OGGO Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Government Operations and Estimates

EVIDENCE

CONTENTS

Tuesday, October 21, 2003

Á

1105

The Acting Chair (Mr. Roy Cullen (Etobicoke North, Lib.))

Chief Superintendent Peter German (Director General, Financial Crime, Royal Canadian Mounted Police)

Á

1110

The Acting Chair (Mr. Roy Cullen)

Chief Officer David Douglas (Chief Officer, Organized Crime Agency of BC, Canadian Association of Chiefs of Police)

Á

1115

The Acting Chair (Mr. Roy Cullen)

Chief Officer David Douglas

Á

1120

Á

1125

Á

1130

The Acting Chair (Mr. Roy Cullen)

Mr. Leon Benoit (Lakeland, Canadian Alliance)

C/Supt Peter German

Mr. Leon Benoit

C/Supt Peter German

Mr. Leon Benoit

C/Supt Peter German

Á

1135

Mr. Leon Benoit

Ms. Judy Sgro (York West, Lib.)

Mr. Leon Benoit

The Acting Chair (Mr. Roy Cullen)

C/Supt Peter German

Mr. Leon Benoit

The Acting Chair (Mr. Roy Cullen)

Mr. Leon Benoit

The Acting Chair (Mr. Roy Cullen)

Mr. Leon Benoit

C/Supt Peter German

Mr. Leon Benoit

C/Supt Peter German

Á

1140

Mr. Leon Benoit

C/Supt Peter German

The Acting Chair (Mr. Roy Cullen)

Mr. Robert Lanctôt (Châteauguay, BQ)

C/Supt Peter German

Mr. Robert Lanctôt

C/Supt Peter German

Mr. Robert Lanctôt

The Acting Chair (Mr. Roy Cullen)

Mr. Robert Lanctôt

The Acting Chair (Mr. Roy Cullen)

Mr. Robert Lanctôt

The Acting Chair (Mr. Roy Cullen)

Mr. Robert Lanctôt

The Acting Chair (Mr. Roy Cullen)

Mr. Robert Lanctôt

The Acting Chair (Mr. Roy Cullen)

Mr. Robert Lanctôt

The Acting Chair (Mr. Roy Cullen)

Mr. Robert Lanctôt

The Acting Chair (Mr. Roy Cullen)

Á

1145

Mr. Robert Lanctôt

C/Supt Peter German

Mr. Robert Lanctôt

The Acting Chair (Mr. Roy Cullen)

C/Supt Peter German

Mr. Robert Lanctôt

Le président suppléant (M. Roy Cullen)

Mr. Robert Lanctôt

C/Supt Peter German

Á

1150

The Acting Chair (Mr. Roy Cullen)

Ms. Judy Sgro

Chief Officer David Douglas

Ms. Judy Sgro

Chief Officer David Douglas

Ms. Judy Sgro

Chief Officer David Douglas

Ms. Judy Sgro

Chief Officer David Douglas

Ms. Judy Sgro

Chief Officer David Douglas

Ms. Judy Sgro

The Acting Chair (Mr. Roy Cullen)

Á

1155

Ms. Judy Sgro

Chief Officer David Douglas

Ms. Judy Sgro

Chief Officer David Douglas

Ms. Judy Sgro

Chief Officer David Douglas

Ms. Judy Sgro

The Acting Chair (Mr. Roy Cullen)

Mr. John Bryden (Ancaster—Dundas—Flamborough—Aldershot, Lib.)

C/Supt Peter German

Mr. John Bryden

C/Supt Peter German

Mr. John Bryden

Chief Officer David Douglas

Mr. John Bryden

Chief Officer David Douglas

Â

1200

Mr. John Bryden

Chief Officer David Douglas

Mr. John Bryden

Chief Officer David Douglas

Mr. John Bryden

Chief Officer David Douglas

Mr. John Bryden

Chief Officer David Douglas

Mr. John Bryden

Chief Officer David Douglas

Mr. John Bryden

Chief Officer David Douglas

Mr. John Bryden

C/Supt Peter German

Â

1205

The Acting Chair (Mr. Roy Cullen)

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, Canadian Alliance)

C/Supt Peter German

Mr. Paul Forseth

C/Supt Peter German

Mr. Paul Forseth

Chief Officer David Douglas

Â

1210

Mr. Paul Forseth

C/Supt Peter German

Mr. Paul Forseth

C/Supt Peter German

The Acting Chair (Mr. Roy Cullen)

C/Supt Peter German

The Acting Chair (Mr. Roy Cullen)

Â

1215

Mr. Robert Lanctôt

The Acting Chair (Mr. Roy Cullen)

Mr. Robert Lanctôt

Chief Officer David Douglas

Â

1220

C/Supt Peter German

Mr. Robert Lanctôt

C/Supt Peter German

The Acting Chair (Mr. Roy Cullen)

Mr. Paul Szabo (Mississauga South, Lib.)

Chief Officer David Douglas

Mr. Paul Szabo

Chief Officer David Douglas

Mr. Paul Szabo

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

Mr. Paul Szabo

Mr. Rick Lauzon

Mr. Paul Szabo

Â

1225

Chief Officer David Douglas

Mr. Paul Szabo

The Acting Chair (Mr. Roy Cullen)

Mr. Leon Benoit

C/Supt Peter German

Chief Officer David Douglas

Mr. Leon Benoit

Chief Officer David Douglas

Mr. Leon Benoit

Chief Officer David Douglas

Mr. Leon Benoit

Chief Officer David Douglas

Mr. Leon Benoit

Chief Officer David Douglas

Mr. Leon Benoit

Chief Officer David Douglas

Mr. Leon Benoit

The Acting Chair (Mr. Roy Cullen)

C/Supt Peter German

Â

1230

Mr. Leon Benoit

C/Supt Peter German

Mr. Leon Benoit

Chief Officer David Douglas

Mr. Leon Benoit

The Acting Chair (Mr. Roy Cullen)

Mr. Robert Lanctôt

C/Supt Peter German

The Acting Chair (Mr. Roy Cullen)

Chief Officer David Douglas

Â

1235

The Acting Chair (Mr. Roy Cullen)

C/Supt Peter German

The Acting Chair (Mr. Roy Cullen)

Chief Officer David Douglas

The Acting Chair (Mr. Roy Cullen)

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CANADA

Standing Committee on Government Operations and Estimates

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NUMBER 065

l

2nd SESSION

l

37th PARLIAMENT

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EVIDENCE

Tuesday, October 21, 2003

[Recorded by Electronic Apparatus]

Á  (1105)  

[English]

    The Acting Chair (Mr. Roy Cullen (Etobicoke North, Lib.)): I would call the meeting to order, please.

    Pursuant to Standing Order 108(3)(c), we are reviewing the Seized Property Management Act.

    From the Royal Canadian Mounted Police we have Mr. Peter German, and from the Canadian Association of Chiefs of Police we have Mr. David Douglas, chief officer.

    Just by way of background, the Seized Property Management Act was enacted in 1993. Subsection 20(1) 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.

    That probably should have taken place in 1996, but I suppose better late than never. We've had a presentation by the department, and we welcome the witnesses. Maybe I'll just ask the people to present in the order they're in on the agenda.

    For the RCMP, Mr. Peter German, please begin and speak for five to seven minutes. Then we'll turn it over to Mr. Douglas. Then we'll have a round of questions and take it from there.

    Chief Superintendent Peter German (Director General, Financial Crime, Royal Canadian Mounted Police): Thank you, Mr. Cullen. Good morning.

    I have some prepared remarks, which have been distributed. A copy should be in front of you in both official languages.

    As director general of financial crime for the Royal Canadian Mounted Police, I welcome the opportunity to appear before this distinguished committee. I also bring greetings from Commissioner Zaccardelli, who is a strong proponent of the integrated policing model reflected by the proceeds of crime program.

    In Canada we, the police, view our role in very simple terms. It is our duty to investigate crime without fear, favour, or affection. We are not the prosecutors; that is a role ably filled by crown prosecutors with the Department of Justice and the provincial attorneys general. Similarly, we do not pretend to be asset managers.

    Very early in the development of the proceeds of crime program, we realized that asset management is a specialized calling that should be handled by persons with the requisite expertise. This was not entirely a revelation, as a similar understanding developed in the United States law enforcement community much earlier. Attempting to maintain a seized dairy farm, a ski hill, or a bar as operating concerns should not be a job for the police.

    Since its inception in 1993, the Seized Property Management Directorate has, in our view, very ably performed the role of asset manager for seized and restrained assets. As the proceeds of crime program became the integrated proceeds of crime program in 1996 and up to the present, SPMD has developed its systems and policies in a manner that allowed it to remain abreast of change in the law enforcement community. I believe we enjoy a strong and professional working relationship with SPMD and look forward to that continuing and growing.

    We also support efforts to share forfeited assets with those governments whose law enforcement agencies have contributed to the seizure and restraint of proceeds of crime. Canada has been the recipient of moneys resulting from investigations abroad thanks to the existence of sharing agreements. We know that similar sharing takes place between levels of government in Canada. The nature of those arrangements and the amounts shared fall to other ministries.

