence is imposed, cases that normally would receive a sentence of three years will now get
one of perhaps four or five years because the judge will take into account the fact that Parliament has set a minimum of
I do not know whether my question is clear enough. Is what I am saying correct, or are there any distinctions to be
Ms. Klineberg: I am not sure that the courts would look at a minimum sentence that was already below what the
courts would give in the absence of the minimum, and use the minimum as a reason to increase the sentence they
otherwise would have given. I am not sure a court would take that view.
By contrast, when the maximum penalty for fraud was increased from 10 to 14, that is a factor the courts would
consider to say that Parliament stated that this offence, in its most serious form, is now more serious than it was before,
therefore when we sentence anyone for fraud, we will increase the level.
I do not think that with a mandatory minimum it would have the same effect. I think it instructs the courts not to go
below that level. With a sentence, for instance, of 10 years for a very large fraud, I would not imagine the courts would
say that because there is a mandatory minimum of two years I should give 11 years instead of 10.
Senator Carignan: Without going beyond 10 years, it definitely could not go higher than the maximum?
Ms. Klineberg: I do not know. I would not think so.
Senator Runciman: I was wondering if you have any experience with respect to frauds committed against
governments, and if there is a track record of less severe penalties. I am thinking of the case the minister referenced, the
Coffin case in Montreal in the sponsorship scandal, where originally there was a conditional sentence, then the Court
of Appeal upped it to 18 months. I assume the gentleman walked after 6 months. In Manitoba, a Health Canada
bureaucrat was given house arrest for defrauding the federal government of over $1 million.
I am wondering if there is a perception with the courts that this is a victimless crime, and consequently we are seeing
what appear to be lesser sentences meted out to individuals who defraud governments. Of course, it is not victimless, all
taxpayers are the victims.
Ms. Klineberg: I have not seen anything in the case law to suggest that frauds against governments are viewed less
seriously. I should mention, none of those courts have given a monetary threshold for what large-scale fraud means.
You see a variation in terms of the cases that are categorized as large-scale fraud, but some of those cases were frauds
against governments. Some were very large-scale health insurance frauds. The courts, from what I can read in
jurisprudence, do take those cases seriously.
Senator Runciman: The appeal court did. I think you are talking about the Ontario case with the doctor defrauding
Ms. Klineberg: There are others of that nature as well. There may not be victims submitting victim impact
statements of the sort we talked about yesterday, so there might be an absence of additional aggravating factors, where
individuals are the victims of the fraud, but I am not sure that translates into the courts treating these cases less
seriously. I think they handle them on the basis of the evidence before them.
Senator Runciman: Another thing that jumped out in these briefing notes provided to us is that restitution is ordered
in only 16 per cent of fraud cases. Do you have any views with respect to that statistic?
Catherine Kane, Director General and Senior General Counsel, Criminal Law Policy Section, Department of Justice
Canada: Restitution tends to be ordered infrequently in cases in general. You will note in this bill there is an
encouragement for the court to consider restitution. Where it is an appropriate part of the sentence it will be ordered,
but a variety of factors come into play in terms of restitution. The amount must be readily ascertainable, because the
criminal courts cannot become a forum for sorting out disputes about what the actual losses are.
It must be considered to be appropriate as part of the sentence. Often, restitution is not an appropriate part of the
sentence, and that is why it is not ordered and that is why the rates of restitution are low.
Ability to pay is taken into account as well. If there are no resources from which that restitution can be made, it
becomes an order that cannot be satisfied. Courts often take that into consideration, and they will not make the order
We do think that with this bill and because these frauds have a monetary value in most cases, there may be an
increase in restitution ordered as a part of the sentence.
Senator Runciman: Do you have any data on how often restitution orders are followed through?
Ms. Kane: We do have some information as part of our work in the Policy Centre for Victim Issues in terms of
restitution, and we are working diligently with our provincial colleagues to see how efforts can be made to ensure
restitution orders that are imposed are collected.
Some provinces will waive the fees that are attached to filing that order in the civil courts to have it executed. Some
will provide the victim with an information kit about how to go about enforcing the order.
At the end of the day, these things are not easy. If the offender has no assets that can be attached, it is impossible for
the victim to satisfy the restitution order.
Senator Runciman: The minister addressed this yesterday, but there is still some fuzziness surrounding the definition
of ``community'' in ``community impact statement.'' Could you speak to that?
Ms. Kane: Certainly. As senators know, there are already provisions in the code with respect to victim impact
statements. They have been in the code since 1988, and there has been an evolution in terms of the court's acceptance
of victim impact statements. There have been a number of amendments made over the years.
Victim impact statements are the norm. The direct victims of crime, and other victims as defined in the Criminal
Code, have an opportunity to submit a victim impact statement. The court is required to consider that victim impact
statement when sentencing.
There is no obligation on a victim to present a victim impact statement, but, where they want to, they may do so.
The court may also permit them to present it orally.
The community impact statement is meant to complement the victim impact statement and is for people other than
those considered victims. There could be some overlap. It is meant for the other people or communities who are
impacted by the crime. In situations where the victim is not readily identifiable or, for example, in drug cases where a
whole community might be impacted by drug trafficking in their parks, we have seen communities submit victim
impact statements at the sentencing of an offender to show how they have been impacted by reduced property values,
increased risk of crime and so on. That has been the typical use of community impact statements to date. It could be
done by the president of a condominium association or a community association or other such organization.
In this bill, we are contemplating that a spokesperson for whole communities of interest or communities
geographically could submit an impact statement to show how they have been affected by the fraud. For example, in a
small village or town where many members have been victims of fraud such that their savings have been depleted, there
will be an impact on the economy of the town because people living there will not have the resources. There will be
impacts to others.
People in a retirement home who have been victims of fraud, even those who are not direct victims, may suffer a lack
of trust and their standard of life may change if the dynamics of that retirement home community change because some
have to leave and live elsewhere.
A whole variety of communities can be considered to have a role at sentencing. If they have a spokesperson that can
be identified and they can indicate how they have been impacted, a community impact statement can be considered. It
is not a requirement. It is at the discretion of the judge. This provision will make it clear to the judge that there is no
impediment to the judge receiving that information at sentencing. At sentencing, the court has a great deal more
discretion in terms of the information they take into account. This is just one additional type of information.
Senator Runciman: Wide latitude is afforded to the judge in terms of interpreting ``community.''
Ms. Kane: There is quite a bit of latitude both ways. If a judge thinks this will slow down the sentencing proceedings
and will not have the anticipated value or that it will detract or there are competing impact statements, he or she can
narrow the number of statements heard in an effort to move on and get the sentencing done in a fair way.
Senator Joyal: Ms. Kane my first question is about the concept of community, which I had raised yesterday. You
were ready to answer but deferred to this morning. When I read 380.4(1), it seems that if taken literally there is only
one community. I heard your explanation to Senator Runciman that there might be more than one community affected
by the fraud. An offender might have targeted seniors in one scheme and town folk in another scheme. Different
communities might be affected by an offender.
The section seems to concentrate only on ``by a person on a community.'' Would it be possible for the judge to ask
for different spokespersons from the different communities affected?
Ms. Kane: Yes, there is no limit. It says, ``a community,'' not ``the community.'' The word ``a'' signifies that it could
be a range of communities. Practically speaking, the sentencing judge will have some practical limits on the number of
community impact statements that he feels will be of assistance at the sentencing. The judge can limit the number of
statements that he will receive to a representative number, as they do now with victim impact statements. There are
situations in which 32 or 35 victim impact statements are filed. The judge may say, ``I will consider a representative
number to ensure that I have a sense of the impact on the victims.'' It will be much the same in this situation.
Senator Joyal: I still question the interpretation of ``a community.'' I feel that to cover the various groups that might
be affected directly — those who were defrauded — it would be better to say ``by groups of defrauded persons.'' It
could be worded in a much clearer way so that it is not limited to one community per offender. We are talking about $1
million. Normally, offenders who defraud such large amounts have spread their activities among various groups. They
target more vulnerable people. The way that it is worded, a judge might ask how many communities have been affected
and choose to hear from a representative.
The judge may select which group seems to be better organized to speak for the victims.
Ms. Kane: We are confident that the provision as worded would permit the judge to consider more than one
statement from more than one community of interest, if that is the best way to define it.
In your description, you had referred to victims who were defrauded. To clarify, the community impact statement
does not come necessarily from the victims of the particular fraud. It would be from others who are impacted but
perhaps did not lose directly their savings or their money. They were impacted in an indirect way. They were not the
direct victims. Otherwise, they would have no opportunity to bring a victim impact statement. Nonetheless, their sense
of trust has been destroyed or their standard of living has been impacted because they do not have customers anymore
because all their customers have been defrauded; or something of that nature.
In this case, the judge would not identify in advance who he wants to hear from. This is all voluntary. For example,
if a community association wanted to make an impact statement at the sentencing hearing of a notorious offender for
fraud, they would take that initiative on their own to say, ``We have been impacted. We want to have our
representative submit this statement.'' The judge would indicate whether he would accept it. It is discretionary on the
part of the court. This provision will clarify for them that they have the authority to accept those statements where they
see fit to do so.
Senator Joyal: What you say is important. You are widening, although not tremendously but certainly seriously, the
evaluation of the impact not only on the direct victim but also the overall community of people in close contact with
the direct victim. By doing that you are introducing to the Criminal Code, unless I am badly informed, an element of
novelty that is fairly important.
Let us take another example. Someone was killed by a drunk driver. You want to evaluate the impact of the death of
the victim. It might vary a lot depending on whether the person had children or was the caregiver for another person, et
cetera. Many circumstances exist in practical life.
By doing that, by going beyond the frontline victim, you are introducing in the code a very important element. I am
not saying I am against it. In that context, normally, we would have to maintain the same principles or the same
philosophy of compensation with the other section of the code whereby the person might be affected.
Did you think along those lines when you were drafting those clauses?
Ms. Kane: Yes, very much so. I am not sure what you mean by the same type of compensation. There is no element
of compensation involved.
Senator Joyal: No, but it will impact the determination of the sentencing.
Ms. Kane: That is an interesting issue, whether and how victim impact statements and community impact statements
have a bearing on the ultimate sentence.
Victim impact statements, as I have noted, have been in our criminal law since 1988. You will hear various views on
whether or not they do result in a more severe sentence. That is not their intention. Their intention is that victims and
now, in this case, communities, will have an opportunity to describe the harm done or the loss suffered by them as a
result of the crime.
There is also the informative aspect to the court and to the offender so that the offender hears firsthand that it was
not just an offence that was committed in a vacuum without regard to how anyone was affected, that real people have
They have a variety of purposes. We would not say that they are in the code to ensure that there is a harsher
sentence meted out, because so many factors go into the consideration of the appropriate sentence to the particular
offender. This is just one more aspect or one more element of the information that judges will have at hand when they
are balancing all those factors.
The other thing I would note is that community impact statements are being considered by courts now, not routinely
because they are not appropriate in all cases. Courts have shown in some cases an openness to hearing about the
impact on whole communities, however you define communities, of particular crimes. I noted earlier the drug
trafficking situation. Also, a First Nation submitted an impact statement with respect to crimes committed on their
reserve how it affected the whole band. There have been other examples as well.
This is innovative in some respects. It is innovative in terms of putting it right in the Criminal Code so that judges
who might question whether they have the authority to accept that kind of statement will be assured that they do, but
many courts have been open to that for several years now.
You noted the grammatical term ``a community'' in the drafting. When we look at the victim impact statement
provisions, they use the term ``a victim,'' and obviously in many cases there is more than one victim and they all present
victim impact statements.
``A'' is used as opposed to ``the'' because ``the'' is the particular article that indicates there can be only one. The ``a''
signifies that it could be any community.
Senator Wallace: My question is directed to Ms. Kane and Ms. Klineberg. Clause 3 of the bill provides for the
aggravating factors that the court will consider in sentencing. One of those factors is that the magnitude, complexity,
duration or degree of planning of the fraud committed must be significant. The word is ``significant.'' That word
appears as well in another aggravating factor, ``the offence had a significant impact on the victims.''
At law, what does ``significant'' mean? Would that be determined subjectively by the judge or is there, in case law or
in statute law, some criteria for determining what is significant as opposed to something that is less or insignificant?
Ms. Klineberg: We are not aware of any jurisprudence that has interpreted this term in a similar context. I doubt
that it would be purely subjective, according to a victim, for instance. The judge would have to employ his or her
common sense and look at a comparison of whichever the factor is, a comparison of the case before him or her, and
possibly other cases. It would be through comparison and really just the use of common sense that the judge would
come to a determination about whether the level of the element in question was significant or not.
Senator Baker: I imagine that today, in similar circumstances of fraud over $1 million, the range of sentences would
be in excess of the mandatory minimum suggested in this legislation. I imagine it would be in the range of four to seven
years. I imagine restitution orders, as a normal procedure, would be issued by the judge more often than not.
Are there any of these cases where conditional sentences were issued by the court in cases of fraud over $1 million,
or of sentences served in the community, as the Criminal Code says — in other words, house arrest?
Ms. Kane: My colleague will talk about the range of sentences that we are seeing now. There are a number of criteria
for when a conditional sentence can be ordered. A conditional sentence cannot be ordered when there is a mandatory
minimum penalty. If Bill C-48 is passed and enacted, that will make is impossible for a conditional sentence to be
ordered in a fraud case of over $1 million.
In addition, another bill is before the other place that will further restrict the use of conditional sentences and make
it clear that where an offence carries a penalty of over 14 years, which the fraud offence does, there will be no
possibility of a conditional sentence.
There are two law reforms going forward, both of which will foreclose the opportunity for a conditional sentence to
ever be awarded in a large-scale fraud.
We have seen some conditional sentences. One was mentioned yesterday, the Coffin case. The trial court imposed a
conditional sentence initially, I believe. The Court of Appeal turned that into a custodial sentence of 18 months.
There are two other examples that we are aware of where a conditional sentence was ordered for a large fraud. In
one case, the conditional sentence was imposed on an offender who had cooperated and provided evidence against
Senator Baker: You can have a sentence of custody served in the community at home. This is imprisonment we are
talking about in this bill. I am not interested in the range of sentences. I can guess what the range of sentences would be
for over $1 million. It would range, as I said, probably between four and seven years, give or take a year.
Normally these frauds that we are referring to here of over $1 million involve more than one person in the
prosecution. More often than not, the sentences will vary among persons; for example the secretary in the office. I am
sure you get my point. I am not really interested in having won this case here or this case there, because I am sure you
would find a lot of conditional sentences, sentences that do not involve a couple of years in jail.
I am wondering what the prosecutor will do in those cases in the future. You are loading new considerations on the
prosecutor. The prosecutor of the offence is going to have to make a decision.
Is there any direction? What does the department have to say about the intent of this legislation in relation to
persons who would normally not receive the mandatory minimum?
Ms. Kane: I may need you to clarify your question. The intent of the legislation with respect to people who would
not get the mandatory minimum pertains to those who have not been convicted of a fraud with a cumulative value of
over $1 million?
Senator Baker: No, I am talking about people now. When you look at cases that have been adjudged by the courts,
you see people who do not receive the mandatory minimum laid down in this legislation. Is there a direction as to what
the crown prosecutors do? The prosecutors lay a charge, knowing there is a mandatory minimum. The prosecutor at
times has to make a choice.
Is there anything the department has to say or any direction or policy that you have in relation to the crown
prosecutors who have to prosecute, in this case, mandatory minimum?
Ms. Kane: There is no mandatory minimum in the current law.
Senator Baker: There will be.
Ms. Kane: There will be one.
Senator Baker: That is what I am talking about.
Ms. Kane: Obviously amendments made to the law do send a message as to the government's intent, which would be
that these frauds require a starting sentence of two years and up. We do not direct Crown prosecutors in terms of what
submissions they make. They have the range of aggravating and mitigating circumstances set out in what is proposed
in this bill for these fraud cases. There are the principles in section 718 that are taken into account. The Crown sizes up
the case and all the factors that they need to take into account and make their submissions at sentencing accordingly.
As my colleague mentioned earlier, it is difficult to summarize any trends in terms of sentencing because each case is
so different and so many different factors are at play.
Senator Baker: Normally, in each piece of legislation we have seen recently imposing a mandatory minimum
sentence is wording that allows a Crown prosecutor to make a decision on whether or not, for example, to put forward
the person's previous record, such as the most recent ones having to do with impaired driving. There is no such
mechanism in this particular legislation to allow for prosecutorial discretion, is there?
Ms. Kane: If the offence charged is fraud under this provision of the Criminal Code and the person is convicted,
then there is no discretion at that point. The discretion would be what charge they would lay based on the evidence that
the police have gathered for them. If there are other charges they prefer to lay that do not carry mandatory minimum
sentences, they may proceed with those.
I would suggest that if the factors all point in the direction of this being a fraud of a magnitude over $1 million, or a
fraud that fits the elements of the offence, it will be charged under the appropriate offence.
Senator Baker: Today, normally, in cases involving over $1 million, you have two actions that are taking place
normally: A criminal action and a civil action; a civil action on behalf of the victims of the fraud.
Ms. Kane: Perhaps.
Senator Baker: In what way does this bill change the present procedure of having two actions going at the same time
— one civil, one criminal?
Ms. Kane: Not at all.
Senator Baker: In this bill the word used is ``shall.'' The judge shall consider restitution. There is an imposition on
the trial judge here. Would the intent of that be to perhaps relieve certain people of the expense of going forward with a
Ms. Kane: Certainly in any restitution order as part of the civil court, many victims would think that is a one-stop
shopping type approach. However, it may not cover all of the losses they suffered. Therefore, it may not alleviate their
intention or the benefits of a civil action because, as I mentioned, the restitution has to be considered an appropriate
part of the sentence. A victim could have losses of $6 million and the court may choose to order restitution of $900,000.
They may not order the full amount of restitution.
If that victim were also part of a civil action to recuperate the total losses, any amount collected under the criminal
restitution order would not be collected under the civil order for damages. There would not be double recovery.
Senator Baker: Will these cases normally, from now on, be prosecuted by federal prosecutors or provincial
Ms. Kane: If it is an offence committed in Ontario, it would be the Ontario attorney general and their Crown that
would prosecute, in Quebec the Quebec crown. It is the same process as exists for other offences.
Senator Baker: These offences are complicated and laborious to prosecute, as well as time consuming. Now the
government is imposing additional duties on prosecutors in the provinces.
Is there any allocation made to assist the prosecutions in the provinces?
Ms. Kane: Senator, are you referring to the notion of the restitution?
Senator Baker: That is an additional order on the prosecutor, yes.
Ms. Kane: Actually we think these provisions in the code are perhaps assisting prosecutors in their submissions on
sentencing with respect to restitution.
Senator Baker: How is that?
Ms. Kane: It is for a variety of reasons. Right now, the only way a victim can get restitution is if the Crown makes
the application or if the judge makes the order on their own motion. They can only do so when they have the
appropriate evidence before them. Victims and victim advocates have made it clear for years that they would like to
have an independent standing.
That has not happened. They have to rely on the Crown. The Crown prosecutors are very receptive to the concerns
of victims even though the Crown does not represent the victims. I do not think the Crown would assume this was a
burden upon them. They have a checklist in their file of things they need to follow up on, one of which is whether a
victim has been made aware of the victim impact statement. This could be another thing added to their check list. Is the
victim aware of the restitution form that has been provided in the code that they can fill in, which the Crown would
have at hand to say that victim X has suffered losses of $4,000 as well as the documents to support that claim, and they
can be put before the court? The Crown does not have to, at the last minute, try to gather that information. The Crown
can also delegate that responsibility to the victim services that now exist fairly universally in courts across the country,
and in particular for large-scale crimes.
Senator Baker: Or provincial crimes.
Senator Carignan: I would like to go back to the subject we discussed earlier. Ms. Klineberg, do we agree that
imposing a minimum sentence sends the signal that Parliament believes the offence is objectively more serious? Are we
Ms. Klineberg: Generally speaking, that the offence is more serious than in the absence of a mandatory minimum is
a fair assumption. When Parliament enacts a mandatory minimum, the courts would take that to mean that Parliament
is emphasizing its denunciation.
Senator Carignan: So the objective severity of the offence is greater. Do we agree that, when a judge determines a
penalty, the objective severity of the offence is one of the criteria that he or she must consider as an aggravating or
mitigating factor? There are Supreme Court judgments on this question.
Ms. Klineberg: I think mostly the sentence is based on the particular circumstances of the case before the judge. The
nature of the offence, the conduct of the offender, the impact of the offence and so on, are the elements that, generally
speaking, the courts will look to as the most important considerations in determining a fit sentence.
Senator Carignan: But the objectivity of the offence, the severity of the offence is taken into consideration. That is in
the Supreme Court judgment.
Ms. Klineberg: I think it is in the background.
Senator Carignan: I have another point. You also said, in response to Senator Poulin, that the courts had
nevertheless generally imposed sentences greater than two years for similar offences and that, in practice, that was
generally the case. However, do we agree that the courts are not bound by instructions concerning minimum sentences
and that they may impose less than what a court of appeal may have said?
Ms. Klineberg: The cases I have referenced are, generally speaking, Court of Appeal decisions. Those Court of
Appeal decisions are binding on lower courts in the province.
What the courts of appeal say is, for a large-scale fraud, which can be anywhere from $1 million plus or minus a few
hundred thousand, especially where there is an abuse of a position of trust or authority, there must be a penitentiary
However, the courts of appeal would recognize, as would trial courts, that exceptional mitigating circumstances in a
case — for instance, you could have an elderly offender suffering from cancer and has two months to live — would still
have to be taken into account and might, in some circumstance, justify dropping below the range.
The rules that the courts of appeal have established are generally followed by the trial courts.
Senator Carignan: Including a minimum sentence in the act will definitely establish the minimum, and moreover I
would like to cite section 718.3 of the Criminal Code, which states:
Where an enactment prescribes different degrees or kinds of punishment in respect of an offence, the
punishment to be imposed is, subject to the limitations prescribed in the enactment, in the discretion of the court
that convicts the person who commits the offence.
But no sentence is a minimum sentence, unless it is declared as such. That is what Parliament is doing now.
Ms. Klineberg: That is right.
Senator Joyal: What impact will this bill have on the financial markets?
Nicolas Marion, Chief, Capital Markets and International Affairs, Department of Finance Canada: Since we are
talking about Bill C-21, we are currently working with the provinces, the 10 participating provinces, to develop a
system to create a national securities regulatory agency.
