OGGO Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Government Operations and Estimates

EVIDENCE

CONTENTS

Wednesday, September 24, 2003

¹

1530

The Chair (Mr. Reg Alcock (Winnipeg South, Lib.))

º

1600

Mr. Dan Ross (Acting Assistant Deputy Minister, Operations Branch, Department of Public Works and Government Services)

The Chair

º

1605

Mr. Rick Lauzon (Director, Seized Property Management Directorate, Department of Public Works and Government Services)

º

1610

Mr. Dan Ross

Mr. Rick Lauzon

º

1615

The Chair

Mr. Rick Lauzon

The Chair

Mr. Rick Lauzon

Mr. David Price (Compton—Stanstead, Lib.)

Mr. Rick Lauzon

Mr. David Price

Mr. Rick Lauzon

º

1620

The Chair

Mr. Rick Lauzon

The Chair

Mr. Rick Lauzon

º

1625

Mr. Paul Harold Macklin (Northumberland, Lib.)

Mr. Rick Lauzon

The Chair

Mr. Rick Lauzon

The Chair

Mr. Leon Benoit (Lakeland, Canadian Alliance)

Mr. Rick Lauzon

Mr. Leon Benoit

Mr. Rick Lauzon

Mr. Leon Benoit

Mr. Rick Lauzon

Mr. Leon Benoit

Mr. Rick Lauzon

Mr. Leon Benoit

Mr. Rick Lauzon

º

1630

Mr. Leon Benoit

Mr. Rick Lauzon

Mr. Leon Benoit

Mr. Rick Lauzon

Mr. Leon Benoit

Mr. Rick Lauzon

The Chair

Mr. Leon Benoit

Mr. Rick Lauzon

Mr. Leon Benoit

Mr. Rick Lauzon

Mr. Leon Benoit

Mr. Rick Lauzon

Mr. Leon Benoit

Mr. Rick Lauzon

Mr. Leon Benoit

Mr. Rick Lauzon

º

1635

Mr. Leon Benoit

Mr. Rick Lauzon

Mr. Leon Benoit

Mr. Rick Lauzon

Mr. Leon Benoit

Mr. Rick Lauzon

The Chair

Mr. Robert Lanctôt

Mr. Rick Lauzon

Mr. Robert Lanctôt

Mr. Rick Lauzon

Mr. Robert Lanctôt

Mr. Rick Lauzon

Mr. Robert Lanctôt

Mr. Rick Lauzon

Mr. Robert Lanctôt

º

1640

Mr. Rick Lauzon

Mr. Robert Lanctôt

Mr. Rick Lauzon

Mr. Robert Lanctôt

Mr. Rick Lauzon

Mr. Robert Lanctôt

Mr. Rick Lauzon

Mr. Robert Lanctôt

Mr. Rick Lauzon

Mr. Robert Lanctôt

Mr. Rick Lauzon

Mr. Robert Lanctôt

Mr. Rick Lauzon

Mr. Robert Lanctôt

Mr. Rick Lauzon

Mr. Robert Lanctôt

Mr. Rick Lauzon

Mr. Robert Lanctôt

Mr. Rick Lauzon

Mr. Robert Lanctôt

Mr. Rick Lauzon

Mr. Robert Lanctôt

Mr. Rick Lauzon

Mr. Robert Lanctôt

Mr. Rick Lauzon

The Chair

Mr. Leon Benoit

Mr. David Price

º

1645

Mr. Rick Lauzon

Mr. David Price

Mr. Rick Lauzon

Mr. David Price

The Chair

Mr. Pat Martin (Winnipeg Centre, NDP)

Mr. Rick Lauzon

Mr. Pat Martin

Mr. Rick Lauzon

Mr. Pat Martin

Mr. Rick Lauzon

Mr. Pat Martin

Mr. Rick Lauzon

Mr. Pat Martin

º

1650

Mr. Rick Lauzon

Mr. Pat Martin

The Chair

Mr. Paul Szabo (Mississauga South, Lib.)

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Dan Ross

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Dan Ross

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Paul Szabo

º

1655

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Dan Ross

Mr. Paul Szabo

Mr. Dan Ross

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Dan Ross

Mr. Paul Szabo

The Chair

Mr. Rick Lauzon

»

1700

Mr. Paul Szabo

Mr. Paul Szabo

The Chair

Mr. Paul Szabo

The Chair

Mr. Paul Szabo

The Chair

Mr. Paul Szabo

The Chair

Ms. Raymonde Folco (Laval West, Lib.)

The Chair

Mr. Paul Harold Macklin

Mr. Rick Lauzon

Mr. Paul Harold Macklin

Mr. Rick Lauzon

Mr. Paul Harold Macklin

Mr. Rick Lauzon

Mr. Paul Harold Macklin

Mr. Rick Lauzon

»

1705

Mr. Paul Harold Macklin

Mr. Rick Lauzon

Mr. Paul Harold Macklin

Mr. Rick Lauzon

Mr. Paul Harold Macklin

Mr. Rick Lauzon

Mr. Paul Harold Macklin

Mr. Rick Lauzon

Mr. Dan Ross

Mr. Paul Harold Macklin

Mr. Rick Lauzon

Mr. Paul Harold Macklin

Mr. Rick Lauzon

The Chair

Ms. Judy Sgro (York West, Lib.)

Mr. Rick Lauzon

Ms. Judy Sgro

Mr. Rick Lauzon

»

1710

Ms. Judy Sgro

Mr. Rick Lauzon

Ms. Judy Sgro

Mr. Rick Lauzon

Ms. Judy Sgro

Mr. Rick Lauzon

Ms. Judy Sgro

Mr. Rick Lauzon

Ms. Judy Sgro

The Chair

Mr. Ken Epp (Elk Island, Canadian Alliance)

Mr. Rick Lauzon

Mr. Ken Epp

Mr. Rick Lauzon

Mr. Ken Epp

Mr. Rick Lauzon

»

1715

Mr. Ken Epp

Mr. Rick Lauzon

Mr. Ken Epp

Mr. Rick Lauzon

The Chair

Mr. Ken Epp

Mr. Dan Ross

Mr. Rick Lauzon

»

1720

Mr. Ken Epp

The Chair

Mr. Robert Lanctôt

Mr. Rick Lauzon

Mr. Robert Lanctôt

The Chair

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Rick Lauzon

»

1725

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Paul Szabo

Mr. Dan Ross

Mr. Paul Szabo

Mr. Dan Ross

Mr. Paul Szabo

Mr. Dan Ross

Mr. Paul Szabo

Mr. Dan Ross

Mr. Paul Szabo

The Chair

Ms. Judy Sgro

The Chair

Mr. Dan Ross

Mr. Rick Lauzon

The Chair

---

CANADA

Standing Committee on Government Operations and Estimates

---

NUMBER 058

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Wednesday, September 24, 2003

[Recorded by Electronic Apparatus]

¹  (1530)  

[English]

    The Chair (Mr. Reg Alcock (Winnipeg South, Lib.)): Members, if I could have your attention, we will proceed.

    We have here with us Mr. Dan Ross, acting assistant deputy minister of the operations branch for the Department of Public Works and Government Services; and Mr. Rick Lauzon, director, seized property management directorate.

    Just for the information of members who were not at the business meeting, Public Works and Government Services is one of the departments we have a responsibility for. There is a piece of legislation called the Seized Property Management Act, which I believe—you'll give us more detail—deals with the disposition of seized property, I'm assuming, from police investigations. It is overdue for review. There was a five-year review clause. I believe it has been eight years since the act was enacted, so it is time to get on with a parliamentary review. We were not certain whether we would be able to start and complete a review in the potentially short period of time, but we thought we should open the door and start the discussion.

    I believe a list of witnesses has been suggested, and of course, as this is seized property, I propose that we should call the Rock Machine and the Hells Angels also. Perhaps Mr. Lauzon can comment on that.

    Perhaps you would like to begin with your introduction. Then we'll turn it over to members for questions.

º  (1600)  

    Mr. Dan Ross (Acting Assistant Deputy Minister, Operations Branch, Department of Public Works and Government Services): Thank you, Mr. Chairman. Thank you for the opportunity to start off this review process.