    Organized crime does operate in Canada, and we and all law enforcement are doing our utmost to curb its activities. However, as you all know only too well, this is an ongoing battle fought on many fronts. Organized crime will not simply vanish. Furthermore, Canada's many strengths often serve as vulnerabilities in the fight against organized crime.

    Our strategic geographic location, just north of a country that is a huge market for illegal drugs, our large ports and airports, our advanced financial institutions, and any number of other factors contribute to Canada being a good place for organized crime to do business. A prime example is the issue of B.C. bud, or homegrown marijuana, and the huge financial infrastructure that surrounds it.

    For the reasons stated above, we anticipate that more, not less, property will be restrained and seized in the future by RCMP and integrated units. The development of municipal and provincial proceeds-of-crime units will further increase these numbers. In our considered opinion, it is critical that a strong asset management capability be maintained, and that it continue to reside within the four corners of government, where it is proven to be both reliable and secure.

    Thank you very much, and I'm more than pleased to answer any questions you may have.

Á  (1110)  

    The Acting Chair (Mr. Roy Cullen): Thank you very much, Mr. German.

    I will turn it over to Mr. Douglas, of the Canadian Association of Chiefs of Police.

    Chief Officer David Douglas (Chief Officer, Organized Crime Agency of BC, Canadian Association of Chiefs of Police): Good morning. My name is David Douglas. I am the chief officer of the Organized Crime Agency of British Columbia, which has a provincial mandate within British Columbia to facilitate the disruption and suppression of organized crime that affects all British Columbians.

    It is my pleasure to represent the organized crime committee of the Canadian Association of Chiefs of Police on behalf of our chair, Chief Julian Fantino of the Toronto Police Service. Thank you for your kind invitation to appear before this committee today.

    I think it's safe to say that in the past five to ten years the pace of organized crime has changed a great deal, and it has created unprecedented challenges for governments around the world. Globalization, the fusion of criminal groups, multi-commodity criminal activity, the use of technology, the geography of organized crime, and now the convergence of organized crime, the international drug trade, and terrorism have allowed organized crime to create a seamless capability for criminal activity.

    How do we counter this changing face of organized crime? Law enforcement is out-gunned, out-manned, and under-resourced in this battle and really has only two strategies in its arsenal to combat transnational organized crime, those being disruption and suppression—disrupting organized criminal activity by seizing contraband and prosecuting those responsible, and suppressing these criminal empires by the seizure of their assets.

    I think law enforcement groups around this country have been successful at disrupting and suppressing organized criminal activity. However, we need to build on our successes with a multidisciplinary response to this issue and utilize all the tools in the tool box in meeting our respective mandates.

    With respect to the federal response to this issue, the CACP have a number of outstanding issues. The first one is the determination of share to the contributing police agency. The Seized Property Management Act and regulations lack adequate mechanisms to ensure there is input from the investigating agency at the outset of the determination process, or if necessary to initiate a sharing determination, or to appeal a federal sharing determination.

    The manner in which proceeds of crime are forfeited and subsequently distributed under Canadian law is very different from that of our American counterparts. In Canada there is no direct benefit to a police agency that seizes proceeds of crime.

    With respect to the actual sharing of forfeited assets, the DOJ—the Department of Justice—follow the intent of the legislation. The practice is that the federal crown agent who prosecuted the case file is consulted for a recommendation. I am advised that all investigative contributions, which includes both the substantive and the proceeds-of-crime investigation, provide both subjective and objective considerations to determine the sharing formula.

    In Ontario, the Attorney General combines the federal money received from the sharing formula with the provincial money, keeps a portion to pay for the prosecution of offences, and makes other money available for grant programs operated by Criminal Intelligence Service Ontario—crime prevention and law enforcement grants. Under the Ontario model, 60% of the forfeited proceeds of crime go to the Ministry of Public Safety and Security, with the remainder to the Ministry of the Attorney General.

    Within the MPSS the proceeds are divided equally between the standards and new programs branch and CISO. The CISO portion of the proceeds is made available to police services through grants to fund joint force operations targeted at organized criminal activity. Police agencies may apply to CISO for funding through the law enforcement grant program. The proposals must include a proceeds of crime component to be eligible.

    As this process clearly demonstrates, the police are at best indirect beneficiaries of assets forfeited as proceeds of crime; therefore, law enforcement agencies have a distinct interest in the process surrounding the management of assets and their ultimate distribution.

    Only Ontario and Alberta have a structure in place to provide funding out of their province's forfeited proceeds of crime funds to law enforcement for ongoing or future investigations. However, my own agency did receive a disbursement of $3.75 million, which was the residual account balance at the time, when OCABC was successful in obtaining a provincial prosecuted forfeiture of $6.2 million. These moneys were directed back into ongoing organized crime investigations.

    Between 1996 and 2001, gross yearly forfeited proceeds of crime for the period by Seized Property Management Directorate are shown as $123 million. From this gross figure, almost $42 million was subtracted for returns and the costs associated with managing the assets. Of the remaining $81 million, almost $67 million was retained by the federal government to finance the IPOC program, $2.5 million was returned to foreign governments, and approximately $12 million was shared with the provinces. Using these figures, it appears that only 14.5% of the total reported forfeitures eventually make it back to the provinces.

    Although B.C has the largest number of RCMP members of any province and on provincial contract, between 1996 and 2001 only $1 million of the $81.1 million federally forfeited was apportioned as B.C's contribution.

Á  (1115)  

    There have been numerous cases that develop this point. Surrey RCMP obtained a forfeiture of a residence valued at approximately $400,000 arising from an investigation under the CDSA in regard to a marijuana grow operation in May 2003. Other properties are also being pursued for forfeiture.

    North Vancouver RCMP obtained a forfeiture of $1million cash, arising from an investigation under the CDSA with regard to a date rape drug. My own agency completed a joint force operation with the Ontario Provincial Police. As a result of that investigation, numerous large-scale seizures of marijuana were secured, along with extensive assets. For instance, cash in the amount of $3.9 million was seized after it was found hidden inside the bedroom wall of one of the targets.

    In Manitoba an RCMP contract highway patrol member effected a $3 million seizure, and the Province of Manitoba received a 50% disbursement after seized property management costs, based on the recommendation of the federal Department of Justice.

    These investigations were completed by RCMP contract detachments, to which the provinces of British Columbia and Manitoba and their respective municipal governments have contributed resources.

    OCABC has a provincial mandate, which is a joint force operation staffed with secondments from the RCMP, federal and provincial secondments, and eleven municipal police departments. Therefore, these cases appeared to generate an entitlement to the province as a predominant contributor. It is unknown how the DOJ will treat these forfeitures in terms of asset-sharing.

    In the aforementioned Manitoba case where $3 million was seized, how was the determination made between that contribution being significant instead of being predominant?

    With respect to consultation, initiation, and appeal, the sharing regulations state that the federal Attorney General may, for the purposes of determining a contribution of relevant police agencies, consult with the relevant agencies and jurisdictions. However, the determination remains a unilateral federal process.

    In reality, even if there appears to be an increased level of consultation between the DOJ and the provinces, the disbursement process appears to be somewhat ad hoc, and there needs to be more transparency and accountability in this decision-making process.

    Is there consistency between the DOJ recommendations on the sharing formula from one province to another? This is a matter that should be pursued by this committee.

    It is unclear exactly how entitlement is determined. For example, federal officials have suggested that the Seized Property Management Act....

    The Acting Chair (Mr. Roy Cullen): Sorry to interject, but could you speak a little more slowly so the translation people can keep up with you? Thank you.

    Chief Officer David Douglas: Sure.

    For example, federal officials have suggested that the Seized Property Management Act sharing provisions apply only to the proceeds aspects of a criminal investigation, regardless of any contribution made by non-federal police to the underlying substantive criminal investigation.

    Again, in reality, a very large portion of the proceeds of crime investigations are conducted by the federally funded integrated proceeds of crime units, IPOC units. In some jurisdictions, provincial and municipal police agencies do not have the resources, funding, or expertise to mount proceeds-of-crime investigations. Using the above analogy, they therefore receive no benefit from completing substantive investigations, which in many cases have been lengthy, complex, and expensive investigations. Such reasoning is inconsistent with the legislative intent of the Seized Property Management Act.

    The lack of mechanisms to ensure there is adequate input from the investigating police agency at the outset of the determination process or if necessary to appeal a federal decision as to the contribution are deficiencies in the Seized Property Management Act and sharing regulations.

    Regarding consistent application of policy, the sharing regulations stipulate that the federal Attorney General shall assess the contribution of the Government of Canada and police agencies on the basis of the nature and importance of information provided by each agency and the participation in the investigation and prosecution that lead to forfeiture or the imposition of a fine.

    There is a necessity to develop comprehensive and clear written guidelines on what constitute nature and importance and participation of police agencies; otherwise, there could be many interpretations of what constitutes nature and importance and participation.