The securities market provisions in the proposed Securities Act, which was tabled in Parliament for information
purposes on May 26 of last year, have been included in this bill.
I believe that the benefits of creating incentives to reduce crime, by setting minimum sentences, will definitely
contribute, if you will, to the regulatory framework for securities, and with regard to aggravating circumstances; I
believe this can also contribute to the regulatory framework that applies to the securities market.
Senator Joyal: Does the United States have a market that is relatively integrated with Canada's? Does it have
provisions comparable to those in this bill or are there more restrictive provisions than those in this bill?
Mr. Marion: If we look at the proposed framework of a securities act and compare it with the one that applies in the
United States, it is different, partly because the current system in Canada is slightly different from that in the United
States. What is similar, however, is that the United States has the Securities and Exchange Commission, which has
enough powers, but the fact that it is a national institution in the United States enables them to concentrate the
expertise. It think it enables them to enforce the act better.
In our case, if we look at the provision of an act, that would lead to the creation of a national securities regulatory
agency. That national regulatory agency would definitely have certain benefits that would result from concentrating its
law enforcement expertise. Enforcement resources would be under the same roof.
At the same time, criminal provisions and administrative management provisions in a single text really make it
possible to appreciate and enforce the acts in a standard manner across the country and, at the same time, to strike a
balance on a continuum between the administrative aspect and the criminal aspect.
Senator Joyal: Ms. Kane, in the legislation in the United States are there similar provisions for restitution when the
judge considers the level of sentencing and various factors that would be brought to his or her attention in order to
determine the final decision?
Ms. Kane: In restitution, in general in criminal law, it varies. I am not talking about the federal securities legislation
in the United States, because that is beyond my knowledge. However, in the criminal legislation, which is state to state,
there is a great deal of variation in terms of how the restitution provisions are dealt with. Basically, all state criminal
law has a provision for restitution to be ordered. In some states they have a rigorous criminal enforcement model,
which follows the imposition of restitution.
Restitution is not new to our law; we have had restitution provisions in the Criminal Code since 1953, I think. They
have not been relied on to a great extent for the reasons I mentioned earlier, but they are fairly common in most
Senator Joyal: What would be the strongest provisions in the United States in terms of restitution in comparison
with what we have in this legislation?
Ms. Kane: It is difficult to make comparisons because the American models differ greatly. I am not suggesting that
this is a model that would work at all for Canada, but I am aware of a system in California where they have what they
call ``restitution fines.'' Restitution is imposed and part of the amount of revenue is used to fund the state
compensation regime and the victims are paid from the state compensation regime. However, it is a very different
process. I cannot talk in terms of whether it is stronger.
In Canadian law, it is very difficult to contemplate a criminal enforcement regime for restitution because if the
offender has no ability to pay, they have no ability to pay and no amount of criminal enforcement will change that. It
might cost a great deal to develop some sort of a regime. At the end of the day, those costs would be deducted from the
amount ultimately provided to the victim.
Senator Joyal: There are provincial funds that are supported by all kinds of fines that the government might collect
for the implementation of other statutes. I am not sure if they exist in Ontario, and I am looking to Senator Runciman
to confirm. It is through those funds that the provincial government can compensate some victims when they come to
the conclusion that the restitution option is almost nil because the offender has no means, everything has disappeared
and so on.
Would it not be possible to figure that, in this legislation, such additional capacity would help the victims in a much
more coherent way than what we have had in the past and what we have seen for the victims of people such as Earl
Jones and others recently?
Ms. Kane: The matter of compensating victims is always very important to them. We have to make a distinction
between restitution under the Criminal Code and the compensation programs that exist in some, but not all, provinces.
Some provinces have fairly generous compensation programs, and they are funded from a variety of sources, primarily
general revenue. In some cases, some of the victims' surcharge revenue is used to also fund the provincial compensation
They vary greatly. For example, in Alberta, they have a tariff scheme based on the nature of your injury. An amount
is administered quickly for the victim. There is no large process involved or a tribunal that administers it. In Quebec,
they follow a model similar to the workers compensation scheme. Ontario has a different model with a board and I
understand it is being revamped to address recommendations in a recent review.
Ultimately, the compensation is a notional amount for a victim. It is not a substitute for their total losses or
damages, and it is not from the offender but from the state. Restitution is considered to be part of the sentence, so that
the offender is accountable to the victim for their losses. On the civil side, if you had a civil judgment, it would also be
the particular offender accountable to their particular victim for the amount of the losses.
Again, at the end of the day, state compensation is not based on the model of accountability for the offender; it is
quite separate from the problem you face when trying to get restitution from the offender who may not have the
With respect to whether it would be better for victims to have compensation from the state, victims groups might
well say ``Yes, it is.'' Certainly, victims of violent crime have made that point over and over again, but there is only so
much revenue in any particular province to meet the needs of a wide variety of victims. Therefore, they prioritize. Often
the priority is for victims of violent crime that have incurred pecuniary losses.
Senator Runciman: I can only speak of Ontario, but I think state compensation is totally inadequate and very
bureaucratic. It is a real mess and does not do the job very well.
As a follow-up question to Senator Joyal's comment, would proceeds of crime have any application in a situation of
Ms. Kane: The proceeds of crime provisions in the code can be used where applicable.
Senator Runciman: Have they ever been used for fraud?
Ms. Kane: I would imagine so but am not certain.
Ms. Klineberg: I have not come across reference to it but I was never particularly looking for that. We could do a
review and get back to you.
Senator Runciman: Is mortgage fraud captured by this legislation?
Ms. Klineberg: Yes.
Senator Runciman: I was prompted to ask that question after reading the title of the bill. How do you define ``white-
collar crime''? What does that term capture and exclude?
Ms. Klineberg: It is not a legal term. It is not a term used in the Criminal Code. It does not define any particular
offence. It is more of a commonly-used term in public discourse to refer to crimes that are essentially economic in
nature. However, if you asked 10 people how to define white-collar crime you might get 10 different answers.
Senator Runciman: Robbing a bank is about economic crime.
Ms. Klineberg: That is a good point. Defrauding a bank certainly is a white-collar crime.
The Chair: Are things like stock market manipulation and insider trading covered by this bill?
Ms. Klineberg: No. This bill only addresses the sentencing for the offence of fraud.
The Chair: I can think of a good number of forms of stock market manipulation that would be fraudulent, but you
would have to be charged with fraud.
Ms. Klineberg: In every single case where there is a victim who can be identified and losses that can be measured, a
suspect will be charged with fraud.
The Chair: That brings me back to what was to be my original question, which arose out of Senator Joyal's
discussion of victims: In general discussion, as we deal with these bills, the word ``victim'' just seems to be expanding in
Let us take murder, for example. That is not covered by this bill, of course, but it will make my point. The real
victim is the dead person, or persons, but we commonly now refer to members of the victim's family as victims. Now
we are potentially extending that. I am not sure where the line would actually be drawn between victims for the
purpose of this bill and the community. I can see grey zones appearing.
Are you aware of any cases where there is a discussion of the broadening of the meaning or ambiguity in the
meaning of the word ``victim,'' or has this problem not yet arisen? I suspect it will if it has not.
Ms. Kane: There have been many discussions about the term ``victim'' in different contexts and what it means. We
have a definition in the Criminal Code of ``victim.''
The Chair: ``Victim of an alleged offence'' does not help much.
Ms. Kane: Yet there is a reason for that definition. In the past, we had submissions made that you could not be a
victim unless somebody had been convicted of an offence. If you ask any person who has been impacted or aggrieved
by a crime, they will say it is ridiculous because often no one is arrested, charged or convicted. Even if they are arrested
and charged, you still know you have been assaulted or are a victim of theft. You know you are a victim. That deals
with that particular school of thought.
Another precise definition of who is encompassed by the term ``victim'' pertains to the provisions in the code dealing
with victim impact statements. We make it clear who is encompassed and who can bring a victim impact statement. In
the case of a murder, the victim is deceased, so those who survive are the victims — their dependents, parents, children,
et cetera. In the case of children, the parents can make the statement on behalf of the child.
Similar definitions exist in the Corrections and Conditional Release Act where particular victims have entitlement to
information and opportunities to make submissions to the Parole Board and to get additional information with respect
to the status of an offender's sentence.
We do have definitions, and in those contexts issues sometimes arise about whether they are a victim. The issues are
usually fairly easy to resolve because it basically comes down to how the individual has been harmed. If you suffered
loss or harm, you are a victim. You may not be considered the victim that suffered the most harm or the most loss, but
you have suffered some. These are not difficult issues to resolve in most cases.
The Chair: I will take your word for that, at least for now, and we will see how it unfolds as the years go by.
Ms. Kane: You may want to ask that question of the victim ombudsman who will appear later.
The Chair: Thank you very much. You have helped us a great deal and we are grateful.
The committee is pleased to welcome our next witnesses. From Statistics Canada we have Craig Grimes, Senior
Analyst, Canadian Centre for Justice Statistics; John Turner, Chief of Policing Services, Canadian Centre for Justice
Statistics; and Julie McAuley, Director, Canadian Centre for Justice Statistics.
Julie McAuley, Director, Canadian Centre for Justice Statistics, Statistics Canada: Thank you for the opportunity to
present to the committee on Bill C-21.
Statistics Canada does not take a position on the proposed amendments in the bill. The presentation we have
prepared contains our most recent data on fraud in Canada. All data sources used are clearly indicated on the slides, as
are any pertinent data notes. Distributed for your consideration is an article summarizing the results of a 2008
Statistics Canada survey on fraud against businesses in Canada.
My colleagues, Mr. John Turner and Mr. Craig Grimes, will help in answering any questions. Please turn to the
second slide in the deck.
Using data received from police services across Canada, we can examine trends in police-reported incidents of fraud.
Over the last 10 years, the rate of police-reported incidents of fraud has fluctuated, but has generally been declining
since 2004. In Canada, in 2009, police reported approximately 90,600 incidents of fraud. This represents a slight
decrease from the year prior.
On Slide 3 we can examine the geographical variation in the rates of police-reported incidents of fraud. In 2009, the
highest rates of police-reported fraud were in the Yukon, Alberta, and British Columbia, while the lowest rates were in
While rates are used to ensure that trends are not biased by variations in populations, it is important to note that the
geographical distribution of the number of incidents of these offences in Canada is different from the rates.
In 2009, the highest number of incidents of police-reported fraud was found in Ontario and Quebec.
Fraud in Canada is changing. Each year, new and emerging trends come to the attention of the police. While
Statistics Canada's Uniform Crime Reporting Survey captures eight categories of fraud, we have the ability to record
other types of fraud as well. Slide 4 provides an overview of frauds that were reported to the police in 2009 by
combinations of these eight categories.
In that year, the most common type of fraud reported to police was transaction card and equipment fraud followed
by cheque fraud. In addition to the frauds shown here, a further 45 per cent of total police-reported frauds were not
classified but included, for example, mortgage frauds, frauds related to price fixing, patent infringement and kickbacks.
As shown on Slide 5, in 2009, approximately 32,000 individuals were accused of fraud in Canada. Six in ten of these
individuals were under the age of 35. Regardless of age, in 2009, males were twice as likely to be accused of committing
Slide 6 shows the number of fraud charges and cases completed in adult criminal courts since 2000-01. These include
only cases where fraud was the most serious charge in the case. When examining trends, we see that, while the number
of fraud charges has fluctuated since 2000-01, it has remained relatively stable over the last four years. On the other
hand, the number of fraud cases completed in adult criminal courts in Canada has generally decreased since 2000-01.
In 2008-09, there were approximately 24,400 fraud charges in Canada that were contained in approximately 6,700
court cases where fraud was the most serious offence in the case.
As seen on slide seven, most fraud cases completed in adult criminal courts in Canada are for fraud under $5,000.
This has been a consistent trend since 2000-01. In 2008-09, approximately 60 per cent of all fraud cases completed in
adult criminal courts were for fraud under $5,000, while approximately 20 per cent were for fraud over $5,000. These
proportions have remained relatively stable since 2000-01. The next few slides focus on fraud over $5,000.
Slide eight shows the proportion of guilty findings for cases of fraud over $5,000. In 2008-09, 66 per cent of cases
where the most serious offence in the case was fraud over $5,000 resulted in a finding of guilt. This proportion has
remained relatively stable since 2000-01.
Slide nine shows the differences in the types of sentences imposed for cases of fraud over $5,000. While the
proportion of cases sentenced to custody has increased since 2000-01, it has remained relatively stable over the last
In 2008-09, 28 per cent of guilty cases of fraud over $5,000 were sentenced to custody. The use of conditional
sentencing has varied since 2000-01. In 2008-09 it was the most serious sentence imposed in approximately 34 per cent
of cases involving fraud over $5,000. This is an increase over the previous two years and a return to a level seen in 2000-
01. The use of probation has decreased since 2000-01 and in 2008-09 was the most serious sentence imposed in
approximately 30 per cent of cases involving fraud over $5,000.
Turning to slide 10, approximately 40 per cent of custodial sentences imposed in 2008-09 for guilty cases of fraud
over $5,000 were for less than six months, while 25 per cent were for six to 12 months. In 2008-09, 16 per cent of the 238
guilty cases of fraud over $5,000 involved sentencing to custody for two years or more, which is federal custody,
compared with only 4 per cent of adult guilty cases in general.
Turning to slide 11, in 2008, Statistics Canada conducted a national survey of fraud against businesses which
collected information on the nature of fraud experienced by business establishments in the retail, banking, and health
and property insurance sectors.
Results of the survey found that the majority of retailers in bank establishments who had experienced fraud in the
previous 12 months reported losses between $1 and $20,000. A small proportion of retailers and banks reported losses
between $20,000 and $60,000.
In addition, questions on Internet fraud were included in the 2009 general social survey on victimization. From these
we know that one in ten Internet users was a victim of fraud in the 12 months preceding the survey. A detailed analysis
of these data will be released by summer 2011.
The Chair: One in ten Internet users?
Ms. McAuley: Yes. Furthermore, Statistics Canada has been working with stakeholders to determine the feasibility
of collecting more detailed information on consumer fraud.
This ends my presentation.
The Chair: Before I go to the questioners, on a point of clarification, on the last slide, your note says that these data
exclude establishments for which information was provided by a head office.
Ms. McAuley: Yes.
The Chair: Would it be a reach too far to assume that the biggest frauds would be reported by head offices?
Ms. McAuley: We would not be able to know that directly. I will give you an example. In the cases of the banks, the
way it was reported was that all of the branches reported to the head office and the head office provided a total figure
for that banking establishment. We do not have the breakdown for the head office of the bank versus the other
branches of the bank.
Senator Poulin: Thank you Ms. McAuley for your excellent presentation. I have a question on the research process.
If I understand correctly, you said in your presentation, before going to the tables, that your information sources were
police officers. Did I correctly understand that all the research is based on the results given to you by the police
agencies across the country?
Ms. McAuley: The first set of slides, namely, slides 2, 3, 4 and 5 are data provided to us by the police services across
Canada through the uniformed crime reporting survey. Slides 6 through to slide 11 are data that are provided to us by
the adult criminal courts across Canada.
Senator Poulin: You said in your presentation that that was commercial fraud only. Did I understand correctly?
Ms. McAuley: Slide 11 looks solely at the business establishments and the retail banking and health and property
insurance sectors. The rest of the presentation is fraud, regardless of who it was committed against. It could have been
committed against a person or an establishment. It is police reported fraud for the first set of slides and then any fraud
case that came before the adult criminal courts in Canada.
Senator Poulin: Ms. McAuley, does that mean we do not have any information on the nature of the crime or the
number of victims?
John Turner, Chief of Policing Services, Canadian Centre for Justice Statistics, Statistics Canada: For the police-
reported data, we only have victim information for victims of violent crimes. We do not have victim information for
Ms. McAuley: Through the general social survey, we have the questions that we asked in terms of Internet-based
fraud. We would have that for any of the respondents that answered, which would be any Canadian 15 years of age or
older in Canada.
We are also working right now with partners in the justice community to look at conducting a survey on consumer
fraud. That would get into more details of an individual basis. A feasibility study was done over the last couple of years
by Statistics Canada; the results are available. We are now in a position of seeking funding for that survey.
Senator Poulin: I am going to cheat and ask a final question. The legislation before us deals directly with frauds of
$1 million or more. Do you have any specific data on frauds of $1 million or more?
Ms. McAuley: We do not have that information. There is a new Criminal Code section introduced under this law.
The way it is currently collected in Canada, it is under $5,000 and over $5,000.
The Chair: Will you, in the future, be collecting information on fraud over $1 million? Will this bill enable you to do
Ms. McAuley: If changes are made to the Criminal Code it would allow us to collect that information.
Senator Carignan: I had the same questions as Senator Poulin.
Senator Wallace: One of the elements of the bill involves the possibility of restitution. Do you have statistics that
relate to court-awarded restitution, amounts, frequency and that type of thing?
Craig Grimes, Senior Analyst, Canadian Centre for Justice Statistics, Statistics Canada: It is possible to produce
statistics on restitution sanctions and the amount of restitution. It is not in this presentation, but I could prepare that
for fraud in general or for fraud over $5,000 and provide it to the clerk of the committee, if you would like.
Senator Wallace: That would be helpful. A separate category for fraud over $5,000 would be helpful. The statistics
that you presented are up to and include 2009.
Ms. McAuley: Yes, for any policing data reported in 2009 and for the court data the last reference year we have
available is fiscal 2008-09.
Senator Wallace: I think of the recessionary times we have been through. It seems that the recession has brought a
number of frauds to the surface because of the cash crunch. Probably those incidents more likely would have appeared
through 2010 and forward. You presented up to 2009 but there might be a bit of an iceberg out there because of the
impact of the recession
Ms. McAuley: Our court data for 2009-10 will be available in the coming months. I do not know how long your
study of this bill is. We will have that information in the late spring. The 2010 crime data, which include information on
fraud, will be released in July.
Mr. Grimes: The fraud cases tend to take a long time in criminal court. The average number of days for fraud is 358
from the first appearance to the first final decision with a sanction. That does not take into consideration the time
between the date of the offence and the first appearance in court. If you are looking for frauds that occurred in 2009-
2010, it might be a number of years before those matters clear the court system.
Senator Wallace: Thank you for clarifying. We might see different trends when the experience of 2010 is reviewed
next year and beyond.
Senator Chaput: My question complements that of Senator Poulin because I would like to make sure I understood
correctly. The statistics and figures you have provided give us the number of frauds but not the number of victims of
those frauds. That would mean that, for 50 frauds, there could be 2,000 victims.
We are unable to determine the number of victims. Is that correct?
Ms. McAuley: We do not have information on victims of fraud and the number of victims of fraud. We have only
the number of incidents that came to the attention of the police. We have a counter to track how many times an
individual committed a fraud, although the data are not of the best quality. We would not want to present that at this
Senator Chaput: In your opinion, would it be important to obtain that kind of information? Would there be a good
reason why we should obtain it?
Ms. McAuley: We work with police forces across Canada through the Canadian Association of Chiefs of Police to
determine whether that type of information would need to be added to our national data requirements.
I would not be able to give my personal opinion. I would need to go back and discuss with them whether that
information should be collected.
Senator Chaput: This bills concerns frauds of over $1 million. That kind of fraud may affect and harm a number of
people. Is that not correct?
Ms. McAuley: It may. I would not be able to comment on that because I do not have that data.
Mr. Grimes: On criminal court cases, it is possible to look at each one and count the number of fraud charges within.
If you are interested in fraud cases that have hundreds of victims, presumably each victim would result in a charge
being brought before the courts for those charges. They would be counts of fraud. We can count those counts of fraud
in the cases. I can prepare a distribution that shows fraud cases by the number of fraud charges, if that would help the
The Chair: That might help. Forgive me, Senator Chaput; my attention was caught by table 6 with a consistent huge
gap between the number of fraud charges and the number of cases completed. If the reason is that each case, on
average, includes several charges, then that would explain the statistic that between three and four times as many
charges are laid than cases are completed. Do I understand correctly?
Ms. McAuley: We have shown cases where fraud was the most serious charge in the case. Other cases might be going
before the courts where a fraud charge is included in the offence make-up; however, it is not the most serious offence.
We wanted to show cases where fraud was the most serious offence so that you would be able to look at the
sentencing information for those types of cases. We could provide you with information on case composition where
fraud is one of a number of offences or charges included in the case composition.
The Chair: At first glance, one might say: Oh, dear; is this table showing me that only one quarter to one third of the
charges result in convictions or even completed cases, one way or the other? I understand that is not what this chart
shows me. This chart shows me that there may be, among other things, many cases where more than one charge of
fraud is brought.
Mr. Grimes: That is correct.
Ms. McAuley: Yes.
The Chair: That is a relief.
Senator Poulin: Ms. McAuley, have any studies been done on recidivism? In other words, let us take the example of
an individual who commits a fraud of under $5,000, but who, in subsequent years, tests those successful results.
Ms. McAuley: Statistics Canada has not conducted that kind of research. Currently, it is not possible for us to track
an offender's path through the criminal justice system and their ability to repeat an offence after they have been
released from custody or after they have come in contact with the police for a previous offence.
Senator Wallace: As you were speaking, I was thinking of the statistics you presented. One of the overriding
purposes of the bill is to try to circumvent the reoffending of those who commit fraud. Clause 4 of the bill provides that
the court, as you are aware, can make an order that would prohibit the offender from seeking employment or being in
a situation of handling property and money in the future. The idea is to the get those offenders away from the
opportunity to reoffend in those types of crimes.
Do you have any statistics that reflect the numbers of offenders who have been convicted of fraud and reoffended
Ms. McAuley: We do not have that information. We can look only at unique incidents that come to the attention of
the police. We would not be able to go back and look at an offender's history.
It would be possible if there were significant funds available. The issue is around creating a unique identifier for each
individual that comes in contact with the police and carrying that identifier through from policing to the courts to the
corrections sectors in Canada.
Senator Wallace: It might be something to think about, not only in terms of this bill. You have been before us many
times before. The issue of reoffending is a critical one. A number of the bills are directed towards it. Please give thought
to making those inquiries of courts or police officials. That information could be helpful to us in regard to a number of
Ms. McAuley: We have spent a number of years working with stakeholders in the justice sector to find sufficient
funding to do that. Unfortunately, to date, we have not succeeded in finding funding.