    Rick Lauzon is the director of the seized property management directorate within PWGSC and within the operations branch that I head.

    As the chairman mentioned, the act was put into force in 1993. It authorized the Minister of Public Works and Government Services to provide consultative services to law enforcement agencies, to manage property seized or restrained in connection with criminal offences, to handle the disposal of that property when the courts have declared for forfeiture, and to share the proceeds of their disposition.

    To fulfill this responsibility on behalf of the minister, the seized property management directorate works closely with law enforcement agencies and the Department of Justice. They also liaise with the Canada Customs and Revenue Agency and the office of the Solicitor General of Canada.

    As the chairman pointed out, clause 20 of the Seized Property Management Act stipulates that:

On the expiration of three years after the coming into force of this Act, the provisions contained herein shall be referred to such committee of the House of Commons, of the Senate, or of both Houses of Parliament as may be designated or established by Parliament for that purpose.

In 1997, the intent of the Standing Committee on Government Operations was to conduct a review; however, that was suspended by an election call. Since then, each year PWGSC has prepared for such a review; however, the reviews have not taken place.

    Mr. Lauzon and I are here at your request. We have provided some background material and a deck. We're at your disposal to either go through that deck or to answer questions of substance or clarification on the information we provided.

    The Chair: I think it would be useful, just for the information of members, if you could walk us through the deck and give us a sense of not just the technical overview of the act, but more what the issues are.

    Obviously Parliament had a reason for asking for a review. Are there problem issues that you think we should be looking at? Try to be as clear about that as you can, because this is, certainly for the chair, new business. I've not encountered it before. So perhaps you could help us understand why it's important that we review this at this time.

º  (1605)  

    Mr. Rick Lauzon (Director, Seized Property Management Directorate, Department of Public Works and Government Services): Certainly.

    By way of background, I'd like to take us back to 1989 when the proceeds of crime legislation was put in place. The intent of that act was basically to attack the accumulated capital associated with organized crime, primarily drug dealers and, to a certain extent, alcohol and tobacco smugglers.

    What that didn't address back in 1989 was the aspect of asset management. What happened was police forces went out, they seized, and then they were responsible for managing assets. They became asset managers instead of criminal investigators. It was subsequently determined that it would be appropriate to establish an asset management regime, so in 1993 the Seized Property Management Act was assented to, and we were created September 1, 1993.

    As alluded to in Mr. Ross' opening statement, we do have a statutory requirement in our legislation that says that within three years it's to be reviewed by a parliamentary committee. We've prepared every year for that review. We've been on various agendas. But there seems to have always been a different set of priorities overtaking the review of this act.

    By way of the various roles and how we interact with our sister departments, we've laid out for you, in the next slide, the responsibility of the police officers. Those four bullets are pretty much self-explanatory. In the following slide, we lay out for you the responsibilities of the Department of Justice. In a nutshell, the police forces are responsible for investigation, DOJ is responsible for prosecution and provision of legal services, and the seized property management directorate, as illustrated on the next slide, is responsible for asset management.

    In that background information, we gave you basic bullets to identify what we mean by asset management. On the bottom, we give you the size of our organization. We have 12 people located in the regions and 54 located at headquarters.

    By way of process, the seizure itself is actually conducted by the police force. Custody is transferred to the seized property management directorate by way of a court order called a management order. Upon finding of guilt, part of the criminal sentencing can result in forfeiture of these assets. If forfeiture is ordered, then the Minister of Public Works becomes the owner and we discharge those responsibilities of disposition.

    The disposition regulations of the Seized Property Management Act identify that property may be disposed of in any manner, including public tender or public auction. We've identified in this document the types of organizations we use. In a nutshell, we use both industry and government as we see the best fit in terms of economy and effectiveness.

    The following slide lays out the basic financial framework as identified in the Seized Property Management Act. I won't run you through the entire process at this point in time unless you ask for it, but it works very well.

    To give you an idea of the business volume, we've laid out, as of September 16, what the accumulated seizures since our creation have been.

    In the following two tables, we give you the financial results to date. On a year-by-year basis, we close out a number of files. For the files that we do close out, a profit or loss is established. The net proceeds are then calculated, and they are subsequently shared in accordance with the sharing regulations of the Seized Property Management Act.

º  (1610)  

    On the following slide, we give you the basics of the sharing regulations. You may from time to time hear of this formula: 90-50-10. It's associated with the amount of the investigative effort in contribution to the investigation leading to the forfeiture of those assets.

    Mr. Dan Ross: Rick, before you go on, I would just point out that there are three slides there with charts on them. On the first chart, the $379 million is the total seized to date. On the next slide, the $110 million is the total value of those things that have actually been closed or disposed of and money has come in for that. The third table is how that actually was broken out and shared. So money was actually taken off for the loss of value and for the cost of doing the business, which left the $89,424,000 that was available to be shared among levels of governments and police forces.

    Mr. Rick Lauzon: Not police forces. Maybe I had better point that out, because that will become a bone of contention at some point.

    As was addressed back in 1993, the Government of Canada established sharing regulations in which the federal government shares with the provinces, and only the provinces, in this country. Because law enforcement falls within the bailiwick of the province, the provinces thereafter can make their own determination with respect to how they disburse that money.

    The basic argument presented at that time was that they did not want to share directly with police forces, amongst other reasons, for a concern with respect to a conflict of interest between a police officer testifying that the seizure was associated with a criminal act as opposed to his trying to top up his budget.

    Following the sharing slide, the issues that we think this committee might wish to ponder upon are.... For the most part, our department is pretty happy with the legislation, but one of the areas we do have a little problem with is mortgage payment and renewal authorities. You see, only the Minister of Finance can actually borrow money. We find ourselves in situations where the property is declared forfeit and it would be potentially advantageous for us to assume the mortgage, not pay prepayment penalties, particularly if there are one or two months left on the mortgage. We would prefer to renew the mortgage and then pay it off when the mortgage expires two months later rather than paying three months' prepayment mortgage interest. That makes sense.

    When we first started up, the Crown was at a disadvantage in that interest rates were reasonably high. Some of the old mortgages on some of the properties that were declared forfeit had significantly lower rates of interest. It would have been monetarily advantageous to the Crown to be able to renew those mortgages until we sold the properties. We weren't able to do that and still aren't able to do that. We are in the process of talking with Finance to see if there's a way for us to be able to do that either by way of legislative change or any other change that we might be able to do by way of delegation back from the finance minister. It hasn't been finalized yet, but it is one issue.

    One of the other more serious issues is that other than the Province of Quebec, none of the provinces have an asset management regime in place. The RCMP acts as the provincial police force for all provinces except for Ontario and Quebec, and when they're doing investigations and seeking forfeiture under all of the other acts other than drug work, the prosecution is normally provincial in nature. For those assets that need to be managed there is no organization in place.

    We've been doing a bit of a pilot project with Ontario and managing some of their assets on a pilot project basis to show that we can in fact do it and do it effectively, but we don't have true statutory power to do so. We would propose making changes to allow us to do this on an optional basis, not on a mandatory basis. If the province wanted us to do it, we'd be more than happy to do it and do it effectively.

    Other issues, as I said, that could in fact come up, issues of domestic sharing, I've alluded to a little bit earlier with respect to concerns for direct sharing back. The world has changed very dramatically for seized property in the last four or five years. When we were first put in place back in 1993, we were focused on proceeds of crime. At that time we had the anti-drug profiteering units in place in Montreal, Toronto, and Vancouver. We were forecasting a requirement for 10 or 15 people and basically providing service to about 200 police officers. The law, however, states that we are also responsible for offence-related property. That had to do primarily with the Narcotic Control Act.

º  (1615)  

    In 1997 the Controlled Drugs and Substances Act came into place, and our business volume on offence-related property has shot through the roof. To give you an idea, when we closed our books March 31, 1999, we had 3,805 active cases. On September 16, when we ran our reports, we had 19,995 active files. Of those, in excess of 4,600 are pure hydroponics grow operation files, where nothing was seized other than grow equipment.

    When we share with the provinces, we divide everything up by jurisdiction in accordance with that 90-50-10 formula, and we share the positives and negatives. What we're finding with these massive hydroponic seizures is that while we used to have positive sharing with everybody, now we're starting to have some negative sharing. So if you choose to go forward with this, you're going to probably hear representatives from stakeholders who perhaps may not be happy with the sharing regulations.