    The development of such guidelines should be transparent and should be completed in consultation with provincial representatives and law enforcement. As previously noted, federal officials must appreciate that provincial and municipal police agencies can expend significant resources in terms of surveillance and other investigative techniques on the investigation of predicate federal offences leading to the forfeiture of proceeds of crime.

    Regarding the disbursal of seized funds before the judicial process, lawyers can apply through the courts to obtain access to seized assets in order to pay for their legal services. Where cash assets have been seized, defence counsel generally succeeds in making an application to access seized assets under section 462 of the Criminal Code, which involves the application for review of a restraining order.

    Denial of right to counsel is clearly a concern, and Parliament has seen fit to ensure that counsel can be retained, even if it is from the use of the proceeds of crime itself. This section of the Criminal Code also allows for the accused to meet reasonable living and business expenses. The courts can hold the subject, the charged person, accountable for those funds in order to pay them back, although this rarely happens.

    This process has nothing to do with the police, except that an investigator may attend a hearing to assist the crown attorney or crown counsel in indicating whether indeed the charged person has no other money available, or if there are further assets that could be used to pay for the legal expenses. These hearings can run for weeks, depending on the complexity of the case and the evidence to be called to support or refute the applicant's claims.

    Proceeds-of-crime investigators have to rely on the services of on-staff forensic accountants to ensure that all possible assets are identified, but only those assets for which forfeiture is a reasonable likelihood are restrained or seized. Assets held in nominee relationships that are too remotely located in terms of the predicate criminal events are not restrained or seized. However, they are identified to the crown, so that their existence and relationship to the suspect can be used to counter the argument of defence counsel to access those funds.

    What is the impact of defence counsel accessing seized cash assets? This is now the norm, not the exception, and has become a source of great frustration for prosecutors and the police. Although judges are supposed to bear in mind legal aid rates in making determinations, the reality across Canada is that the accused persons are hiring top-dollar defence lawyers, and judges are routinely granting them top-dollar access to seized funds while allowing the accused to maintain the lifestyle to which he has become accustomed--i.e., private schooling for his children. The effect of this is to substantially diminish the seized funds.

    This can also lead to a plea-bargaining process with the accused, which would not otherwise have been contemplated. For example, a prosecutor may regard a plea bargain as a way of literally cutting losses, given that a full-scale trial taking months or even years to complete may result in the bulk of the seized funds being used to pay defence legal expenses, leaving little if anything to be forfeited to the government.

Á  (1120)  

    Such actions result in assets being returned to the accused, negating the intent of the legislation to take the profit out of crime. In doing so, the administration of justice is brought into question. The public can rightly feel aggrieved that money that could, would, and should have been forfeited to public funds ends up in the pockets of defence lawyers and accused persons.

    The way in which judges have allowed such open access to seized funds has been instrumental in enabling this negative cycle, and undermined the ability of prosecutors to keep the profits of crime out of the hands of the offenders. The legislation should be amended to address this ever-widening loophole.

    With respect to the maintenance of assets, assets seized during federal prosecutions are managed by the Seized Property Management Directorate; when a forfeiture is ordered, the cost and fees of managing those assets is paid from the liquidated asset. I have a Seized Property Management Directorate summary that shows the apportionments to cover cost and fees, which range from 20% in 1996 to about 58% in 2001, five years later. Therefore, it's clear that during that period seized property management costs have gone up extensively.

    Assets seized as the proceeds of crime in federally prosecuted cases are stored or maintained by the Seized Property Management Directorate, and the directorate has absorbed this risk and bills back for its costs for doing so.

    Early experience with the federally prosecuted investigations presented serious risks. Suspects deliberately left their property insecure or turned the water on in freezing weather, natural events caused damage to property by falling trees, marine boats and vessels corroded, and in one case sank.

    With respect to seized property management costs, accounting changes recommended by the Auditor General are eroding disbursements to all of the provinces. Cash cases, the seizures of cash or bank accounts, are easy and inexpensive to manage. The seizure of real estate and depreciable property, non-cash cases, are costly to manage and frequently offer little in terms of resale value.

    Due to the increases in the non-cash cases, due in part to the expansion of offence-related property, the Seized Property Management Directorate is subsidizing these costs from cash cases in each province. For example, a warehouse of offence-related grow equipment property has no resale value, but is costly to manage. Similarly, a fungus-infested real estate property is also costly to manage. These costs are being paid from seized-cash cases, resulting in less disbursement on forfeiture. There are cases where the provinces actually owe money as a result of such seizures.

    It is generally felt that Seized Property Management Directorate does quite well to manage the diverse categories of assets, stock portfolios, perishables and time-sensitive inventories, which do require special handling. Pre-seizure planning and consultation with SPMD can greatly reduce the challenges they must meet.

    An amendment to section 462, which is a management order brought about as a result of Bill C-24, now allows anyone making assets on behalf of the Attorney General of Canada to make interlocutory sales of perishable and rapidly depreciating property.

    Assets seized in provincially prosecuted cases are more problematic. For instance, Ontario does not have its own property management system and does not have a standing agreement with SPMD, although such agreements can be and have been made on a case-by-case basis.

    Property deemed to be offence-related property and not the proceeds of crime in provincial cases is left for the police agency to store and maintain. Currently, the Ontario Provincial Police have 35 motorcycles seized from an Outlaw motorcycle project that require regular maintenance and secure storage in case they are returned to the owners at the conclusion of the trial. This is obviously an expensive and onerous task for the police agency, and there's no protocol yet established to allow the police to recoup those expenses upon forfeiture.

    A greater concern was highlighted in the 1999 search of a large corporation that was operating entirely outside the law. The inability of investigators to completely deal with the issue of continuation of the offence due to not having a vehicle to contain the corporation's activities resulted in the investigators walking off with the evidence they needed but leaving the criminal business operations intact. The cashflow of that corporation was in excess of $100 million a year.

Á  (1125)  

    This may have been remedied by the subsequent introduction of a new management order at section 490 of the Criminal Code and the expansion of the concept of offence-related property throughout indictable offences of the Criminal Code; and the provincial forfeiture legislation, if it were enacted, could also be of assistance.

    Statutory protection is needed to protect police and government prosecutors when investigating and prosecuting complex commercial crime and proceeds-of-crime cases. This has a particular application where third-party interests may be involved. An OCABC investigation into an Internet gambling operation illustrates this point. The target company at one point reached a market capitalization of almost $900 million U.S. on the NASDAQ over-the-counter bulletin board trading. On the day the police executed the search warrant on the company's corporate offices in Vancouver the stock price plummeted from $15 a share to $3.

    The lack of statutory protection for police and prosecutors from civil lawsuits when investigating complex criminal enterprises will someday present real issues in advancing investigations of organized crime entities. We hope that provincial securities and regulatory statutes contain statutory protection, immunity provisions for personnel mandated to enforce such statutes.

    Regarding the maintenance of assets, with the enactment of Bill C-24 bringing offence-related property to the Criminal Code, the landscape of police maintaining property assets has changed considerably. If the property is subsequently ordered forfeited, the Attorney General is also responsible to liquidate the assets, with no current sharing agreement with the police agency to recover any pre-forfeiture expenses. The federal government saw fit to establish SPMD to ensure the proper handling and disposition of assets. How can a province operate without the same support?

    Finally, on the issue of maintenance of assets, large and complex Criminal Code investigations in one province often identify criminally derived assets in other provinces. Provincial asset management schemes need to be coordinated interprovincially. This point is further advanced by Ontario's enactment of civil forfeiture legislation and the likely consideration of that type of legislation by other provinces. Civil forfeiture judgments in one province will be enforceable in another province, thereby creating a need for a coordinated approach.

    Thank you very much.

Á  (1130)  

    The Acting Chair (Mr. Roy Cullen): Thank you very much, Mr. Douglas.

    We'll now go to an eight-minute round, starting with Mr. Benoit.

    Mr. Leon Benoit (Lakeland, Canadian Alliance): Thank you very much, Mr. Chair.

    Welcome, gentlemen. Thank you for coming here this morning and thank you for your presentations.

    I have questions for both of you. I probably won't get to anywhere near all of them, but I'll start with some questions to you, Mr. German.

    Actually the Auditor General has referenced money laundering, the possibility of money laundering through crown corporations. Could you tell me if there are any investigations going on concerning this now?

    C/Supt Peter German: Thank you, Mr. Benoit.

    It would not be appropriate to comment on ongoing investigations. However, in terms of investigations concluded in the recent past, I am not aware of situations involving crown corporations and money laundering.

    Mr. Leon Benoit: Do you feel that you're not even free to give Parliament information on the number of investigations going on in crown corporations, in government departments? I'm not asking about details of any investigation or even which individuals are involved; I'm asking about whether there are investigations going on.

    C/Supt Peter German: Are you asking about money laundering investigations specifically, or are you talking about corruption investigations and so forth?