Senator Raine: Am I to understand that one in ten Internet users is a victim of fraud? Nearly one hundred per cent
of Canadians use the Internet.
Ms. McAuley: According to statements made by general social survey respondents to the 2009 survey on
victimization, one in ten of the 22.8 million Canadians who use the Internet were victims of some form of Internet
fraud in the 12 months preceding the survey. Four per cent were victims of bank fraud and 7 per cent were frauded
while making a purchase on-line. This latter value represents 14 per cent of Internet users who have made an on-line
purchase in the 12 months preceding.
The data are publicly available. However, we have not had sufficient time to thoroughly analyze them. We are
working on the Juristat now.
Senator Raine: We identify criminals by name when they are charged and convicted. Would we have their social
security number? Could there be tracking in the criminal system by social security number? That has come up in other
areas where reference checks have to be done. If a criminal changes their name, you can no longer track them. They are
allowed to change their name; that is a provincial jurisdiction. However, social insurance numbers are federal. Could
we not do some tracking that way?
Ms. McAuley: There would have to be discussions with the Office of the Privacy Commissioner to see if that would
Mr. Grimes: We work with stakeholders. On the criminal court survey, we collect things like the fingerprint number,
when it is available. We are trying to collect better personal identifiers to improve our linking and identification of
individuals over time. What we are talking about is identifying people over time and having an accurate link to identify
these people. A driver's licence number is an option, as is the fingerprint number, when it is available. The name, if it is
available, can be collected through the privacy commissioner within a province.
We are collecting all of these things in order to improve those linkages of records and produce statistics on prior
conviction history and prior contact with not only the courts, but policing and corrections.
Senator Raine: Are you looking at social insurance numbers as one of those links?
Ms. McAuley: Social insurance numbers are not collected on police reported information. We would need to find a
unique identifier in order for us to link through from policing, courts and corrections.
The police use various elements of the individual's person, such as things around their name and date of birth for
their own policing records. However, there is no consistency across policing courts and corrections in Canada in order
to be able to track someone, their criminal history and their repeat offending.
In the discussions that we have been having with stakeholders, we have looked at different kinds of indicators that
we could use in order to do that form of tracking.
There have been many studies done on this within jurisdictions and there have been preliminary studies done by
Statistics Canada. However, to date, there is insufficient funding for us to do it.
Senator Raine: A convicted child abuser or sexual abuser of a child can change their name. This necessitates that
everyone who wants to coach young kids must get their fingerprints done to prove they are not that person, especially
if they happen to have the bad luck to have the criminal change his name to their name.
Ms. McAuley: The discussions about social insurance numbers in terms of the police records is a conversation that
would be useful to have with the Canadian Association of Chiefs of Police or representatives from the police forces. We
are not in a position to comment about its possible inclusion.
Senator Runciman: The information given to us indicates that restitution is ordered in only 16 per cent of fraud
cases. I am not sure if that is data from Statistics Canada. If it is, have you collected data on how often restitution
orders are followed through on?
Mr. Grimes: It is not possible to identify whether or not there has been either priority to restitution or the restitution
has actually been paid to the victim. However, it is possible to identify the number of restitution orders.
Senator Runciman: Did this data come from some other source?
Mr. Grimes: I can look into that number to see whether or not it is the same as the data we have.
Senator Runciman: It is an important part of this legislation as well.
Mr. Grimes: I will provide data on restitution back to the clerk of the committee.
The Chair: We are continuing our study of Bill C-21, An Act to amend the Criminal Code (sentencing for fraud).
We are fortunate to have with us for this section of our proceedings, witnesses from the police. From the Royal
Canadian Mounted Police, we have Assistant Commissioner Stephen White, Director General, Financial Crime;
Superintendent Stephen Foster, Director, Commercial Crime Branch; and Superintendent Dean Buzza, Director,
Integrated Market Enforcement Branch. From the Ontario Provincial Police, we have Deputy Commissioner Scott
Tod, Investigations and Organized Crime.
You bring a mighty powerful lot of expertise to our proceedings.
Assistant Commissioner Stephen White, Director General, Financial Crime, Royal Canadian Mounted Police: Thank
you for inviting the RCMP to participate in today's proceedings. I am pleased to have this opportunity to speak about
financial crime in Canada and the Royal Canadian Mounted Police's efforts to address it.
Let me begin by telling you something I suspect you already know: Financial crime has become a very serious
problem. A 2008 EKOS survey indicated that Canadians ranked financial crimes as their number one concern, even
more troubling than terrorism, organized crime and gang violence.
A recent study by McMaster University estimated that in 2008, 1.7 million Canadian victims of identity theft spent
20 million hours and $150 million clearing their names. The McMaster study also indicated that only 19 per cent of
identity frauds were ever reported to the police or to credit agencies.
Since the vast majority, roughly 81 per cent, of all identity frauds go unreported, the actual losses are probably
Financial crimes have become so serious that we must stop minimizing their impact by referring to them as white
collar crimes. Financial crimes are both local and global in natural and they come in many different forms. We deal
with mass marketing and payment card frauds, identity theft and identity fraud, capital market frauds, Ponzi schemes,
insider trading and money laundering.
Whether local or global, financial crime has a devastating impact on individuals, businesses, communities,
economies and international reputations.
When businesses and individuals are victimized, we see an increase in personal and corporate bankruptcies. With the
loss of investments, homes and life savings, the social damage can be severe and can undermine the trust people have in
Many financial crimes are complex and difficult to expose. They are time-consuming and labour-intensive to
investigate and prosecute. We have seen investigations that have consumed tens of thousands of person hours, involved
millions of documents and incurred millions of dollars in forensic accounting costs. Our ability to carry out this work is
strengthened by our partnerships with regulatory and other law enforcement agencies within Canada and
internationally. Our efforts to combat financial crime reside in the RCMP's financial crime programs, which include
the Commercial Crime Program, the Integrated Proceeds of Crime Program, and Anti-Money Laundering Program,
and the Integrated Market Enforcement Team Program. Each of these programs began as an initiative meant to
address emerging demands.
The Commercial Crime Branch was established in the mid-1960s to address concerns about securities and
bankruptcies. The present-day mission of the Commercial Crime Program is to detect and prevent threats to the
Canadian economy and to help ensure the integrity of Canadian institutions. There are now 26 commercial crime units
strategically located across the country. Investigators deal primarily with frauds, offences against the Government of
Canada, the corruption of public officials, the insolvency process, and bank note counterfeiting.
The Integrated Proceeds of Crime Program was launched in the mid-1990s with the objective of using a
collaborative team approach to eliminate the financial incentive from criminal activities. When you get rid of profit,
you get rid of the incentive to commit profit-driven crimes. Therefore, the main objective of the Integrated Proceeds of
Crime Program is to identify, restrain and confiscate illicit and unreported wealth accumulated through criminal
activities. Across the country the RCMP operates in partnership with other law enforcement and government agencies
in 13 Integrated Proceeds of Crime units.
The mandate of the RCMP's Anti-Money Laundering Program is to implement specific measures that will help
detect and deter money-laundering and to facilitate investigation of money-laundering activities. The RCMP's Anti-
Money Laundering Program participates in the exchange of information between initiative partners such as
FINTRAC and the Canada Border Services Agency. It also provides an investigative assessment of money-laundering
intelligence and monitors national and international money-laundering trends.
In 2003, the Integrated Market Enforcement Teams, or IMETs, were established in Toronto, Montreal, Vancouver
and Calgary. The teams are made up of RCMP investigators, Public Prosecution Service of Canada legal advisers,
forensic accountants and in some locations representatives of securities regulators and local law enforcement agencies.
The IMETs investigate serious Criminal Code capital market fraud offences that threaten investor confidence or
economic stability in Canada.
Over the past decade, the significant growth of technology and the widespread use of computers have led to great
advances in research and global communications, but they have also opened the flood gates for enterprising criminals.
Technology has had a significant impact on the manner in which economic crimes are committed and the challenges
faced by investigators. The RCMP's ongoing fight against financial crime is an excellent example of our ability to
adapt to a changing criminal element. Our financial crime programs contribute to Canada's economic integrity by
protecting the financial systems that are the backbone of our economy.
Before I conclude my opening remarks, I feel it is important to point out that the RCMP works closely with many
other justice system participants to combat financial crime in Canada. Enforcement of the Criminal Code's fraud-
related provisions, including enforcement related to capital market fraud, is a mandate that the RCMP shares with
every other police service in the country. The RCMP and other police services work closely with each other and with
provincial and federal Crown prosecutors to bring financial criminals before the courts.
We look forward the answering your questions.
Deputy Commissioner Scott Tod, Investigations and Organized Crime, Ontario Provincial Police: Distinguished
members of the Senate, I was pleased to accept your invitation to be here today representing the Ontario Provincial
Police. Commissioner Chris Lewis and senior command of the Ontario Provincial Police support the provisions within
Bill C-21. I find it most appropriate that I am making this presentation in support of this legislation concerning the
crime of fraud during the month of March. March is Fraud Prevention Month. Fraud prevention is an annual
educational awareness campaign held in Canada and around the world. The Fraud Prevention Month slogan is ``fraud,
recognize it, report it and stop it.''
The OPP senior command is also pleased that this bill supports our law enforcement partners and the victims of
crime across Canada. As I am sure you know and have heard from other participants here, fraud is a serious problem
within Canada. As a long-serving member of the OPP, I have firsthand experience of more than 10 years of criminal
investigation of serious fraud and I understand its damaging effects on the citizens and businesses of our country. A
single serious fraud can cause a ripple effect that erodes the trust in the Canadian economy and negatively affects our
According to banking and assurance groups, fraud incurs total financial losses well over the billion dollar mark each
year. The real cost is probably several times that amount since fraud often goes unreported and the total dollar value is
difficult to calculate accurately.
Fraud also contributes to overall social problems and disorganization within Canadian society. Despite the drastic
financial cost and the social consequences, fraud continues to be an offence that generates less public concern than
others crimes. Victims often feel embarrassed and shamed as a result of being a victim of fraud, and businesses often
underreport or fail to report to avoid damage of brand or reputation of the business and its leaders.
Unfortunately, reports of violent crime overshadow white collar crime. White collar crime is fraud that is
perpetrated at the most extreme levels in society. There can be no mistake that the crime of fraud hurts hundreds of
thousands of people across this country every year. Mass marketing fraud, identity fraud, stock market fraud, real
estate fraud, mortgage fraud, health fraud and fraud against governments are some of the forms of this crime where
criminals prey upon society's most vulnerable people and business systems that are built upon trust. Fraud can destroy
in trust honest relationships that our economy and financial markets are built upon. Whether it is a senior citizen
bilked out of his or her life savings or a young couple stripped of their assets and starting over, the harm of fraud is real
As a police officer with a background of investigating the crime of fraud, I can tell you that the proposed changes
within Bill C-21 will be welcomed by police and investigators. Our neighbours to the south, the United States, have had
federal sentencing guidelines for fraud-type offences for some time. The guidelines created by the United States
Sentencing Commission are used to determine the level of sentencing by association with the seriousness of the offence,
the quantum of the victim losses, the number of persons victimized, the perpetrator's criminal history and other keys
issues. The sophistication of the crime and the related violence are also considered in sentencing for fraud in the United
The U.S. guidelines even allow for the reduction of the sentence of conviction if the perpetrator cooperates in a
further investigation. As a police officer and an executive, I am pleased to see Canada moving in this direction with Bill
White collar crimes like fraud are not crimes of passion. White collar criminals assess the risk of capture and
punishment and then make their decisions to commit criminal offences. The imposition of minimum sentences for two
years for frauds involving victimization losses over $1 million will be an effective deterrent. Giving judges the latitude
to delay parole eligibility will add to that deterrent.
This will complete the five steps of effective law enforcement, which are investigate, apprehend, prosecute, punish
appropriately, and rehabilitate.
The OPP is supportive of expanding the list of aggravating factors to consider on sentencing of fraud. Modernizing
laws in regard to changing values, trends and needs of a Canadian society is important in providing better public safety
and security to the residents and visitors of this country. The destruction of records often hinders many fraud
investigators. They will be pleased that this will become an aggravating factor in the sentencing of criminals who have
We are pleased that victims will be able to make victim impact statements and seek restitution orders. Fraud
investigators quickly learn about the horrendous effects this crime can have on victims. Restitution can be a
complicated process that is emotional, especially if there are multiple victims, so I understand why this bill gives the
courts considerable discretion on the restitution of fraud. However, some restitution orders can be accomplished by the
criminal courts after Bill C-21 is passed that will be superior to the uncertain lengthy process required by civil actions.
In short, the OPP is supportive of Bill C-21 and urges the Senate to pass it, after you have done your proper due
diligence. The OPP has no specific recommendations to make in regards to Bill C-21 at this time. I would be pleased to
answer any questions you may have.
Senator Poulin: First of all, I would like to thank you for your excellent presentation. I entirely agree with your
premise that fraud is a very serious act due to the impact it has on victims, both individuals and institutions.
You talked about the increase in fraud in recent years. Before your appearance, we heard from a group from
Statistics Canada. I was surprised to hear them tell us that, since 1999 — and I have the table here before me — there
has not been an increase in fraud, contrary to what I had thought.
But their first table, on page 2 of their presentation, shows that there has been no increase. What are your comments
on that subject?
The Chair: We will get a copy of the StatsCan material for you.
Mr. White: My assessment of the level of fraud is largely based on fraud that we anticipate or assess has not been
reported. The statistics in this presentation are based on reported frauds by police.
As I mentioned in my opening statements, in the study that McMaster University did, their approximation is that,
with regard to identity theft and identity fraud, approximately 81 per cent of that activity is not reported to police, and
therefore we would not be reporting it under StatsCan. Our overall picture is based on what is reported but also our
estimates of what we anticipate is not being reported.
Senator Poulin: What are the sources of information, for a university researcher, for example, if these frauds are not
Mr. White: They are doing it based on surveys. They do a survey, and they ask people if they have or have not
reported it. If their finding was that only 19 per cent is reporting, basically they are correlating, and the finding would
be that there is a lot of fraud that is not being reported to anyone — to police or to any other agency.
Senator Poulin: Based on your experience, what might be the reasons for not reporting a fraud?
Mr. White: There are a number of reasons. Many people are embarrassed, especially with regard to the multitude of
mass marketing type frauds you got previously through telemarketing and now through on-line frauds. People are
embarrassed that they have actually been defrauded into participating in an activity. Some people may worry that,
because they participated, they themselves may be, in some regard, involved in a fraudulent activity, and they make a
decision not to report it.
I will ask Superintendent Foster if he would like to add to this.
Superintendent Stephen Foster, Director, Commercial Crime Branch, Royal Canadian Mounted Police: I might be able
to contribute something in respect to the actual victimization. It might be a feeling of helplessness on the part of the
victims and also that the police will not be able to do anything in terms of taking action. However, we do work with
numbers of complaints where we consolidate the information and eventually do investigate those things that are most
serious. In part, it is the victims, as Assistant Commissioner White said, who think, ``I will be embarrassed or look like
I was easily taken and not look very intelligent, and what will the police do to help me?'' They largely go unreported, as
the researchers have found.
Superintendent Dean Buzza, Director Integrated Market Enforcement Branch, Royal Canadian Mounted Police:
Another relatively new thing we are seeing is that some people are being counselled not to report it to the police for fear
of not being able to get their lost money back. They will go to see either a financial adviser or perhaps a lawyer, who in
turn will tell them to not report this because, if they do, it will be much more difficult for them to take any type of
action in order to get your lost wages back.
Senator Runciman: I am wondering about jurisdictional responsibilities here. How does it work with respect to the
RCMP and the OPP if there is an allegation of fraud? Do you investigate certain levels of fraud, or is it only in areas
where the RCMP provides provincial policing? What is the breakdown in terms of responsibilities between the various
Mr. White: The local police have primacy jurisdiction with regard to investigating fraud. In many provinces, the
RCMP are the provincial and municipal police, and as the local police service of jurisdiction, we would have the
primary mandate. In Ontario, for example, it would fall to, for the most part, municipal police, Toronto police,
Ontario Provincial Police. Our role in those jurisdictions is at the federal level in terms of bankruptcy-type
investigations. We also work closely with municipal and provincial police like the OPP in terms of doing a number of
large-scale fraud investigations.
Senator Runciman: Regulators have the ability to conduct investigations. The OSC, for example, can lay charges as
well. They have their own forensic audit folks. At what stage would they call in the OPP?
Mr. Tod: The OSC does have the ability to lay charges both within the legislation that guides the OSC and also the
Criminal Code. I will not speak on behalf of the RCMP, but the integrated market enforcement teams work closely
with the Ontario securities regulators in the province of Ontario. Mr. White would best be able to answer that question
as far as charges within Ontario from a stock market enforcement opportunity.
Mr. White: In Ontario, we work closely with the Ontario Securities Commission. We do a lot of good work together.
In terms of investigations, we have a consultative group. We will get together and look at particular investigations, and
a determination is made whether it is a type of investigation that is more appropriate to be done by the securities
commission or whether it is a criminal investigation to be done by the integrated market enforcement teams.
Senator Runciman: You referenced proceeds of crime in your opening remarks. We have been talking to previous
witnesses about the utilization of proceeds of crime in relation to restitution. I assume restitution would be directed
towards the victims. Can proceeds of crime be utilized in that way as well?
Mr. White: There are two regimes. There is a criminal regime for forfeiture of proceeds of crime. There is also a civil
regime. Under the criminal regime, which basically oversees the integrated proceeds of crime units we have, they work
for criminal forfeiture. When they proceed with criminal forfeiture, anything that is forfeited is forfeited to the
Government of Canada.
That is not to say that consideration cannot be given for some sort of mechanism to allow some proceeds of crimes
to be shared with identified victims. That is an issue that would need to be reviewed.
Senator Runciman: Do you have any experience with respect to restitution orders? We had evidence that in only 16
per cent of the cases are restitution orders applied. I have a suspicion that they are rarely followed through on. Do you
have any experience in that regard?
You do not have to comment on that.
Mr. Foster: I have some personal experience related to restitution as opposed to statistical information.
I have seen a situation where, through whatever checklists people are following, it got missed in terms of
consideration. I have seen where, say, individuals who were ordered to pay restitution went off to commit further
offences in order to make their restitution payments. I have also seen restitution ordered when it would be impossible
for the individual to ever fully pay off the restitution. I am thinking of a $400,000 restitution order and the individual
reforms and takes up employment in a fast food restaurant.
Senator Runciman: I have another question to do with Internet crime and the challenges there. I had a personal
experience and I can understand the unreported crime aspect. I got an email saying there was a problem with my Visa
card and that we will have to stop utilization of this card by noon hour tomorrow if we do not get certain information.
It was very well done. It was looking for the data of your mother's maiden name and so on. I was tempted, I admit, to
react to it. Then I had a second thought and called my bank. They put me on to another number. They indicated to me
that nothing would ever happen. They were not going to contact the police. About a month later, I had the same email
come through to me.
I know this is a challenge. It seems it is not only with individuals but institutions as well that do not report some of
these crimes. That is the impression I have. I do not know if you want to respond or not.
Mr. White: In terms of the ``non-statistics'' we talk about, that is a good example. We are seeing emerging trends
almost on a daily basis with regard to different types of Internet perpetrated fraudulent activity. The volume is
significant and, just to emphasize again, a lot of it is not being reported for a variety of reasons. I would just like to
echo what you just highlighted: It is happening.
If I may just jump back for a second to the proceeds of crime; I did not mention the civil forfeiture regime, which is a
provincial regime. Most provinces now have civil forfeiture regimes in place. If for whatever reason a criminal
investigation under the proceeds of crime units cannot proceed or it has been decided not to prosecute because we are
missing a piece of evidence — there are a variety of reasons — we do refer those cases to the provincial civil forfeiture
regime. They can proceed civilly. The threshold for evidence is lower in the civil regime. I would think in some
provinces there probably are mechanisms under the civil forfeiture regime for sharing proceeds of crime with victims of
Senator Carignan: I would like to say that I have also been a victim of credit card fraud. I am among the 81 per cent
of people who would technically turn up in a victimization survey but who would not be identified in the statistics.
I would like to add a comment further to the response you gave us on the reasons why people do not report fraud.
Fraud is often committed by a family member. That is why people want to avoid reporting it.
There is also the example of insurance. People do not want their insurance premiums to increase, and when a small
amount of money is involved, they prefer not to report the fraud. I previously conducted a victimization survey in my
city when I was mayor and the results were the same.
The OPP gave us enough details on the benefits of the deterrent effect on criminals. However, I would like you, as
representatives of two police services, to tell us about the impact of the bill on police. What tools does the bill provide
for police services? Lastly, what is the RCMP's perception of the bill's impact on criminals and victims?
Mr. White: I will go briefly through each question.
There are no direct tools in the bill for policing. The positive thing about this piece of legislation for policing is it has
a tool that can potentially act as a deterrent. That is the minimum mandatory of two years for fraudulent activity over
$1 million. From a policing perspective, any potential tool or enhancement, however big or small, that can act
potentially as a deterrent is positive and can contribute to policing. If it is a deterrent, there are potentially fewer people
To what extent will it be a deterrent? The minimum mandatory sentence of two years will be a deterrent for some
individuals. For other individuals, such as organized crime groups that are involved in large-scale fraud, their only
concern is whether or not they get caught. Any type of sentence is secondary.
In terms of victims, there are some enhancements in terms of funds for restitution to victims. Anything that can
enhance that process or potential is very positive. There is a potential for the enhancement of community victim impact
statements. That is an important component of the legislation. It is a component that should be included and assessed
when sentencing is under consideration. Those key points all have their individual benefits and positive features.
Mr. Tod: I agree with Assistant Commissioner White's comments. The legislation offers no direct tools in regard to
law enforcement assistance. However, in dealing with victims of fraud and the suffering they go through, and the
process in regard to investigation, subsequent trial and sentencing, I see this as offering an opportunity for us to
provide some comfort; what little comfort we can to the victims.
Provisions are in place during restitution and sentencing opportunities that allow for certain crimes to carry a
Senator Boisvenu: Thank you, gentlemen. Your presentations were very clear. When we examine a bill, we have to
have a forward-looking perspective in order to prevent the legislation from being drafted again in two, three or four
How would you describe criminal developments in this area? For sexual predators, the Internet has become the tool
that sexual predators have used in recent years. When I look at the tables on types of crime, I would have thought the
rates concerning securities and financial instruments would have been higher than seven per cent, given the Earl Jones
and Vincent Lacroix incidents. Furthermore, when I look at the number of charges relative to cases, we go from
approximately one-third in 2000 to one-quarter. So there are now fewer charges than there were 10 years ago.