    The Chair: Transfer it to the Minister of Health.

    Mr. Rick Lauzon: That used to be the case. Going back in history, the Minister of Health was responsible for asset management.

    The Chair: I'm not surprised.

    Mr. Rick Lauzon: They chose to make us responsible for all asset management.

    The other issue is that of asset disposition. There have been some issues associated with asset disposition, and questions have been raised in the House.

    If I might, I'd like to take the opportunity to clarify how we go about managing our disposition process. The norm is for us to dispose publicly. That means for moveable assets, in particular, using auctions and crown assets. If it's a specialty item, then we use the appropriate specialists in the area. If it's a ship, then you go to a broker; if it's an aircraft, you would find the appropriate broker and endeavour to obtain the best possible value. For real estate, very occasionally for unique properties, we will tender, as was the case with our very first property, the famous Ski Montjoye, which was actually responsible for the creation of our organization.

    Mr. David Price (Compton—Stanstead, Lib.): I bought that.

    Mr. Rick Lauzon: You bought that?

    Some hon. members: Oh, oh!

    Mr. Rick Lauzon: Then, Mr. Price, you can verify that we did actually sell that via public tender as opposed to listing it.

    Mr. David Price: It was the municipality that bought it. I came up and dealt with Madame Marleau.

    Mr. Rick Lauzon: Yes, it was a win-win situation for everybody, but you weren't the high bidder. Fortunately, in that particular instance the high bidder wanted to put 10% down, and of course our regulations call for “as is, where is”. The next highest bidder was, in fact, the township. So we found a win-win situation for everybody.

    For us, the norm is to sell through real estate agents. Public Works and Government Services Canada has an MOU with the Canadian Real Estate Association. Basically, we list through agents, through MLS. We utilize industry in that fashion.

    There are exceptions to the public disposal process, however. Issues of health, safety, or security are issues we take seriously and have to address. A construction site is a real problem for us, trying to sell that. Other issues are really obvious ones. We've had gold rings with Nazi logos and worse--Hells Angels paraphernalia. There are real health and safety issues with trying to wear Hells Angels colours or paraphernalia if you're not a Hells Angels member.

    There are all kinds of health and safety issues we address before we decide whether or not we're going to sell publicly.

    A voice: You don't sell those publicly. You melt them down.

    Mr. Rick Lauzon: Yes, those we don't sell publicly. There are legal impediments that preclude us from selling them publicly. Again, we work very closely with our legal advisers and with the crown prosecutors in the disposal of these in a non-public fashion.

    An example of that would be the matrimonial home alleged to have been purchased with proceeds of crime in which the wife has a claim--it's not clear. Part of the plea bargaining process can result in a forfeiture of the home, but a directed sale back to the family. There are other plea bargains.

    Moving on, a lot of stuff we destroy. We don't sell it publicly, or we donate, as the case may be.

    To hydroponics, we assign a zero value, other than, say, generators or something for which we can find a legitimate, real home for true, legal usage. With the massive amounts of hydroponic equipment we get right now, we would be putting the bad guys back in business at a subsidized rate.

    Most of it we destroy. Some of it we can find homes for in schools and other public institutions. Whatever we can, we do.

    Oh yes, to give you an example, we shipped, I think, two tractor-trailer loads of hydroponic equipment to--I can't remember the name--a place that grows plants. It's not a farm, not a nursery either. You know, it's a place that grows all kinds of exotic plants, like a museum for....

º  (1620)  

    The Chair: Yes, a conservatory. A botanical garden.

    Mr. Rick Lauzon: Yes, that's it, a botanical garden. Thank you.

    So we do our best to find legitimate homes, the rest we trash, we crush.

    Chemicals can be a big problem for us, in grow ops, particularly in clan labs, where they're manufacturing drugs. Again, we've tried returning them to the manufacturer, but no one's interested, so it's all destroyed.

    Then there's a whole pile of inappropriate material that we just won't touch, and it's destroyed.

    The Chair: Well, I can tell you you're before the right committee. In Mr. Martin's riding, the Hells Angels are trying to open a store to sell paraphernalia, so you could just ship it right to him and he'd take care of it for you.

    Right, Mr. Martin?

    Mr. Rick Lauzon: Yes, we're big customers of theirs.

    By way of donation, I mentioned hydroponics. Again, as for stuff like cellphones, you'd think they would have a commercial value. Our problem is with the Privacy Act. There's a lot of personal information, and we would have to pay people to cleanse them and what not.

    In the past we've worked arrangements with non-profit organizations. There was a battered wives' shelter that was able to cleanse the cellphones and then lend them to the women. During the 9/11 crisis in New York City, we paid a little money, cleansed a bunch of phones, and shipped them down to New York. But for the most part, we have to respect the provisions of the Financial Administration Act, so the donations are of assets that we deem to be of minimal value. With minimal value, by the time you add the cost to refurbish something and then sell it, you're probably in a loss or break-even situation.

º  (1625)  

    Mr. Paul Harold Macklin (Northumberland, Lib.): How would a group apply for the hydroponics or cellphones, things of that nature?

    Mr. Rick Lauzon: Typically, through the local police force. Someone can write directly to us--that's not a problem--or they can write to the Department of Justice or the RCMP or the OPP, any of the police forces, and they'll forward it back. If we've never heard of the organization, we normally will ask the police force to check it out and make a recommendation to us. If the police force checks it out and recommends to us that, yes, these are people on the up and up, doing good community work, then we make the donation.

    The Chair: I'll start a round of questions here before a discussion breaks out. I just want to frame one piece of this that I think I heard you say correctly, and I think I understand this chart.

    You seize this property, and when you dispose of it, you have a certain amount of income. From that income you recover your expenses. Does that include the 66 staff who work in this unit?

    Mr. Rick Lauzon: Yes, it does. If we go back to the financial framework slide just for a second, you'll see that we have seizure restraints that we then manage. We borrow from the seized property working capital account, and if it's, say, an apartment building that generates revenues, we pay back into the seized property proceeds account. Subsequently the norm is that we get forfeiture, and the assets are sold, and the net proceeds are then deposited into the seized property proceeds account. Out of that, SPMD operating costs, provisions for future losses, and the DOJ undertaking are recovered.

    The Chair: I'll begin with Mr. Benoit.

    Mr. Leon Benoit (Lakeland, Canadian Alliance): Maybe I'll just pursue that a little bit before I get on to the first questions I had.

    I look at the direct costs for the department handling this and it looks awful high. From a gross revenue of $142 million, the costs are $32 million, roughly. It does seem awful high. How is that calculated?

    Mr. Rick Lauzon: The direct costs include absolutely everything that we have to pay for. If we seize a house and it has a mortgage on it and we have to pay the mortgage out, it's included in the direct costs.

    The gross value of the home is included in our gross seizures because we have custodial responsibility for a home that's worth, say, $400,000. We pay out the $300,000 mortgage and it will show up as a direct cost.

    Mr. Leon Benoit: For staff costs, is that calculated at the actual rate that staff are paid?

    Mr. Rick Lauzon: Yes, all costs associated with the seized property management directorate are recovered out of the seized property proceeds account. Everything—the salaries, the travel—is included in your numbers.

    Mr. Leon Benoit: And nothing else. This figure is actual costs incurred.

    Mr. Rick Lauzon: If you go to the page that you show for direct costs, those are all of the costs for clearing liens, for clearing third-party claims, for paying for the tow trucks, for paying contractors to come in and do whatever work needs to be done.

    On the next page—

    Mr. Leon Benoit: I guess what I'm getting at is this. Are any costs included, for example, for depreciation on buildings, that type of thing?

    Mr. Rick Lauzon: No, depreciation isn't one of the issues. These are disbursements that we claim.

    Mr. Leon Benoit: It would be closer to cash costs, then.

    Mr. Rick Lauzon: Yes. These are disbursements that are made out of the working capital account.

º  (1630)  

    Mr. Leon Benoit: Okay. Now to the first question I had. It has been 10 years since this act passed. A review was supposed to have been done within three years—you mentioned that—and it wasn't done. You said you were prepared to come. Is it the minister's responsibility to see that it happens—that the review happens within the prescribed time?