    Mr. Leon Benoit: All types of RCMP investigations into crown corporations and government departments.

    C/Supt Peter German: There definitely are ongoing investigations with respect to the sponsorships and so forth; it's really a matter of public record. But in terms of actual numbers of investigations conducted with respect to government departments and crown corporations, I don't have that statistic with me.

    I thought you were referring specifically to money laundering investigations, and this is not something that I'm aware has surfaced in a government department or a crown corporation. I suppose you could say whenever you have a criminal offence there's always the possibility of a money laundering aspect to it, and that's something we always try to address. So if our commercial crime section is looking at a corruption investigation, they would hopefully follow it through to its logical conclusion and see what became of any assets that resulted from this illegal activity and follow up from a money laundering perspective.

Á  (1135)  

    Mr. Leon Benoit: Okay, from your answer, then, you're saying that all of the police investigations going on in crown corporations or in government departments have been made public. There are none going on that haven't been made public. Is that accurate?

    Ms. Judy Sgro (York West, Lib.): On a point of order...[Inaudible--Editor].

    Mr. Leon Benoit: It certainly does; we're talking about proceeds of crime, and that's what I'm getting to.

    The Acting Chair (Mr. Roy Cullen): Mr. German, are you in a position to answer these questions?

    C/Supt Peter German: Again, I don't believe it would be appropriate for me to comment on ongoing investigations. Certainly I didn't bring with me statistics on corruption investigations or anything. We really came here to discuss money laundering. So I'm sorry, I don't have any specific numbers in terms of ongoing investigations in corruption matters, government departments, and so forth.

    Mr. Leon Benoit: The question was a very general question. The question was whether there any investigations going on to do with money laundering in crown corporations, or money laundering through crown corporations.

    The Acting Chair (Mr. Roy Cullen): I'm just going to interject here for a moment.

    The way I would see it, your question, Mr. Benoit, is germane if you're talking about assets that might be seized as a result of some criminal activities conducted by people within a crown corporation, or by a crown corporation itself. Is that what you're trying to get at--in other words, at how this act would deal with assets that would be seized as a result of some criminal acts undertaken by employees of a crown corporation?

    Mr. Leon Benoit: Mr. Chair, I'm not there yet; I'm working to that. But my first question was a very general question about whether there are any investigations taking place. Surely it can't be a secret or inappropriate to comment on whether or not there are investigations taking place into money laundering through crown corporations.

    Once I get an answer to that, I'll follow through to connect it to proceeds of crime.

    The Acting Chair (Mr. Roy Cullen): Okay, but I just want to remind members that we're talking about the Seized Property Management Act. So with the Seized Property Management Act, I think it is a legitimate question to pursue seized property as a result of criminal acts being undertaken by employees of a crown corporation. Other than that, I'm not sure it's topical.

    So if you want to just stay on the topic, I'd appreciate it.

    Mr. Leon Benoit: Mr. Chair, you're making it unnecessarily difficult.

    I can ask the question in this way: Is there any seized property potentially resulting from investigations going on with money laundering through crown corporations?

    C/Supt Peter German: Again, in fairness, I'm not trying to avoid your question, but I would not feel comfortable commenting on ongoing investigations. There are lots of reasons why we would not necessarily disclose an ongoing investigation, if for some reason it's still in progress. So really, I simply can't comment on ongoing investigations.

    There are, from time to time, investigations that are a matter of public record, for which we issue press releases and so forth. We tend to do that once charges are laid, or on occasion we will confirm that we are investigating the matter.

    In terms of money laundering resulting from one of those investigations, again, the best answer I can really give is that we try to look at the proceeds of crime component in every investigation, and if a person receives some illicit property, cash, or whatever it may be, we do attempt to follow through on that. Now, fortunately, in the Criminal Code virtually all criminal offences are what we would refer to as predicate offences, for purposes of proceeds of crime, so we can follow up and pursue the illegal assets.

    Again, I just wouldn't feel comfortable going into specific ongoing investigations.

    Mr. Leon Benoit: So investigations often take place that aren't made public. Are they always made public at a point where charges are laid? Is that then a matter of full public disclosure?

    C/Supt Peter German: Certainly in our system, once a charge is laid and information is laid before a court that's a public document. When a person appears in court, that is the beginning of the prosecutorial process. So yes, they become a matter of public record at that point.

Á  (1140)  

    Mr. Leon Benoit: How often is the fact that an investigation is taking place made public before charges are laid?

    C/Supt Peter German: Let me use an example of a drug investigation. If we are conducting an undercover drug operation, obviously we're not going to tell people we're conducting an undercover drug operation in their community. That's the last thing we would want to do, because there wouldn't be much purpose in pursuing it. That would be a prime example of a situation where the public would find out about that investigation once information was laid in court, once charges were presented.

    So there can be a lot of reasons like that for the police not wanting to disclose the fact that they're involved in an investigation.

    Similarly, on a commercial fraud investigation, it's often very key to get the necessary documents we need to pursue the case, and we don't want to tip our hand ahead of time and say we're coming with a search warrant, we're investigating.

    There are a lot of reasons we wouldn't disclose it. But at the appropriate juncture, these matters do become a matter of public record.

    The Acting Chair (Mr. Roy Cullen): Okay, thank you very much, Mr. Benoit.

    Monsieur Lanctôt, s'il vous plaît.

[Translation]

    Mr. Robert Lanctôt (Châteauguay, BQ): Thank you, Mr. Chair.

    The first point I’m going to raise is aimed simply at getting a quick answer in the light of what’s just been said. You seem to be familiar with the matter of the Sponsorship Program investigations; it was you who raised the matter.

    Without telling us what the investigations are, can you tell us how many there are at present?

[English]

    C/Supt Peter German: Again, I did not bring statistics on corruption investigations with me. It is a matter of public record that some charges have been laid already with respect to what we can refer to generically as sponsorship investigations. It's also a matter of public record that a number of cases were referred to the RCMP by Public Works and Government Services Canada. So that is an ongoing matter. But I am sorry, I did not bring any of those statistics with me, because I understood that was not the focus of this committee.

[Translation]

    Mr. Robert Lanctôt: I just want to know how many investigations are going on.

[English]

    C/Supt Peter German: No, I simply don't have that number at the top of my head, and I wouldn't want to make a guess.

[Translation]

    Mr. Robert Lanctôt: Are we talking about 100, 10 or 2? There’s a difference. Without giving us an exact number, you can tell me how many.

[English]

    The Acting Chair (Mr. Roy Cullen): Mr. Lanctôt, we're here to discuss this bill, and I'm not sure we're even getting close to dealing with some very important points that have been made by--

[Translation]

    Mr. Robert Lanctôt: This is very important because we’re talking about…

[English]

    The Acting Chair (Mr. Roy Cullen): Excuse me. I have the floor.

    Some very important points have been made by the witnesses, and we keep going over and over the statistics. Mr. German has said he doesn't have those statistics.

    I wonder if we could get to the act that we're here to review.

[Translation]

    Mr. Robert Lanctôt: He’s able to tell me.

    Why is there a connection? Because when we talk about repayments, the sponsorship investigations now taking place are, I think, pretty connected to the issue before us today, Mr. Chair; we’re talking about repayments. I think that if we don’t understand that, we’ve got a problem. So I ask my question again.

    Are we talking about several investigations? Is it more than 10 or less than 10? Even if you don’t have the exact number because you’re not actually involved... You specifically raised the matter a while ago. I’m not asking you in general terms, but just that one. I hope you’re aware of whether there are 100 investigations, 10 investigations or more than 2. That’s all I want to know. After that, I’ll have other questions to ask.

[English]

    The Acting Chair (Mr. Roy Cullen): Mr. Lanctôt, I know why we're here. We're here to review the Seized Property Management Act, how it operates, and whether there could be improvements to this particular piece of legislation.

    I'm not sure of the relevance of whether there are or aren't criminal acts under investigation with respect to a government department, agency, or crown corporation. Surely the question before us is if there is seized property as a result of any criminal charges, does this piece of legislation deal adequately and appropriately with those seized assets? That's what we're here to discuss.

[Translation]

    Mr. Robert Lanctôt: But this is very important because...

[English]

    The Acting Chair (Mr. Roy Cullen): So unless we can get back on track, I'm going to move to another questioner.

[Translation]

    Mr. Robert Lanctôt: ...if it’s zero, I won’t ask any questions. But, if there are five or ten, I’m going to ask whether they make any attachments before judgment. That will go with the application of the act before us. The act exists and I want to know what we’re going to do about that.

[English]

    The Acting Chair (Mr. Roy Cullen): If there are five or ten or a hundred, what relevance is that to how the assets are managed under this particular piece of legislation?

[Translation]

    Mr. Robert Lanctôt: We’ll be examining the financial point of view, the way it handles this, what’s in the act that could be improved, what could be done beforehand. I’ve got lots of things to propose as applications after that.

[English]

    The Acting Chair (Mr. Roy Cullen): I'll give you a short chance to pursue this line of questioning, and then we're going to move--

[Translation]

    Mr. Robert Lanctôt: All you have to do is tell me yes or no.

