INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 12, 1998

• 1532

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'm going to call the meeting to order. Pursuant to an order of reference of the House dated Tuesday, March 17, 1998, we will continue consideration of Bill C-20, an act to amend the Competition Act and to make consequential and related amendments to other acts.

Just for the members' knowledge, we're going to start with B, orders of the day. We're not going to do A today; we will do that tomorrow at 3.30 p.m. There was not a 48-hour notice for that motion, and we do not have unanimous consent, so we will do it tomorrow at 3.30.

Today we will begin with the witnesses we have today for Bill C-20. We're pleased to have several witnesses. What we propose is that each witness will do their presentation.

We have six witnesses with us today. We have Mr. Don Vickery from the Canadian Office Machine Dealers Association; Mr. John Gustavson from the Canadian Direct Marketing Association; Leslie King from the Better Business Bureau; Mr. Ivor Thompson from the Canadian Survey Research Council; Mr. Al Finn from Visa Canada Association, and Mr. Barry Elliott from the Ontario Provincial Police.

I propose that we begin in the order the witnesses are listed. That means I will begin with Mr. Vickery, the executive director of the Canadian Office Machine Dealers Association. Just one moment, Mr. Vickery.

Mr. Schmidt.

Mr. Werner Schmidt (Kelowna, Ref.): Do we have the order of all the papers before us?

The Chair: I forgot to mention you have several briefs before you. You should have one from the Canadian Office Machine Dealers Association. You should have one from the Canadian Direct Marketing Association; the presentation is inside. There is no written brief from the Better Business Bureau. You should have the Canadian Survey Research Council brief. There is no written brief from Visa Canada Association. Each opposition party has one to share from the Ontario Provincial Police.

Madame Lalonde, Mr. Dubé, you have one to share from the Ontario Provincial Police. There should be a few over on the Liberal side for the Liberal members to share as well. Okay?

• 1535

Mr. Vickery, perhaps you would like to begin, please.

Mr. Don Vickery (Executive Director, Canadian Office Machine Dealers Association): It's a pleasure for me to have this opportunity to appear before this committee with reference to Bill C-20 and the changes in the act with reference to telemarketing and misleading advertising.

The Canadian Office Machine Dealers Association, short form COMDA, is a trade association of office equipment dealers and suppliers who together work for the betterment and improvement of our industry.

COMDA has been active in this industry over the past 55 years, and our membership represents a true cross-section of the industry. That telemarketing as it affects this industry is profitable is borne out by the continuing activities of the parties involved, who have little or no fear of the actions that may be taken against their operations. It is obvious that companies using this type of telemarketing in the industry have to have some knowledge dealing with the products offered and of the types of equipment used by the consumers.

How do they operate? They commence by making initial phone calls under the guise of a survey in which they request the types of copiers, facsimile machines and printers used in the called company's offices. Once this information is received a second and often third call is made in an attempt to secure business from the unsuspecting consumer.

Some of the approaches used when calling, after determining the type of product, are indicated in the following examples:

—I'm the warehouse for your regular dealer.

—You can buy more cheaply from us.

—I'm the national representative of a copier, fax, or printer manufacturer or distributor.

—A customer in your area has changed copiers and they can't use their supplies.

—Your dealer—and the name of the dealer is always given—has told me to call.

—Your dealer—name given—is going out of business and we are taking over the territory.

As an aside to this, in Yorkton, Saskatchewan, about six months ago telemarketers contacted an unsuspecting customer and announced that his dealer was going bankrupt. Surprising enough, the customer they phoned was a lawyer of the dealer going bankrupt who had no knowledge of his friend going out of business. This is the type of action that goes on.

Any of the above approaches can lead the receiving party to believe they are being contacted by a legitimate company or representative of our industry. Unfortunately, the customers who purchase the products, to their surprise, find the prices charged are much higher than those charged by their normal dealers. As well, often the quantities per case are not as normally shipped by the dealer, and as a result the case price could be lower, but the quantities received smaller.

Throughout the years the association has provided our members with mailers and stick-on labels to send to customers alerting them of the problems. We are attaching a copy of the sample mailer and stick-ons for your information.

Since the formation of Operation PhoneBusters this has greatly assisted our members and the industry and their customers in bringing before the authorities indications of the scams that are being carried out. We have advised all members that as they receive complaints from their customers they should send the information to Operation PhoneBusters. We know that PhoneBusters is receiving many copies of material and invoices from the consumers.

This industry is extremely competitive. Dealers and suppliers aggressively work and promote the sale of their products, supplies, and services. As a result, the membership is not the least bit afraid of competition. It is the type of competition that is evident through illicit telemarketers that affects not only our customers but also the reputation of the dealers and supplier members.

The board of directors of this association gives its full support to the changes in the act that are proposed in the areas of telemarketing and misleading advertising. We are particularly in favour of the following points, which in our opinion will assist in the control of the marketers involved in this illicit marketing.

• 1540

Telemarketers will be required to disclose certain information during telephone calls made to consumers. We believe these types of disclosures should be clearly defined in the act.

It will be easier for the courts to issue interim injunctions to halt the operations of suspected fraudulent telemarketers. When the bill is passed into law, and when illicit telemarketers realize that criminal action will and can be taken, we believe the problem as it presently exists can be brought under control.

Telemarketing is an important tool. When used correctly, it can assist both the consumer and the dealer and supplier. Under the changes proposed, we feel this industry and its members will be placed on a level playing field with all the players in the marketplace.

I appreciate the opportunity to appear before the committee on behalf of our board of directors and to add our support for the changes in proposed Bill C-20. If you have any questions with reference to this presentation or any other information, I'd be pleased to reply, if I can.

Once again, the association gives its full support to the changes proposed.

Thank you.

The Chair: Thank you very much, Mr. Vickery.

I'll now turn to Mr. John Gustavson, president and CEO of the Canadian Direct Marketing Association.

Mr. John Gustavson (President and Chief Executive Officer, Canadian Direct Marketing Association): Thank you, Madam Chairman.

CDMA is an organization that represents those engaged in legitimate telemarketing as well as other marketing disciplines. I welcome this opportunity to comment on Bill C-20. I would like to offer CDMA's support as well for the proposed amendments to the Competition Act.

CDMA was founded in 1967 and is the largest association for information-based marketing in Canada. Our 750 corporate members include Canada's major financial institutions, publishers, cataloguers, charities, and various suppliers of goods and services to the industry.

Our corporate members are responsible for over 80% of the $12.4 billion in direct-response sales in Canada in 1997. Those sales increased 12% over those in 1996.

Our members use many different media to present offers to consumers, including print, electronic, interactive and the telephone, to sell goods and services or raise charitable donations. They employ some 230,000 Canadians. Call centres alone currently employ tens of thousands of individuals in all regions of the country.

Shopping from home has become a real convenience in the busy lives of many Canadians, but shopping by telephone is not just a choice for some consumers; it is an absolute necessity for many seniors and the disabled.

These people, and all consumers, must be able to do business over the telephone with confidence. We recognize that consumer trust is essential to this vibrant business. This is why CDMA has such a strong history of self-regulation. Members of CDMA know that high standards of business practice are our fundamental responsibility to the public, are essential to winning and holding consumer confidence, and form the foundation of a successful, independent industry.