Will this bill, as drafted, address developments in crime in this area in three, four or five years?
Mr. White: I do not see the legislation having an impact on future emerging trends of criminal activity related to
financial crime. The minimum mandatory sentence of two years is indirectly related.
Looking at the statistics, a number of the cases with regard to cheque, transaction or credit and debit card fraud are
over $1 million. To what extent will the minimum mandatory sentence of two years be a deterrent to individuals
involved in these types of criminal activities? I cannot give a definitive answer on what the deterrent will be.
In terms of overall criminal activity in the financial crime area, we see a lot of that migrating to the cyber world.
Much of the debit card and credit card fraud has migrated to the cyber world, which is facilitated by computers and the
The mass marketing fraud is very low. However, a lot of the mass marketing fraud activity is also covered under the
fraudulent cheque activity as well. A lot of fraudulent cheques are related to mass marketing fraud.
Will we need new legislation down the road to assist law enforcement with the broader scope of migration of
financial crime activity to the Internet and to the cyber world? I would think so. There are a lot of new emerging trends
that we are starting to see and trends we will probably not see for a few years. However, they will be facilitated largely
over the Internet.
Mr. Tod: I mentioned an underreporting of fraud in the collective statistics prepared here by Statistics Canada. The
crime reporting statistics are crimes that are reported to police and entered into a police database. Unreported crimes
or frauds would not make it into that database. The Canadian Bankers Association may tell you that crimes
amounting to approximately $500 million occur in regard to payment card fraud and debit card fraud across Canada.
Unless it is reported to police agencies in the jurisdiction, investigated and entered into the database, it would not be
captured by these statistics. That may be an area where underreporting happens.
Also, for reasons of shame, embarrassment, business reputation and reputation of the brand, many such crimes are
not reported. Such situations may include some of the most significant manufacturers of consumer goods around the
world that do not want counterfeit goods or other types of goods reported to the public in general. They look after
much of it internally.
Mr. White: Many Canadians think that debit and credit card fraud will be covered by the financial institutions;
therefore, there is no need to report it to police. We are working closely with the banking institutions to get
information on those types of offences.
Regardless of whether it is reported to financial institutions, if it is not reported to police, at the end of the day it is
still proceeds from criminal activity and it remains in the hands of the criminals.
We are seeing a migration of traditional organized crime groups involved in drug trafficking to financial crime as
well. A recent case dealt with an organized crime group involved in making synthetic drugs such as ecstasy. The
investigation was concluded after search warrants were executed. Half of that organized crime group was involved in
manufacturing synthetic drugs; the other half of the organization was involved in debit card and credit card fraud.
Financial crime is very lucrative and they assume the risks to be a lot less than drug trafficking.
Senator Boisvenu: Over the past 10 years or so, we have also observed an increase in purchasing over the Internet,
particularly by credit card. Have you noticed an increase in the number of reports by consumers who have been stung
by bad purchases? Or are they a bit proud and prefer not to report so they do not look ridiculous? In other words, are
there now more reports of fraud in Internet purchases?
Mr. White: I ask Superintendent Foster to comment on the statistics for ``card-not-present fraud,'' meaning fraud
that is over the Internet.
Mr. Foster: If you are purchasing on-line and you do not provide the three-digit security number off the back, in the
case of two cards, or the four digits off the front of the other card, you would not be able to make a secure purchase
over the Internet and thereby prevent the cost of the fraud or the impact from going back to the business. Those digits
are essentially the security code, the signature portion if the transaction were done in person. If you do not get a
signature and there is a fraud, your business would experience the loss.
In terms of the use of credit card numbers in card-not-present transactions transacted over the Internet versus
counterfeiting cards and using them in person, there is more of a trend toward on-line purchases because of their
Senator Boisvenu: Are you seeing an increase in this type of crime in the fraudulent practices of vendors or false
Mr. Foster: Payment card fraud overall is about the same for the last two years — at $512 million for the previous
year, and $500 million for the current year that we have statistics for. However, there has been a shift in the activity to
card-not-present fraud, which is more easily committed online.
It is unlikely that a business will take your word that is your credit card number if you show up in person, but if you
are transacting over the Internet, you do not need to have the card.
Mr. Tod: The mechanical component of the card-not-present fraud is largely due to the chip and pin. Many of our
credit cards now have a computerized chip located on them and it requires a pin number upon entry. I believe that is
why the card-not-present fraud has been increasing steadily. That type of crime is a result of the chip and pin.
The Chair: I have a small duty to perform in the Senate chamber so the deputy chair of the committee, Senator
Wallace, will now take the chair.
Senator John D. Wallace (Deputy Chair) in the chair.
Senator Raine: In your presentation, Mr. Tod, you mentioned the guidelines created by the U.S. Sentencing
Commission, and then you listed a few things they use, including the perpetrator's criminal history. I am interested in
hearing your thoughts on whether we are doing a good job of tracking the perpetrator's criminal history in Canada?
How does that work?
Mr. Tod: We do. Criminal history can be tracked through our Canadian Police Information Centre; there is a
criminal record check that can be done. That is one of the sentencing guidelines they have in the United States. It has
been included in the Canadian conviction process for some time. That is one of the aggravating factors they look at.
Senator Raine: What items do you list in that criminal record?
Mr. Tod: The type of the conviction and the sentence imposed at that time.
Senator Raine: How would you identify that?
Mr. Tod: Through a process after conviction in regard to entering a criminal record history of the offender.
Senator Raine: It would include the name?
Mr. Tod: Type of offence for which there was a conviction.
Senator Raine: Fingerprint?
Mr. Tod: The criminal record history is based upon the original impetus of that fingerprint to ensure identification.
The actual print is not entered into evidence upon conviction; but conviction itself, the number of convictions, the type
of offence and the penalty imposed by the courts upon conviction are all entered into a criminal record history.
Senator Raine: I am wondering if a person changes his name and moves to a different jurisdiction, they can set
themselves up in crime all over again.
Mr. Tod: I cannot speak to the mechanics of the Canadian Police Information Centre. The RCMP are custodians of
the information. I am not sure if my colleagues can speak to it today, but I do not believe that to be true.
Mr. Foster: The actual submissions are supported by fingerprints. If you are picked up once and then picked up
again, you will be fingerprinted again, and if there is a mismatch, that will be picked up. The criminal record is matched
to the fingerprints. If you change your name and you are apprehended, it will not prevent you from being matched up
to your previous criminal record, with our system.
Two other things you will get on your criminal record are location of the conviction and the date, so it will show
over what period of time you have been involved in crime and where you were geographically.
Senator Raine: Is a social security number ever entered into that data? Is there any reason it would not be?
Mr. Foster: We do not use the social security number for that purpose, as far as the criminal record goes. I used to
make the submissions and put in the convictions afterwards. I would do the initial submission of fingerprints and then
submit the criminal record once the court had handed down sentence. In any of the instances that I am aware of, the
social insurance number is not part of that record.
Mr. Tod: If you are concerned about the tracking of a record and using the social insurance number as the
identification factor, the fingerprint creates an FPS number, a fingerprint identification number. That is the one
number that constantly remains with the fingerprint. The social insurance number is not used to track persons; but a
number created as a result of the fingerprint.
Senator Raine: I am coming at it from a different direction because if a person wants to prove they are innocent, they
then have to get fingerprinted.
Mr. Tod: In regard to proving innocence —
Senator Raine: It does not matter. For criminal record checks, you have to go and get fingerprinted.
Mr. Foster: You are inquiring about what happens if you do not have a criminal record. You have to provide your
fingerprints so they can be checked against the criminal records maintained by the RCMP through the Canadian Police
Senator Baker: I would like to revisit what Senator Raine was saying a moment ago. I think her question to you was
this: Was there a recent change in policy at the RCMP whereby somebody applying for clearance to work in an
establishment where there are vulnerable persons involved is now required to give fingerprints in order for you to give
Mr. White: I cannot confirm if there was a recent policy change. I think the only way to definitively confirm whether
someone has or does not have a criminal record is through a fingerprint. Name and date of birth would not be
definitive on its own.
Senator Baker: Senator Raine raised this point because there is a real problem here in that if somebody has the same
birth date as somebody with a criminal record, they cannot receive clearance. You now ask for somebody's fingerprints
so they can be matched. The reason for that is, as I understand it, you came to the conclusion that somebody can
change their name. Am I correct in assuming this?
Mr. White: If you have two individuals with the same name and same date of birth, the only way to definitively
exclude one would be through fingerprints.
Senator Baker: This is a recent change though.
Mr. White: I cannot confirm that.
Mr. Tod: I believe the changes were initiated in the summer of 2010. I will speak on behalf of a provincial
perspective; I believe it was in July 2010.
As I understand it — and it is not within my command but it has created much discussion among the public and
police — first, it is in regard to a person with the same date of birth and name; and second, it is also in regard to
vulnerable sector checks, to ensure the person presenting themselves for the check is the person whose record of
conviction we are being able to ensure.
Senator Baker: I think the minister has intervened and he will put machines at various locations in Canada whereby
people can go in and get their fingerprinting done.
Mr. Tod: I cannot confirm that within the province of Ontario.
Mr. White: Real time identification, I think, is what you are referring to.
Senator Baker: Let me ask you the question I wanted to ask. I am sorry I took up that amount of time to do that but
it is a huge problem with hiring employees in hospitals up North. If they have a birth date the same as someone
convicted of a criminal offence, they cannot receive a clearance unless they submit their fingerprints. The RCMP says
that is to ensure that they are not hiring a criminal, because someone can change their name.
My question to you is this: You both admitted that there are no tools in this legislation for the police to investigate
these types of crimes, which are complicated crimes to investigate. Do you have any suggestions for this committee on
what can be done to facilitate your investigations into these very complex matters, given the recent judgments of the
Supreme Court of Canada that there is a very high expectation of privacy in someone's computer, which has led to
several decisions whereby the warrants used in these types of investigations are being thrown out.
Is there any suggestion or comment that you wish to make on something that could facilitate your investigations?
Mr. Tod: I will address warrants, first. In regard to warrants that you say ``are being thrown out'' during trial
process, the cause may be as a result of a defect in the warrant that originated from within the police investigation.
I do not see any additional tools that could be gathered in regard to this specific legislation for police or in the
investigation of fraud. A number of other pieces of legislation are working their way through the other place or here
with regard to access to electronic information and the ability of Internet service providers to provide information.
That legislation will help us to catch up in regard to the use of the Internet to commit fraud as well. It also gives
Internet service providers the opportunity to provide information to the police. I believe that is working its way
through the system.
With respect to warrants, in my 29 years of experience in the court system, the courts have set the standard on
warrants. There are acceptable standards and the statutes provide for an appeal process. The courts set a standard and
an expectation that is very high. It is both consuming and demanding for policing. It affects us in regard to resourcing
and developing employees to work within the system.
Senator Baker: For these types of crimes, we recently approved the general warrant provision, section 487.01. You
can get a warrant to do something. The only condition stated under receiving that warrant is that it not be allowed to
be given under any other provision of the Criminal Code. A general warrant is something to do something that is not
provided for in the existing law, which was supposed to assist you in matters involving different types of investigative
techniques for which you need to apply.
Are you finding that the general warrant provision to be adequate for your investigations?
Mr. Tod: I have no experience to say that it is inadequate at all, senator.
Senator Baker: With respect to FINTRAC and the tracking of money — and you referenced this in your brief —
what are your recent opinions? Any transaction in Canada today over $10,000, about which there is some suspicion,
must be reported. Someone who makes a transaction anywhere must answer certain questions. As I understand it, all
accounting firms, all people in banks, and so on, must do so. It is an incredible imposition but a necessary one for the
tracking of funds.
Is that working? Does this over tax you on your investigation? Are you called in to investigate when there is a
suspicious transaction over $10,000?
Mr. White: First, the relationship between the RCMP and FINTRAC is excellent. It has evolved significantly over
the last five years. We work with FINTRAC in two ways. First, when we have an ongoing criminal investigation, for
example, on proceeds of crime or money laundering, we make a request to FINTRAC. We tell them that we are doing
and ask them for any information in their inventory of intelligence holdings that may assist in our investigation.
The other component of FINTRAC's work is the suspicious transaction reports that they receive from financial
institutions or other reporting entities under that regime. They will identify on their own suspicious cases of money
laundering or terrorist financing. They will refer those cases to us, to the RCMP or to the OPP, depending on the
location and jurisdiction.
Over the last couple of years, we have seen a significant increase of those cases coming from FINTRAC. That is part
of their evolution. They have been in existence now for a number of years and their regime has grown. Their
intelligence is more robust than it was when they were starting out as an organization. They have become very
proficient at identifying suspected cases of money laundering, which they refer to us.
It then comes to what extent we have the capacity to investigate those cases. The relationship is very positive.
Senator Baker: Has this investigative process driven parcels of money being floated across the country in mail and so
on, as an alternative to shipping it through normal bank transactions?
Mr. White: Bulk cash smuggling has not gone away. We see it largely related to the drug trafficking industry,
especially between Canada and the U.S. We still see significant amounts of cash being carried across the border.
Mr. Tod: In regard to large cash transportation, the dollar today is worth less than what it was many years ago. I am
not surprised by the large bulk volume. However, it can vary depending on what the money is worth.
One of the advantages of the electronic age is that it has tightened up surveillance opportunities within FINTRAC,
the banking sector and other areas to monitor large cash transactions or suspicious transactions. That has caused
criminals to move money in large quantities across Canada.
Senator Baker: Yes, by Purolator and FedEx?
Mr. Tod: Both of those carriers are used. From an interdiction standpoint and policing in general, we stop motor
vehicles or vessels and seize huge volumes of cash.
Senator Baker: Most Canadian monies are tainted with some sort of drugs, are they not? Do you have a mechanism
to find out if there is money in the package, apart from an X-ray?
Mr. Tod: I have seen it in garbage bags, milk bags, suitcases, in the back seats of cars, through legal access
opportunities or consent searches to go into a vehicle. It is not necessarily hidden; it can be that open.
With regard to smuggling money, I think the RCMP's experience would be greater than mine.
Senator Chaput: Bill C-21 concerns fraud offences over $1 million. You told us that the majority of fraud cases are
not reported. To be able to make that kind of statement, you must be able to determine that that is happening; you are
seeing fraud, you are hearing about it, but in the final analysis, it is not being reported and, if I understand correctly,
you therefore can do nothing about it.
This is also affecting Statistics Canada because you submit most of the statistics to them. And when fraud is not
reported, you cannot report it to Statistics Canada. So it is a vicious circle.
How can Bill C-21 punish fraud artists when fraud exceeds $1 million since the majority of these frauds are not
Have you considered any solutions to ensure that these frauds are increasingly reported? Do you have any ideas on
Mr. White: As I mentioned earlier, we are working closely with financial institutions. Therefore, if a crime is
reported to them and not to the police, we try to get those statistics from financial institutions.
The main way to do it is through education and awareness directed at Canadians and Canadian businesses to
emphasize to them the importance of reporting fraudulent criminal activity, however small or large. As I mentioned
earlier, there are many reasons for police to have those complete reports. They give us a good picture of the level of
fraudulent activity. Also, the more reports we get, the more proficient we become at being able to identify the emerging
trends in almost real time. On a daily or weekly basis, especially with the Internet, new trends are emerging. Many of
the organized crime groups that carry out these fraudulent activities do not target one community in Canada; they
target dozens of communities. Only two or three victims in a particular community might seem insignificant. However,
on a daily basis, when you go across the country you might see that they have targeted 20 or 30 communities, and
instead of only two or three victims for that particular emerging trend, there are actually thousands. We need to get
We are trying to put more emphasis on education and awareness to Canadians and we are also working closely with
the broader spectrum of the private sector to get that messaging out.
The Deputy Chair: Gentlemen, thank you for the information you provided us. It is very helpful.
I am pleased to introduce as our next witnesses an illustrious panel, some of whom we have seen here before. We
have Phil Downes, Barrister, Canadian Council of Criminal Defence Lawyers; Michael Spratt, Director, Criminal
Lawyers' Association; Joseph Groia, Principal, Groia & Company Professional Corporation and Lincoln Caylor,
Partner, Bennett Jones LLP.
Phil Downes, Barrister, Canadian Council of Criminal Defence Lawyers: As always, it is a pleasure to be back before
you on behalf of the Canadian Council of Criminal Defence Lawyers, an association I know you are all familiar with.
We always appreciate the opportunity to comment on the legislation to which you are giving careful consideration.
Recently, in passing sentence in large-scale accounting fraud, the sentencing judge saidthat: It has been said many
times that sentencing is a very human process. Like many judicial functions, it calls for balancing. The sentence must
reflect the circumstances and seriousness of the specific offence, the attributes of the specific offender, and maintain the
public confidence in and respect for the justice system. The court speaks for the community and must reflect the values
and concerns of the community.
In our view, these comments capture the very essence of the criminal sentencing process in Canada. It is our
respectful submission to you that the vast majority of this bill you are considering is superfluous and unnecessary.
It is legislation for legislation's sake, adding weight to the substantial weight that already makes up our Criminal
Code and allowing, in our respectful submission, for the suggestion that we are solving the problem of fraud or doing
something to contribute to the growing problem of fraud when, in reality, it will really not impact the way that fraud
sentences happen already and have happened for some considerable time.
What is the gap that we are trying to fill or that this legislation tries to fill? The Criminal Code, as you will know,
already provides that, on sentencing, one of the goals of sentencing is to provide reparations for harm done to victims
or to the community, and to promote a sense of responsibility in offenders and acknowledgment of the harm done to
victims and to the community.
In considering the appropriate sentence, our Criminal Code already directs judges to consider the factors that are
included as the new aggravating factors in this legislation, and judges, in our submission, already do that. The
magnitude, complexity and the degree of planning, impact on victims and their particular financial situation are factors
that are routinely taken into account in cases of fraud, and particularly in cases of substantial fraud. It is difficult to
imagine a fraud of over $1 million where a responsible jurist would not factor these conditions into his or her
consideration of the appropriate sentence. They are well known, they are established and they are routinely applied.
Justice David Watt, now of the Ontario Court of Appeal, when he was sentencing a couple in a fairly high-profile
fraud case in Toronto a number of years ago, commented on the ingenuity of the commercial fraudsman and the wide
range of activities taken in by this kind of person which make it, he said, difficult to establish a range of sentences in
these cases. He said that routinely sentences of five to six years are imposed, sometimes extended to seven, eight years
and beyond, in cases that involve large amounts of money or economic risk, a breach of trust, vulnerable victims, and
that represent a diminution, as he called it, in the public confidence in regulated activity or industry. Sentences of into
the multiple years are not uncommon and indeed frequently imposed in those kinds of cases.
You have heard me say this on behalf of our association before with respect to mandatory minimum sentences, and
we will continue to say it: They have, in our submission, no measurable effect on crime rates. The very nature of many
individuals who commit fraudulent conduct is that they do not think they will be caught. Mandatory minimums simply
have the effect of increasing prison populations and increasing the cost to the taxpayer without any real benefit to
More significant is what they say about our view of the judges that we appoint and have confidence in. We take
pride in sending our judges, through the National Judicial Institute, around the world — Russia, Ukraine, Serbia, the
Philippines, Pakistan, China, to name just a few — to conduct judicial education in those countries. Our judicial
appointments process rarely if ever results in allegations of any kind of political interference or lack of adequate
qualifications. Yet, we are seeing, by the steady stream of legislation regarding minimum sentences, an erosion of
important judicial discretion in relation to sentencing, which is always an individualized and must continue to be an
individualized process. It is, in our submission, a triumph of symbolism over substance.
I will pick on one aspect of the legislation in particular, and it is where judges are required to state for the record the
aggravating and mitigating factors. Putting that in the legislation is representative of the kind of view that we strongly
disagree with in terms of the trust that we have in judges.
I will mention a few practical issues before I close. On the calculation of loss, you know that fraud does not have to
be actual loss. It can be a risk of economic loss. There may be situations where there is no actual loss but the potential
loss is over $1 million. You will have sentencing hearings that run the risk of becoming unnecessarily complicated by
setting the threshold number.
With respect to the employment restriction, we have concerns. It is a valid objective to prevent people from engaging
in that kind of work, but it is broad and vague, and it begs the question of what kind of employment would be
forbidden. If you read this bill, it suggests I could not work in a coat check. In our submission, it needs refining and
With respect to the community impact statements, we have no concerns about the validity of victim impact
statements and the desirability of them. We do have concerns, and I think Crown attorneys have concerns, about who
will speak for a group of victims. Is it up to the judge to determine that? Is it up to the Crown to determine that? The
Crown is not the lawyer for the victims. Who will decide that there is an adequately representative person? I say that
bearing in mind that today judges would hear from a group of victims, without question, on a fraud sentencing.
In closing, it is wrong to say to the public that this bill is having a substantial impact or contributing to solving fraud
problems in Canada. Those problems are bigger, and they require bigger solutions, and you will hear that from some of
my colleagues with respect to national security regulator, with respect to better training, better focused prosecutors and
investigators, and even, perhaps, triers of fact. These are the questions that will tackle the real problem of substantive
fraud in Canada, not, in our submission, this kind of legislation.
I look forward to your questions at the end of our presentations.
The Deputy Chair: Thank you, Mr. Downes.
Michael Spratt, Director, Criminal Lawyers' Association: The Criminal Lawyers' Association welcomes the
opportunity to make submissions on this bill. We are always happy to appear in the upper chamber.
For those who do not know, the Criminal Lawyers' Association was founded in 1971. We are a not-for-profit
organization. We boast over a thousand members from largely across Ontario but also spanning the country. Our
objective is to educate, promote and represent our members on issues related to criminal and constitutional law,
including important issues that this bill addresses.
It will be no surprise to hear, because I have said it in this chamber many times, and I have said it before the house
committee many times, that our main objection to this legislation, and the majority of the tough on crime legislation
that has preceded and will follow this bill, is the use of mandatory minimum sentences.
I adopt what Mr. Downes has said. I will try not to be repetitive, but it does bear some discussion. The main
objection, in general and specifically in terms of this bill, with the use of mandatory minimum sentences is that
mandatory minimum sentences remove discretion from the hands of judges. As you will hear, and as you are aware, for
frauds that involve large sums of money, over $1 million, generally the sentences that will be imposed will be well over
the two-year minimum that is suggested in this legislation.