    Mr. Rick Lauzon: I'm sorry, I can't answer that. I don't know whose responsibility it is. I know we get put on the agenda and we're advised of that.

    Mr. Leon Benoit: On the agenda of the committee.

    Mr. Rick Lauzon: Of the reviewing committee. But then the committee makes a determination as to whether or not they're going to call us.

    Mr. Leon Benoit: So it's the responsibility of the committee, then, to ensure that this review happens.

    Mr. Rick Lauzon: I would assume so, but I can't speak on behalf of Mr. Alcock.

    The Chair: If I can just add to that, Mr. Benoit, the minister on this particular occasion wrote a letter, as I believe other ministers have done in the past. But the minister can't instruct the committee to do it. It's a request. Committees have not found time on their calender to deal with it in the past, which is why I put it on the agenda immediately when we received the letter this time.

    Mr. Leon Benoit: It says that the assets can be disposed of in any fashion, any manner, including public tender, public auction. You've explained a little bit why some assets are disposed of in other fashions. What percentage of the assets in terms of sales value are disposed of through public tender or public auction?

    Mr. Rick Lauzon: I didn't come armed with a number for that, but I certainly can tell you that the vast majority are. I can run the numbers and provide them back to the committee.

    Mr. Leon Benoit: What type of assets wouldn't be disposed of in that fashion?

    Mr. Rick Lauzon: It's stuff that is subject to plea bargaining. As I said, it's the family home, where there may be legal impediments associated with it. There's a whole list of items of that nature. It's usually items where we have health and safety issues or legal impediments preventing us....There has to be a reason for not doing it, or there has to be something stopping us from doing it in an efficient fashion.

    I can give you an example where we had the forfeiture of 50% of a home. With the other 50%, it couldn't be proved that it was proceeds, but it was alleged that it belonged to the wife. We had the property appraised and we negotiated directly with the wife and got, I believe, very close to 100% of appraised value. We sold the home directly to her. There would have been no point in a public sale.

    Mr. Leon Benoit: Are assets purchased by other departments, agencies, or other arms of government?

    Mr. Rick Lauzon: No, not directly. I don't know if they go to the auctions, or whatever, but we don't sell directly to departments. The only example I can remember was in our very first year, where it wasn't clear with respect to our requirements relative to the Surplus Crown Assets Act. I don't believe we had our disposition regulations in place at the time, and we sold an aircraft through Crown Assets. It was a wreck that was used for spare parts for the Department of Energy, Mines and Resources in accordance with the appraised value.

    Mr. Leon Benoit: Okay. I had a question to follow up on that. What are the guidelines, and what's determined to be a public auction or public tender?

    Mr. Rick Lauzon: Firstly, as I said, we utilize the services of various specialists for disposal. What we call a tender would be a disposition, the traditional sealed tender type of arrangement in which people would submit their offer for dollars.

    I don't think I explained myself very well.

    Mr. Leon Benoit: How would it normally be advertised?

    Mr. Rick Lauzon: It's advertised via the specialists that we use. If we use Empire Auctions, then they will include it in their auctions and as part of their advertising.

    In any given month, we don't necessarily have enough for one auctioneer to come in and just do our stuff. We'll feed it to the professionals we're utilizing, and they will come up with a marketing plan and will use their expertise to dispose of the stuff.

º  (1635)  

    Mr. Leon Benoit: Okay.

    I noticed that under property destroyed, you have hydroponics--which is understandable--chemicals, inappropriate material, and firearms. Are they all destroyed, even if it's a collector's item?

    Mr. Rick Lauzon: If we had something deemed to be really valuable—which we haven't seen yet—then we might try to find it a home with the Canadian War Museum or some place of that nature. But the short answer is, no, we do not sell firearms. As a matter of fact, that's a bit of a misnomer; it's not just firearms, it's weapons, period. I have an operating instruction to my people: they are not to sell weapons. So if there are Rambo knives—which is stuff that we get—it's all to be destroyed. The Government of Canada is not in the business of—

    Mr. Leon Benoit: A firearm wouldn't normally be classified as a weapon, though.

    Mr. Rick Lauzon: Well—

    Mr. Leon Benoit: No, it would be unusual for a firearm to be classified as a weapon.

    Mr. Rick Lauzon: Well, in my operating instructions, it's quite clear that you don't sell guns and you don't sell any other weapons.

    Mr. Leon Benoit: Okay.

    The Chair: Thank you, Mr. Benoit.

    Monsieur Lanctôt.

[Translation]

    Mr. Robert Lanctôt: Thank you, Mr. Chairman.

    We'll go with a question-and- answer format. That will work better. I have several questions and you can supply your answers as we move along.

    In you slide “cumulative seizures”, you peg the total value of goods seized at $379 million over 10 years.

    Mr. Rick Lauzon: Which page are you referring to?

    Mr. Robert Lanctôt: The pages aren't numbered. I'm looking under the heading “cumulative seizures”. The value of the property seized is estimated at $379 million. However, net proceeds earned totalled only $142 million. Correct?

    Mr. Rick Lauzon: No. The figure of $379 million represents the cumulative value of property seized since our directorate's inception. The value of...

    Mr. Robert Lanctôt: The figure quoted on the following page is $142 million.

    Mr. Rick Lauzon: That figure represents the value of property seized in cases that we were able to settle. A case file cannot be closed until all assets are sold.

    Mr. Robert Lanctôt: I see. The value of the property seized was pegged at $380 million and proceeds from the sale of assets totalled $140 million. Some cases have yet to be settled and an estimated $200 million remains to be recovered.

    Mr. Rick Lauzon: We still have quite an extensive inventory of items.

    Mr. Robert Lanctôt: That's important information.

    My next question concerns the value of the property seized, which doesn't seems very high. Do you have agreements in place with countries that serve as tax havens? Can you go in and recover the money? We're talking about $183 million recovered over a period of 10 years. That doesn't seem like a great deal of money to me, especially given media reports. Huge sums of money are involved, often billions of dollars. One single seizure can net $30 million. That's why $183 million over 10 years seems like an insignificant amount. Can you explain why the figures aren't any higher? Do you have agreements in place with these countries to recover money?

º  (1640)  

    Mr. Rick Lauzon: First off, we are not responsible for seizures. Law enforcement agencies carry out that particular task. We receive money further to the court's issuance of a compliance order.

    Concerning agreements with foreign countries, again, this isn't our area of responsibility. Agreements are concluded with law enforcement agencies, not with our directorate.

    Mr. Robert Lanctôt: You're telling me than in the case of a property seizure, law enforcement agencies, whether it be the RCMP, the SQ or some other law enforcement body... The fact is that this legislation doesn't apply to the SQ in Quebec.

    Mr. Rick Lauzon: As a rule, in Quebec, cases are handled by provincial authorities, not by the federal government.

    Mr. Robert Lanctôt: That's correct. However, you're saying that you are not responsible for property abroad. Does your jurisdiction extend only to property on Canadian soil?

    Mr. Rick Lauzon: Property seized in a foreign country is the responsibility of that country. Occasionally, reciprocity agreements have been arranged with foreign countries.

    Mr. Robert Lanctôt: Therefore, on the question of whether permanent agreements have been concluded, you're saying that each case is different.

    Mr. Rick Lauzon: Permanent agreements are in place with several countries, but this is the responsibility of the judicial system. The agreement concluded with the United States stipulates that when seized assets are shared, US law applies. In Canada, our legislation applies.

    Mr. Robert Lanctôt: In the case of assets...

    Mr. Rick Lauzon: If the assets are seized in Canada, that means the proceeds are confiscated in Canada. Our office receives the proceeds which are shared in accordance with the formula set out in the act. If the assets are seized outside the country, then the matter is disposed of by a foreign court.

    Mr. Robert Lanctôt: Therefore, the agreements stipulate that foreign authorities will dispose of the assets resulting from a crime...

    Mr. Rick Lauzon: Precisely.

    Mr. Robert Lanctôt: The assets are transferred elsewhere...

    Mr. Rick Lauzon: As a rule, when assets are seized outside the country, we are not involved in the actual seizure.