All of our members comply with a mandatory code of ethics and standards of practice, which includes requirements for full and fair disclosure of details relating to the marketer and the offer in question.

I quote from our code of ethics:

Offers must be clear and truthful and shall not misrepresent a product, service, solicitation or program and shall not mislead by statement, or technique of demonstration or comparison.

A full copy of our code of ethics is included in the package that was distributed to you this afternoon.

Not all companies, however, are bound by CDMA's code of ethics. Membership in this association is voluntary, and despite the fact that we represent about 80% of direct-response sales in Canada, some marketers, whether responsible or not, are not members.

It's also an unfortunate truth that as an industry grows, some operations with questionable or fraudulent business practices will enter the field to take advantage of that growth and indeed of the consumer trust that has been established.

Scam artists have always been around, but with the emerging technological tools available, they are finding new ways to prey upon innocent victims, especially those who are the most vulnerable, such as senior citizens. Telephone fraud currently victimizes far too many individuals each year, and it threatens consumer confidence in doing business by phone generally.

We feel it is the government's role to create and enforce laws that will protect consumers and prevent telemarketing fraud. The proposed changes outlined in Bill C-20 will improve the framework that already exists and will equip law enforcement agencies with the investigative tools they need to crack down on fraud.

We welcome new measures such as judicially authorized wiretapping of suspected scam artists, a quicker resolution process, and stricter penalties for offenders. In addition, the requirement for a full disclosure of information brings this legislation in step with CDMA's own code of ethics and standards of practice.

• 1545

I would like to point out that the amendments we are talking about today will certainly help Canadians from becoming victims of scam artists, but CDMA strongly believes that the best defence against all forms of fraud remains an educated and cautious consumer.

CDMA has an established commitment to educate consumers about how to avoid telemarketing fraud. Last December we participated in an event called Hang Up on Fraud, held in cooperation with the Ontario government, PhoneBusters, and seniors' groups. This joint effort was a reverse boiler room in which seniors turned the tables on fraud by calling lists of potential victims to warn them about scams.

CDMA has also been involved, along with Industry Canada, in the production of a consumer education video called Scam Alert, has participated in a government-led forum for the prevention of telemarketing fraud, and has collaborated with Bell Canada and other groups to deal with automatic dialing devices. In the mid-1990s, at the joint request of CDMA and Bell Canada, the CRTC adopted key elements of our code of ethics as a regulatory framework for all telemarketers.

We believe consumer education is important because there are ways Canadians can avoid potential telephone scams, such as only do business with businesses you know from experience or reputation; don't be pressured into an immediate purchase—legitimate telemarketers will always be willing to send you written material for your consideration; and if in doubt, consult with friends, relatives, or neighbours before making a buying decision.

Ideally, consumers should be able to ask questions and judge for themselves whether they are dealing with a trustworthy operation over the telephone. Only at that point should they ever offer any personal financial information. We do realize, however, that this is not always the case, and this is why the marketplace needs strong legislated measures such as those contained in Bill C-20.

In conclusion, CDMA would like to see the positive relationships between marketers and consumers continue to grow. Bill C-20, along with consumer education initiatives, will help prevent Canadians from becoming the victims of telephone fraud and will encourage responsible business growth among telemarketers.

Thank you for this opportunity to comment.

The Chair: Thank you very much, Mr. Gustavson.

We will now turn to Ms. Leslie King from the Better Business Bureau. Ms. King is the chairman of the committee of managers and the executive director. Welcome, Ms. King.

Ms. Leslie King (Chairman of the Committee of Managers and Executive Director, Better Business Bureau): I would like to thank the chair and the committee members for inviting the Better Business Bureau of Ottawa-Hull to appear before you.

The Better Business Bureau is a resource for the general public, business and government. We are a community-based source of information. Too often the information received is of the despair a person feels when they realize they have made an error in judgment. The error is in trusting a charming voice over the telephone bringing glad tidings to do with a prize. We all know the strings attached. At the BBB, we can give advice, warn the public through the media, and refer people to Project PhoneBusters, but usually we are unable to stop deceptive telemarketing at its source or get the money back.

The Better Business Bureaus across Canada applaud the proposed amendment to Bill C-20. It is a terrific initiative to combat a type of business based on compounding of lies. We believe the proposed amendment should require the telemarketer to disclose the exact location from which the call originates. This disclosure should include a street address, along with a city and postal code.

The telemarketer should be required to be up front in stating the product that is being sold. Prizes should not be offered over the phone but rather in writing. The consumer should then be able to inspect and return these, if required. Victims of telemarketing fraud should be able to receive full compensation equal to their dollar loss, regardless of whether the defendant is given a jail term or a fine or both.

We would strongly recommend that under contacts for complaints, every Better Business Bureau should be listed. The bureaus are strong action vehicles that should be part of the deceptive telemarketing solution.

We commend the work you have done and look forward to a plain-language act that will help all of us. Thank you.

The Chair: Thank you very much, Ms. King.

We are now going to turn to Mr. Ivor Thompson from the Canadian Survey Research Council.

Mr. Ivor Thompson (President, Canadian Survey Research Council): Thank you very much, Madam Chair. I would like to thank the committee for the opportunity to appear here today to present our industry views on Bill C-20.

The Canadian Survey Research Council represents more than 50 companies in Canada that offer market and survey research services. It also represents more than 50 major Canadian corporations that commission and use the results from market and survey research.

• 1550

Our industry, like a lot of others, relies on the confidence and the trust and the cooperation of the Canadian public to take part in surveys, whether by mail, by telephone, or personally in the mall.

Surveys commissioned by the industry about the industry, which have been shared with government departments and organizations such as the CRTC, demonstrate that the majority of Canadians understand and endorse the role of market and survey research and the benefits to Canadian industry in the development and marketing of new products and services. The Canadian public also understands and supports the role in the evaluation of government services and development of new government policies and initiatives. In all of these areas, Canadians have shown to be supportive. We believe it's vital to our industry to maintain that trust and support and not to abuse its attendant privileges.

However, deceptive telemarketing undermines that trust and continues to erode day-to-day the public cooperation that's vital to our success. Two years ago the industry established a mechanism whereby before taking part in any survey a member of the public can call a 1-800 number to verify the authenticity of a survey or a company claiming to be conducting a survey. This was created in response to the government initiatives on privacy, again an initiative supported by the industry.

Today we strongly endorse the proposed introduction of Bill C-20. We believe it's another major step forward in combating deceptive uses of technology, so vital to other industries and sectors.

If anything, we would strongly urge the government to go further in the disclosure provisions of Bill C-20 and make it mandatory that any unsolicited call to the Canadian public make clear at the beginning the purpose of the call, whether it's to ask questions for a survey, whether it's to raise money for charity or other causes or to sell a product and service, all legitimate and bona fide uses.

We've outlined in our written submission a similar bill introduced and passed into law by the U.S. Congress, which included a clarification of the disclosure requirements to disclose promptly in a clear and conspicuous manner a number of items, which included the identity of the caller and the purpose of the call. We strongly endorse a similar provision being added to the disclosure requirements of Bill C-20 currently under review.

In their submission of April 30, I understand the Canadian Bar Association also noted that the disclosure provision is, and I quote from their brief, “simply too broad a requirement to be left to regulation”. We believe this disclosure requirement would go a long way to help to maintain the trust and cooperation of the Canadian public.