[English]

    The Acting Chair (Mr. Roy Cullen): --to another witness, because we're here to review this piece of legislation.

Á  (1145)  

[Translation]

    Mr. Robert Lanctôt: Have you got any idea?

[English]

    C/Supt Peter German: Again, I would not feel comfortable providing a guesstimate on the number of files. As I indicated, I did not bring any statistics with me with respect to ongoing commercial crime investigations, of which the sponsorship files would be part.

    What I can say is that if any assets are seized as a result of those investigations, then quite correctly they would be managed as would any other assets. And there are provisions in part XII.2 of the Criminal Code that would allow for the return of those assets, assuming they were illegally acquired. They can then be returned to innocent third parties, be it the government or whoever is victimized.

    So certainly the provisions of the Seized Property Management Act can be helpful in those situations. It is totally hypothetical, though.

[Translation]

    Mr. Robert Lanctôt: It’s important and that’s what I’m getting at, because if the investigations are not going anywhere and if we don’t know how many or what’s going to happen... In this matter, at present there are companies going bankrupt, and the money will no longer be there, in fact, for repayments.

    Do you see my point, Mr. Chair? It’s pretty important for us to know.

    So, if there are investigations which are not being concluded and we don’t know how many, although you are conducting investigations and there are companies going bankrupt at present or closing their doors, what are you going to do, even if your investigation is properly conducted, if things don’t change? It’s now been many months--16, 18, 19, almost 20 months--since you were apprised of the matter and no seizures can take place because there are no judgments, because no charges have been laid.

    My question is as follows: if you have files that are ready, why are there no charges and why are there no seizures or applications to a judge for there to be attachments before judgment, in order to avoid these sums of money being put elsewhere or wasted?

    Does that have a connection, Mr. Chair?

[English]

    The Acting Chair (Mr. Roy Cullen): Well, it's not a very strong one. I think it's unfortunate that we're wasting our time on some points that aren't that relevant.

    Do you want to respond, Mr. German?

    C/Supt Peter German: Yes. A quick response to that, sir, would be that commercial crime investigations tend to be lengthy. We do our best through the allocation of resources, a team concept in conducting investigations, to reduce the time it takes us as much as possible.

    There are a number of constraints we have no control over. We certainly have to comply with the charter, the provisions that deal with search and seizure, search warrants. Various investigative tools do take time to develop, particularly when you're talking about complex financial investigations. Forensic accounting is often a part of it.

    So it's not a matter of simply running out, as you might, on a drug seizure on a downtown street--a bust and buy. It's not that way with commercial crime. We do try to reduce the time of those investigations as much as possible. Certainly, as I've indicated, if we become aware of assets in someone's possession that we believe are illegally acquired, we will do our very best to restrain them at an early point in time.

    Again, I can't comment on specific investigations that are ongoing.

[Translation]

    Mr. Robert Lanctôt: Do I have any time left?

    Le président suppléant (M. Roy Cullen): Yes, a little.

    Mr. Robert Lanctôt: Under the act we are reviewing now, in your practices, as much in this matter as in any other, especially organized crime, do you use what is called in civil law attachments before judgment? Do you apply for them to the crown prosecutor? You may call them searches or something else, but I’m talking about seizures of property. Do you make such applications, rather than wait for the case to be concluded and the assets, for instance, a house, have been placed, by donation or otherwise, in the name of the spouse of the person concerned or the brother’s name or someone else’s? Do you make attachments before judgment?

[English]

    C/Supt Peter German: Yes, that's the whole point of part XII.2 of the Criminal Code: to allow for the seizure and the restraint of assets prior to a conviction. That is, of course, the issue that is germane here, that there is oftentimes a gap between what is seized and what is eventually forfeited. That goes back to what my friend Mr. Douglas indicated, that between seizure and forfeiture, various different costs will come off--legal costs, maintenance costs, and so forth.

    But yes, the whole point is we try to seize early in time. We try to restrain, if it's real property or intangibles, as soon as possible. Then eventually charges are laid and hopefully forfeiture is made, and the assets are then returned to the innocent third party or to the government.

Á  (1150)  

    The Acting Chair (Mr. Roy Cullen): Thank you.

    Ms. Sgro.

    Ms. Judy Sgro: My questions are to Mr. Douglas.

    You mentioned a variety of issues you have with the Seized Property Management Act. Can you elaborate a little bit on the access to the seized funds for judges and defence counsel? Could you elaborate a bit more on that issue?

    Chief Officer David Douglas: Well, I think it happens on a pretty regular basis. I think police forces across this country, whether they're federal, provincial, or municipal, see this. It occurs every day. We're faced with very lengthy, complex, and expensive investigations. We go forward and make the seizures, prove the substantive case and put the restraining orders in place, and between that time and the time these people go forward to prosecution.... I can give you an example of one particular case in Vancouver called Project Nova, done by the Vancouver police department, where between the time of arrest to the time of actual conviction--and they haven't finished that yet, because they've appealed the conviction--it took five years. Within that five years, there were substantial legal fees to mount what we call “dream team” defence counsel, and it exasperates in the process.

    Ms. Judy Sgro: In essence, though, whether we approve or not, it probably is his right to do that, is it not? There is probably not a lot we could do to prevent it from happening, is there?

    Chief Officer David Douglas: There is a dilemma. You're going to pay one way or the other. If he gets access to legal aid, then he's going to get access to legal aid. This is one way, I guess, of getting around the legal aid issues--they're using the moneys that have been seized. But I think the general public aren't aware of that. I think the general public would be very interested in the fact that the police are spending their tax dollars and making substantial seizures that are being given back to the accused to mount a defence and also to maintain a business and personal lifestyle they are accustomed to.

    Ms. Judy Sgro: I follow what you're saying. I just don't know how we would go about changing something to prevent it from happening.

    I don't want to use all my time. If I get more, I'll come back to that issue.

    Chief Officer David Douglas: In the past few years, and Peter can probably join in this discussion, the reverse onus has always been.... It used to be on the accused; now the reverse onus is on the police to prove the person doesn't have those assets, and we have to go to court to show that he has.

    I think he should be making full disclosure of all his assets right up front, before he ever gets access to those seized funds. This is not happening.

    Ms. Judy Sgro: Okay. You talked about the need for new guidelines on how the sharing aspect—who initiates the investigation, who carries it out, and how much money is distributed throughout—is decided upon. Have you ever been consulted, or has the police association ever been consulted, on this particular act and the different components of the sharing?

    Chief Officer David Douglas: Not to my knowledge.

    Ms. Judy Sgro: So one of your suggestions today is that we look at the avenue of consultation concerning how that decision of sharing is done, is that right?

    Chief Officer David Douglas: That's right.

    Ms. Judy Sgro: How's my time?

    The Acting Chair (Mr. Roy Cullen): You're okay. Carry on.

Á  (1155)  

    Ms. Judy Sgro: I want to make sure I go back to this other issue.

    If you have full disclosure upon the arrest of an individual, and he has a house, a boat, and a Mercedes, until you have a conviction, are we allowed...? I guess we do seize them and retain them, but you have to show that they were illegally obtained.

    Chief Officer David Douglas: I have had experience where people have been charged in Criminal Code offences such as murder and have had to put a second mortgage on their house to get money to support their legal expenses, but that is not the case that is happening here.

    What's happening here is that they're accessing money that is actually public money that has been seized. It's their money, but it has been seized, and they're accessing it. These people are maintaining a lifestyle they have been accustomed to.

    Ms. Judy Sgro: Until you get through that process where the individual is convicted, we simply have to hold on to it. You can't dispose of it, because it doesn't belong to the taxpayer. It belongs to them until they're convicted of whatever offence. Isn't that right?

    Chief Officer David Douglas: Yes, but with some of these people you can track back to the fact that they have medium-type wealth but own 22 businesses. Maybe they should sell off some of these 22 businesses. That's one case, where a person has 22 online businesses running and yet accesses seized money.

    Ms. Judy Sgro: Okay.

    Chief Officer David Douglas: And we have to go to court to show all of that. There is no disclosure by him. We have to put the case then; we have to do all of that investigation. That is separate from the actual seized property in nominee relationships. We are talking about extensive property here. We are talking about extensive businesses, in the millions of dollars, and yet they seem to have the ability to access those seized funds.

    Ms. Judy Sgro: Okay, thank you.

    The Acting Chair (Mr. Roy Cullen): Mr. Bryden.

    Mr. John Bryden (Ancaster—Dundas—Flamborough—Aldershot, Lib.): Thank you, Mr. Chair. I have several questions.

    When a charity is listed as a terrorist organization, how does the Seized Property Management Act apply in that context? Charities often have all kinds of assets, both financial and harder assets, and if you have the phenomenon of an organization in Canada that is listed as a terrorist organization, what happens?