    Mr. Robert Lanctôt: I see. If I understand correctly then, the seizure is managed by foreign authorities, and the proceeds are subsequently shared. For example, aircraft wouldn't be handed over. Foreign authorities would dispose of the assets and then share the proceeds.

    Mr. Rick Lauzon: That hasn't happened thus far, except in one instance.

    Mr. Robert Lanctôt: I see.

    Mr. Rick Lauzon: Antigua and Barbados requested our help. We took over the management aspects and disposed of the assets. Aside from that case, we let other countries take care of the management and disposal details, in accordance with their laws. In turn, we abide by the terms of our legislation.

    Mr. Robert Lanctôt: I understand. You say that you are prepared to offer services to the provinces. Have you some idea of the sums of money that could be transferred to a province, for instance, to Quebec, to deal with an incident occurring within its borders?

    Mr. Rick Lauzon: It's not a matter of transferring any money. We're merely prepared to provide assistance.

    Mr. Robert Lanctôt: Nevertheless, we can see that some surplus funds have accumulated. If these surpluses are the result of operations conducted in Quebec, could the proceeds be transferred to the provinces?

    Mr. Rick Lauzon: I'm not certain that I understand your question. Proceeds are already shared according to existing rules. The federal government's proceeds are deposited into a federal government account. The federal government then decides how this money will be spent.

    Mr. Robert Lanctôt: That's what I want to know. In your presentation, you mentioned that 90 per cent is transferred to the province if you offer your services...

    Mr. Rick Lauzon: No, it works on a case-by-case basis. The regulations stipulate that if the bulk of the investigation was conducted by a provincial or municipal law enforcement agency, 90 per cent of the proceeds earned from the disposal of the assets can be shared with the province.

    Mr. Robert Lanctôt: You operate on a case-by-case basis?

    Mr. Rick Lauzon: Correct.

[English]

    The Chair: Thank you, Mr. Lanctôt.

    Mr. Martin, with your indulgence, may I let Mr. Price ask one short question, because he has to leave. Given that he has direct experience with this, I'm interested in the question.

    Mr. Leon Benoit: I thought so....

    Mr. David Price: This is fascinating. It shows what a small world it is, doesn't it? I certainly never expected to hear that today; but, yes, I was the mayor of Lennoxville when we bought the ski area there.

    The question I have, though, is about the seizure and the fact that it was quite a few years before you were able to sell it. You had to operate the ski area during that time—but granted, I know it was given over to a company to operate.

    As we can see from the books, you have a lot that seems to be sitting in inventory. Do you have a lot of operations? Do you get into that situation a lot, where you have a business that you have to continue to operate?

º  (1645)  

    Mr. Rick Lauzon: Unfortunately, yes. From the date of seizure through finally obtaining forfeiture can be a very, very long time. Three years is not uncommon. Subsequent to that, when you're dealing with the kind of clientele we're dealing with, things aren't always as they seem. When we're trying to clear title, believe me, our lawyers can work a year or two sorting it all out before we can finally sell with clear title to whomever.

    Mr. David Price: In this case, I think we were talking about five or six years, anyway. It was quite a while.

    Mr. Rick Lauzon: Oh, yes.

    As of last year, there were still legitimate legal issues that had to be wrestled with, and that prevented us from disposing of one or two pieces still left in that file. When these guys money-launder, and bring back established liens of offshore companies, and play their games, they're not necessarily playing by the rules—although we're playing by the rules—and it can take a long time to clear title. It can take a long time.

    Mr. David Price: Thank you very much, Mr. Chair.

    The Chair: Thank you, Mr. Price.

    Mr. Martin.

    Mr. Pat Martin (Winnipeg Centre, NDP): Thank you, Mr. Chair.

    I too find this really interesting and fascinating. On the face of it, I have nothing but praise for the work you do; it's a difficult task you have. The fact that it's a net revenue generator is just an added bonus to me. Frankly, that you're doing this necessary work and doing it so well, and if there's money left at the end of the day, indicates to me we're on the right track with all of this.

    I understand that by the legislation, it's a mandatory three-year review or five-year review?

    Mr. Rick Lauzon: Three years after the coming into force and effect of the act--I can't remember the exact words--I think it was “must be” or “will be” reviewed.

    Mr. Pat Martin: But that hasn't been happening to date. This is the first time you've been asked to come before a committee with a report--ten years later. As an opposition MP I have to find something negative to say about all this, so I'm critical as heck about that.

    I do have a couple of brief questions. First, I find it a little bit galling or frustrating, as a taxpayer, that when you seize a property that has a mortgage against it, you have to pay out that mortgage. I thought the lending institution factored that risk into the interest they charge. Why would you want to bail out the bank for making a bad judgment call on who they lent money to, etc? Why are we paying taxpayers' money to pay off the mortgage of some bad guy? It's crazy to me.

    Mr. Rick Lauzon: These--

    Mr. Pat Martin: It's a serious question. I want to know why we are on the hook for their bad debts.

    Mr. Rick Lauzon: In the opinion of the courts, these are third-party claimants who have a valid interest. On proceeds files, when they file their claim, invariably it gets approved by the courts, and by court order we have no choice other than to pay. On offence-related property--

    Mr. Pat Martin: In other words, just as if it was a bankruptcy or something, secured creditors would be.... Actually, the Government of Canada comes before any other secured creditors.

    Mr. Rick Lauzon: Not necessarily as proprietors. They could take us to Federal Court. The short answer is that they could take us to Federal Court and we're advised that we would lose.

    Mr. Pat Martin: That's just an observation I'd make.

    The other question I have, just out of interest, is that when you talk about the seized property, as examples of the types of seized property you list personal properties such as jewellery and lottery tickets. I only raise that to ask you, is this sometimes something you have seized, that is, lottery tickets?

º  (1650)  

    Mr. Rick Lauzon: Yes. If it's in there, we've had it. Yes, and on more than one case.

    Mr. Pat Martin: Real lottery tickets or counterfeit ones?

    Mr. Rick Lauzon: Real lottery tickets. There are problems associated with dealing with lottery tickets, but they are legitimate assets and they're part of money-laundering schemes and such. You see, these guys have a lot of cash and how they go about finding people with winning lottery tickets, we don't know, but a link is made and these lottery tickets are declared forfeit. There's a long court process that takes place, and prior to their expiration, our people, by way of asset management responsibility, have to get a hold of the provincial lottery corporations and ensure that all of the necessary legal work is put in place so that when we do get forfeiture we will be able to claim and get our money.

    Mr. Pat Martin: I find that really interesting.

    Thank you very much. Good job.

    The Chair: Thank you very much, Pat.

    Paul Szabo.

    Mr. Paul Szabo (Mississauga South, Lib.): Thank you, Mr. Chairman.

    On the charts analyzing the proceeds, I note that in the last years, 2000, 2001, and 2002, the SPMD costs are two to three times higher than they are in all previous years. It looks unusual because these are in fact your direct costs. I think you answered a previous question on the other chart, the one dealing with gross revenues and direct costs, and you said that the direct costs on the first chart--and I don't have a page number here either, but it's on the page that has the $142 million--are liens, encumbrances, and other things that are associated with the assets seized, I assume.

    Mr. Rick Lauzon: The numbers you're referring to are--

    Mr. Paul Szabo: It's the page with $142 million. The $31,735,000 is described as direct costs. Those are not your costs?

    Mr. Dan Ross: The last year was $6,200,000 and the year before that was $6,900,000. The previous year was only $3,500,000. That's the period you're looking at?

    Mr. Rick Lauzon: Is that the column with--

    Mr. Paul Szabo: Do you have the page with $110,000,000 at the bottom right?

    Mr. Rick Lauzon: Right.

    Mr. Paul Szabo: The column “Direct Costs”, those are not your costs?

    Mr. Rick Lauzon: The costs for my organization, the salaries for my organization?

    Mr. Paul Szabo: Those are not your costs?

    Mr. Rick Lauzon: That is correct. These are direct costs on a file for service providers for third-party claimants.

    To give you a better understanding, March 31, 1999, if you look at that line where you see $32 million in gross revenue and $10 million in direct costs, that was the year we closed out the biggest file in Canadian history and there were a whole pile of mortgages included in that.

    Mr. Paul Szabo: These are all the costs that are incurred whether or not an asset has been disposed of.