On behalf of the market and survey research industry, thank you for the time and for the consideration of our brief.

The Chair: Thank you very much, Mr. Thompson.

I'd now like to turn to Mr. Al Finn, from Visa Canada Association.

Mr. Al Finn (Manager, Risk Management and Security, Visa Canada Association): Thank you, Madam Chair, for the invitation.

My comments today are going to be directed solely and entirely to the deceptive telemarketing section of Bill C-20.

Having provided input on deceptive telemarketing practices to the deceptive telemarketing forum of Industry Canada, overall we are pleased with the content of Bill C-20. We in the credit card industry think it's the right prescription to exercise some degree of control on unscrupulous telemarketers. We want to make it clear, however, that in our opinion, the large majority of telemarketing business in Canada is legitimate and above board. The problem stems from a minority of telemarketing scam artists.

In our opinion, Bill C-20 and the enforcement of Bill C-20 should not adversely impact the legitimate telemarketers in Canada, who are part of a fast-growing industry. Unfortunately, deceptive telemarketers prey on seniors and less fortunate consumers, and the scams take all forms and all shapes. Seniors who have grown up trusting people see their trust betrayed. Scammers clearly take advantage of them.

• 1555

Consumers with credit problems can least afford the upfront fee that is required to allegedly provide a credit card, which we all know the scammers cannot deliver. There is only one way in Canada to obtain a credit card; it is through a credit-card-issuing bank. No other organization or party is authorized to issue a credit card.

The high pressuring of consumers to disclose credit card numbers over the telephone results in unauthorized charges to the card. I could go on and on, but suffice to say that deceptive telemarketers are not short on imagination. It's a very profitable business and frequently carries aspects of multi-level sales.

We recently had an arrest in Edmonton. When the RCMP walked in, the owner was there and he admitted he had some 40,000 applications for credit cards from around the world at $200 apiece. To me that sounds like $8 million. Assuming that only 25% respond, it is still a very profitable enterprise.

Normally we find out about the scammers from consumers who complain directly to us and want to find out if Visa or MasterCard endorses the activity. But more recently we have found out from employees who were hired by those scammers, worked for a day or two and realized something was not right. They phone us to find out if we endorse the product or the activity.

We, like some other people, have said here we believe the best defence against scammers' deceptive telemarketing is education. This is why all along we've been supporting the educational efforts of Industry Canada. We are very pleased that deceptive telemarketing is being made subject to disclosure requirements, and specific offences are being created with respect to certain deceptive telemarketing practices.

We would like to leave you with two items as food for thought. If and when this bill is passed, we feel it will force the deceptive telemarketers to move to the Internet. We are not too sure how at this point—we have some ideas—but I think it bears watching the activity moving to Internet.

Secondly, we believe if we had the support of the telephone companies we could, without question, almost eliminate this activity. What I mean by that is when the telephone company gets a request to install 20 or 25 telephones in a room that is 10 by 20, it should be a pretty good clue that something is not right. I fully appreciate that the business of the telephone companies is to provide a service and not to police it, but it seems to me they also have a social responsibility.

Again, thank you for the opportunity to come in front of the committee. Thank you.

The Chair: Thank you very much, Mr. Finn.

We're now going to turn to Mr. Barry Elliott, the detective staff sergeant and coordinator of Project PhoneBusters from the Ontario Provincial Police. I'll remind members there are copies on both sides of the table to share of Mr. Elliott's presentation.

Mr. Elliott.

Detective Staff Sergeant Barry Elliott (Coordinator, Project PhoneBusters, Ontario Provincial Police): Thank you very much. Thank you to the committee for having me here today.

For those who don't know what PhoneBusters is, it's a group of both federal-provincial and private companies that have come together to fight telemarketing fraud. We central-source complaint data on telemarketing victims and attempts across the country, including U.S. victims who are being hit by Canadian companies.

Our group includes the Ontario Provincial Police, who coordinate PhoneBusters, the Ministry of Consumer and Commercial Relations Ontario, Industry Canada, Alberta Municipal Affairs, Visa and MasterCard Canada, Solicitor General of Canada, American Association of Retired Persons, the Royal Canadian Mounted Police, Toronto Metropolitan Police, Montreal Urban Police, Better Business Bureaus in both Canada and the United States, the Canadian Courier Association, and the Canadian Bankers Association.

• 1600

Just to give you an idea of what we know about telemarketing fraud, between 1995 and the present we received approximately 56,000 Canadian complaints at PhoneBusters. Of those 56,000, we had 10,000 victims who lost around $30 million Canadian.

One of the things that a lot of people aren't aware of is that telemarketing fraud is one of the most unreported crimes in Canada because most people are too embarrassed by it.

Senior citizens are the primary target for telemarketers. Our statistics clearly indicate that the people who have lost over $5,000 in this country are over 60 years. They will take money from anybody, whether you're 20, 30, female—no matter who you are, they'll take money from you, but they're looking for the senior to take down for their life savings. It destroys not only the senior's life, but families; it has a devastating effect on everybody.

A lot of people think telemarketing is a white-collar fraud, that it's a clean crime and it doesn't really have much violence associated with it. Mentally, the violence associated with telemarketing fraud can drive somebody to suicide. Can you imagine being 80 years old in three to six months and losing your life savings to a telemarketer? What do you do after you've lost your life savings when you're 80 years old? Where do you turn? How do you get your money back?

The police support Bill C-20. It's not that we want to dilute the responsibility the police have for fighting telemarketing fraud, because telemarketing fraud is an organized crime activity. It has been recognized to be so. In partnership with these regulations and the civil injunctions and some of the remedies that can maybe be quickly handled in trying to slow these guys down, we support it strongly. We support every recommendation being put forward, including the wiretap that they require to do the investigation. We think it's a great idea.

The other thing a lot of people aren't aware of is how this has a devastating effect in terms of U.S. victims. A number of companies in this country are targeting U.S. victims—in Toronto, Montreal, and Vancouver. Of course, this doesn't help as far as our relationship with the U.S., especially when they're targeting senior citizens in the States.

To give you an idea, between 1996 and the present we've received about 10,000 complaints from U.S. citizens, and we've had 4,500 victims who've lost about $10 million.

When I talk about the numbers I'm giving here today, we're talking about one pitch alone, the most popular pitch, which is the prize pitch. It doesn't include fax and toner fraud. It doesn't include the gem pitch. It doesn't include investment pitches. There are a number of scams involving telemarketing fraud that are highly sophisticated and highly unreported. It's a very diverse, multi-level-type of fraud and it's ever changing.

We think this legislation, especially proposed subsection 52.1(3), where it makes it unlawful for them to promise— money up front for a prize won. I think it will have a tremendous effect. Again, as long as they have the resources to enforce the new sections of this act— You can have the greatest sections in the world. If they don't have the money to enforce it, it doesn't do much good.

The other thing that we really think— and it's the way the U.S. is going: the increased penalty when it comes to sentencing for targeting specific groups. They don't mention here specifically the senior citizen. They say especially those who may be vulnerable. We think people who are suffering from Alzheimer's or people who are at that age where they're taken advantage of should be included as vulnerable people. Hopefully, the judge will give them an increased penalty.

I totally support what Al Finn from Visa said, that the CRTC and Stentor could be doing a lot more proactively to help fight this crime, as well as Canada Post. The number one method in this country to lose your money is by courier pick-up. The number one company that picks up the money in this country is Canada Post, through priority post.