    C/Supt Peter German: I suspect, Mr. Bryden, that how Seized Property Management Directorate handle that is a question that should probably be put to them, because, again from a police perspective, our involvement would be with a terrorist organization. If we were to investigate a terrorist organization, if we were to seize or restrain property, then yes, it is likely that it would go to Seized Property Management Directorate for care. But if your question relates to the very fact that it's listed and to what happens with its assets and how they are managed—

    Mr. John Bryden: Well, first, the primary question is if the charity is listed as a terrorist organization, are its assets seized and turned over to Seized Property Management Directorate?

    C/Supt Peter German: Not as such by the police. I believe that's a question that should be put to Seized—

    Mr. John Bryden: Is that a question you can address, Mr. Douglas?

    Chief Officer David Douglas: I'm not familiar with the actual.... I agree with Peter, it's probably a question that should be posed to Seized Property Management Directorate.

    Mr. John Bryden: Okay. But it relates to some of the observations you've made as well. If you have this problem where you might be an organization that has been listed as a terrorist organization and your assets are seized, are they seized indefinitely? There's no conviction. There seems to be no process. Do you have any instructions, or is this relevant to the police authority? Is this something that...?

    Chief Officer David Douglas: It becomes quite involved, because you have the convergence of the international drug trade, organized crime, and terrorism; they all fuse together. That's all handled under the CDSA. It would come back to being a matter that Seized Property Management Directorate would become involved in, because it's under the CDSA.

    There are lots of examples of terrorist financing coming from things such as counterfeit products—handbags, T-shirts, whatever you like, at the street level. That would come under the Copyright Act. Any assets attached to it could be tracked back and would become a subject for Seized Property Management Directorate in the end. So there are different avenues. You could tie terrorism in to organized crime through various different commodities.

  (1200)  

    Mr. John Bryden: Let me just change subject a little bit. In looking over your experience with the proceeds of crime over say the last ten years, have there been any specific trends in the types of assets that are seized? Is there more real estate rather than less? What is happening there?

    Chief Officer David Douglas: I can tell you that these groups are moving into high-tech crime. The Starnet case I talked about was the online gambling investigation that had Hell's Angels involvement in Vancouver. We're talking about a company whose stock the day of the arrest was running at around $900 million. It had made, I think, $68 million or $70 million that year. It was the largest one-day loss—$250 million—in the history of the NASDAQ, and it's a Canadian company and a Canadian organized crime company. So they've moved into different areas that are very lucrative. Stock market manipulation is another one.

    Mr. John Bryden: But I take it this is an area of your particular interest, because now you're talking about big assets.

    Chief Officer David Douglas: Exactly.

    Mr. John Bryden: And I take it you feel the act isn't adequate to deal with this type of asset seizure.

    Chief Officer David Douglas: I think we need to get some protection around it, because, as I suggested in my comments, statutory protection is needed to protect the police and prosecutors when investigating and prosecuting complex commercial crime and proceeds-of-crime cases. This is one area where you're going in and disrupting a company—a significant company—and there are significant assets attached to the company.

    Mr. John Bryden: Is there any reason we can't have the name of that company you're citing?

    Chief Officer David Douglas: It's called Starnet Communications. It was charged.

    Mr. John Bryden: And has the case proceeded and been completed in that particular instance?

    Chief Officer David Douglas: Yes, and it took three years. I believe they were fined $100,000 and forfeited $10 million.

    Mr. John Bryden: It doesn't sound like much of a penalty, actually, if it's worth all that much money.

    Chief Officer David Douglas: It's a very complex case. We're talking about servers around the world and online gambling. It was the first case of its kind, I believe, in the history of Canada.

    Mr. John Bryden: Now, I don't know whether this is under the purview of the seized property management people, but is there something to be said for doing a ten-year overview of trends in this particular field? It seems to me that the types of assets that are seized should be a very good marker for trends not only in organized crime but in terrorist fundraising. Is that something that falls within your area?

    C/Supt Peter German: That's a very good question, sir.

    The integrated proceeds of crime program has been with us since 1996, and it was an initiative. It was A-based in Budget 2003. Prior to being A-based and prior to the budget, there was a pretty comprehensive evaluation conducted by Consulting and Audit Canada that looked at all aspects of the program. In addition to what CAC has done, there are a number of published works dealing with proceeds of crime in Canada that have looked at similar issues.

    My response to your earlier question with regard to the types of assets being seized is that you will still see the full panoply of assets, such as luxury items, obviously, and real estate.

    But picking up on the theme Mr. Douglas referred to, I expect what you will notice increasingly is that, whereas in the early stages of money laundering investigation we were concerned with bulk cash movement, now, with people's ability to move money electronically as zeros and ones, obviously the movement of currency has changed. You will still have people transporting cash in a bulk fashion, but increasingly you're going to see it done by a bank transfer, a wire transfer, and so forth.

    The landscape is constantly changing, but certain things do remain, and criminals like their luxury items just like we do, you know, so there are some constants as well.

  (1205)  

    The Acting Chair (Mr. Roy Cullen): Thank you, Mr. Bryden.

    In the second round we'll go to Mr. Forseth.

    Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, Canadian Alliance): Thank you very much, Chair.

    We're doing the statute review, and of course we need to look at first of all the capacities to act from a legal perspective. Second, we want to do some kind of social evaluation. By taking their money, are we actually reducing the criminals' ability to carry on? You take their assets; therefore, you reduce their capacity to expand or to continue their activities. Is that working? And then the bottom line this committee is going to have to address in a report is, what needs to be done to improve the legislative base on which you work?

    There were some interesting things around charities. Do you have some assistants sitting in the chairs behind you who could add some additional insight into how your capacities in the statute could be helped to address the issues around crime and charities?

    C/Supt Peter German: If I could, I'll go by way of an overview to begin with.

    We strongly believe that pursuing the profits of crime is the way to go. I think the seizures that have been made over the last decade, certainly since the proceeds-of-crime legislation came into effect in Canada in 1989, demonstrate that there are assets out there to be seized.

    The thing to keep in mind is that persons who become involved in criminal activity tend to do it for one reason: to make money. It's the profit motive. There are exceptions. Terrorism would be an exception. A murder based on rage or jealousy would be an exception. But generally speaking, most crime is conducted with the pecuniary motive in mind. Therefore, if one attacks the profits of crime, hopefully one is also reducing crime to one degree or another. We strongly endorse that concept. And certainly Canada is not alone. Countries around the world pursue the profits of crime.

    In terms of terrorism, no, we're not in a position.... I could take that under advisement. Our Criminal Intelligence Directorate deals with terrorist activity. In the RCMP we have separated, for various reasons, terrorist financing investigations from money laundering investigations.

    As the director general for financial crime, I have responsibility for our proceeds-of-crime program and our commercial crime program, which are your Criminal Code programs dealing with money laundering. Our focus is, as is Mr. Douglas's, organized crime. Our criminal intelligence folks deal with terrorist financing. They have a unit dedicated to terrorist financing, and they also liaise with their counterparts in the intelligence community domestically and abroad.

    So no, we are not the correct people to answer specific questions with regard to terrorist financing. We could certainly take them under advisement and get back to you on that.

    Mr. Paul Forseth: We heard some testimony about increasing certain legal capacities to manage the assets that were already seized. You just mentioned a previous case you said was very complicated. Were there some legal shortcomings within the statute you're operating under that needed to be fixed to address that kind of problem?

    C/Supt Peter German: Are you referring to the Starnet case?

    Mr. Paul Forseth: Yes.

    Chief Officer David Douglas: No, I don't think so. I think the legislation was there. The only issue, really, around that particular investigation was that it was global. As I suggested earlier, we have organized crime groups that have become global and are multi-commodity criminal activities. If they're into one of them, they're into everything else. The whole global aspect of that particular investigation made it very complex. As I said before, they were operating with, I think, three different servers in different parts of the world. But the legislation was there, and we used it quite successfully.

  (1210)  

    Mr. Paul Forseth: When we're looking at the context of this legislation, you must be aware of other countries and what their legislative base is. Do you look with envy at any other jurisdiction with a legislative context that could be instructive for us for how we could evolve?

    C/Supt Peter German: If you look internationally, money laundering and proceeds of crime became a real topical issue in countries around the world in the 1990s.

    The financial action task force on money laundering, the FATF, has 40 recommendations with respect to Criminal Code money laundering, and these tend to be a world standard of what is expected of countries around the world. Canada is a member of the FATF, which meets on a regular basis. Through the years, Canada has done its best to comply with the various recommendations of the FATF, and we are in substantial compliance with virtually all of them. So there is an international standard out there.

    What is also new in Canada is FINTRAC, our financial tracking agency or Canada's FIU, financial intelligence unit, which is part of a vast international network of FIUs. Again, based on the FATF recommendations, countries around the world are creating FIUs to deal with suspicious transaction reporting and so forth. So essentially the structure is in place in Canada to deal with money laundering and proceeds of crime. The creation of FINTRAC was really the last step in creating the structure we needed to work on a level playing field with other countries.