    Mr. Rick Lauzon: No, no.

    Mr. Dan Ross: After its disposal.

    Mr. Paul Szabo: After disposal.

    Mr. Rick Lauzon: Yes, you have to understand that those kinds of costs are inventoried and applied against the file. They're borrowed from the working capital account. The costs are collected, and when the file is closed, after all of the assets have been sold, the working capital account is repaid and the net profitability is determined and sharing is done accordingly.

    Mr. Paul Szabo: I understand that, because on this page it includes files or assets that have been disposed of in addition to those that aren't yet disposed of. Is that right?

    Mr. Rick Lauzon: Yes. We put that in to show there's a big difference between the $379 million versus the $142 million.

    Mr. Paul Szabo: I understand that. So what we should really be looking at, if we're looking at things that are within your control, is at the second chart, the one that has the $89,424,000 on the bottom right.

    Mr. Rick Lauzon: That is correct.

    Mr. Paul Szabo: So now if we look at that SPMD cost, which is the question I asked you originally, and if you look at the percentage of the costs to the so-called net proceeds, which are not your costs, it's like after things that are liens and encumbrances and other third-party costs, this is what's left over. Your cost as a percentage of those net proceeds, as I had indicated, are two to three times.... If you look at March 31, 2002, 35% of the net proceeds are your costs; the next year, 34%; the next year before that, 20%; and then if you keep going down, it's down to 11%, 11%, 14%, 19%, etc. The question was why is it that the costs as a per cent of net proceeds have been rising every year?

º  (1655)  

    Mr. Rick Lauzon: There's not necessarily a direct relationship here. Remember, earlier I told you the world has changed. We aren't seizing just money makers now. I'm sitting with an inventory of 4,600 money-losing files right now.

    In terms of taking a look at our growth, in three and a half years, since March 31, 1999, our caseload has grown from 3,805, say 3,800, to approximately 20,000 files today for which we have asset management responsibility.

    Mr. Paul Szabo: Let me stop you right there, because we're talking about cases closed, and the number of cases closed is also shown on this chart, and we're not talking about 20 to 30. In fact, the number of cases is just over 2,100 cases; in March 1999, it was 1,900 cases, etc. Your cost of disposition as a per cent of net proceeds has been growing every year. Why?

    Mr. Rick Lauzon: What you're looking at in the second column from the right is our budget. Our manloading is determined based upon work effort.

    Mr. Paul Szabo: Maybe I can help you, Mr. Lauzon. Are you suggesting the nature of these cases is such that it takes more human resources because the mix of the assets has substantially changed?

    Mr. Rick Lauzon: No, no. I'm just telling you that the massive increase in work effort, work volume, the level of seizures...and as I stated earlier, for hydroponics we put in an appraised value of zero, because at the end of the day we're going to destroy it all or donate it, as the case may be.

    Now, with respect to the closing of files, as I stated earlier, for many of these cases it's two or three years before we actually get a court decision, forfeiture, and then we can start closing the files.

    Mr. Paul Szabo: Mr. Chairman, I still don't have an answer.

    If I look at March 1998, there is just over $20 million of gross revenue--about 2,000 cases--and at direct costs of review.... I'm sorry, that's not included. We have to look at the right page, the one with the $89 million.

    We're talking about the same number of cases in 1998 as in 2002. It's very similar in terms of the gross revenue, but your costs are double in 2002 from what they were in 1998--for the same revenue and the same number of cases. Why?

    Mr. Rick Lauzon: The revenue is generated based on the files we're able to close. We're able to close files dependent upon courts arriving at a decision, making a determination of guilt, and ordering forfeiture.

    Mr. Paul Szabo: But they're identical. It's 2,000 cases.

    Mr. Dan Ross: No, but I think your question is--

    Mr. Paul Szabo: It's the SPMD direct costs, which is salary costs.

    Mr. Dan Ross: Salary costs, yes.

    Mr. Paul Szabo: The figure between 1.845--which is there--and this figure, which is largely salary and pension and travel, why is that different?

    Mr. Rick Lauzon: Why is that different? Because our caseload has improved so dramatically.

    Mr. Paul Szabo: I'm sorry, the caseload is identical in both years.

    Mr. Dan Ross: No, cases closed are identical, but caseloads are not identical.

    Mr. Paul Szabo: So you're saying you're allocating your costs here even if they don't relate to the cases closed.

    The Chair: Whoa, whoa. Mr. Szabo, slow down. It's possible to ask the question.

    Mr. Rick Lauzon: We cannot inventory our labour costs. They're distributed as an overhead.

»  (1700)  

    Mr. Paul Szabo: The answer is that these costs don't necessarily relate to these cases that are closed.

    A witness: That's correct. That's what I said.

    A witness: Exactly. That was the answer five minutes ago.

    Mr. Paul Szabo: Oh, I'm sorry.

    The Chair: Thank you.

    Mr. Szabo, please, you are well over time. I have been exceptionally lenient, because I'm always interested in your questions because of the high quality of the questions, if not the delivery.

    Mr. Paul Szabo: Well, Mr. Chairman, I'll accept that--

    The Chair: Perhaps, Mr. Szabo, I will come back to you in a minute--

    Mr. Paul Szabo: --but the charging of this committee is on subclause 20(I). I'll just refer members to it. That's our responsibility.

    The Chair: Absolutely.

    Mr. Paul Szabo: And I hope somebody asks the question about whether there is anything they're suggesting or aware of that we should change in this bill.

    The Chair: Mr. Szabo, I pray every day that you never become my auditor. But having said that, I will move now to Mr. Macklin.

    Actually, Madame Folco, I have you next on the list here.

    Ms. Raymonde Folco (Laval West, Lib.): Thank you, Mr. Chairman. Mr. Szabo took my question away. Thank you.

    The Chair: Okay, that's fine.

    We have Mr. Macklin, Madame Sgro, and then I'm on to a second round, where I have Mr. Epp. Mr. Lanctôt has indicated another question, and Mr. Szabo, I will put you out there now that we've clarified our terminology.

    Mr. Macklin, please.

    Mr. Paul Harold Macklin: Thank you, Chair.

    First of all, at the end of each fiscal year you do up a financial statement. Who do you give that financial statement to?

    Mr. Rick Lauzon: We do up a financial statement. It's audited by Deloitte and Touche, our current auditor. We do internal financial statements and we send the information to the Department of Justice, which is our partner in the sharing regulations. We determine how much is available for sharing in a file, and the Department of Justice determines who gets what percentage.

    The audit is finalized, and to each of the provinces we send a copy of the audited financial statements along with a cheque, a covering letter, and a complete breakdown of the costs and revenues associated with each file we have closed.

    Mr. Paul Harold Macklin: Okay. Then, going back to the concerns of Mr. Szabo, what in fact you have is direct cost relationships that you account for on an annual basis, and then you have a consolidated financial statement, which is roughly what you're giving us here, in the sense that you're consolidating your position for the purposes of helping out this committee.

    Mr. Rick Lauzon: That is correct.

    Mr. Paul Harold Macklin: All right.

    Now, with respect to inventory that you have, you say you have some 4,000-plus files that are money losers at the moment. Obviously that brings to mind a concern, and that is, is there a problem with the way in which the act is functioning such that you are being burdened by files of this nature through the failure of the courts or the police to properly assess the value of the files you're being given in terms of assets to dispose of?

    Mr. Rick Lauzon: No, you have to understand, under those money losers, those are files in which prosecution is conducted under the Controlled Drugs and Substances Act. These so-called assets are items used to commit the crime. They're offence-related property. The courts make a determination as part of their sentencing on whether or not it's appropriate to leave these in the hands of the accused or to declare them forfeit. Somebody has to deal with them, whether it be us, the police forces, or whoever. But the decision is made in a court of law, based on all of the facts presented before a judge.

    So my answer is no.

    Mr. Paul Harold Macklin: So you have a service function that is separate and distinct from trying to ultimately receive proceeds of crime in a net way for the Crown.

    Mr. Rick Lauzon: When this legislation was put forward, never was it identified that amongst other things we must be generating big profits. The intent of the Seized Property Management Act is to allow us to provide service to the Department of Justice and to the police forces so they can enforce and prosecute the laws of the land. It was never identified that we were to be revenue makers. We're service providers.