• 1605

There's a whole package of statistics and a breakdown that I've given to all three parties. If anybody has any questions either today or even afterwards, please call me at my office. If you want any more information faxed to you or sent to you I'd be more than happy to send it off to you.

Thank you.

The Chair: Thank you very much, Mr. Elliott.

I want to thank all the witnesses for their opening comments. We're going to begin with questions and we'll begin with Mr. Schmidt.

Mr. Werner Schmidt (Kelowna, Ref.): Thank you, Madam Chair.

I have a number of questions. I'd like to begin with the statement that was made by the Canadian Survey Research Council. I think several of you made the observation that you wanted perhaps more disclosure. I noticed on page 4 of your submission— Before I do that, I'm sorry I neglected to thank you for being here. It's good to see such a broad cross-section ranging all the way from the Better Business Bureau through to the visa people and the police. I was very pleased to see all of you here.

Going back now to the Canadian Survey Research Council, on page 4 you list four areas of disclosure. I think the comment made was that you wanted more disclosure, and when I examined proposed subsections 52.1(2) and 52.1(3) it seems to me that the four areas you have indicated on your page 4 are indeed contained within those sections. What else would you like to have in here?

Mr. Ivor Thompson: What we had listed here in those four items are the items that are indicated in the U.S. bill; we want to have those carried forward. We were referring to the wording of clause 13, which just talks about a fair and reasonable manner, where what we're really pushing for here is to have the identity and the purpose of the call made promptly at the beginning of the call and to have that identity made as soon as possible.

Mr. Werner Schmidt: The part I'm not clear about is paragraph (a) of proposed subsection 52.1(2), which reads:

Disclosure is made, in a fair and reasonable manner at the beginning of each telephone communication, of the identify of the person on behalf of whom the communication is made, the nature of the product or business interest being promoted and the purposes of the communication;

I'm not quite sure, I'm really trying to find out how I can help you.

Mr. Ivor Thompson: Right. No, I must admit that it is the provision we're looking for.

Mr. Werner Schmidt: So you have it. So the bill has met your intent then?

Mr. Ivor Thompson: Yes.

Mr. Werner Schmidt: That's good.

The other question has to do with restitution. I believe Ms. King of the Canadian Better Business Bureau made that point. How would you propose that the act be amended to bring in this concept of restitution?

Ms. Leslie King: I would propose that perhaps there should be a cooling-off period. At present there's very little cooling-off period in Ontario right now. There's a 48-hour period if somebody comes to your home to sell you something, and you're not paying payments. I propose that there be some kind of similar thing that would have to be longer—presuming that this is going through the mail or courier—of maybe a week cooling-off period, for them to return the items if they're not satisfied with them. For instance, before they could offer you a prize and then you ended up with some pens or some key chains or something like that, something of very little value, which you may pay $600 for, perhaps there should be a cooling-off period in which you could return those items and get a refund.

Mr. Werner Schmidt: I'm just wondering how practical that suggestion is. Because some of these telemarketers don't even use land lines any more, they use the digital wireless telephones, and by the time you've probably gone to the post office they're in another province. They've moved right across the country. So I'm wondering if it is practical. How would you actually get this thing to happen?

Ms. Leslie King: I don't know, because if somebody is really out to scam you and use all the technology, they're going to hide. They're going to be working out of a truck. They won't even have a physical address.

Mr. Werner Schmidt: I like the concept of restitution. I'd like to turn to the police here. How would you bring about this restitution? Do you think we could make it work?

• 1610

Det Barry Elliott: I think there are two ways of looking at it. As far as the pens up front are concerned, it would be illegal now for them to—

Mr. Werner Schmidt: Yes, that's illegal.

Det Barry Elliott: —get money up front, which would take care of a lot of the pitches that are based on the illusion you've won a prize.

As far as restitution is concerned, I'm not an expert on what they want to do here, but I know there's been discussion in the past of being able to seize the proceeds of these criminals' activities. I don't know if they have the ability under this act to do so. One of the things that may be considered is that they marry up the ability to work under the existing legislation as far as proceeds are concerned. That might assist them on being able to recover some of these assets.

Mr. Werner Schmidt: Interesting concept.

I have one more question, if I might, and it concerns the other point Mr. Elliott made with regard to adequate resources to enforce. I'm sure you've given that some thought, sir. First of all, what kinds of enforcement mechanisms ought there to be? What kinds of personnel would be required, what technology, and how would one go about doing the right thing in terms of all these resources necessary to bring about adequate implementation of this act?

Det Barry Elliott: Again, when it comes to dealing with the Competition Act, that's enforced by Industry Canada's own investigators, not by the OPP. They have their own investigators within Industry Canada to enforce this act. My point was to make sure that the impetus is still there even after the legislation is passed, to make sure that they have the adequate resources set aside to have the adequate number of investigators to continue battling this particular problem and making sure that as many cases as possible are brought before the courts and dealt with.

Mr. Werner Schmidt: And would you go one step further and make it a criminal offence to break this law, especially as provided for in proposed sections 52.1(2) and 52.1(3)?

Det Barry Elliott: I think that without a doubt the police play a large role.

Mr. Werner Schmidt: It's under the Criminal Code.

Det Barry Elliott: Right. And I think you're going to see and are seeing ongoing investigations today, both with U.S. agencies and Canadian enforcement agencies, to continue fighting this thing on the Criminal Code as well as using this enforcement to augment what we're doing—not replace it, just to augment what we're doing. We think this is a very valuable tool, especially for those cases where it's a fine line between a fraud under the Criminal Code and straight deception, but there may not be the available proof under the Criminal Code to proceed there where we could maybe get a quicker conviction here. And with their civil remedies you could maybe stop it quicker here, where we know it may take us some time to do something under the Criminal Code.

Mr. Werner Schmidt: Thank you, Madam Chair.

The Chair: Thank you, Mr. Schmidt.

Mr. Thompson, you wish to reply?

Mr. Ivor Thompson: I would just return to the first question, Mr. Schmidt.

What we're trying to emphasize is not the items for disclosure, but rather the terminology there at the beginning, “fair and reasonable”, which again can leave open to interpretation what the term “reasonable” means and what's fair. We're arguing more for the U.S. terminology, which makes it clear and conspicuous so that these items are absolutely identified up front. So it's more to that phrase “fair and reasonable” as opposed to the list.

Mr. Werner Schmidt: Okay. Thank you.

The Chair: Mr. Lastewka, please.

Mr. Walt Lastewka (St. Catharines, Lib.): Madam Chair, I want to also take the opportunity to thank the witnesses for being here today on this bill, which is growing more and more important for Canadian society.

All of you said you agree with the bill as it's going through. I don't want to appear suspicious, but are there things we've left out, lost along the way, that you would have wanted to have in the bill to strengthen it? And I'd like to have you compare your experience of what you know about in the U.S. versus what we're trying to do in Canada. Are there things that are different? Maybe we could start with that first.

• 1615

The Chair: Mr. Vickery.

Mr. Don Vickery: To answer your question on disclosure, in our brief we agree that telemarketers will be required to disclose certain information during telephone calls to consumers. That's what the proposal in the bill says. We add that these types of disclosures should be clearly defined in the bill. In other words, if there are going to be disclosures, they should be clearly in the bill.