    Having said that, every country's legal system is different. Ours is quite different from that of the United States, even though we come from a common mother, so to speak. There are differences in how we obtain search warrants in Canada from the way they obtain them in the United States. The United States has a grand jury system; we don't have a grand jury system. You could go on and on about the differences. Investigations can be shorter in other jurisdictions than they are in Canada. We have a Charter of Rights that we're very proud of and that we try to work under—but there are always some constraints that go with constitutional protections.

    So it's really a case of yes, other countries work differently. Is the entire structure in place? Yes, we do have a structure that works. There are complexities.

    Mr. Paul Forseth: I have just one follow-up question.

    In order to get this done, these are all links in a chain: when the police do their reporting, they eventually have to put these comprehensive files into the prosecutorial side.

    Of course one of the problems I've noticed is the lack of capacity in the federal Department of Justice in white collar crime. We had the one case, of course, that got a lot of media attention in the Kamloops area, when they said, “Well, fine, there's crime there, and we know it's there, but, sorry, we just can't do anything, because we don't have any lawyers to do it”. That was a symbol of an ongoing problem with providing the prosecutorial resources to deal with these cases. There's no point in providing police resources and a statute for you if at the other end the Department of Justice can't deliver at the courtroom side.

    Perhaps you can comment on the interrelationships there, and resourcing in that respect, to make the statute actually work.

    C/Supt Peter German: Yes, I'd be pleased to.

    We always have to differentiate—

    The Acting Chair (Mr. Roy Cullen): Excuse me, Mr. German, since we're over the time limit, could you make it as brief as you could?

    C/Supt Peter German: Yes, I'd be pleased to.

    One point I would make is that we have to keep in mind that there is the federal Department of Justice, and then there are the provincial attorneys general responsible for the Criminal Code prosecutions.

    With respect to the integrated proceeds-of-crime program, the federal Department of Justice is a partner in that program, just as much as the RCMP is. Since 1996 it has been funded under that program as an equal partner with the RCMP. We have Department of Justice prosecutors in our RCMP offices, in each of our integrated units, and they also have resources to deal with the prosecution of proceeds cases. I'm talking strictly of money laundering proceeds-of-crime cases; commercial crime is another issue altogether.

    Do they have enough resources and do we have enough resources are always open questions. But they are an integral partner in the money laundering program.

    The Acting Chair (Mr. Roy Cullen): Thank you very much.

    We're now going to go to Mr. Lanctôt and then to Mr. Szabo. Then I have a couple of questions, and then we're going to finish this session.

    Not to get ahead of ourselves too much, these are the last witnesses, so what I'd like to do, with the indulgence of the committee members, is to go in camera for maybe for five or ten minutes after we've finished with the witnesses, and brainstorm where we go from here.

    I wondered if we could ask the witnesses and departmental officials to maybe step outside, but be available, in case we had any points to clarify, so we can move forward and either report back to the main committee or at least start drafting a response.

    Mr. Lanctôt, and then Mr. Szabo.

  (1215)  

[Translation]

    Mr. Robert Lanctôt: Thank you.

    Mr. German, at present, there is an alarming organized crime situation in Quebec. People talk about hydroponic cultivation and fields where there are crops. However, there’s a somewhat special situation being created right now because your own officers agree that the detachments in Quebec shouldn’t close, but you are now planning to close eight or nine detachments within Quebec. Your own police officers, elected representatives and the public have trouble understanding. The fund for dealing with organized crime has been increased, and a very large share, I think, has been taken away to deal with hydroponic cultivation and fields of crops, which are really awful for Quebec.

    The situation is as follows. For the people, there has to be an appearance of security. But we know how it works in the fields where there are crops or hydroponic cultivation: these are the people who blow the whistle, who complain. If you take away offices from those regions, how are people going to feel? How can there be an appearance of security if they have to leave and go to Quebec City or Drummondville because the stations in Roberval, Joliette and elsewhere are closed and they have to make their way to the large centres? Already people are afraid. What can you say and, above all, not say as to what your decision will be? I know that you’re going to tell me that you’re studying the matter, but the study has already been made. You’re going to talk to me about consultations, but you’ve conducted the consultations. We mustn’t wait, because we mustn’t decide to close them. They have to be maintained. Even your officers say so. What will be the intention, and when are you going to give a clear decision saying that they won’t be affected?

    I see that the departmental officials have given us...

[English]

    The Acting Chair (Mr. Roy Cullen): Sorry to interrupt, but I'm wondering if you could put your question or comment in the context of the Seized Property Management Act, which is why we are here today.

[Translation]

    Mr. Robert Lanctôt: Yes. I’m using the figures given to us by the last two witnesses. I don’t know whether you were here last week, but we’re talking about hydroponic cultivation and seizures. What has surprised me is that mention was made of 7,601 cases settled for only $236,000 over a period stretching from September 1993 to September 2003. I have trouble understanding how it is that the sums of money are not greater with respect to seizures of hydroponic crops and everything involving drugs.

[English]

    Chief Officer David Douglas: I probably can answer that question, because in British Columbia, where the marijuana grow industry began, we've moved forward very quickly in looking at the problem. It's very cellular in structure. What you have with the marijuana grow industry is probably 100 or 150 independent grow operations in a cell being coordinated by probably no more than four or five brokers.

    The way we do those investigations now is we put together a coordinated intelligence-led operation plan at that particular cell, go in, and do the analysis on the intelligence. Within these cells you can clearly determine who the four or five key people are. On our charts there are red dots, so we go after the red dots. We target on the convergence of the finished product and the money, and we've been extremely successful in doing that. In one particular case with the Ontario Provincial Police, there were tons and tons of marijuana. It amounted to in excess of $22 million in assets and money—$3.9 million hidden inside of the individual's wall that I already alluded to.

    So there is an intelligence-led process that needs to be done on this particular problem. When we do intelligence-led policing and target strategically on these cells, we're very successful in not only disrupting them but suppressing them.

  (1220)  

    C/Supt Peter German: If I may just just add to that, there has been no reduction in our resources with respect to proceeds of crime in la Belle province. We have an integrated proceeds of crime unit in Quebec City and in Montreal. We also have proceeds of crime investigators in Sherbrooke. That has not decreased. There is no plan for those resources to decrease.

    I would agree with my friend that in policing these days we always have to be both intelligence-led and strategic in reaching the priorities that we are attempting to obtain--i.e., organized crime.

[Translation]

    Mr. Robert Lanctôt: As far as the offices in these areas are concerned, can you give me an answer about the closing of the eight or nine RCMP stations or detachments?

[English]

    C/Supt Peter German: I'm sorry, Mr. Lanctôt--

    The Acting Chair (Mr. Roy Cullen): It's irrelevant.

    I'll go to Mr. Szabo now.

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

    It was provided for in the act as it was passed that this act be reviewed. We cannot change the bill. What we can do is report on what we heard during the review. I think there are two important aspects here.

    Mr. German has already pretty well indicated that he's reasonably comfortable with the operations of the act as it stands. Mr. Douglas, I don't think you really agreed. But I think it would be helpful if you advise the committee whether you are aware of any provision within the act as it presently sits that should be amended in some form so that the bill can more effectively meet the objectives for which it was passed.

    Chief Officer David Douglas: I'll go back to my earlier comments. I think there need to be some guidelines around the determination process of the actual sharing of the proceeds. Right now it's not a transparent process, and I think it needs to be transparent. As I indicated in one of my examples, how do people determine whether you're a significant contributor to that investigation or a predominant one? There are no guidelines to explain that.

    Mr. Paul Szabo: You said that the guidelines should be clarified, but now you're saying there are no guidelines. Are there guidelines on the sharing of assets?

    Chief Officer David Douglas: I've never seen them, other than what's in the act.

    Mr. Paul Szabo: Could we ask the officials, please, are there guidelines for the distribution of assets? This is pretty important.

    Mr. Rick Lauzon (Director, Seized Property Management Directorate, Department of Public Works and Government Services): The actual determination of the share, as I stated during my last testimony, is a determination made by the Department of Justice. The crown prosecutor is asked, in all instances, in his or her professional opinion whether the information provided by the provincial or municipal police force versus the federal police force is predominant, significant, or whatever. It's a determination made by the professionals on the job with respect to the value of the information provided by the police force in obtaining forfeiture of those assets to Her Majesty in right of Canada.

    Mr. Paul Szabo: Do I understand that the distribution of assets between stakeholders is basically on a case-by-case basis? Because it would be extremely difficult to articulate an empirical route to go for the distribution.

    Mr. Rick Lauzon: You're absolutely correct.

    Mr. Paul Szabo: Fair enough.

    Mr. Douglas, is there anything else that you can think of where the act in fact is deficient in terms of the legislation being able to achieve its stated objectives? I understand that there might be some ways in which we could even do a little better. Someone had suggested that because we have this expertise in the Department of Public Works to be able to dispose of assets, maybe we could do this on behalf of other jurisdictions. That's a productivity issue, which departments can always consider, but from a perspective of those who must operate under this, can you do your job under the current act, and if not, where is the problem?