Judicial discretion is one of the pillars of our system. As Mr. Downes said, it is the pillar on which we educate other
emerging democracies and other jurisdictions setting up their own judicial systems. We travel the world trumpeting our
system and trying to bring that system to other jurisdictions. The removal of discretion from judges is what I consider
to be another step in what can be seen as the unnecessary erosion of confidence in our judicial system.
Judges are in the best position to impose a sentence. They have heard the facts, they have heard from the victims,
and they have heard the particular circumstances of the offender and the offence. They are privy to the reports and all
the mitigating and aggravating factors. As such, it is our position that the judges themselves are in the best position to
determine the appropriate sentence. Parliament has provided guidelines for that through the principles of sentencing. I
do not have any problems with the various aggravating and mitigating factors. They are a good thing.
The problem with mandatory minimum sentences is that they are a one size fits all solution. It may be appropriate
for the vast majority of people. However, it may be very inappropriate in specific cases. Imagine a case of someone who
is a party to the fraud or a small player in a large fraud who is still charged with fraud over $1 million because they are
a party. They would be captured by the minimum sentence when it is not appropriate.
If, for example, Garth Drabinsky had a secretary who was not fully aware but wilfully blind to the circumstances,
participated in the fraud, received no monetary benefit, and was acting through the direction of her employer. That
person could be captured with this minimum sentence. A small player who receives very little financial benefit and may
not know the scope of the fraud but is involved nonetheless could also be captured by in minimum sentence which, in
that specific case, may not be appropriate.
There are cases where people have received a lesser sentence for a fraud in this range. Motivating factors such as
mental illness have been considered which may lower the normal starting point for a sentence to less than the proposed
minimum range. Cases such as these show why discretion is appropriate. When a judge is acting and exercising his or
her discretion, the Crown is there to speak for the state. That discretion is always reviewable. That is why we have
courts of appeal. If discretion is exercised inappropriately, it can be reviewed.
A better way to address concerns is through the use of statements of principle and statements of aggravating and
mitigating factors which exist in the code.
The transfer of discretion from the judiciary to the police and the Crown is an important point with regard to
mandatory minimum sentences. I will use the example of the difference between a fraud over and a fraud under. A
fraud over $5,000 is punishable by a maximum sentence of 14 years. One cannot receive a conditional discharge for
that. We have numerous cases where someone is charged with fraud over. They are on welfare. They might have
misrepresented their situation to welfare. They are struggling and have accepted more money than they should have
from the welfare system. If, over a year or two, that amounts to more than $5,000, they are charged with fraud over. It
is common in the closed-door negotiations that are not part of any record and are not reviewable that we will engage in
negotiations with the Crown to say, ``Perhaps, if the person can struggle and come up with some money and pay some
restitution up front to bring the amount to below $5,000, you will proceed on the lesser included offence. This
struggling immigrant with no criminal record has the potential of receiving a conditional discharge because you will
not be seeking a conviction on the fraud over charge.''
This is an example of the type of discretion that is imparted to Crown attorneys. For the most part, it is exercised
appropriately. It is not reviewable. That discretion should be left in the hands of judges.
The mandatory minimum will increase the complexity, length of cases and amount of litigation. Even on a guilty
plea, we will be engaged in litigation about specific amounts, such as cases related to having victims of the fraud come
in to testify where there is a debate. Is it a $1-million-and-$1 fraud or is it a fraud $5 less than that? That important
factor can turn what would be a very streamlined, resource-saving process, through a guilty plea, to a lengthy process.
It is a great incentive to engage in that defence.
Mandatory minimum sentences do not deter. It is the certainty of being caught, not the certainty of punishment.
Before further mandatory minimum sentences are added to the code there should be empirical information to justify
I will be happy to answer questions on this interesting topic.
Joseph Groia, Principal, Groia & Company Professional Corporation: I would like to speak to this committee from
my background as the former head of enforcement at the Ontario Securities Commission, where I practiced for a
number of years.
The goal of securities enforcement is to create a fair and efficient capital market. By a fair marketplace, we mean one
which is honest. By efficient, we mean one which is established to allow trading at the lowest possible cost.
The primary difficulty with Bill C-21 is that it is counterproductive to the goal of establishing an efficient
enforcement regime in the capital markets. Over 50 years ago, Chief Justice McCruer said that mandatory jail
sentences tend to corrupt the administration of justice by creating the will to circumvent the legislation.
When I was the head of enforcement, I was faced with difficult enforcement choices. There is a tension between the
goal of compensating investors who have been cheated out of their savings by persons engaged in fraud — what we
refer to as ``the restitutionary component'' — and the need to have deterrents so that in the future people do not engage
in frauds, particularly frauds over $1 million.
The people who engage in insider trading activity, market manipulation, or sophisticated securities fraud, which is
the area in which I practice, are not deterred by the prospect of a mandatory jail sentence.
The literature in the United States shows that deterrence for those kinds of criminals comes primarily from the use
of a range of administrative and civil sanctions. Sending someone to jail who has engaged in that kind of fraud does
not add to the deterrence that comes from the fact that he or she has been forced to disgorge all their money, to lose
their level hood and ability to trade in the markets and to lose their ability to be a director and officer of a public
This bill has as its goal two contradictory objectives. On the one hand, it pursues restitution for injured investors.
That ought to be the primary focus of an enforcement policy. At the same time, it imposes a mandatory jail sentence.
Those two are contradictory. As the head of enforcement, I was often faced with the opportunity of negotiating a
solution that resulted in the repayment of money to injured investors. To do that, I had to give up the pursuit of a
criminal sanction in order to achieve the restitutionary goal.
Mr. Caylor will speak primarily to the question of restitution. I ask this committee, when it considers this bill in
relation to securities fraud, to carefully consider those competing choices and whether this bill accomplishes what you
hope it will or is counterproductive to those noble goals and ambitions.
Lincoln Caylor, Partner, Bennett Jones LLP: Thank you for inviting me here today, and I thank your clerk who has
been e-mailing me at midnight to get the schedule right for me.
I am a commercial litigation lawyer in Toronto with an emphasis in my practice on fraud. I come from a commercial
and civil background. I was recently appointed to the Ontario Securities Commission Investor Advisory Panel, so I
have that background as well. With respect to public policy, I am on the board of the Macdonald-Laurier Institute, a
national nonpartisan think tank here in Ottawa.
My evidence here today will be given as an individual. In my view, Canada needs to be more aggressive with and
tougher in combating white-collar crime. Criminals of that nature in Canada must be persuaded it is likely they will be
caught; it is likely they will be vigorously investigated; that charges will be laid; that the Crown's office will have the
wherewithal to prosecute through to trial; that if convictions are obtained, white-collar criminals in serious white-collar
fraud will go to jail; and that when they go to jail, they will not have the luxury of a large amount of assets waiting for
them when they get out.
Bill C-21 is an important step in achieving certain of those goals. However, it will have a minimal impact on its own.
Certain aspects of the bill may be counterproductive.
Fraud cases, both civil and criminal, are complex, paper intensive and typically use up a lot of court time. Also,
Crowns and judges do not have as much experience with fraud cases as they do with other offences under the Criminal
Code. Often criminal fraud cases involve a delay, and procedural fairness becomes a hotly contested issue in these types
of trials. In my view, it is important that any legislation dealing with white-collar crime in Canada not increase the
complexity of an already complex type of case and that it not increase the already heavy burden on defence counsel,
enforcement investigators, Crowns and judges.
In that context, I will speak to clause 2 with respect to the minimum sentencing. On clause 3, I will focus on two of
the aggravated factors that have been added. Finally, I will discuss clause 4 with respect to restitution.
With respect to clause 2 of the bill and mandatory minimum sentencing, in my experience, serious white-collar
crimes in excess of $1 million that are prosecuted, and where convictions are obtained, sentences are often in excess of
two years. The added complexity of a mandatory minimum, to quote from the bill, ``if the total value of the subject
matter of the offences exceeds one million dollars,'' risks adding a further burden to the Crown and increasing the
complexity of the trials. In my experience, the criminal process does not lend itself to quantifying or valuing damages
or the value of the subject matter of the fraud.
My concern is that time, effort and resources by police, the Crown and the court will be focused on quantifying and
establishing frauds at a value in excess of $1 million. In the code, $1 million is already an aggravating factor for the
court to consider.
In my view, there is limited value in including this threshold as part of a mandatory minimum sentence when large
scale, serious frauds that are clearly in excess of $1 million typically already receive sentences in excess of two years.
Frauds where quantification is difficult, which is most of them, in my experience, or where it is near the threshold of
the $1 million, will complicate these trials unnecessarily. It may also be an area fraught with disclosure issues and
With respect to clause 3 and the aggravating circumstances, I will only comment on the two I think are very
important. One is that the offence have a significant impact on victims, given their personal circumstances, including
their age, health and financial situation. Quite often, large-scale investment frauds prey upon the most vulnerable in
our society. I commend that as an appropriate aggravating factor.
The second aggravating factor I will comment on is where the offender conceals or destroyed records relating to the
fraud or the disbursement of the proceeds of the fraud. That goes to my point that the trial judge ought to consider in
the sentencing whether the convicted white-collar criminal has made it easier for the money to be recovered, which goes
to my goal that they ought not look forward to a large pot of money when they get out of jail. That will also go to
deterrence, in my view.
Finally, clause 4 has to do with restitution. This clause, particularly as amended, is helpful in one aspect only: It will
help ensure that the request for restitution and the consideration of restitution is made by the Crown and the
sentencing judge, and that victims are made aware of this option. However, the amendments with respect to ensuring
that restitution is considered do not change the legal threshold of granting restitution, which includes that it be easily
quantified by the sentencing judge and the ability of the person being sentenced to pay.
Finally, it does nothing to impact upon something that is very common: By the time restitution is ordered at
sentencing of the now convicted individual, there is no money left to pay any restitution because it is so far down and
so far after the fraud has been discovered.
I have previously expressed my concern that victims of fraud will view Bill C-21 as a criminal sentencing process that
will get them their money back. The criminal sentencing process does not get victims their money back and it will not.
Other than the civil litigation process with respect to getting money back for victims, the provincial regulators have
some mandate and more ability to do that through receiverships, freezing assets, and orders to return monies to
I will now make my pitch for a national regulator: A national regulator would be the most efficient and effective
means to the extent that there is an ability to get money back for victims of white-collar crime.
Senator Runciman: The government agrees with your view regarding the national regulator, if only we could get
Quebec and Alberta onside.
Mr. Caylor raised the issue of quantifying the value of fraud. That issue has not been raised before. As you pointed
out, it is already an aggravating factor. I am not sure how much of a challenge that is, but it might be that we might
want to have Justice appear before us before we wrap up our hearings to have their reaction to that particular aspect. I
would like to know how they see it in terms of what kinds of challenge it will pose for the court.
From previous appearances, we understand how many of you feel regarding minimum sentences. I know you have
talked about five to seven years being not uncommon in terms of the sentencing track record with respect to fraud.
However, other instances with respect to some very serious crimes are being addressed by this legislation, sentences
that were less than appropriate. I can cite a few if you wish.
In some small way — I grant you — this bill does address those kinds of situations. I will reference one, the Paul
Coffin sponsorship scandal where the judge gave Mr. Coffin a conditional sentence. That was for bilking the
government out of $1.5 million. The Court of Appeal upped that to 18 months, but the sentence is still relatively
modest. We had another situation in Manitoba where a Health Canada bureaucrat was given house arrest for
defrauding the federal government out of over $1 million. Those are cases with respect to defrauding the government,
and maybe that is looked upon by the courts as a victimless crime, I am not sure. As we know, taxpayers are all victims
with respect to those kinds of instances.
Rather than saying most folks are getting five to seven, we have these prominent cases where the public at large are
very offended, and rightfully so, with the way the courts approached those situations. Do any of you have any
Mr. Downes: It is interesting that you mention the Court of Appeal in the Coffin case. Looking at Ontario at Dobis
and cases like that, they could not be clearer that the starting point range for substantial frauds, where there is a breach
of trust or a vulnerable victim, is three to five years. It seems to me that today there are some appeals coming down the
line, and I think we will see that affirmed again fairly soon. I do not know about some of the details of the cases you
There will be the occasional case where a judge, having looked at all of the factors, will say, this is that rare case
where I think it has to fall below a certain amount. There is an appellate process that I think works effectively.
It is fair to say that, generally speaking, we are all of the view that those sentences that you mentioned are the
exception. That is what we have to build legislation on, what is the general and not on the exceptional case.
Mr. Spratt: I agree with what Mr. Downes said about the exceptional cases you have mentioned where there has
been a sentence less than two years for that type of fraud.
Respectfully, I do not think it is appropriate to trade one unfairness for another. In the cases you mentioned there
might be an unfairness in that specific instance, as perceived by some, where the sentence is too lenient. This legislation,
by crafting that minimum sentence, is correcting that perceived unfairness and sets up a process where there might be
other unfairnesses where, if those truly appropriate cases do exist, the sentence that is appropriate would not be
The legislation and practice of criminal law is never perfect, but I do not think it is ideal to trade one unfairness for
another type of unfairness.
Senator Runciman: I have trouble defining it as ``unfairness'' for someone who has participated in large-scale fraud
and receives a two-year sentence. On average, someone who receives a two-year sentence is out on parole after eight
months. To say it is some sort of extraordinary hardship, when the individual has been found guilty of participating
and engaging in a fraud of over $1 million, I do not agree.
You mentioned restitution orders and that they should be the primary focus. You also mentioned that this
legislation would close the door in instances where prosecution could be given up for settlement.
Again, I have trouble with the principle that, if someone has committed a serious crime, you are prepared to look at
a negotiation so they can walk out the back door. I have a lot of trouble with that, personally.
Mr. Spratt: I hope the committee will hear from the Crown attorney's association, because they speak eloquently to
the point. The fact is that negotiations before trial are advantageous in many aspects, in terms of saving the system,
saving victims from testifying, and it is a historical feature of our system that has served us well.
I agree it is not advantageous at all times, which is why this legislation is problematic because it encourages the very
behaviour with which it appears you disagree.
Senator Runciman: When you are talking about that two-year sentence, I am a hard-liner in this regard. I said to the
minister that it should be higher. In any event, we will agree to disagree.
Senator Fraser: I apologize for having been absent, while doing a chore in the chamber, when you began your
testimony, but I think I heard most of it and it was very interesting.
A couple of you have said, as other witnesses have said before this committee on numerous occasions, that for
many, if not most criminals, the real deterrent is not a mandatory minimum, it is the likelihood of getting caught.
The question is, how likely is it — and I do not know whether this is even answerable — that people who engage in
large-scale fraud will get caught? Do we have any metric by which to get even an idea of that?
Mr. Groia: I can speak to the capital market side of that question. The perception is that, particularly within insider
trading, the vast majority of illegal insider trading is never detected or prosecuted.
One of the reasons I advocate strongly in favour of a national securities commission is that I believe there are better
enforcement tools available that are not being used. I can tell you in my own practice I have referred a number of cases
of what I believed to be insider trading activity where my clients have been the victim. I have sent them to one
commission who has told me, no, I need to send them to another commission, who then told me they are too busy.
On the insider trading side of these issues, I believe there is an enormous amount of work to be done that would be
productive if it were carried out.
On Ponzi schemes and other kinds of market misconduct, I think the reality is that most of those cases, by their very
nature, inevitably, are caught. The reality of a Ponzi scheme is it cannot last forever.
As we saw with Madoff in the United States, often market tremors will cause those cases to collapse. We need to see
a greater emphasis on the recovery of money for the victims of Ponzi schemes. The Americans, in my view, do a better
job than we do in Canada in going after and recovering money from deep pockets and others who have benefited from
I am not in favour of seeing anyone walk out the back door. That would be a travesty. However, if we are concerned
about bringing as many cases as we can and having the fairest market we can, the question that I would raise for your
consideration is: After you have taken away the wrongdoer's livelihood, his money, his reputation, his respect in the
community, his ability to be a director, to trade again, and he is disgraced, then what else is there left that would be
accomplished by a mandatory jail sentence — in particular if, by pursuing the criminal process, you reduce the chances
of being able to negotiate significant restitution?
Senator Fraser: That was going to be my second question but, before going to that, does anybody else want to
comment on the first?
Mr. Downes: Look at the numbers from the integrated market enforcement teams, the IMET teams, over the first
five years of their investigations, the amount of money spent and how many convictions have been registered. That
might tell you something about whether, in fact, we are doing the right thing to properly investigate and prosecute
these cases, and look at how long they take.
Senator Fraser: You are not suggesting that we do not investigate and prosecute?
Mr. Downes: You ask what the chances are of being caught, and I say if you look at the numbers in these large cases
and the amount of resources put into them, it tells you something about how effective our investigations and
prosecutions have been.
These are complex, challenging cases. As a former Crown who prosecuted these cases, I can tell you that many
people do not like doing them, and a lot of police officers do not like doing them. It is part of their rotation and they
get in and get out. If we really want to tackle this area, you need some real specialization and commitment to the
detection and prosecution.
Mr. Groia: When I was the head of enforcement, my rough rule of thumb was that I could prosecute five
administrative or civil cases where the outcome would be the kinds of remedies I have described for every single
criminal case. My choice was, do I bring five people to justice in an administrative hearing or go after one person in a
criminal court where the chances of success are much less than they would be in a civil court or an administrative
Senator Fraser: I want to be sure I am following the logic of your points, Mr. Groia.
I think I heard you say, several times now, that often when faced with either the ability to negotiate restitution or the
ability to secure a conviction, you ended up having to choose one of those outcomes, that you could not get both.
I am wondering whether something like this bill might not in fact make it easier to achieve both, if one wished to
achieve both, which I am not sure you do.
Mr. Groia: In a perfect world, one would have a system that dealt with restitution, appropriate deterrence and
Mr. Spratt and Mr. Downes will be able to speak knowledgeably about the realities of the way these cases have to be
handled. When I would sit down to talk about resolving cases with sophisticated market participants, the first part of
the discussion would be: If you are prepared to give up the prosecution, we are prepared to do the following nine
things. If you are not prepared to give up the prosecution, then we will use the money we have stolen from the victims
to defend this case until time immemorial.
Unless we see a sea change in the way that criminal defence lawyers approach these problems, and I do not think
that is coming any time soon, I believe the Crown will always face a difficult choice as to which of the two masters he
will serve. My friends are quite right a Crown attorney is not in the business of looking for restitution for victims. This
bill is imposing that obligation and it will be a very uneasy position for the Crown to be in.
Senator Carignan: To continue with questions concerning restitution, what is the effect of the restitution order under
the Bankruptcy Act? Because we know that, in bankruptcy, calendar dates will be released by not fines.
Do you know what effect the restitution order will have in bankruptcy cases? Could a bankrupt be released if there
is a restitution order? That is an advantage that could be quite significant in certain situations.
Mr. Caylor: With respect to the restitution order granted as a part of the sentencing, it is not discharged if the
accused becomes bankrupt. However, the sentencing and the restitution order do not increase the priority, so it does
not rank ahead of other judgment creditors, but it will survive the accused going bankrupt. It is something the accused
cannot get away from by going bankrupt.
Senator Carignan: Am I to understand that an accused who decides to declare bankruptcy will not be released from
the restitution order even if the restitution order does not give him priority?
Mr. Caylor: That is correct. The restitution order and the order to pay that the sentencing judge makes survives
bankruptcy and does not go away until it is satisfied and paid.
Senator Carignan: That is quite a good benefit.
My other question concerns defence counsel. You said that the impact of minimum sentences would be quite minor
because sentences are already for more than two years for this type of fraud.
Will you agree with me that imposing a minimum sentence sends the judge the signal, when he imposes a minimum
sentence, that the objectivity or the severity of the crime is greater?
Mr. Downes: I think my answer is no. I do not think the judges will see this and say, ``Next time I get a fraud of $5
million I had better get serious.'' Frankly, with a fraud of a few hundred thousand dollars, depending on the victim and
the offender, particularly if the offender is a professional, a lawyer or accountant, you are struggling to avoid a two-
year sentence in those cases. It will be great one day if you could have an in camera session and hear from judges on
this subject. I do not think it will make any difference, not because they do not care, but because that is already the way
they are thinking about these sentences.
To a certain extent, Senator Runciman's view is more legitimate when he says it should be higher. If you think the
way to deal with large frauds is to imprison people, then make it a minimum of 10 years. That is, to me, the more
Senator Carignan: There is nevertheless one possibility, because, even though there are certain case law trends, the
Supreme Court has held that care must be taken with sentences that have a starting point, and it hesitates to impose
such sentences precisely in order to retain a certain amount of discretion. And the Criminal Code states, in section 715,
I believe, that there is no minimum sentence unless one is set by law. So there are situations in which, in practice, the
fact that a minimum sentence is set will have an impact.
Mr. Downes: Mr. Spratt had that debate with Senator Runciman. I do not agree that it will impact on the kind of
cases we are talking about.
Senator Carignan: If you think it will have no effect, that it will change nothing, why are you opposed to it?
Mr. Downes: Why are we passing legislation that has no impact? Our Criminal Code 30 years ago was this big and
now it is this big. We are constantly passing new laws. Why do we spend resources to do that?
Senator Carignan: Perhaps it is preferable to make the Criminal Code bigger than the case law libraries.
Mr. Downes: It is not doing any good for my back.
Senator Joyal: What is still preoccupying me is the relationship between the order of restitution under the Criminal
Code and the civil action to recover from the offender and the other agencies or financial institutions that might be
responsible, fair compensation. What I feel is a tricky situation is that we are giving the impression that it is sufficient
to request a restitution order and you will get an amount of money which the court will calculate. It is after all a
defence process that can be contested and so on. What you get from that process is worth little more than the paper it is
written on. Whereas with a civil action, you can also seek the responsibility of the financial institution, if it has closed
its eyes to the operation that was going on. We have seen that in Montreal, as you know, with the Vincent Lacroix case.
The bank closed its eyes. At one point in time they were not even checking on the deposits, the withdrawals and so
forth. It was the same with Madoff. You could see that someone in the system did not exercise due diligence, perhaps
because the person is known and the amount of money was so large that he or she is a privileged customer and so on.
They get better treatment than someone who goes to the bank and asks to borrow $50,000. When you are a customer
of the bank and you have an account with $50 million you receive preferred treatment.