Using this industry only as an example, the first thing that happens in your constituency office is a phone rings and somebody is doing a survey. The question they ask is “What types of copiers, fax machines, or printers do you have?” If your girls have not been instructed not to release this information, right away the next two or three phone calls come in indicating “We have a product. We've just replaced your dealer.” They name all the scams they use that will end up with you receiving equipment you're already paying for from your present vendor.

So we feel disclosure should be very clear so that when they take the scammers to court, they have a piece of evidence or some information that will clearly assist the courts in ruling on the case.

The Chair: Mr. Gustavson.

Mr. John Gustavson: Thank you, Madam Chair.

I'm not sure if committee members are aware, but many of the organizations present were involved in the consultative process in the development of these regulations. There was an actual dedicated telemarketing fraud forum. Many organizations participated in that, trying to design the rules to get rid of the people who are killing the legitimate industries without being unduly restrictive on allowing something that's creating jobs in the Canadian economy to go forward. So perhaps some of the homogeneous opinion you see is due to the fact that we had an opportunity as organizations to participate in the development of some of these proposals.

I just want to take a brief moment to emphasize that it's not so much what is missing from the bill but the companion to the bill, which I strongly believe has to be more resources to consumer education. You can pass all the laws you want, but there will always be people around who can find a way of contacting consumers and getting them to spend their money and it's fraudulent. I can't tell you how many times people call our office and say “I've sent my money off to a post office box in Las Vegas. Can you help me get it back?”, without any identification of the company or exactly where it went.

So whether it's Internet or telemarketing or mail, the consumer has to be given some tools to protect themselves. I hope Industry Canada and the Office of Consumer Protection consider a more aggressive consumer education campaign.

The Chair: Mr. Thompson, do you want to add to that?

Mr. Ivor Thompson: No, that's a good point.

The Chair: Mr. Finn.

Mr. Al Finn: Following my comments regarding the telephone companies and the CRTC, it would be worth exploring what's happening in the U.S. My understanding is that the telephone companies are cooperating and working closely with law enforcement to combat those scammers. It's also my understanding that the telephone companies have a system whereby they inform law enforcement when suspicious activity is taking place, such as, as I described a minute ago, a request to install 25 telephones in a 10 by 20 room.

So maybe that aspect of it would be worth exploring, because that would be a cost-effective way of reducing the activities of the scammers.

The Chair: Mr. Elliott.

Det Barry Elliott: I agree totally with John Gustavson. In fact the committee that was originally drafted to assist in drafting this new legislation has still remained and is now a national education forum. I don't want to sound as though I'm saying enforcement, enforcement, enforcement. Without a doubt, I'm a strong advocate of education, because really one of the biggest successes we have is through education.

To answer your original question, the one thing we're missing that I'd love to bring in from the States is their sentencing guidelines, but that's not part of this legislation.

The Chair: Mr. Lastewka.

Mr. Walt Lastewka: I just want to get on the record. I've been involved with Mr. Elliott on a cable show going back months, and some of the promotion he supplied and so forth was very valuable.

Someone already mentioned that education of the consumer needs to be really heightened. The amount of inquiries I got as a result of doing some work in the Niagara area convinced me without a doubt that we must educate the consumer on what they should and should not do. It's loud and clear for me.

• 1620

You mentioned about the Stentor group, the CRTC, and Canada Post doing more. Maybe you could give us some examples so we could get that on the record.

Det Barry Elliott: I can't say enough good things about all our partners, especially the Canadian Bankers Association, Visa, and MasterCard. They have led, as far as the private sector is concerned, the fighting against telemarketing fraud by closing down accounts, checking Visa accounts and so on. These are all these different things that are being used for money laundering in association with telemarketing fraud.

It's very difficult for a dishonest telemarketer to get a legitimate bank account in Montreal today, which is 95% of where our problem is as far as Canadian victims are concerned. In fact, they're getting to the point where they have to buy their own cheque-cashing places so they can cash the money orders or launder the money through the States and/or Britain and other places. These people are very sophisticated.

As for lawfully obstructing their ability to operate, the banks have done a terrific job. We intercept money orders at different branches and credit unions right across the country. They're doing a terrific job for us.

We're not getting the same type of cooperation from Canada Post or from Stentor. We have argued lengthily with the CRTC and Stentor that they could be shutting off phone numbers associated with telemarketing fraud based on consumer complaint data just as chequing accounts are being closed based on consumer complaint data that PhoneBusters can supply. This cuts off their ability to continue operating with those phone numbers.

As a matter of fact, I was called just the other day by one of Bell Canada's representatives in Ontario. They're losing money on a regular basis because a lot of these rooms aren't paying any money. So it would be in their interest to do this or to actually evict them.

When it comes to Canada Post, the number one method in this country and the fastest way to get your money to Montreal tomorrow is by courier pick-up. It used to be that the fastest way was by credit card over the phone. There's nothing faster than credit card over the phone. That's instant cash.

We've taken that away. The banks were losing about $5 million per annum back in about 1992 or 1993 in credit card merchant account fraud. With our partnership with Visa and MasterCard, those losses are down to under $250,000. Of course, Canadian aren't losing that money because they're not giving out their credit cards over the phone.

The Canadian Courier Association joined PhoneBusters. Say you send something by FedEx, UPS, or any other private courier. Say you send $10,000, and someone says to you that maybe you made a mistake by sending that $10,000. If you contact FedEx before they deliver it to ask them to return it, they will. They will return it to the shipper because you're paying the freight. They may charge you a return fee, but you'll get your $10,000 back.

If it's priority post, it won't come back, because it's considered as mail and they have to deliver it. Even if you're sending your last $10,000, they won't hold it for a warrant.

As for the Canada Post Corporation Act, I'm not too sure about the last time it was revised. It has been a long time. They say there are certain areas they can't be proactive on but there's supposedly a lot grey areas there they don't seem to want to act on. There's no reason why they can't be more proactive and, based on reasonable and probable grounds, return somebody's money to them if they want their money back.

The bad guys know they're not going to return the money. It's the same with mail drops with Canada Post outlets. They're not as cooperative as private outlets in helping us fight these guys.

There are a lot of things these people could be doing to help fight this telemarketing problem in this country. When you think about it, they're representing Canadians across the country, especially seniors.

The Chair: Thank you very much, Mr. Lastewka.

Madame Lalonde.

[Translation]

Ms. Francine Lalonde (Mercier, BQ): Thank you very much for your most interesting presentations. I would like to start by asking about statistics concerning PhoneBusters.

• 1625

I understand those statistics concern complaints received by you. Am I right?

[English]

Det Barry Elliott: Yes.

[Translation]

Ms. Francine Lalonde: How do you read these statistics? Would there be more fraud cases in Ontario or is it that PhoneBusters is better known as compared to Quebec where there were only 26 complaints in 1995 and only 10 complaints in 1997? I'm inclined to believe that given these statistics, we don't need any legislation.

[English]

Det Barry Elliott: In Canada, as far as Canadian victims are concerned, you have basically three groups operating, in Montreal, Toronto, and Vancouver. Vancouver and Toronto are targeting primarily U.S. victims. Montreal is an organized anglophone crime group that's calling across the country except for the province of Quebec, and they are or have been using the jurisdictional issues to thwart police investigations.