»  (1705)  

    Mr. Paul Harold Macklin: With respect to reserve for losses, which you've indicated on whatever page it's on--it's headed up “Financial Results”--how do you determine that reserve and what does it reflect?

    Mr. Rick Lauzon: The reserves for losses identify basically any number of issues associated with losses that we can't specifically attribute to SPMD costs.

    Let me give you some examples.

    Mr. Paul Harold Macklin: Could you clarify one other thing, then? Is the reserve for losses related to closed files or to files that are still open, where you're anticipating?

    Mr. Rick Lauzon: Often what happens is that we close the file; we think we have all of the costs, we've shared with the province, and then all of a sudden out of the woodwork comes some bill. It's something of that nature. We no longer have an active file and we can't charge it to anything in particular. So those types of losses we cover out of the reserve for losses.

    Mr. Paul Harold Macklin: How do you anticipate a bill on a file that's closed?

    Mr. Rick Lauzon: We maintain a kitty at about the $150,000 level and we keep replenishing it.

    Mr. Paul Harold Macklin: You just would look at it on a global basis in terms of losses being set up as reserves?

    Mr. Rick Lauzon: That is correct.

    Mr. Dan Ross: Then at the end of the year, you end up with a figure that represents what it proved to be for the year, at the end of the fiscal year, which is shown here.

    Mr. Paul Harold Macklin: With respect to the sharing, you say there are regulations for sharing, and you use terms like “predominant”, “significant”, “minimal”. How well are these regulations working in determining the division of property, that is the net proceeds of the property?

    Is there a need for any clarification there, or is it working well?

    Mr. Rick Lauzon: I hate to bail out on you, but that's the call of the Department of Justice. We calculate how much is available for sharing, and the Department of Justice makes a determination in accordance with these sharing regulations; for example, who gets 90%, who gets 50%, who gets 10%, or who gets nothing. I would be reluctant to make a comment on something that isn't under our control.

    Mr. Paul Harold Macklin: So you don't make the division?

    Mr. Rick Lauzon: We do the mathematics after we're instructed by the Attorney General of Canada on who merits what.

    The Chair: Mr. Macklin, I may have a second round that would give you the opportunity to ask more questions.

    Madame Sgro.

    Ms. Judy Sgro (York West, Lib.): Thank you, Mr. Chairman.

    I just have a couple of questions further to some of those that have been asked. Given the fact we've been able to operate under this particular act since 1994, I would expect that you would have several areas, over and above what you had suggested earlier, that you might suggest would improve program delivery. Was I wrong to assume that?

    Mr. Rick Lauzon: We identified those earlier, Ms. Sgro, including the mortgage payment issue and provision of services to the provinces. But in terms of delivering the program, I can't think of any legislative need that is clearly required at this point of time under the provisions of the Seized Property Management Act.

    Ms. Judy Sgro: Who makes the arguments to the Department of Justice on the disposal or distribution of the dollars left?

    Mr. Rick Lauzon: We collect data. We do a preliminary spreadsheet that says, based on the information in our files, here's the amount available for sharing; this is our recommendation, and this is the way the numbers would work out. It's a draft only.

    We forward the draft to the headquarters of the national strategy on drug prosecution in the Department of Justice. They then distribute it to the regional directors, who then distribute the relevant portions to the crown prosecutors responsible for each of those cases. Those people then come back and make their recommendation, either agreeing or disagreeing with our recommendations. At the end, the Attorney General of Canada makes his decision.

»  (1710)  

    Ms. Judy Sgro: Once you've seized the items, how long are they generally in your possession before they are finally sold off?

    Mr. Rick Lauzon: It varies from case to case.

    Ms. Judy Sgro: Is it on average a year or five years? If you can't dispose of those items until a court case has come, and a verdict has been rendered, and so on, I would tend to think that you have to look after these for a fair amount of time on average.

    Mr. Rick Lauzon: Yes. The cases involving real estate are usually the more complex files, and they're the ones that tend to last for several years. The hydroponics files are often a little quicker, but it just varies from file to file.

    Ms. Judy Sgro: But you can't dispose of them until you have a directive from the court.

    Mr. Rick Lauzon: That is correct. We can't.... There are powers of interlocutory sale, where we can sell with the approval of the courts before guilt or innocence has been determined. But when we do that, a number of provisos are established by the courts with respect to what we do with those moneys. That occurs when an accused may have run out of money to pay for his lawyer, and the courts will instruct us to sell the property and forward the proceeds to the accused.

    Ms. Judy Sgro: I have one last question. How aggressive is the department in selling off the items and seeking the maximum amount of money for them?

    Mr. Rick Lauzon: We have performance standards that we follow religiously. Our goal is to obtain 90% of appraised value 90% of the time. We have computer programs that spill the information out to us, and any time we deviate from our goal, we do an investigation and a determination to verify whether or not we have a generic problem.

    Ms. Judy Sgro: Very good. Thank you.

    The Chair: Thank you, Madame Sgro.

    I think it would be useful to share with members a conversation I had with Mr. Macklin right now. He was asking me about some financial information. But in fairness to our presenters, they were not brought here to discuss the budget and finances of the operation—although there's no resistance to talking about those. The invitation here was to explain to us the parameters of the act, so we could begin to make a decision about a review. I'm sure that if members would like to get more detailed financial information as part of that, it would be freely available. But in fairness to our two guests, it was not part of the original invitation. So if there's any other information members would like, perhaps we could ask to have it provided later.

    Now I will move to Mr. Epp. Then I believe Mr. Lanctôt wants to ask another question, and I believe Mr. Szabo will too.

    Mr. Epp.

    Mr. Ken Epp (Elk Island, Canadian Alliance): Thank you. I'll be quite brief.

    First of all, I would like to know whether I heard you right with respect to suggested changes, from you to the act. One is that you want to have the ability or the power to borrow money so that you can take advantage of assets that need protection. Was I right in that?

    Mr. Rick Lauzon: The principle is to borrow money. All we want is the flexibility, when it's appropriate, to renew a mortgage as opposed to paying it out.

    Mr. Ken Epp: Right now, only the Minister of Finance can incur debt on behalf of the government. Who do you want to have this ability—the minister?

    Mr. Rick Lauzon: Yes, just for existing mortgages in very peculiar circumstances.

    Mr. Ken Epp: Would it not be possible to amend the act so that you could achieve that goal, but still under the aegis of the Minister of Finance?

    Mr. Rick Lauzon: We're exploring that. I've tried to line up some meetings, and we're very close to lining up some meetings, with the legal advisers for Finance, our legal advisers, ourselves, and the people over there on the line responsible for that kind of stuff. I don't have a full recommendation for you yet. It's one of the issues we're working on.

»  (1715)  

    Mr. Ken Epp: Mr. Chairman, we should probably explore that if we're going to look at amending that part of the act.

    I have a question for you with respect to disposal of computers. I think this would be true not only under this act but also in general, when the department gets rid of assets of the government. Right now the practice is to take a computer and drive a spike through the hard drive and destroy it and thereby render the computer worth about one one-hundredth of what it was before it was so mutilated. There are obviously means of erasing a disk entirely—securely—without having to physically destroy it and render the computer so valueless. Do you practise that yourselves in your disposals? Who controls that decision?

    Mr. Rick Lauzon: We don't get very many computers. The problem with our files is that they last two, three, or four years. A three- or four-year-old computer, by the time we have forfeiture on it, isn't worth a whole lot. It's not the kind of thing the police forces tend to seek forfeiture on.

    Mr. Ken Epp: I would generally agree with you; in the North American market it's not worth much. But I'm thinking of the need in the developing countries. I think Canada could make a huge contribution.

    I've gone to both the Canada and also the Alberta government surplus locations in Edmonton. They handle those computers with forklifts; they just dump them in the corner. Then somebody comes and bids $5 on the lot. They're just wasted. With a little bit of care we could make a substantial contribution to the education of young people and children in the developing countries. It would make so much sense. I just throw that out as a suggestion.

    For my last question with respect to the act and your work here, I'd like to come back again to guns. A lot of people think of guns only as bad weapons that kill people, and that isn't true. There are a lot of very valuable pieces out there. Of course, for those of us who happen to come from the rural parts, it's almost a necessity of living out there. You'd get that from others as well.