For someone looking to get the money back, as well as added compensation, it might be better to launch a civil
action than to rely on the restitution order to get something.
Mr. Groia and Mr. Caylor, do you think that the good intentions of the restitution provision in this legislation will
trump civil litigation because the victim will not have to incur the civil costs of an action, but will go directly to the
criminal court to get the restitution order, and it will be quick? They will not have to offer the same proof that would
have to be offered in civil litigation.
I have difficulty reconciling the two avenues; that a victim will be faced with the restitution order versus civil
litigation, or any other compensation program that might exist to compensate someone defrauded of a large amount of
Mr. Caylor: The two avenues of recovery are distinct. With respect to the criminal sentencing, only the sentencing
judge can order restitution with respect to the accused. The person being sentenced may be ordered to pay back a
certain amount, assuming that the court is satisfied that it is easily quantifiable and that the person has the ability to
pay it back.
The sentencing in the criminal process has nothing to do with suing third parties who may also be liable, the banks
in your example. As for the victim of fraud — and this is my practice area — you advise them, whether corporation or
individual, as to which avenue to rely on to get your money back.
Rarely, in my experience, will a victim get their money back if they only choose to rely on the criminal process. What
is more often the case is the victim will use the civil process to seek out and freeze the assets. They may then decide to
await the outcome of the criminal procedure, and if restitution is ordered by the sentencing judge you can turn that
restitution order, which survives bankruptcy, into a civil judgment and execute it against the frozen assets. That is in a
perfect world, but the victim then has to pay to have civil lawyers take those steps at the beginning.
In your example, the victim of the fraud also has the option to sue the banks that may have some liability, or sue
other co-conspirators that have not been charged.
Senator Joyal: In the case of Mr. Lacroix, the victims sought action in court against the agency that was supposed to
monitor his operations. For all kinds of reasons, they did not do the job and were subject to accusations of professional
negligence. They came to a settlement, because there was a shared responsibility among a certain number of bodies.
With a restitution order you address only one person. That might be good on paper, but if the perpetrator goes
bankrupt the victim is deprived of retribution from the financial business entities. How much time will it take before
the person makes enough money to pay all those restitution orders?
Mr. Groia: With regard to Ontario, there are no mechanisms in place to actually pursue recovery under restitution
orders. If we get a national securities commission, one of the things I hope they will do is actually use their resources to
follow up on these orders. It is a rare case where someone like Mr. Lacroix is sitting there with $80 million in his bank
account at the Royal Bank waiting for the restitution order to come. The money is overseas or it has disappeared; it is
in secrecy havens. The agencies in Ontario are not interested in spending the resources they would need to in pursuing
all those avenues.
The order gets made. We all feel so much better because now there is a restitution order. I have not seen any
statistics but I can tell you my experience is the vast majority of restitution orders never result in any restitution
actually being paid. They are nice pieces of paper that are meaningless in financial terms.
Senator Joyal: My other preoccupation is in relation to the definition of communities in proposed section 380.41,
whereby a statement is made by a person on the community's behalf.
What is your interpretation of the ``community's behalf?'' How do you interpret that to your customers?
Mr. Caylor: I am not sure I can add much to that other than the common sense of what a community is in my
experience with victims and family members who have been involved. Many of those frauds are what we call affinity
frauds, so a church group, an ethnic group or union group may be the community. One of my friends has already
spoken about the problem with defining ``community.'' That is all I can add with respect to your question.
Mr. Spratt: It can be a broad definition if we consider frauds committed on a city, members of that community, a
specific church or group of individuals. The questions are: Will that be another thing that we litigate? How extensive is
that definition? What sort of information does that community provide?
Mr. Downes: The wording clearly suggests that it is a statement made by a person on a community's behalf;
describing the harm done to the community. I believe Mr. Caylor is right. It is the community of impacted people. The
questions remain: Are they a homogenous community always? Who speaks for them?
Senator Joyal: Mr. Groia, on the basis of your experience, and Mr. Caylor, because you have been active in an
institution responsible for securities, financial investments, mutual funds and all kinds of investments on paper, what in
your opinions is the context in which we see those frauds multiplying today? We have heard of famous cases in the
past, such as the Baron Empain case, the famous case where French investors defrauded millions of people. Why is it
multiplying today? Why it is becoming more visible and the public is more concerned today than it was, say, 20 years
Mr. Groia: Let me answer that question in two ways: First, I believe we are seeing more frauds today because I
believe law enforcement has become much more proficient in detecting them. When I went to the securities
commission, I had 20 people who worked for me in my branch and now there are well over 200. The advent of
computer technology and market surveillance by way of computer systems has had an enormous impact on market
manipulation and insider trading cases. I actually believe, although it may not be the popular view, we are detecting a
larger percentage of frauds in the capital markets today than we did 20 years ago.
Second, the perception continues to be, because of a handful of high profile and tragic cases like Norbourg and Earl
Jones in Montreal and Drabinsky in Toronto, the perception is that these frauds are increasing in size. That is clearly
When I was the head of enforcement, if we investigated a case that involved several million dollars, we thought that
was a very large fraud. I defended in the Bre-X trial, and that was a $1 billion collapse in the market. I was also
involved in the Portus case, which was $1.2 billion. There is no question the size of these problems is, from a financial
point of view, significantly increasing. I think that has caused Canadian investors to become more alarmed about the
status of our marketplace.
I personally believe, and I think I am supported by the literature, that our markets are getting fairer all the time. I do
not think we suffer the Wild West reputation as much as we did 20 years ago, when the Americans were reluctant to
invest in Canada because the perception was that we were the Wild West of capital markets and there was no effective
I am discouraged by Bill C-21 because it seems to continue to suggest that we are doing a bad job of regulating the
Canadian markets, when I believe we are doing a much better job. A national securities commission would be a more
effective way of regulating our marketplace.
Mr. Caylor: People come forward more often now than they did historically, as well. In the last 15 or 20 years, more
people are willing to admit they have been defrauded and take active steps. Fifteen or 20 years ago, people would be
too embarrassed to do anything. That is also a factor.
Senator Joyal: Would it be also that it has become a means of managing the savings or the investments of people on
a broader scale?
Before, you had limited kinds of institutions to channel the savings of people with limited amounts of money.
Today, the product for investing is more available. It is more disseminated in small towns and so on.
Mr. LaCroix did not start in Montreal; he started in Sherbrooke and moved to Montreal. We live in a different
economic context whereby people are looking more to make investments in the venture capital market that is much
more diversified today than it was before. Before, people were satisfied with taking their money to the banks or the
credit unions. Today, they are solicited regularly with all kinds of investment products that give them the perception
that they will have a much higher return; it is a different world.
I wonder if our regulatory agencies are equipped with the tools to follow all the different markets, compared to what
there were 20, 30 years ago, when the market was reserved for affluent investors and a smaller number of people.
Mr. Groia: There was a publication released last week by the Foundation for the Advancement of Investor Rights,
an organization in Toronto, called FAIR, that I help from time to time with issues. One of the proposals that was made
was that there needs to be much more money spent on the active investigation into the marketplace of matters before
they become frauds.
To use your example, when I read the business section in the newspaper, I see little ads advertising 10 per cent
guaranteed returns. I say to myself, if I was the head of enforcement at the Securities Commission, I would have
somebody pretend to be an investor and check that out.
For Mr. LaCroix, there were ads everywhere. We could talk on another day about the regulatory failures that led to
Norbourg and Portus and these other cases, but I come back to the national securities commission. Whether we end up
with a national commission or just a national enforcement agency, we could devote some of the resources we waste by
having 13 different securities regulators at the provincial level to proactive efforts to investigate cases before they
explode to the level of an Earl Jones and to encourage whistle blowing.
The reality is that Mr. Jones only survived because he got a large number of referrals from all kinds of people. The
better example is Mr. Madoff. JP Morgan is being sued because there were memos where they said, ``We know this is a
scam, but let's make money while we can before the thing explodes.''
A number of steps can be taken and I hope will be taken as part of the overall regulatory reform.
Bill C-21 is not the subject of the discussion we are having now, but my view is that if we could ever see the national
agency get off the ground, hopefully they will do some of the things you are talking about in a proactive way.
Senator Joyal: My question might not be directly on the interpretation of one section of the bill, but the bill works in
the context of that new investment world we are in today that is totally different than it was when those sections of the
code were formulated.
Mr. Groia: I do not think Mr. Lacroix would have conducted himself differently whether or not he thought there
was a mandatory two-year jail sentence. In my practice, the people I deal with are not deterred by the prospect of going
to jail because they do not believe they will be caught. They are smarter than all the rest of us, so they are going to be
able to do this forever.
You make policy choices with a bill such as Bill C-21. My view is you need to ask, given where we all want to get to,
does this bill help us or pull us back?
Senator Joyal: Fundamentally, that is the question. Is it the right answer to the world in which we live today? The
market today is much more open to all kinds of economic initiatives. It attracts all kinds of venture capitalists, and
people are lured by the idea of making big money fast. That is essentially what drives those kinds of investments.
Mr. Groia: Right; the greed of the investor and victim.
Senator Joyal: I think there is greed on both sides. If you represent to somebody that you will manage their money
and give them a return of 10 per cent, while the interest rates are almost zero, there is something not quite right. Unless
you can turn lead into gold, there is something fishy about it. If there were only that person with that recipe, he or she
would be very rich.
As you say, there are elements of this situation that trigger a reasonable person to react reasonably in the face of a
Mr. Groia: If you are a student of market fraud, as I am, you will know that there was many years ago a famous
fraud in the United States, where the promoter said that he could turn lead into gold. That was the investment scam he
used to steal money from investors.
Senator Boisvenu: I have a brief question, but first I would like to make a comment. Earlier you said that
governments are doing a good job of regulating markets, that they have everything they need to monitor offenders.
However, I believe the Lacroix affair leaves us wondering about the AMF's ability to play the role it was expected to
In those situations, fraud victims are very vulnerable. Often these are people who have saved all their lives, and the
government has nevertheless taken measures to modernize the regulations concerning these criminals.
Consider the one-sixth reduction of the sentence because, for the majority of Canadians and Quebecers, it was
shameful to see Vincent Lacroix released after two years, after being sentenced to 12 years in prison. The decision was
made that this type of crime was no longer a crime against property, but rather a crime against the person.
Can you look at all the measures adopted rather than focus strictly on Bill C-21? This is a set of measures that have
been proposed, that will be adopted or have been adopted to ensure that this type of crime is punished in a manner
commensurate with its impact on people.
Mr. Groia: I hope I did not leave the impression with the committee that I believe the job is over, the markets are
fully protected and we can all sleep well at night. That is not my view. I wanted to convey my belief that we are doing a
better job than we did 20 years ago. I say that with some regret because 20 years ago, I was the head of enforcement in
I will let Mr. Spratt and Mr. Downes deal with the noncapital market frauds, but I strongly believe — and I believe
this view is shared by the literature and by the American experience — the best way to regulate the capital markets is
not to use the criminal law power and all the changes you have mentioned. The best way to regulate the capital markets
is to use administrative and civil powers much more often and more effectively, to be more proactive in investigations,
and to pass laws that will allow deep pockets to take responsibility if their advisers are engaged in rogue activities.
The Canadian capital markets are probably the most heavily regulated aspect of Canadian society. I believe that we
can do a more effective job of policing them if we do not resort to criminal sanction, which I do not believe deters my
clients or the kinds of people that I represent when they are accused of offences. I believe you can do a far more
effective job taking away livelihoods, removing people from the market, taking away their money and giving it back to
investors, disgracing them, ruining their reputations, and moving on with the next case.
We must understand that the use of the criminal sanction, where you have a sophisticated fraud, is a long
prosecution. The Bre-X case, which I defended, took 11 years. It is a long, complicated process. Judges are ill-equipped
to deal with securities matters. I have had judges ask me to explain to them what is the difference between a convertible
debenture and a simple debenture?
If you are to develop an effective enforcement program, you want to have specialized tribunals with specialized tools
to deal with these particular problems. That may not be the right thing to do for welfare fraud or other kinds of frauds
outside the capital markets — I will let my friends speak to that — but I strongly believe that trying to use these tools in
the area in which I practice is not the best way of going about solving the problem to reach the goals we all share.
Senator Boisvenu: You were opposed to abolishing releases at one-sixth of the sentence for this type of criminal?
Mr. Groia: I do not have a view about the parole aspect of the amendments because my interest is in the detection
and prosecution of these cases. I am not a student of the parole and probation system. My friends may be able to speak
to that subject.
Senator Boisvenu: I am going to ask my question differently. In the public's mind, having the privilege of being
released after serving one-sixth of the sentence after committing the kind of fraud that Vincent Lacroix did is
scandalous. The Lacroix case, I believe, involved $150 million and nearly 1,000 investors.
You operate in that market; every week you might meet people who have the potential to defraud. Do you think the
government is making a good decision by eliminating the possibility for those people to enjoy the generosity of a justice
system that allows them to be released after serving one-sixth of a sentence of 10 or 12 years, after defrauding
thousands of people?
Mr. Groia: Again, my experience is that the use of the criminal process — whether it is a one-sixth reduction, a one-
third reduction, or no reduction — for the people who engage in market fraud, insider trading, or market manipulation
— that is, the area in which I practice — does not deter them because they are not making their decisions based on the
chance that they may go to jail for 14 years. Under the sentencing guidelines in the United States, you would serve 95
per cent of that sentence. Under Canadian sentencing guidelines, you would serve perhaps a sixth.
Senator Boisvenu: Ultimately, your reasoning could be applied to a murderer. Our justice system is based on the
principle that a sentence is imposed for a crime committed. It is what is called ``paying one's debt to society.''
Correct me if I am wrong, but it is as though you were saying that we should avoid imposing prison sentences for
this type of criminal because that is not what will prevent them from defrauding. Ultimately, I could say that we should
avoid sentencing a murderer to 25 years without parole because it will not prevent him from murdering. I do not know;
I am trying to understand your reasoning.
Mr. Groia: I cannot usefully contribute to the use of jails for people who commit murder. It is not an area in which I
have any expertise or experience.
I can say unequivocally that if we share a common goal to reduce the amount of misconduct in the stock market,
using the criminal law is the wrong way to go about it. In my experience, once you use the criminal law, you end up
getting a result that is not the result that you hoped for. In the United States, where the sentencing guidelines are much
more dramatic than in Canada, Mr. Kozlowski went to jail for 95 years; Mr. Madoff went to jail for over 100 years.
Those men will never get out of jail again. There is absolutely no evidence to support the conclusion that that means
that the next person who comes along is less likely to engage in the same activity in the capital markets.
I cannot help with whether sending murderers to jail deters someone else from committing a murder, but I can tell
you that sending insider traders to jail has no effect on future conduct by other people who are going to do the same
Senator Boisvenu: That was not my point. Do you agree or not? Vincent Lacroix committed a serious crime. This is a
man who a stole the pensions of thousands of people in Quebec, people who were forced to go back to work at 60 or 65
years of age because they no longer had incomes.
I will ask you the question again. For a society that is subject to the rule of law, that relies on punishment when a
serious crime is committed, are we not entitled to exercise this right as a society and to tell a criminal: ``Your crime has
had an impact; there is a sentence that is attached to that?'' Whether or not that has an impact on his rehabilitation?
``You committed a crime and that crime is punishable.'' Are you comfortable with that principle?
Mr. Groia: Absolutely; I feel comfortable with that principle. I feel comfortable that under the current legal system,
Mr. Lacroix was given the sentence. As I recall, Judge Wagner would have sentenced him to more than 14 years if the
maximum was greater. Perhaps this committee may want to look at whether the 14-year maximum is sufficient.
From a broader perspective, you are being asked to make changes to the laws as they now exist. You do so because,
in your judgment, you believe they will be more effective in helping us police the capital markets. My simple suggestion
is that these changes will not help you do so.
Now, debating whether Lacroix got the right or the wrong sentence, those are interesting policy choices. I am happy
to come back on another occasion and address those as well. My concern remains that this is not an improvement on
the current regime.
We must compare where we are today, which is serving one sixth or perhaps one third on a mandatory remission
basis, to the U.S. experience, which is serving 95 per cent of your sentence. It is an interesting choice in the context of
what that means for society as a whole, the jail system, and the capital markets as a whole.
I believe I am supported by the literature in my belief that the American system is not necessarily a better way of
going about policing the marketplace than the one we have. To repeat, I am not suggesting that we are perfect, but
many policy choices go into how long Mr. Lacroix was sentenced for and whether he should have been out. I saw the
same pictures in the Gazette that you saw of him going from custody to a halfway house.
The Deputy Chair: Mr. Groia, you have tremendous on-the-ground experience in capital markets and the issues.
You said to Senator Boisvenu that the Criminal Code is not the way to go in matters of capital market frauds, that
having a national securities regulator would be the way to go, and I quite agree with you. However, that is not the
matter before us now.
You state your position in such absolute terms, as if the Criminal Code has no involvement in this process. Perhaps I
misunderstood you. It seems to me that, as with most things in life, there is a balance. All the points you make about
the need for a national securities regulator and a more cohesive national approach makes eminent sense, and I believe
that the government agrees with you on that.
However, would you not agree that there is that component and that it should continue to be strengthened, and also
that the Criminal Code does have a role to play and that, in that regard, the Criminal Code provisions should be
We continually refer to mandatory minimums and whether they deter future criminal conduct. We have had many
discussions about the effect of mandatory minimums. Section 718 of the Criminal Code states that the objectives of
sentencing include deterrence, but that is only one of seven objectives. There is also the denunciation of unlawful
conduct. It is clearly a societal statement that that behaviour is wrong and must be severely denounced.
Another objective is to separate offenders from society, where necessary. In the case of offenders committing the
types of crimes we are talking about here, I doubt that any of us would disagree with that worthy objective. Another
objective is to promote a sense of responsibility in offenders and an acknowledgment of the harm done to victims and
to the community.
As we have in the past and I am sure will in the future, we can debate the extent to which deterrence results from
mandatory minimums. However, I suggest that there are other sentencing objectives that are equally important, and I
believe they would be served by Bill C-21.
Did you overstate your position that the Criminal Code seemingly has no role to play in dealing with these types of
Mr. Groia: I hope I did not leave the committee with that impression, because that is not my view. There is, as you
pointed out, a need for balance. There is a range of remedies available.
My background allows me to bring to this discussion the practical reality of running an enforcement program to
protect the capital markets. For example, insider trading has only been a criminal offence for a handful of years. Yet,
for many years I successfully prosecuted insider trading cases in the provincial court. We sent people to jail, levied
substantial fines and prosecuted them in administrative tribunals. I led the Ontario side of the prosecution of former
premier Bennett in British Columbia when he was tried for insider trading.
My proposition is that an enforcement agency makes a number of choices. If we have a criminal law sanction
available, there are instances where it needs to be used, particularly for repeat offenders or for those who, by their
conduct, demonstrate that they are not otherwise governable.
We will not improve the enforcement of the capital markets by adding a mandatory jail sentence. Ninety-six per cent
of all security prosecutions in the United States by the SEC take place outside the criminal courts, yet the perception is
that the Americans send everyone to jail.
When looking at the overall objectives of an enforcement program and the use of the criminal law power, keep in
mind that it is a relatively limited power and a fairly blunt instrument.
If I have left you with the impression that we should do away with it, as someone who makes his living defending
these cases, I regret that.
The Deputy Chair: Perhaps I overstated my reaction to what you said. We are probably in agreement that the
Criminal Code has a role to play and we must find the appropriate balance to get the result we all want. There is work
to be done on both sides of the equation, whether administratively or through the Criminal Code.
Earlier Mr. Downes made reference to the provision in the bill that would allow the court to make a prohibition
order that would prevent the offender being employed or volunteering in a position that would involve having
authority over real property, money or security. I would think the obvious intent of that is to minimize as much as
possible offenders reoffending. I am sure we all agree with that objective.
Mr. Downes questioned the effectiveness of the section, saying that perhaps the wording is too vague. I am not so
sure of that myself. It refers to someone being prohibited from having authority or control over real property, money
or security. I do not know that I find that terribly vague.
What is your sense of the appropriateness of that prohibition order that the court could make?
Mr. Caylor: Clearly, the sentencing judge would be able to balance. The comment that was made was that if a
person is given that prohibition, they will not be making money to pay any restitution order. The sentencing judge
must weigh the importance of the person not having access to those types of jobs in order that he or she will not create
more victims with the fact that the person may not be able to make money to pay back a restitution order.
I think it is an appropriate option for the sentencing judge. The judge must use discretion to decide whether it is
more important that the convicted person is able to work in order to pay a restitution order or that he or she have no
further opportunity to steal from other people.
Mr. Groia: I agree with Mr. Caylor. As a practical matter, in the capital markets, the first thing that happens to a
person accused of a market offence is that he is kicked out of the market. He is given no access to the marketplace. He
is denied the ability to trade and engage in transactions. To the extent that this would provide a similar prohibition
order outside the market context, it is a necessary part of an overall enforcement approach. It is superfluous to the
market case because I have never had a client convicted of a criminal offence related to market activity who has not
been totally removed forever from the capital markets.
The Deputy Chair: The impact of the bill would go beyond capital market fraud. There are other types of fraud.
Mr. Caylor: Bill C-21 is mirrored in the proposed national regulator act. In thinking of the balancing and amending
carried out in this bill, keep in mind that the same wording is included with respect to the criminal provisions of the
proposed national regulator act.
The Deputy Chair: Gentlemen, thank you for your fascinating, excellent quality presentations. We will now hear
from our final panel of the day.
Senator Joan Fraser (Chair) in the chair:
The Chair: Colleagues, we resume our study of Bill C-21, An Act to amend the Criminal Code and to make
consequential amendments to the National Defence Act. For our last panel of witnesses, we are pleased to welcome
again, for the second time in 24 hours, Sue O'Sullivan, Federal Ombudsman, Office of the Federal Ombudsman for
Victims of Crime; and also two witnesses who have made a great effort to be here on very short notice — and I am sure
all colleagues will join me in thanking them for that — Simon Roy, Professor; and Al Rosen, Principal, Accountability
Research Corporation. We thank you for the effort you made to help us in our work.
Sue O'Sullivan, Federal Ombudsman, Office of the Federal Ombudsman for Victims of Crime: Senators, thank you
for inviting me here to speak with you and to share our views on Bill C-21, An Act to amend the Criminal Code.
Before speaking directly to the content of Bill C-21, it is important to talk about the true nature of the crime we are
discussing and to understand the scope of the problem.