It's the same modus operandi they use in the States. Operating out of say the state of Nevada, they call across the country except for the state of Nevada. So by the time the police get rolling to do something about it, they move to another state. In Canada, they just stayed in Quebec. That's why you have a low number. You do have Quebec telemarketing victims, but not associated to that organized crime group. They're not being targeted as the rest of the country is. The reason Ontario, B.C., and Alberta are in that order is because of the population.

Does that answer your question?

[Translation]

Ms. Francine Lalonde: Precisely. This means that for once, because of the language barrier, people are a little less under attack in Quebec.

[English]

Det Barry Elliott: You could have French telemarketing operations telemarketing the province of Quebec, but I wouldn't be aware of it.

[Translation]

Ms. Francine Lalonde: Do you know whether those anglophones who are solicited are from other provinces or from the United States, or whether they are Anglo-Quebeckers?

[English]

Det Barry Elliott: Right. The anglophones are the bad guys in Quebec, calling across the country, including the United States, from Montreal. Over 95% of all the Canadian victims are being hit on by Montreal companies, anglophone crime groups.

[Translation]

Ms. Francine Lalonde: You're talking about anglophone Montrealers. The problem is thus in Montreal.

[English]

Det Barry Elliott: Yes.

[Translation]

Ms. Francine Lalonde: Thank you very much. It is important for us to understand and you're the experts.

In your opinion, why has there been a decrease in the number of complaints from 1995 to 1997?

[English]

Det Barry Elliott: Education. We haven't scared them. We've had a number of successful prosecutions, but the sentencing is so low that it doesn't deter them from telemarketing. And there's hardly any restitution. The only reason the Canadian victims are going down is because we're slowly educating the Canadian public to be more aware. But it's still a big problem.

[Translation]

Ms. Francine Lalonde: Are you in favour of the definition of telemarketing as found in the bill or would you have any comments in this regard as did some of the other witnesses?

[English]

Det Barry Elliott: You're talking about proposed section 52.1?

[Translation]

Ms. Francine Lalonde: Yes.

[English]

Det Barry Elliott: Yes, it covers it.

• 1630

The thing we all have to be aware of with this legislation is that it may be good today, but there may have to be some changes made in the future, because these guys are always changing, always adapting. When this legislation comes out— In fact I'd be surprised if they don't have copies of this now and their lawyers are talking about how they can get around this legislation.

When it comes to a telemarketing pitch, generally speaking, most telemarketing pitches, no matter how they are described, are based on the illusion that there is a prize there and you have to send money up front. This pretty much covers that. The only thing I'm not sure is covered in here, which I'm very concerned about, are 900 numbers. There are scratch-and-win cards where you call a 900 number right away, under the illusion that you've won a prize. I don't know whether it falls under this. We're concerned about that.

Mr. John Gustavson: Madam Chair, I noted in the proposed guidelines to be issued under the act that 1-900 numbers would be considered to be a prohibited payment, conditional on delivery of a prize. So although it's not in the legislation, it is the intent of the bureau to consider 1-900 numbers as part of a prior payment to receive a prize.

[Translation]

Ms. Francine Lalonde: I have another question. There's a fine line between telemarketing fraud and undue pressure to sell a product. Even when you give out all possible information, when you're on the phone with a vulnerable person, suffering from an onset of Alzheimer for instance, even if you're totally candid you can easily deceive that person.

In this instance, wouldn't it be better to have what is provided for by the consumer protection legislation in Quebec, which is the possibility for the consumer to change his or her mind during a certain period?

[English]

Det Barry Elliott: I agree with that. I think that's great if everybody else here does, which they probably won't.

At PhoneBusters, there is no problem in identifying who's fraudulent and who's honest. We don't get complaints from Sears, we don't get complaints from other honest companies that do a lot of telemarketing. Somebody may be dissatisfied with their telemarketing, about their style, about their approach, their ethics, but that's something the Direct Marketing Association of Canada can handle quite easily. When it comes to deceptive telemarketing, if you sit on the phones in my office it won't take you long to figure out what kinds of complaints we're getting. It's not honest companies we're concerned about.

[Translation]

Ms. Francine Lalonde: However you agree that there is a fine line between fraud and undue pressure?

[English]

Det Barry Elliott: What I say to the fraudulent telemarketers who call me up to discuss and argue about what they're doing is whether it's a little lie or a big lie, it's a lie. As long as you're not lying, I'm happy. If it's honest pressure, I don't care.

The Chair: Mr. Finn.

Mr. Al Finn: If I may, Madam Lalonde, I believe that the more disclosure there is up front, the better position the consumer is in to take a decision, in spite of the pressure. The problem that is arising now is that all the pressure is put on them but no facts. If there were some facts mixed with the pressure, we would still get scammers, but I think it would allow the consumer to make a better judgment.

The Chair: Mr. Shepherd please.

Mr. Alex Shepherd (Durham, Lib.): I guess I'm alluding to some of those things as well. We talk about the provisions in the act, but we're already acknowledging that these people are fraudulent anyway, so clearly they're willing to cross those lines as well, identifying yourself and all the provisions that are here. Within the legislative format, what is that going to contribute, unless we enter into a massive education campaign?

• 1635

Det Barry Elliott: First of all, it will allow them to move faster. It makes it specifically prohibitive not to do certain things. So you're violating specific areas. It's not so general as it used to be. Right now they have to conduct fairly lengthy investigations to prove the misrepresentation, similar to what we would have to do. This, we think, will shorten their ability— both civilly and criminally.

We still have a line that's going to be there on what's criminal fraud and what falls under this bill. We're always going to have a little bit of overlap, but we think we can work in harmony with each other and get the job done.

Mr. Alex Shepherd: In view of some of the statistics that are showing a downward tracking of the actual incidence— And we're bringing in wiretapping, and we're also talking about these people moving around the countryside. Is that apropos?

Det Barry Elliott: If you're going to have this legislation for these investigators, you have to give them the tools to be able to prove their offence. I don't see anything wrong on my side of the table with having the power to do wiretapping. That is completely controlled by their evidence, by the reasonable and probable grounds that they're going to have to provide to a Supreme Court judge to get it in the first place. Certainly with all the deceptions, the fake names, as you say, even though they're moving around they can still do say a one-week wiretap that will give them a lot of evidence to prove what they need to prove in court.

Mr. Alex Shepherd: So give me a capsulized view of how this works. Presumably somebody contacts me. I'm suspicious. I phone you. He's going to phone me again tomorrow at 4 p.m., and somehow you can tap into my telephone. Is that how it can work?

Det Barry Elliott: What they would probably do is try to tap into the telemarketer's telephone and get all his calls, not just your call. Right now the Canadian public can tape their telephone conversations voluntarily without having a wiretap, and we can use that in court. I can't suggest to them that they tape their conversations, but it's certainly not unlawful for them to tape their conversations. We can certainly use that in court.

What they would be targeting would be if they have a room or a telemarketer they are keying in on. Once they find out where he is operating in that one-week or two-week period, they could zoom in on his clone c-phone or his hard line or whatever he is using and perhaps get on record 10 or 15 actual pitches where he's lying over the phone. It's his voice. It's great evidence, and that's the end of the investigation.