  (1225)  

    Chief Officer David Douglas: I think the act as it stands is fine. Our issues are around the consultation process; our issues are around what is the definition of the nature of the information or the participation. We've heard that there's consultation with the Department of Justice. I've never seen that yet. That's what we're talking about. We're talking about enshrining the consultation process in some guidelines so that there's a consistent approach across this country, because that's what you need, consistency.

    Mr. Paul Szabo: Mr. Chairman, I think that's probably all the questions I have.

    I would simply note that the witnesses appear to be comfortable with the general operation of the legislation as it was enacted, but that there are, not only from these witnesses but from the Department of Public Works, a couple of items that may improve the productivity or may provide some clarity, which we certainly could include in a report for consideration by the minister for subsequent amendment through a new bill.

    The Acting Chair (Mr. Roy Cullen): Thank you, Mr. Szabo.

    Mr. Benoit was on the list, so now I'll give him another eight minutes.

    Mr. Leon Benoit: Yes, I actually was going to ask similar questions to Mr. Szabo's, but I'll ask them more directly.

    Are there changes that either one of you gentlemen would like made to this act? You came here to be witnesses on the act. You're familiar with them. You work under the act on many occasions. Are there any specific changes you would like to be made to the Seized Property Management Act?

    C/Supt Peter German: The answer is no for me.

    Chief Officer David Douglas: No, not beyond what I have already alluded to with respect to some policy placed around that, which may impact on changing the legislation itself.

    Mr. Leon Benoit: It may lead to some changes. What did you mean when you said the conservation process? You have some concerns about that.

    Chief Officer David Douglas: Consultation.

    Mr. Leon Benoit: Consultation, but you also said conservation. I thought you said two things.

    Chief Officer David Douglas: No. I probably meant consultation.

    Mr. Leon Benoit: So the consultation process, you've explained that. So by improving that, what kind of a change might that lead to in the act itself?

    Chief Officer David Douglas: I think it goes back to the whole sharing process. What is the determination of predominant, over significant, over minimal? And I can tell you that it's significant money for the provinces. If you're looking at one investigation alone at $22 million and there's a decision that's made that you're a significant contributor, that's a significant amount of money that can go back into the forfeit of proceeds of crime funds of the various provinces. It has a residual flow down to the enforcement side that everybody benefits from.

    Mr. Leon Benoit: So your only concerns are about the splitting of the proceeds of crime then.

    Chief Officer David Douglas: And the definitions around the nature of the participation and the nature of the investigation, yes.

    Mr. Leon Benoit: You mentioned something earlier, and it sure sounded like you were raising concerns about the ability of defence lawyers to in effect skim off a lot of the proceeds of crime before the case is completed. Is there nothing that should be changed in the act to deal with that?

    Chief Officer David Douglas: I can tell you that they not only skim off in that particular case, but that all the money that's seized goes into a pool and they skim off the pool. So it's not just the money they've seized, but beyond that.

    Mr. Leon Benoit: There's no way we can change this act to help deal with that problem.

    The Acting Chair (Mr. Roy Cullen): Mr. German.

    C/Supt Peter German: On the two points, the last point first, we're really talking there about the Criminal Code, part XII.2, which covers the ability of defence counsel to obtain funding out of the seized assets. That's not in the Seized Property Management Act itself.

  (1230)  

    Mr. Leon Benoit: Maybe we should look at that as a committee beyond this, or give it to the justice committee, or whatever.

    So that's one thing you would like us to look at. It's not in the act itself but it certainly affects the way the act operates.

    Anything else?

    C/Supt Peter German: I would go back to your first point with regard to the sharing. As I indicated in my opening statement, we support the concept of sharing because what one must keep in mind is that increasingly these investigations are integrated investigations, with a number of police forces getting together. We have to leverage our resources to be effective. The RCMP doesn't pretend to be able to do it by itself. That's the beauty of the integrated proceeds of crime concept. So therefore one would like to see at the end of the day that those who have participated in the investigations are able to in some way, however indirectly, receive the benefit of this. And I believe that's the point that Mr. Douglas is making. So we certainly support that. How it is done, the mechanics of it and so forth, is something completely out of my realm. But the concept is certainly a solid one, and we agree with it.

    Mr. Leon Benoit: The other thing you mentioned, Mr. Douglas, is full disclosure up front. This again is something that falls outside of this act, within the Criminal Code somewhere else--so it couldn't be dealt with in this act, as far as you could see?

    Chief Officer David Douglas: That's right.

    Mr. Leon Benoit: Okay, thank you.

    The Acting Chair (Mr. Roy Cullen): Thank you, Mr. Benoit.

    Mr. Lanctôt has a very short intervention.

[Translation]

    Mr. Robert Lanctôt: I think that this is an excellent idea. They say that the defence lawyers are the ones that are going to get most of the assets. In civil law, regarding mortgages, they talk about priorities. When assets are advertised, there’s a first-, second-, third-ranking; there are priorities. I wonder whether the same thing could be done in this act: establish an order of priority, place the money in an escrow fund and make sure the assets are shared. A certain amount of money would be saved for the lawyers, because they’re entitled to defend themselves after all, and there would be a set order of priority. I think we could study that function, which would mean that the money wouldn’t all go to the defence lawyers, that there’d be some left. Since this exists in civil law for mortgages, I think it’s something that could very easily be considered. I don’t know what you think, but it might be interesting.

[English]

    C/Supt Peter German: Again, that would bring us under part XII.2 of the Criminal Code, as opposed to the Seized Property Management Act, because again, the ability of defence counsel to access funds comes under part XII.2.

    Certainly, as indicated earlier, it is an ongoing dilemma. On one hand, for most criminal offences, where a person is charged, they don't have access to any moneys to fund their defence; here they do have access to moneys. On the other hand, it's here that we have seized or restrained their livelihood or their cash, so they don't have assets that they could normally use.

    The other issue in all this is that the amount of money given to defence counsel or that they are allowed to access tends to be, in a lot of cases, more than what they would have received on legal aid tariffs. I think that's what Mr. Douglas alluded to.

    So there are a number of issues. There are complex issues going both ways. Again, it would be for you ladies and gentlemen around the table to decide whether or not there should be amendments. We simply highlight it as an issue.

    It is a significant dollar cost between seizure and forfeiture. Is it appropriate the way it's presently constituted? Are there changes? Are there better ways of doing it? Those are all issues that could easily be discussed in another forum. It doesn't apply, though, to the Seized Property Management Act itself specifically.

    The Acting Chair (Mr. Roy Cullen): Thank you very much.

    I have just a couple of questions.

    Mr. Douglas, you talked about how the cash seizures in effect subsidize the non-cash seizures where there are properties to be managed, and so on. Are you suggesting that this is an inappropriate approach, an unfair approach, or are you just commenting on it generally?

    It seems to me that if you have properties to maintain, you will have to find the money somewhere.

    Chief Officer David Douglas: I understand that. I was just commenting on it to bring it to your attention. But it is a trend, and the costs appear to have gone up extensively over the last five years.

    My summary here only goes to 2001. I would suggest that those costs have whittled away even more in the last two years. So it is an issue, I think.

    Again, I guess it goes back to the planning process on managing these assets from the beginning. I think the police, in consultation with seized property management, can go some distance in determining what is the value of this particular property, because in some particular cases, other than the land that these houses are sitting on, they are worthless. They may be worth $500,000 or $600,000 in the mind of the bank that owns them, but in actual fact the value of the property is just the value of the land it sits on, because you can't live in most of the houses after you've had a grow-op in them.

  (1235)  

    The Acting Chair (Mr. Roy Cullen): Okay. I just have a final question.

    The department has made a couple of recommendations, and I think Mr. Szabo alluded to one of them. That has to do with the SPMD, on a cost-recovery basis, offering its services to other governments. From your point of view, does that create any problems other than the fact that, as Mr. Szabo said, the government would have to decide whether that makes any economic or business sense? Could you comment on that?

    Secondly, the department has also recommended that SPMD have the authority to renew mortgage payments on property. Currently, only the Minister of Finance can borrow money on behalf of Her Majesty. Do either of you have any difficulty if the government were to proceed in those ways?

    C/Supt Peter German: No and no.

    With respect to seized property management being involved in other activities, it's almost irrelevant to us, in that as long as they can account through their activity-based accounting system, the other construct, it shouldn't pose any conflict that we're aware of.

    With regard to the ability to properly manage assets--that is, mortgage renewals, and so forth--from my perspective, it just makes sense.

    The Acting Chair (Mr. Roy Cullen): Mr. Douglas.

    Chief Officer David Douglas: I have nothing to add.

    The Acting Chair (Mr. Roy Cullen): The same. Okay.

    Thank you very much, Mr. German and Mr. Douglas.

    I would ask that we go in camera for just a few minutes and that the witnesses and the officials indulge us for a moment and be on standby in case there are any questions or anything to clarify, and then we'll get on with it.

    [Proceedings continue in camera]