As late as this morning, charges were laid in an alleged Ponzi scheme, where as many as 40 seniors may have lost
their life savings. Victimization by white-collar crime is not only financially devastating but may essentially shatter the
lives of all those affected. We have heard from victims who have suffered trauma, including stress, fatigue, shame and
humiliation, and who feel as though they are living through a nightmare. Clearly, white-collar crime has a significant
impact on victims.
I am encouraged that the government is taking some steps to address this issue. While I generally support the
contents of Bill C-21, I encourage the government to engage in a larger discussion about how to meet the needs of
victims of financial crime and indeed support all victims who face a financial burden as a result of crime.
First I will address the components of Bill C-21 that have an impact on victims. Time and again, victims have told us
that they want the person who harmed them brought to justice. A minimum sentence of two years would not only
promote a sense of accountability to the victim on behalf of the offender but also, in my opinion, would act as a public
denunciation of the devastating impact financial crime has on unsuspecting and trusting victims. For this reason, we
support the introduction of a minimum sentence of two years for fraud over $1 million.
In recent cases of financial crime in Canada, we have seen a large number of individuals victimized by the same
person. Moreover, some of these victims were targeted due to the fact that they were elderly or vulnerable. The
introduction of additional aggravating factors, including that which recognizes victims' personal circumstances,
including their age, health and financial situation, will serve to contribute to a sentence that is appropriate to the crime
Concealing and destroying records relating to the offence also limits the ability of investigators to trace the monies
actually belonging to the victims. Concealing records minimizes or eliminates the ability to recover their money and
adds to the severity of the crime. I therefore support the inclusion of these aggravating factors for sentencing.
With regard to the prohibition order, victims have told our office that they do not want what has happened to them
to happen to anyone else. In the case of financial crime, victims want the criminal justice system to stop the offender
from going on to financially and emotionally devastate other individuals, families and communities. Accordingly, I
support the addition of the discretionary prohibition order as means of preventing further victimization.
The next component is the clause with regard to the use of community impact statements. This is a step forward for
victims because community impact statements are an important method or opportunity for recognizing the impact of a
crime on a community and not just on an individual. While this bill is definitely a step forward, more needs to be done
in real terms with victims with regard to community impact statements.
This being said, we would recommend that Bill C-21 propose that a judge may consider a community impact
statement but that the judge be required to consider a victim impact statement.
Community impact statements are an excellent initiative, so long as they are given the same weight as individual
victim impact statements in terms of requiring judges to consider them. If used in this manner, I would encourage the
government to codify the opportunity for these statements in respect to more types of crime.
Last, but perhaps most important, I would like to speak to the provision that requires judges to consider restitution
for victims of fraud. While this bill is definitely a step forward, more needs to be done in real terms for victims with
regard to restitution. I am aware that restitution is already provided for in section 738 of the Criminal Code, although
it is not used as often as it should be. Although this bill may lend some clarity to a judge's consideration of restitution
in sentencing, which I support, in many cases it will not facilitate the victim's access to restitution in any meaningful
The issue of restitution for victims of crime highlights the fact that the costs of crime all too often fall to innocent
victims. In Canada, in a 2006 study, it was estimated that victims bear 67 per cent of the costs of crime, a number that
is totally unacceptable.
We know now that the financial burden of crime on victims can be devastating. This is true not only for white-collar
crime but for all victims. All victims suffer, whether it is their inability to work, mounting debt, legal costs or
counselling, and I could go on.
It is often said that criminal courts are not and should not be collection agencies. While I understand the realities of
the court systems, I also understand from victims the realities of the financial fallout from crime. Restitution is not
ordered as much as it could be. When it is ordered, it is difficult to access the money when the offender is generally
insolvent or apparently insolvent, with monies hidden or distributed. As a result, victims are provided the option of
pursuing civil litigation, which for many is timely and cost prohibitive.
From a victim's perspective, it is easy to come to the understanding that the system does not address their needs for
financial reparation. All victims deserve to be supported and it is for this reason that we need to rethink the ways in
which we can meet the financial needs of victims of crime.
I do not claim to have all the answers. I know that as a society, we do not want victims to bear this level of financial
burden. We need to engage in a dialogue that asks those important questions. How can we do better for victims and
how can we ensure that they have access to the financial supports they need?
In closing, I support Bill C-21, but I also recognize that in addition to this bill, we will need to do more collectively
for victims. A fresh approach to meeting victims' financial needs will require meaningful and productive dialogue and
engagement from many different groups, including victims. It is time to innovate rethink the way we support victims of
I would be pleased to answer any questions you may have.
Al Rosen, Principal, Accountability Research Corporation: I received only yesterday the request to come here today.
There was no chance to prepare a particular document and then have it translated. However, we wrote a book called,
Swindlers: Cons and Cheats and How To Protect Your Investments From Them , which was published four months ago
by Madison Press Books. It will give most of the background that I cannot provide.
I have worked many times with Mr. Groia and a few times with Mr. Caylor. I have disagreements with both in what
they had to say. I do not think some of the facts that were cited to you in the previous session are facts. I will try to
answer those in questions.
In general, I support a step forward, so to speak, with this bill. I understand some of the quibbling over a few things.
I also share your comments that much more has to be done. Anyone who thinks that there is not a problem in Canada
is far off base. Let me explain. Accountability research is the one organization we have that does analyses of various
companies and sends out the buy, sell, hold, or, in the case of Nortel and the business of income trusts, we said: Run as
fast as you can, as far as you can and as early as you can. If you check our track record, you will find that we called
many of these failures years in advance.
For example, two years ago, I spent 21 days in court on the Castor Holdings bankruptcy case. People talk about how
long it takes to get justice in Canada. I was hired in the summer of 1992, and here we are 19 years later, and we still do
not have a decision. There are some sickness problems with one of the judges and so on. Aside from all of that, these
cases are endless. We recently settled a fraud case that went on for 24 years, missed by the auditors.
I have done some of the Alberta bank failures, especially Northland Bank; Victoria Mortgage; Shamray Group, in
part; Hercules Management; Confederation Life; Standard Trust; and several in Montreal. I have gone across the
country to testify endless times. In that sense, the frustration built up with us that nothing was happening in so many
areas it led to the book being written.
The other part I want to stress, which is maddening for us, is that Canada adopted International Financial
Reporting Standards, effective January 1, 2011, with virtually no debate in this country. This is not only a federal
problem but also a problem right across the country. The idea was to have the IFRS be part of a world method of
financial reporting. It is nothing of the kind. It was sold to the governments that it was principles-based; but lots of
luck finding the principles. It was to be on a comparability basis; but it is not that at all. For example, in Canada a real
estate company can have its building and say it is the head office building. It will be reported this year in financial
statements right across Canada at cost, which might have been 30 years ago. Others, such as RioCan were permitted a
one-time write-up of $1.6 billion. The Brookfield Group will adjust their numbers every quarter. We are well into a
disaster, and I am being very polite in calling it ``a disaster.'' Yet, I do not see this bill coming anywhere close to
addressing what I see as a major catastrophe over the next several years.
Anyone who thinks it is easy to find Ponzi schemes, forget it. I know from our long client history that very few of
these frauds get reported to the police. Using those statistics is no starting point whatsoever. I have had this problem in
testifying before both Senate and parliamentary committees: People keep saying stick to the compartment that we are
dealing with today. However, you cannot do that when you are talking about securities frauds. Mr. Groia can say all
he wants about things getting better; but there is no hope they are getting better, and we know that from the number of
emails we receive; the number of cases we have; and the frustration in dealing with the courts. I did not hear mentioned
in the previous session that there are such things as class actions. For the most part, we are getting the restitution
through class actions, through the civil procedure and through what they call ``a balance of probabilities that there is a
problem.'' Going to the criminal courts requires proving intent and beyond a reasonable doubt.
I understand the point being made that parts of the bill are helpful for other purposes. If we are kidding ourselves
for one second that this is anything other than a drop in the bucket, we are in for very serious problems. That is where I
come from. I will be glad to elaborate. We did not write the Swindlers book because we thought Canada was
Simon Roy, Professor, as an individual: This is a very important subject for me, particularly because I am a professor
in a crime program at the University of Sherbrooke and am a lawyer. There has been considerable discussion on this
topic for a number of years and I must say I am pleased to be appearing before this committee on this matter.
Generally speaking, the bill being introduced is a step in the right direction. Obviously, we have not yet reached our
destination; this is only one step. I would have liked to see more measures concerning the certainty of punishment
rather than the severity of punishment. However, I understand that, in absolute terms, if we at least work on severity,
that is already a start, but we must also work on the certainty of punishment and thus ensure that people are caught
when they defraud.
The bill generally reflects a certain mistrust of judges, and I find that hard to understand. I believe the houses of
Parliament should have a positive dialogue with judges. When I see a minimum sentence imposed here — which
suggests that judges find it hard to impose the appropriate sentence in certain cases — and obligations to draft specific
points in judgments in two places in their reasons, I get the impression there is a certain mistrust of judges. That
perhaps should be verified.
As for perhaps more specific points, let us first consider clause 2. It has to be understood that the two-year sentence
means automatic penitentiary time. That seems harsh to me, and I believe a term of less than two years could have been
set and judges could have been allowed some discretion because penitentiary may not be appropriate in certain cases.
Among other things, I am thinking of the case of accomplices.
It must be understood that we are not just talking about the individual who is charged with fraud; there can also be
an accomplice. So the individual who simply helped make the fraud possible — by forging a document, for example —
could also be subject to the two-year sentence. That seems harsh to me.
Another possibility is the case of the $1 million figure. It must be understood that, in criminal law, the $1 million
value does not represent the victim's loss. In fraud cases — and we see this in the Théroux judgment, the leading
Supreme Court fraud case — the risk of privation is sufficient. So when you talk about a total value of $1 million, it is
possible that the victim, very fortunately, may not have suffered any loss, but that the value of the subject-matter of the
fraud may nevertheless have been greater than $1 million in the eyes of the law. So one must pay attention to the
notion of subject-matter of fraud here; it does not necessarily refer to the victim's loss. I would perhaps have liked it to
be limited to the loss suffered by the victim or to see the two-year sentence changed to reflect that.
My main fear, again with regard to clause 2 of the bill, is that there will be a plea bargain between the Crown and the
defence. I think defence counsel will approach the Crown prosecutor and say that he is ready to plead guilty to an
offence other than section 380 of the Criminal Code to avoid the two-year minimum sentence or that he is ready to
plead guilty provided the charge is fraud under $1 million. That might possibly result in more negotiations, which can
be positive, because that will be conducive to a rapid resolution of cases, but at the same time negative because the
Crown attorney might be tempted to go for easier convictions and to get around the minimum sentence.
As I said earlier with regard to clause 3 of the bill, I do not think there is any point in requiring the judge to record
proceedings. Why? Here the judge is being asked to record the aggravating factors he has considered, and I ask myself
the following question: if he forgets to do so, will that be a ground for appeal? What we ultimately want is for the
sentence to be tough enough, not for the judge to have to go through specific formalities. So is it really worth the
trouble to require the judge to record proceedings?
I was pleased to see that aggravating circumstances have been added, but one has been forgotten, one that is
important but in fact is the main one, and that would be fraud involving public funds. We know that fraud over $1
million is often committed against the government. In case law, that is a very significant aggravating factor and it
would send the clear message that defrauding the government is fraud, stealing is stealing, even if it involves public
money. We especially see this in tax matters. People get the impression that, when they engage in tax fraud, it is not
serious. There have been cases in the province of Quebec, involving the businesses of Tony Accurso, in which the issues
were resolved from a tax standpoint, even though these were very significant frauds. I would have liked the aggravating
circumstances to include the fact that the funds come from the public. You were talking about Vincent Lacroix and his
9,200 victims, but, when someone defrauds the Government of Quebec, it does not concern just 9,200 victims, but
rather seven million victims. I do not think that should be forgotten.
With regard to clause 4, France has already shown the way on this. In French law, a victim may be a civil party to a
criminal trial and claim compensation in the course of that criminal trial. There are significant benefits to this, the main
one being that this avoids overlapping trials as it is possible to conduct only one proceeding. The disadvantage, in my
opinion, and an important one, is that the victim is not necessarily well represented by counsel in making his claim
because the government prosecutor's role is clearly not to represent the victim, and the prosecutor does not have the
time to ensure that the victim makes all the appropriate demands. Some consideration should therefore be given to a
support system for victims wishing to file claims under criminal law.
I do not know whether organizations such as CAVAC, which is Quebec's Centre d'aide aux victimes d'actes
criminels, could provide that support, but victims definitely will not be able to complete the form provided in the
Criminal Code in a completely satisfactory manner. It is important to help victims make the most comprehensive
claims possible, or else they will, in any case, have to go back to civil court after the fact. This is a step in the right
direction, but victims will have to be provided with the resources to really take advantage of it.
The prohibition from holding employment is a very good idea, but will it be possible to enforce it in practice? The
prohibition from driving while impaired is an obvious parallel, except that you need a licence to drive and police
officers do some monitoring of that. Who will do the monitoring here? The idea is good, but I am not sure that it will
yield very effective results in practice, unless there is a verification procedure.
As regards the community statement or community impact statement, I think that is an excellent idea. Earlier the
Chair read the various criminal law objectives and one of those objectives was denunciation. I believe that enabling
victims to speak before the judge is one way to give them power and the feeling of being heard, and even if the sentence
is not what they hoped for, simply having the opportunity to speak to the judge is very important.
In conclusion, with your permission, I believe that Bill C-21 is a good thing, but there are nevertheless things in the
Criminal Code that could have been used instead and that can be used instead. Among other things, I am thinking of
section 462.37 of the Criminal Code, which provides that, for crimes that generate proceeds of crime, which is the case
of fraud, there may be forfeiture or, if the money has been spent, a fine instead of forfeiture. Where the proceeds of
crime are worth $1 million or more, a consecutive prison term of five to 10 years may be substituted for a fine. This is a
very good measure because the convicted individual is assessed a fine and knows that he can go to prison for five years
if he does not pay; that puts enormous pressure on him to reimburse the victims, to put the money back into the
I believe we would do well to use section 462.37 of the Criminal Code. It is currently not being used, simply because
Crown prosecutors are overworked and do not have the time. But it is a tool that exists.
I would not like Bill C-21 to have the effect of taking the money in order to do more punishment and less
prevention. I believe it is important to put a lot of eggs in the prevention basket. Mete out punishment, yes, but what is
important is really prevention because, as we were saying earlier, criminals engaged in fraud conduct a cost-benefit
analysis before committing their acts. The question that arises is not: What sentence will I get if I get caught, but rather
am I going to get caught?
One final detail and I will finish with that. Fraud is serious; it is significant; it is good that we are adding a minimum
sentence, but other offences should not be forgotten. If I or my children are victims of sexual assault, I consider it quite
curious to recommend a minimum prison term of 45 days for sexual touching involving a child, but two years for fraud
over $1 million. There is a lack of proportion here and that sends the following debatable message to society: even
though it is $1 million, it is much, much more important than the sexual integrity of our children.
There is a lack of proportion in the sentences, which could be corrected by reducing the minimum term for fraud.
The Chair: Thank you very much. The three of you are providing us with a lot of food for thought.
Senator Poulin: Ms. Sullivan, Mr. Rosen and Mr. Roy, thank you for your excellent presentations.
Ms. O'Sullivan, I would like to know more about your mandate as Canada's federal ombudsman for victims of
crime in order to have a better understanding of the context of your presentation.
Ms. O'Sullivan: Thank you for the question. Normally, I start with a better explanation. I was reflective of the time
Our mandate has several portions. One is that we can review complaints against federal agencies, if victims of crime
have complaints. The other is through the Minister of Justice. I can make recommendations to policy and legislative
changes in relation to victims of crime and also identify new and emerging issues.
If you go to the actual components of the mandate, one that is not written but which certainly the Government of
Canada created was to provide a voice to victims. I am here today to bring the voice of victims to the table and amplify
their issues, concerns and needs. That is a short version.
We can help victims of crime individually. If there is an individual complaint and if they contact our office, it does
not fall within our mandate, but we can refer. As you are aware, many services that are applied directly to victims are
provided at the provincial, territorial and local level.
The other way we do so is collectively, by bringing that voice to many of the issues, including proposed legislation.
Senator Boisvenu: Thank you for your presentation, which was very interesting. We could definitely spend the
evening discussing issues such as compensation. So it is that point that I am going to focus on more particularly.
Mr. Roy, as you said, France has an enviable mechanism in the area of criminal proceedings in which they
simultaneously conduct civil proceedings, as a result of which, when a criminal is convicted, the court simultaneously
sentences him to compensate his victims. A national compensation fund is provided for if the criminal is insolvent. In
France, the government provides a lawyer to support the family.
I hailed this concept of compensation in this bill because, when an act includes compensation for victims, that means
that we are taking victims' interests into account and granting them the right to compensation.
I would like to know whether this notion of compensation should be included in all aspects of the Criminal Code in
a future Criminal Code reform — because as is increasingly being said, the Criminal Code has gotten quite long — in
order to eventually offer better support for victims at trials. As we know, the Crown prosecutor is not the victim's
counsel, but rather that of the government, whose interests he or she represents. While the government will often
provide support for the criminals, through legal aid, it does not do the same for victims.
I would like to have your views on an eventual in-depth review to include the notion of victim compensation in the
Criminal Code wherever harm has been caused.
Mr. Roy: Thank you. That is a very interesting question, but one that unfortunately involves three major problems.
The first is clearly a problem of joint jurisdictions. Whether we like it or not, the Canadian state is a federal state and
compensation for victims is a provincial jurisdiction. Consequently, compensation is possible under section 738 of the
Code, but within very strict limits. We could not have France's system as it stands; some changes would have to be
made. That could be improved, yes, but I believe we could never completely replace civil proceedings unless the
Constitution is amended. I do not think we have gotten to that point.
The other problem is even more serious, and that is the insolvency of the accused. It is possible to go after money in
only very few cases. In fact, prison terms tend to accentuate the insolvency of the accused. So that is another big
problem. It does not prevent us from improving the compensation process, but no compensation will be possible in
many cases quite simply because no money is left.
Lastly, the final problem involves legal differences among the provinces. Where the criminal law grants
compensation, it is assumed that it will do so under applicable provincial law. The applicable law for victim
compensation in Quebec is not the same as that in Ontario or British Columbia. Consequently, in the circumstances,
this may become a problem for the federal government, and the federal government obviously cannot make specific
compensation rules because that would really violate the shared jurisdictions. This definitely poses a problem. Perhaps
a simpler way to resolve the situation would be to reach an agreement with the provinces — and that is definitely
possible — so that a criminal conviction considerably facilitates subsequent civil recourse, perhaps in the form of
facilitated evidence or a provincial provision to the effect that, when a person has been convicted in criminal court,
there is automatic recourse to civil remedies which is granted subject to determination of the amount of compensation.
So there are definitely things that could be done, but there are constitutional and factual limits, such as the
insolvency of the accused, which are significant in this instance.
Senator Boisvenu: I am going to put both of you on another track: in the health field, the provinces provide services
directly to citizens. Canada subsidizes the provinces in part for services, which enables Canada to require that each
province provide a minimum service level. And if the provinces want to provide more, they have to fund themselves.
Victim aid is a provincial responsibility and criminal assistance under incarceration legislation is a federal
responsibility. Consequently, depending on where you commit a crime in Canada, if you are serving your sentence at a
federal penitentiary, you will have the same services in all provinces.
Four provinces currently provide no services to victims, four offer poor service and four more deliver good services.
If we adopted national standards for victim assistance to say that Canadian citizens, from whatever province, must
receive a minimum level of service and that the federal government will subsidize a portion of it, would that be one way
to get around those obstacles?
And Ms. O'Sullivan, in your view, would that be an approach that you as ombudsman could advocate to the federal
Ms. O'Sullivan: I will add to the obstacles Mr. Roy has spoken to. We talk about access to restitution. You talked
about the ability of the accused to pay because restitution is paid by the offender. Victims lack information about
restitution or are unaware of that option. A victim must pay the costs of the enforcement. In other words, if they will
need to go down the civil road to collect, how do you collect? It is a cumbersome application process. There may be
some reluctance to order the request. It may not compensate the victim adequately.
The other is simple. If it implies your recourse is civil court, that usually requires legal representation in the civil
courts. Even the victims' ability to finance that is a problem. It is difficult to even have an understanding of the
complex systems we have in place, putting that burden again on the victim in that if it does not work here and the
offender cannot pay, you can go to civil recourse.
There were a lot of good points raised by the previous panellists on some of the challenges that exist there.
Senator Boisvenu, you were talking about it being time to have a national dialogue about how we can rethink and
support all victims. I was hoping that came out of my comments, also.
As you know, we are here today to talk about Bill C-21. We have had many conversations about the financial
impact to all victims, no matter the crime. You might have to take time off work. Counselling might be required. I
could go on and give you the list. As I said, 67 per cent of this cost is borne by victims, according to a study. We need to
have this dialogue and look nationally. I would argue that we at all three levels of government should start a dialogue
respecting each others' mandates and sometimes the uniqueness?
You pointed out another area. In some areas, we have criminal injuries compensation. There are different processes
in different provinces. Some do not have them. There are inconsistencies about what is available to victims of this
An important statement that could come out of this committee is the need to have that national discussion. Along
with the colleagues, how can we come up with frameworks that will allow us to recognize some of the challenges and
uniqueness aspects of different communities but start to look for that level playing field for victims.
Mr. Roy: What you are proposing would indeed be very good. However, I am concerned about two things. First,
you draw a very good analogy with health because the best way to deal with health problems may not be to provide
better services to people who are already sick, but rather to ensure first and foremost that people have good health
habits. And I believe we can draw a parallel here by saying that the best way to deal with fraud may not be to
reimburse people who have been defrauded, but to train them so they can avoid being defrauded and to put more
resources into fraud detection.
So, yes, in an ideal world, I entirely agree with you; since money is scarce, it would be better to invest it in prevention
to ensure people do not become victims.
Reimbursing the victim somewhat erases the crime — I say ``somewhat'' because the crime is not completely erased.
For a person who is not a victim, since the crime has been detected, the impact will be non-existent.
It is important to invest in prevention. We must of course help victims, but we must not reduce funding for
prevention because it is already inadequate. The problem here is not a legal one. We are not lacking laws. We are
lacking people in the field to enforce them. That is the problem in my view.