Mr. Alex Shepherd: This legislation attempts to apply wiretap evidence to other areas. Perhaps it's not something you're concerned about, but we talked about conspiracy. We talked about bid-rigging as well under this bill. Is it appropriate to extend wiretap evidence to some of those? You may not have an opinion. I don't know.

Det Barry Elliott: No, I don't. I'm specifically on the telemarketing side.

Mr. Alex Shepherd: It's a stronger use in the area of telemarketing.

Det Barry Elliott: Generally speaking, as long as you're not using too much power to get the job done, but you have adequate power to do the job that you're being asked to do, it's not unreasonable. If you're asking somebody to enforce something they just can't do without the necessary powers, then it's hard to do it.

The cost of policing, no matter what it is today, is very expensive. If you can get the evidence quickly and effectively, it saves the whole system a pile of money and a pile of time.

Mr. Alex Shepherd: What's the average conviction? How many months? How many years?

Det Barry Elliott: I'll give you an idea of the last conviction we had. There was a guy who pleaded out in early 1997. He was associated to about $1 million Canadian, with roughly 400 victims across the country. He had a record from the table to the floor for all kinds of stuff. He was sentenced to one year in jail under the new sentencing guidelines, which is what we call pretend jail, where you serve your time at home. He was ordered to make a restitution of $250 a month for three years, which adds up to about $7,000. It didn't even pay the postage on my brief. I'll just give you three guesses as to what he was doing the next day.

• 1640

The Chair: Mr. Finn.

Mr. Al Finn: Back to your initial question about the effectiveness of the bill, Mr. Shepherd, there's a very significant difference in one of the amendments, and that is with regard to making the principals and the owners accountable. Up to now the owners and the principals have been hiding behind a script or behind the statement of their employees.

When law enforcement has gone in, the owners and principals have said they didn't really mean that; you'd better talk to employee B, C, or D, who has since left. The fact that the amendment says you are responsible, Mr. Owner or Mr. Principal, regardless of who said what, is a big improvement compared to what we have now.

The Chair: Mr. Vickery.

Mr. Don Vickery: Mr. Shepherd, you talked about wiretapping with regard to bid-rigging, price-fixing. It isn't effective in my industry, but I would imagine that if four or five companies in our industry were going to sit down to discuss bid-rigging on a tender or whatever, it certainly would not be communicated over a telephone. It would be done in a hotel room or in a suite someplace, where, unless Barry's men were following us around, they would have a tough time getting a tap on what we were talking about.

Unless companies are completely stupid, I don't think that type of information is going to be something that's discussed over a telephone. They're going to make sure they have, as some of the Mafia boys have in the States, a closed line that no one can get into, and most of us don't have that in Canada. So I don't think wiretapping in regard to price-fixing or that type of area is going to play an important role. It does play an important role in what we're looking at in the question of misleading advertising and telemarketing, but not so much in bid-rigging and mergers, because those people are too smart to do it over a telephone.

The Chair: Thank you, Mr. Shepherd.

Mr. Schmidt, do you have more questions?

Mr. Werner Schmidt: My question goes back to the enforcement issue. It has to do with the interception of communications, commonly known as wiretapping, without knowledge. The point was made that the technology is becoming increasingly sophisticated virtually every minute. When you referred to the resources, Mr. Elliott, were you referring to the access to interceptive technology that would allow the enforcement agency to intercept the increasingly sophisticated transmission of communication?

Mr. Barry Elliot: No. In my own personal experience I know how important evidence is when the judge can hear an actual pitch. They can hear the suspect before the court lying over the phone. It's tape-recorded, and there's no question about what is being said: it's his voice; this is what he's saying. That evidence wasn't received by wiretap; it was received by voluntary tapes that my victims happened to tape over the phone.

What I was referring to by using wiretapping to get that kind of evidence, if you can say run a short tap— You don't want to have a long wiretap on a telemarketing room, because you're going to have a lot of transcribing to do. You can do a short tap. You satisfy the prosecutor; you have the evidence and you'll be able to satisfy the judge. You may get a guilty plea, because the defence is going to look at the evidence. So it's going to perhaps save the system a lot of time and money, and it's great evidence. At the same time, it can be very costly to put a wiretap together, especially if it's over any length of time and it's complicated.

Mr. Werner Schmidt: Perhaps I didn't ask my question quite correctly. Does the technology exist today for a law enforcement agency to intercept a communication that is very sophisticated?

Det Barry Elliott: I couldn't answer that question. I know that we're fairly sophisticated, but you'd have to get somebody in here with the technical expertise to answer that question.

Mr. Werner Schmidt: It seems to me that it is very much at the innovative cutting edge in a lot of these areas. They move very, very quickly.

Det Barry Elliott: I know on triangulation for clone c-phones and so on, they can do all that now.

Mr. Werner Schmidt: Yes, but that's elementary now.

Det Barry Elliott: As far as what's coming up in the future and how the bad guys are changing to meet their needs are concerned, I couldn't comment.

Mr. Werner Schmidt: Okay. I suppose the other question I have has to do with Canada Post. How would you propose to enforce Canada Post doing effectively your job?

Det Barry Elliott: No, I disagree with that.

Mr. Werner Schmidt: Okay, that's fine. I expected you to say that.

• 1645

Det Barry Elliott: I think Canada Post as a corporate citizen, and especially as a company that's here for Canadians, has a very strong public trust. It has a moral obligation to make sure it's not knowingly laundering money. To blatantly disregard this problem and not try to do something about it when it knows it's being used as the number one money launderer in this country for telemarketing fraud, and refuse to try to do something proactive about it— The attitude given to me was it would take seven years to think about changing the legislation, seven years to change it, and seven years to enact it, so why should we start now?

Mr. Werner Schmidt: I think that's a terrible indictment, but I want to come back to another point. The key word in your answer was “knowingly”.

Det Barry Elliott: Right.

Mr. Werner Schmidt: You said some very nice things about the banking community and what it's doing. So is it as easy for a postal service to identify the abuse of the system? Can it tell?

Det Barry Elliott: Yes, and it can certainly do a lot. Again, it's not to say some of this stuff won't get through the system. But there's a lot more it could be doing today, such as returning money that's been identified, which it won't do, and trying to make sure it's plugging all the holes it can to make sure its system isn't being used by fraudulent telemarketers as their number one system because it won't return it.

The Chair: Ms. King.

Ms. Leslie King: About five years ago in Ottawa a phoney invoice went out. It had a Canadian government logo on it called “Canadian Repertory”. It was sent out of 240 Sparks Street—there are post office boxes in the basement. These invoices were sent out all over Canada to every major company for $100.25 using a phony GST number and a phoney PST number or Quebec number.

We found out all those things. We informed Canada Post. It would not stop the mail. That mailbox had a glass front on it. I went to look at it because it was right across from my office. It was stuffed with mail, all different coloured envelopes with cheques in them. Canada Post would not touch it. It said it would inform the police and the police would watch the box. That's all it would do. Eventually we did a lot of media work with it, warning people not to send out cheques and that they were phoney invoices and had nothing to do with the government.

I guess it scared these guys. It turned out they had not identified themselves properly. When you open a post office box you're supposed to show a driver's licence and so forth, and they didn't do that. The guys never came back to pick up the mail, luckily.

There was so much mail it couldn't keep it all in the box. It sent what it couldn't fit in the box back to the companies. That's the only action that was taken. So that's Canada Post.