    Your blanket policy of destroying any firearms I think may be misguided. A lot of those firearms would be worth a lot of money in just ordinary commercial sales. Then I'm also thinking, thanks to my colleague here who whispered the suggestion in my ear, there are many good pieces that are collectors' items and that I'm sure from time to time fall into the hands of criminals and would then be seized. I would hope that instead of destroying antique and other pieces that are so valuable you would consider putting them on the market for antiques, for collectors and museums.

    Mr. Rick Lauzon: To be honest with you, I can't recall ever having seen any of any value. The kinds of weapons that are typically seized from Hells Angels and like-minded organizations don't tend to be the kind of weapon you've just described. I hear what you're saying, but at this point—the committee is certainly able to make recommendations that we change the policy—the policy of the Government of Canada has not been one of promoting the sale of firearms, and in keeping with the overall spirit of the way the government is operating, we've had this policy from day one. I have no other comment to make on that.

    The Chair: Mr. Epp.

    Mr. Ken Epp: Are large numbers of the weapons automatic weapons or banned weapons in Canada?

    Mr. Dan Ross: Oh, yes. I mean, we've got handguns--

    Mr. Rick Lauzon: And that's not really what he's talking about, Mr. Ross. He's speaking about those “what if” circumstances, such as a case in which we might get a really nice piece. Ideally, if we got a real collector's item, we would try to find a public institution that could make use of it, much like we do with hydroponics equipment. But to date that's a theoretical situation.

»  (1720)  

    Mr. Ken Epp: That's it, Mr. Chair. Thank you.

    The Chair: Perhaps when we call the Angels, you could ask them about their inventories and find out how many there are.

    Monsieur Lanctôt.

[Translation]

    Mr. Robert Lanctôt: I have a technical question. Can assets be seized prior to a court decision? In other words, can a building be seized before a case has made its way fully through the courts? This could end up saving you some money in many cases. Quebec maintains a registry of building owners. If there is any suspicion that a building may have been purchased with laundered or fraudulently obtained money, if the property seizure has already been registered, the banks are aware of the situation and less money may be requested to cover the outstanding mortgage. Is it possible to seize assets prior to a court decision to keep costs in check?

    What about the seizure of assets after a court decision has been handed down? If we wait until the criminal trial is over, often the party stops making payments on the building so that the property is repossessed by the bank. The bank works out some kind of arrangement with a sibling, spouse or friend, and you lose everything. Is there some mechanism in place to deal with this type of scenario?

    Mr. Rick Lauzon: In the first part of your question, you stated that we oversee the seizure of the property.

    First off, the seizure is managed by law enforcement agencies. We operate under the authority of the court, that is under a court order outlining the exact nature of our powers. If the court order authorizes us to take action, then we act, otherwise, we don't.

    Mr. Robert Lanctôt: Fine.

    Thank you.

[English]

    The Chair: Thank you, Monsieur Lanctôt.

    Just for the advice of members, we're almost at 5:30, when I understand the bells will ring. So Mr. Szabo will be our last questioner, who will of course leave me 30 seconds to thank our guests.

    Mr. Szabo.

    Mr. Paul Szabo: Gentlemen, I want to turn to the act. Parliament is charged with doing this as a one-time review, “On the expiration of three years after the coming into force of this Act”. So it's a one-time review.

    I note that after section 33, on “Coming Into Force”, there is a section called “Amendments Not in Force”. There is a number of these amendments, and they're all dated “as amended by 2001”, etc.Do you know what all of these are and how they came to be?

    Mr. Rick Lauzon: That's very ancient history. Gosh, you're going back a long way.

    Mr. Paul Szabo: Is it literally correct that these are not presently in force?

    Mr. Rick Lauzon: You're making reference to stuff dating back to 1996....There was a bill tabled that would have addressed the issue of offence-related property. That bill, whatever it was, was subsequently replaced by what today is the Controlled Drugs and Substances Act. In the Controlled Drugs and Substances Act, we're given responsibility for all offence-related property seized.

    Mr. Paul Szabo: Well, we'll have to examine that a little further.

    Here is my last question. In your deck you have a page called “Issues”, and the two that I.... I can understand what you mean here. One is suggesting that we consider getting the authority to renew mortgage payments on property.

    Mr. Rick Lauzon: No, it's to renew the mortgage and continue to make the payments. I'm sorry; that's what I meant—to renew the mortgage.

    Mr. Paul Szabo: To renew the mortgage? Not the payments?

    Mr. Rick Lauzon: No.

»  (1725)  

    Mr. Paul Szabo: Okay, I'll correct it on this.

    The second is that the legislative authority could be considered to offer your services to other agencies or governments, etc. Now, these are not deficiencies in the current act, but these are ways you suggest could enhance your ability to do your.... You're providing the service; Public Works and Government Services is a service provider.

    Mr. Rick Lauzon: That is correct.

    Mr. Paul Szabo: And it would be operationally advantageous to do this, because you could average down your costs and a whole bunch of interesting things.

    Have you proposed these two items to the Minister of Public Works and Government Services?

    Mr. Rick Lauzon: I have provided a briefing on all of this stuff to the staff of the Minister of Public Works and Government Services.

    Mr. Paul Szabo: When? In what year?

    Mr. Rick Lauzon: This year. I gave a briefing on this in anticipation last November and I forwarded it up the line. I'm assuming the information has been subsequently forwarded.

    Mr. Paul Szabo: Is the department in favour of these changes? And is it possible the department could simply raise a bill to do this—just a bill to amend?

    Mr. Dan Ross: It is possible. Of course it's possible. The minister could propose a bill.

    Mr. Paul Szabo: I don't think our job, under the charging provisions, is to consider how we amplify the act as it stands, but rather to determine whether the act, as it was given royal assent, is operational or has any deficiencies we might deal with. I don't know whether you've disclosed whether you're aware of anything in this act that has caused you difficulty in discharging your operations. The suggestions you've given are more to improve operational performance. But do you have anything on this act, or are you aware of anybody you do business with in regard to this whole matter of disposition of assets who had some suggestions or problems with the act?

    Mr. Dan Ross: I think Mr. Lauzon mentioned that the first point does cost the Crown unnecessary money.

    Mr. Paul Szabo: But that's something you can do to amend the act, to enhance it.

    Mr. Dan Ross: That's true. We could do that.

    Mr. Paul Szabo: The minister can always table a bill, which we do often.

    The last question is, do you know of anybody who's involved in anything remotely to do with this act or the activities covered by it who has brought to your attention any deficiencies, or things that don't work, or things that inhibit people from being able to in fact achieve the intent of the legislation?

    Mr. Dan Ross: Not really, no.

    Mr. Paul Szabo: Thank you.

    The Chair: Thank you, Mr. Szabo.

    I'm going to share my 30 seconds with Madame Sgro.

    Ms. Judy Sgro: Thank you, Mr. Chairman.

    The minister has been most anxious to get this review done; hence the reason I asked if we could squeeze it in as soon as possible to get it started. It's way overdue. Before going forth, I would suggest, with any other changes via the minister, he wants to know how it's working and whether or not we are satisfied when we do the review and so on. There may be other changes after that, but it needs to have that review done before, I think, the minister would—

    The Chair: Am I correct in assuming that if the committee were to do a review and were to concur with your concerns about, for example, the ability to renew mortgages and the like, it would be of some benefit to you in terms of then moving those amendments?

    You've waited a long time for this. I want to thank you for coming. I want to thank you for engaging in this kind of conversation, as you did. From my perspective, I have a few little questions about why you have a private auditor, but that's something we'll get into when we bring you back. I appreciate the time and the clarity. Frankly, I'm interested in the program, and from what I hear about it, it sounds as if you've made some very good choices about how you deal with this in what could be a very contentious and, I suspect, risky business at times.

    We will look to see. It's going to be difficult, because nobody knows.... Life sort of drops off a cliff on November 7. Whether we can get all of this done is another question, but I appreciate your spending the time here. We'll get back to you as soon as we can.

    Mr. Dan Ross: Thank you.

    Mr. Rick Lauzon: Thank you.

    The Chair: The meeting is adjourned.