Senator Boisvenu: I will conclude with one statistic. For lack of financial resources, less than one per cent of victims
in Canada sue the criminals who have victimized them.
Senator Carignan: I listened to our three witnesses attentively and I noticed that their comments had one point in
common. In different words, you expressed your agreement with the principle of the bill. That is a positive factor, and,
in your view, the bill seems to be a step forward. For Ms. O'Sullivan, it may even constitute a number of steps forward.
First of all, I am delighted by that fact.
From a technical standpoint, Mr. Roy, my question concerns clause 2 of the bill regarding which you referred to the
$1 million figure.
You also said you regretted the fact that the issue of public funds was not considered. I would remind you that the
title of bill is Standing Up for Victims of White Collar Crime. The government wanted to place the emphasis on
protection for private investors and people in need, and not to divert the debate onto issues that would concern the
The total number of offences in question exceeds one million. You seemed to say that it might be difficult to
determine the purpose. Could you clarify that point?
Mr. Roy: First of all, with regard to your comment, I believe it is important to protect small investors. This is the
time when people complete their income tax returns — and I prepared mine yesterday. I cannot help but think that,
every time I send money to Ottawa, it is because someone somewhere has abused that money. I feel personally affected,
even when the federal government is the victim of fraud.
Senator Carignan: To a certain degree.
Mr. Roy: The message that should be borne in mind is that you act toward the government as you act toward others.
When the government is a victim, I am also a victim to a certain degree.
As regards the purpose of the fraud, it is not necessary to have suffered a loss to be a victim. The case law states that
the risk of loss is enough.
Let us consider the example in which, for all kinds of reasons — and we have seen this in certain decisions —, the
victim has not suffered a loss. This happened with the Sisters of Charity in Montreal, or the Sisters of the Good
Sheppard, in the central market affair. By the greatest miracle — and the fact that they were good sisters probably
helped —, they suffered no loss, or very little.
Fraud does not depend on the loss suffered. From the moment a person is exposed to a risk of loss, there is fraud.
The purpose of the fraud is the risk.
In the Supreme Court's decision in Théroux, the individual sold condominiums and said that the deposit paid was
guaranteed, which was not the case. So there was clearly fraud. If the individuals had lost nothing, in view of the fact
that the condominiums were built, there could nevertheless have been fraud over $1 million. Fraud therefore does not
involve a loss of $1 million for the victims.
Senator Carignan: The purpose of the offence is in question, in Théroux, determines the purpose of a fraud as not
necessarily being the equivalent of the proceeds of the fraud.
Mr. Roy: No, but the risk.
Senator Carignan: Based on that judgment, will the courts be able to determine the meaning of this clause?
Mr. Roy: To give you an overview, there are two types of fraud in Canada: fraud under $5,000 and fraud over
$5,000. Clearly, what counts in those cases is not the victim's loss, but the risk of loss. In my view, the same reasoning
will be applied. If the fraud has caused no loss, but the potential loss represented $1 million, we are talking about fraud
over $5,000. Consequently, I assume the same reasoning will apply.
Senator Carignan: The other question concerns section 462.37 of the Criminal Code, to which you referred. That
section seems to apply to criminal organizations. We have to be dealing with criminal organizations for there to be
forfeiture of proceeds. Under subsection 462.37(2.02), the offences concerned are the following: a criminal
organization offence punishable by five or more years of imprisonment, and drug offences.
When we say white collar crime, we are not necessarily talking about situations in which we are dealing with
criminal organizations within the meaning of the Criminal Code. So I have a little difficulty with that term.
Second, you talked about the forfeiture of proceeds of crime. In my opinion, proceeds of crime come from an illegal
or illicit activity. For example, if I sell drugs and derive an income from that, that constitutes proceeds of crime. If I
commit a fraud against someone by embezzling money, that does not constitute proceeds of crime because the money
already existed; I merely transferred it. You may say to me that that money constitutes proceeds because it resulted
from a criminal act. However, I would not necessarily consider it as proceeds of crime within the meaning of section
462.37. I would like to hear your comments on that point.
Mr. Roy: Both your questions are interesting. The part concerning the proceeds of crime is a recent part of the
Criminal Code, which could be made more explicit.
Forfeiture of proceeds of crime does not apply to organizations only. Three types of forfeiture are provided for in
section 462.37. The first, which is applicable in this instance, is set out in subsection (1). It applies in cases where a
person is convicted of a crime and the court is satisfied that that person obtained proceeds of crime as a result of that
crime. The person does not need to belong to a criminal organization.
Subsection (2) provides for the possibility where an individual is convicted and, without a connection being made
with his behaviour, it is known that there are proceeds of crime. Subsections (2.01) and (2.02) to which you refer
outline the third method of forfeiture, which is the reverse onus of proof in the case of gang-related crime. If you
belong to a criminal gang, the assumption is that you have proceeds of crime. That condition obtains for subsection
(2.01) only, not subsections (1) and (2). In addition, at the end of subsection (2.01), there are paragraphs (a) and (b),
but they do not apply to subsections (1) and (2).
Senator Carignan: I will have to reread those sections because they seem very interesting.
The Chair: I am sure they are interesting. However, other senators are waiting to ask questions.
Senator Carignan: I have another question.
Mr. Roy: With your permission.
Senator Boisvenu: Your question is important.
The Chair: I am sure of that, but we all have other questions.
Senator Boisvenu: The question is important for me.
The Chair: Yes.
Mr. Roy: With your permission, Madam Chair, the answer with regard to proceeds of crime is found in section
462.3, which states:
``proceeds of crime'' means any property, benefit or advantage. . ., obtained. . . directly or indirectly. . . the
commission. . . of a designated offence. . .
Fraud is clearly contemplated in this case. If the property is found, it will be returned first to the victim. That does
not prevent this part from applying. In fact, this part may be a very strong incentive for the accused to return the
So the accused who has hidden the money from the fraud somewhere could very well, under the threat of forfeiture
of the proceeds of crime and a fine by default, suddenly find the money.
Section 462.37 provides for a minimum five-year prison term, which can be extended to 10 years consecutive to the
sentence for fraud. I believe that is a very strong incentive.
Senator Carignan: Mr. Rosen, you said that the bill is a ``drop in the bucket''. Are there one or two other aspects
that should be considered and that would add more than a drop in the bucket of economic crime?
Mr. Rosen: The bill focuses on the very end, after there has been a conviction. This is something I said way back,
when we see how much actually goes to court and the convictions on actual cases, this is just the very end. What do we
get in the way of excuses? I have turned over a number of cases that I would call slam dunks in basketball terms where
you just drop it in, and they have not been followed through. It is various police forces. The police are not interested.
They say they are overworked. There are all sorts of excuses from the police.
Then you come to the prosecutor. Do not forget, many of those prosecutors are there for a short period of time and
are trying to build up a record so they can get a job elsewhere in the legal system and so on. They look at a case and
say, ``There is a risk that I may lose,'' so they do not take it on. That chops off a lot of people.
I know that going to court and proving beyond a reasonable doubt, which is what you are talking about with this
bill, is even more of a burden than many of you may think. On that particular basis, you have to have supremely
dedicated, talented and keen people working with you. Otherwise, they do not anticipate what the defences will be. I
have worked with enough criminal lawyers to know most of their tricks, although not all of them, and then a bunch
more cases are dropped.
We can praise judges up, down and sideways all we want. Why is it that the lawyers that I work with will definitely
avoid certain judges? Sometimes it is because they are too tough, and many times it is because they do not listen very
well. If I made a long list of all of those cases that are eventually heard properly, it is a decent decision and it is not
brushed aside because of a long delay, I could only conclude there is not much that this bill deals with.
In 1929, the stock market crashed. The U.S. set up a whole system in their country. What did we do in Canada? We
allowed self-regulating organizations to pick up and do certain things.
For the most part, when you look at the bond dealers, the mutual fund dealers, stocks and so on, the auditors, those
groups have become more and more self-serving. There are victims going to those people, asking for help, and they are
getting pushed around all over the place. That has to stop. This requires a major decision in Canada to stop supporting
self-regulating organizations and in certain cases, unfortunately, building a bit more of a national system and
provincial system, whatever that happens to be.
We have many recommendations, material I have written and everything else, and we would be glad to talk to you
afterwards. What can be done is endless.
I am petrified about this IFRS. We already know it has been a failure in other countries. We know the U.S. rejected
it. They called it a race to the bottom. How could we be so foolish as people to embrace this stuff? It does not matter
what party you are talking about or what province. This will be a major failure. That has to be grabbed hold of and
provided with oversight.
The fox example applies on this one, up, down and sideways. What do you expect auditors to tell you other than it is
wonderful? We have a long list of suggestions, and I do not want to keep harping about the book, but they are in there.
The Chair: I will ask you, Mr. Rosen, to let the clerk see the book so we can make a proper bibliographic note of it
for our records.
Mr. Rosen: You can take it. I have others.
The Chair: Thank you very much.
Senator Runciman: Mr. Rosen, are you the same Al Rosen who looked at school boards in Ontario?
Mr. Rosen: I am guilty of that one, too.
Senator Runciman: Your reputation is solid. Tying into this legislation, you said going down the road with the new
accounting standards will encourage fraudulent activities.
Mr. Rosen: Absolutely, no doubt in my mind.
Senator Runciman: What response have you received from the government and others in raising this flag?
Mr. Rosen: The first time we got upset was a four-part series we did in the National Post in January of 2008. After
that, we sent letters to cabinet ministers right across the country saying, ``Somebody has to look at this stuff.'' It came
out of Europe in a rush. A bunch of countries were told by January 1, 2005, they had to have a common accounting.
There was the Netherlands on one system, Germany, France, Italy and so on, all on different systems. They reduced
this to the lowest common denominator, which was what people could agree on. They gave all sorts of alternatives, and
yet Canada in 2006 adopted this for 2011. We pointed all of this out to many people — it cost us a lot of money in
couriers — so the warning was there.
I had a column for 10 years in every second issue of Canadian Business and five years in the National Post. We wrote
in all sorts of other publications. I have given I do not know how many speeches. I had to give one to a group last
night. I do not know what else you can do.
The point is that we have to educate investors more. We have to wake them up. I have gone to many sessions where
we have had 18 people in Victoria or Edmonton or wherever it happens to be. That is a hugely impossible job, in a
sense. We have to get the help of the securities commissions, and there are also a lot of part-time people in there. We
I have given talks all over the place. Why can we not look across the border to see the U.S. has put a clothes peg on
their nose to this thing, yet we are happily going along and thinking it is wonderful? Even worse, the federal
government thinks it is wonderful.
Senator Runciman: I have a couple of quick questions about restitution. This bill will hopefully help with respect to
restitution orders because if we look at the statistics, there have been few restitution orders issued. What has your
experience and the association's experience been with respect to the follow-through with restitution orders?
Ms. O'Sullivan: It has not been, and Mr. Roy highlighted some of those issues about the split responsibilities with
the provinces and the actual collection and trying to enforce. In terms of restitution orders, at least the bill does clarify
for the judge the requirements to ensure the victim has been asked and is aware of those victim issues. As has been said,
it is time to have dialogue about how to do this better and recognize the challenges.
Senator Runciman: Mr. Roy may have referenced this, but the RCMP witness before us earlier today talked about
the proceeds of crime and suggested that provincial proceeds of crime legislation might be utilized in this area. Has that
ever been explored?
Mr. Roy: The problem is that not all the provinces legislate on proceeds of crime. Ontario is doing very well in this
area, but there is virtually nothing in Quebec. Once again, I believe the problem is the diversity of statutes in each
province. Although we want to improve matters in Quebec, we unfortunately have not reached the same point as
Senator Chaput: My first question is complementary to Senator Boisvenu's questions and concerns victim
compensation. I believe it was Ms. O'Sullivan who said that victims bear 67 per cent of the costs of crime.
I think you did say that.
Ms. O'Sullivan: Yes.
Senator Chaput: What did you mean by that 67 per cent? Did you mean funds that come out of their own pocket, or
did you mean help they get from the province?
Ms. O'Sullivan: This study looked at the actual costs of crime, which included many different costs, including
medical, counselling and all of that.
The Chair: Could you send us a reference?
Ms. O'Sullivan: Certainly.
Senator Chaput: My second question is for Mr. Roy. You said you would have liked to see more certainty over
punishment rather than severity of punishment in Bill C-21. Can you explain what you meant a little more?
Mr. Roy: As I said earlier, we must invest more money in the streets and provide more resources to organizations
that conduct investigations. I believe that is the solution because the more auditors there are, the more audits there will
be and the more chances there will be to catch fraud artists. I believe that is where we stand. Harsher sentences are
being called for, and that is very good, but first you have to catch the person.
Senator Joyal: Ms. O'Sullivan, on the last page of your brief, you say that we need to engage in dialogue that asks
important questions like how we can do better for victims and ensure that they have access to financial support.
One of the ideas floated around in Quebec following the Vincent Lacroix and Earl Jones situations was that when
people register to get a permit for trading and investment, an amount of money be collected and put in a pool to serve
as ``insurance'' to help people who have been defrauded and have no recourse because the person has gone bankrupt or
decided to avoid any kind of capacity to recover the money. I think there are possibilities for establishing that kind of
support, as we have with the banks. You are insured when you deposit your money in a bank for up to $100,000 now.
At least you have a minimum. Perhaps we should look at the possibility of establishing such a fund in the financial
markets, a fund that would be helpful especially to people with minimal amounts of money, people with $50,000 or
$60,000. If there were a minimum, an average minimum, at least they could recover something.
Do you think, Mr. Rosen, that could possibly be done?
Mr. Rosen: Yes, but when I look at something like Castor Holdings, potentially we are talking there about $2
billion, and with Nortel it was $450 billion. The amounts are huge in Canada, but they are just not publicized, so what
you would get back would be small per person.
On the other side, and I know we are not talking about it this afternoon, but class actions are very popular in certain
provinces. Most of the restitution in the cases I have done, has been recovered from the advisers — the banks, law
firms and auditors. We have managed successfully to go after one province with it securities commission and the
That type of education of how to set these suits up is vital. We are getting some fairly big restitution payments
through the civil courts. Unfortunately, they are at the expense of the law firms who take the risk initially. That must
be played up, and I have not heard mentioned this afternoon anything close to what the reality is.
Senator Joyal: My next question is for Mr. Roy.
On page 2 of the bill, subsection 4 provides that there are aggravating circumstances related to the accused:
(e) the offender did not comply with a licensing requirement. . .
(f) the offender concealed or destroyed records. . .
My question is this: why would we not make the ability to reimburse, pursuant to a restitution order, one of the
aggravating factors regarding the accused's conduct? Because, in practice, if we say that he destroyed documents, it was
obviously in order to make it more difficult to prosecute him.
And if he has wasted the money or invested the money in tax havens or something else, he undermines the ability to
compensate. His conduct in the manner in which he has handled the money is an aggravating factor with regard to the
Why would there not be a paragraph (g) acknowledging the fact that, when you make restitution in practice an
illusion, you have an additional responsibility and that the judge must consider that fact in determining the length of
Mr. Roy: In fact, that would be a good idea, but you have to realize that there are a host of possible aggravating
factors and that it is not near the offence that you find aggravating factors. Section 718.1 of the Criminal Code states,
in the part concerning sentence, that a sentence must reflect the objective and subjective gravity of the crime. And the
subjective gravity of the crime includes the harm done to the victim.
I want to reassure you. Even though this is not in Bill C-21, the fact that the victims have been reimbursed or not is a
very important factor. We saw that in the case of the sponsorship scandal. The fact that some of the accuseds had
partly reimbursed the government was considered a mitigating factor. And conversely, if they had not done it, that
increased the severity of the crime.
It must be understood that the Criminal Code represents perhaps 10 per cent to 15 per cent of the law. There are
very few things in the Criminal Code compared to the criminal law as a whole, and, in my view, the fact that this is not
in Bill C-21 is not dramatic. It might have been interesting, but it is something that the courts already consider and that
goes without saying.
My suggestion regarding public funds was slightly different. We in Canada unfortunately still have the idea that
defrauding the government is not at all the same thing as defrauding a person. The courts do not always recognize that
it is a serious matter to defraud the government; that should have been part of the Criminal Code. What you are
suggesting is universally recognized by our courts. It would have been good to add it, but not having done so does not
compromise the state of the law.
Senator Joyal: Based on the sections of the Code that determine aggravating factors in the commission of a criminal
offence, not being able to compensate the victim is definitely an aggravating factor. It seems to me that the fact that an
individual failed to meet a standard of professional conduct, destroyed files or committed fraud in the disbursement of
the proceeds of the fraud is probably the most important factor in relation to those two subsections. If a fraud artist
ensures through his manipulations that nothing is available to be returned to the victims, there is an intent, a mens rea,
that is even more culpable than simply failing to meet a professional standard, as in the case of Mr. Lacroix. Mr.
Lacroix lied on his professional CV by saying that he was a consultant, when he had taken no professional training. I
believe that is an important factor, but it is never as significant as the fact that he completely swindled the victims, by
eliminating all ability to make restitution.
Mr. Roy: With your permission, my reading of the aggravating factors mentioned is slightly different from yours. I
believe that the aggravating factors mentioned are not there because they take priority over others. Those factors are
there because they might not necessarily be considered usually as aggravating factors.
I will give you the example of the status of the victim's health or financial situation. Those are not two
characteristics that the courts have noted very often in the past. I get the impression — and I may be mistaken — that
the bill is attempting especially to emphasize the aggravating factors that have previously been forgotten or that have
not received appropriate attention by the courts. I do not believe that it is an exhaustive list or especially a priority list
because, as you say, the fact that the victims have not been reimbursed is probably the principal aggravating factor.
That, as the courts very frequently note, is not a problem.
I had the impression that it was not the purpose of Bill C-21 to repeat all the aggravating factors that do not pose a
problem. I thought that Bill C-21 was focusing mainly on the aggravating factors that were problems such as, for
example, the indirect consequences for the victim. The victim will not necessarily contract cancer because he or she has
been defrauded, but the situation can result in depression or illness. One may therefore consider the legal question
whether there is a causal relationship. This is an aggravating factor that is not clear, that is not recognized, and putting
it in the Criminal Code grants it a legitimacy that the one you mentioned does not need because it is already
The Chair: Senator Joyal, it is nearly five o'clock. One final question.
Senator Joyal: Let us consider the case of Vincent Lacroix since it is public. Clearly, in the months before his
situation became public knowledge, he conducted all kinds of financial transactions to avoid leaving any traces of
funds anywhere. You know that the property had been transferred into his wife's name or into the names of the
members of his family. We really saw that there was an intent to deprive someone of the opportunity to receive 10 cents
of the money that had been handed over to him. It seems to me that is the most indicative factor of the individual's
intent to do wrong.
In this bill, if you want to send a signal to all those who receive money or who are entrusted with money, you should
tell them very clearly that all fraudulent actions to deprive people of the ability to recover constitute the most directly
harmful factor for the victims of fraudulent transactions. I understand that this may be taken into consideration in
other parts of the bill, but it seems to me this should be the kind of framework within which you want the financial
market to be both disciplined and informed. This is an extremely important point. Moreover, victims' total confusion
and dismay stem from the fact that they find themselves faced with nothing.
As Mr. Rosen has mentioned, it is only through a class action suit that most of them can try to sue because they do
not have the money to recover.
Mr. Rosen: Hang on for a second. To prove beyond a reasonable doubt, you have to prove the intent. Therefore,
someone who does what Vincent Lacoix had done makes it easy for us to get the proof beyond a reasonable doubt. It is
inherent already in what is there. Adding it, I do not think helps. It is something you have to prove.
Senator Joyal: It is the facts that you need to put together to be able to prove the conclusion.
Mr. Rosen: The vast majority do what you are describing, and I love it because then I do not have to prove intent.
They have proven it for me.
Senator Wallace: Just to Senator Joyal's point that an offender who has arranged their affairs so they would not be
in a position to be able to respond to a restitution order would not have the ability to pay. The issue we are dealing
with, though, the offence is one of fraud. A fraudulent act occurred. People suffered financial consequences as a result.
That would be the charge; that would be the offence; that would be the evidence produced. Therefore, they were not
Mr. Roy, whether or not the offender has assets somewhere sufficient to cover the debt may not be determined until
well after the criminal trial is over. The tracing of the assets, the fact that there are no assets that could be available —
those issues tracing the assets would not be the subject of the trial for fraud.
Therefore, the evidence, in order to prove that someone arranged their affairs and there were no assets available to
satisfy the indebtedness to these people, that evidence may well never be before the court as part of the fraudulent
offence. Am I correct in that?
Mr. Roy: It is irrelevant because the problem is whether or not there is fraud. Whether the person can pay his victim
or victims does not matter. There is a fraud, and that is all you need to.
Senator Wallace: That is the offence.
Mr. Roy: The thing that can be interesting is the proceeds of crime. If the person has the money somewhere and
wants to keep it, if he pays, it will not matter a lot on the fraud charge, but it can matter a lot on the proceeds of crime.
I think using the proceeds of crime portion can help pay the victim.
Senator Wallace: Mr. Rosen, on the issue of professional liability of investors, bankers, lawyers, investment bankers
and so forth, perhaps as another approach to fraudulent acts that have cost money, funds be available to cover that
type of risk through insurance. I assume there are many options out there but there could be a pool of money reserved
as compensation. However, my point is there are in the real business world other ways of dealing with those issues.
There is professional liability insurance. That is where the payment comes from, even with $100,000 insured with our
own private investments. It is an insured fund.
If the professional liability associations' rules have to be strengthened to up the limits of professional liability
insurance and to ensure that fraudulent behaviour is also an insured risk, then there would be funding available.
I say it is another alternative.
Mr. Rosen: We are doing that already.
The Chair: I thank you all. You have come at the end of what has been a long day not only for the senators but,
above all, for the staff. It is a tribute to you that I have actually had to cut off the proceedings. The senators want to
keep going, and I am having to be the authoritarian here and say, no, we cannot do that. It has been extremely useful
and very interesting.
Our next meeting will be at 9 o'clock in the morning on Tuesday next, probably in this room. You will be notified if
it is in any other place. At that time, we shall do clause-by-clause consideration of this bill.
Senator Runciman, you had expressed a wish to have more input from Justice officials. The Justice people will be
present during clause-by-clause consideration. If you have questions for them, we can put them then.
Senator Runciman: I have relayed that to them as well.