The Chair: Thank you, Ms. King. Thank you, Mr. Schmidt.

[Translation]

Ms. Lalonde, do you have any other question?

Ms. Francine Lalonde: No.

The Chair: Mr. Dubé, you have the floor.

Mr. Antoine Dubé (Lévis, BQ): My question is for Mr. Elliott. You are a member of the grouping, but you are also with the Ontario Provincial Police. In terms of human resources, how many people are specifically assigned to this problem of telemarketing?

[English]

Det Barry Elliott: As a result of the binational report that was just completed in November 1997— If you remember, Prime Minister Chrétien and President Clinton met just before the election last year, around May or April. As a result of the Americans being targeted, starting heavily in 1995, by Montreal rooms, Toronto rooms, and Vancouver rooms, this cross-border fraud issue was raised at that meeting. Prior to that there wasn't a lot of activity. We were trying to get attention on this fraud and we weren't able to get the attention or the resources we required.

Because of that and because of the ongoing meetings—I was at one this morning, and there are other meetings next week in Washington—we now have the beginnings of a structure that includes everybody, Industry Canada, the police, in trying to fight this problem.

• 1650

A task force called Project Colt, announced about three weeks ago in Montreal, consists of the RCMP, Montreal Urban Community, and the SQ. We have a task force getting started shortly, we hope, in Toronto, plus the PhoneBusters group, which is a central repository for all the complaints. There's also a task force now starting in Vancouver, headed up by the RCMP. We're all working in association with agencies both here in Canada and in the U.S.

On the weekend we were involved in an arrest—I don't know if you saw it in the paper—of a man from Ottawa when he crossed the border at Alexandria Bay, a well-known target of ours. He was hitting both Americans and Canadians. We were able to successfully intercept him at the border. He's now in Newark, New Jersey, and he's looking at about 10 years in jail.

[Translation]

Mr. Antoine Dubé: You mentioned certain types of organized crime. Obviously, organized crime supposes a kind of structure. I'm thinking here in terms of the mafia or similar groups. Those people who have been caught and sentenced, or even those that you keep under surveillance, are they linked to any big organization or do they belong to smaller outfits?

[English]

Det Barry Elliott: It's everything. We have links to bikers. We have links to the traditional mob. Secret Service report from Buffalo to Las Vegas. They're linked between Canada and the United States. Toronto is linked, for example, to Jamaican organized crime in terms of loan scams.

There's so much money to be made here, why sell drugs? You can make a lot more money on telemarketing, you won't go to jail. White-collar fraud is becoming very popular with organized crime because there's so much money and there's no risk.

So it's associated with everything. We were involved in a gangland slaying. One of the people we charged with telemarketing fraud out of Montreal rolled over on a gangland slaying in Montreal. There are all kinds of drugs in telemarketing, and they're associated for money laundering.

It's connected with a lot of things. People are recognizing just recently that telemarketing fraud is an organized crime. It is serious. We hope that'll be reflected in some of these court cases we'll have coming up in the future.

The Chair: Mr. Vickery.

Mr. Don Vickery: I think Barry would agree that in the bill one of the things we looked for, along with the fines and penalties to the telemarketing companies, was to make certain that the owner-operators of the companies are also affected. The easiest way to scare some telemarketers is that if they're convicted, they could face jail time—not house arrest, not the Alan Eagleson-type rest home, but prison time. Let them do hard prison time under the Criminal Code. I think that would discourage a lot of them.

I don't know whether or not Barry agrees with me, but that's my feeling, anyway. I've dealt with quite a few of the telemarketers.

The Chair: Thank you, Mr. Dubé.

Mr. Bellemare, you're the last questioner on my list.

Mr. Eugène Bellemare (Carleton—Gloucester, Lib.): Thank you.

Mr. Elliott, do you have any committee or organization that liaises between different police forces—Quebec, Ontario, the RCMP, U.S. troopers, the FBI?

Det Barry Elliott: Yes, we do. Again, going back to the binational committee that was created last year for this report, we just had a meeting, hosted by Industry Canada, the Solicitor General of Canada, and the RCMP. We're part of that committee, as are others. We're in the process of building some of the ideas that were mentioned in that report, such as a structure, a skeleton.

You have to realize that this is a national problem with international overtones. It's not something a local police force can deal with by itself, or one agency, such as Industry Canada.

So we have that in place now, but it's not all there yet. We don't have everything we want yet, but we're building up toward that.

Mr. Eugène Bellemare: You mentioned earlier that you need tools in order to operate and to nab the bad guys.

Det Barry Elliott: Right—and sentencing.

• 1655

Mr. Eugène Bellemare: Are there tools right now that you think we should add to our law?

Det Barry Elliott: I think what we need in this country, to be quite frank, is sentencing guidelines. We desperately need sentencing guidelines.

Mr. Eugène Bellemare: That's another issue.

And finally, you've taken Canada Post to task, at least in some areas.

Det Barry Elliott: Right.

Mr. Eugène Bellemare: You must have met someone at Canada Post in order to be able to discuss this.

Det Barry Elliott: Yes. Canada Post is actually part of our education forum. But there seems to be some blockage somewhere at the top about—

Mr. Eugène Bellemare: Where at the top?

Det Barry Elliott: I don't know.

Mr. Eugène Bellemare: I'd be interested in knowing who, in the name of Canada Post, said that it will take seven years for this, seven years to think about the law, seven years to establish the law and seven years to apply it.

Det Barry Elliott: Security.

Mr. Eugène Bellemare: Yes. That person may not have had the authority to say that. That was kind of a glib comment to you.

Madam Chairman, I think it is extremely important that we decide today to have the proper authority from Canada Post to come here and have a chit-chat with the committee on some of these issues.

The Chair: We might be able to do that. I'm not sure if we'll have the time before this bill is complete, but we will see.

Mr. Gustavson was also going to reply to your earlier question.

Mr. John Gustavson: Actually, on the earlier question about Canada Post, Madam Chairman, it most certainly is not my job to defend Canada Post, but in fairness I think a couple of comments should be made.

As committee members may be aware, in Canada we don't have the same concept of use of the mails for fraud that they do in the United States. The simple reason is that in the United States criminal law is a matter of state jurisdiction. Therefore, one of the few tools the federal government of the United States has to combat criminal activity is to use some of its agencies, such as the postal service, whereas in Canada, theoretically, of course, the criminal law is a federal matter and the tools to enforce the Criminal Code of Canada and other laws against criminal offences are matters of national jurisdiction. The thought was that we don't need the same tools as the United States does. That's some of the background as to why Canada Post is not the player in some of these things that its U.S. counterpart is.

Having said that, I think that if there is some unwillingness in Canada Post to do what it can within the current legal framework in which it operates, we would be most pleased to use our contacts at a very senior level with Canada Post to explore, in co-operation with Barry Elliott, what they might do.

But I just caution the committee that it may very well be a legislative matter—certainly not seven years, seven years and seven years—not just an unwillingness on the part of Canada Post to be of assistance.

The Chair: Thank you.

I have no more questioners on my list.

I want to thank the witnesses for being with us today to continue our discussions on Bill C-20. You've definitely added more insight with respect to the legislation. We appreciate your presentations and comments on the application of how it will work, hopefully, once it's passed into law. We look forward to meeting with you again at some time in the future.

The meeting's now adjourned.