JURI Committee Meeting

STANDING COMMITTEE ON JUSTICE AND HUMAN RIGHTS

COMITÉ PERMANENT DE LA JUSTICE ET DES DROITS DE LA PERSONNE

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, June 9, 1999

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[English]

The Chair (Mr. John Maloney (Erie—Lincoln, Lib.)): For the record, I will open the discussion.

We are discussing the letter of Commissioner Murray of the RCMP in response to my letter of inquiry to him based on the suggestions of the committee. That letter has been circulated to everyone and is in the possession of everyone. As well, there's an interesting comment and a paper on the letter, which I'm a little disappointed at, before we discuss it in committee.

Go ahead, Mr. Abbott.

Mr. Jim Abbott (Kootenay—Columbia, Ref.): Mr. Chairman, you and I have had a discussion about that. I was unaware of that, and I'm equally disappointed.

With respect to the letter itself, on the first page, in the latter part of the second paragraph, I read:

Based on the review of the available evidence, both the Alberta Justice Department and the RCMP Bre-X Task Force agreed, at that point in time, a successful criminal prosecution against identified suspects would be unlikely.

I go to page 2, and I read just shortly after the top of the page:

The investigation is still ongoing and all available leads are being pursued by the remaining investigators currently assigned to the file.

I come to the third paragraph down on page 2, and I read:

The RCMP in the province of Alberta investigates Criminal Code offences under the terms of the provincial contract. Securities Act violations fall under the Provincial Attorney General with those offences being handled by those investigators who have specific jurisdiction under that provincial statute.

It's not said here, but I would assume that the conduct of the RCMP in Alberta investigations under the Criminal Code would also be done with the full knowledge and support of the provincial Attorney General as well.

If I may, I'd like to put this into context and say why I consider it exceptionally important.

I have a document that is a copy of the U.S. government's guilty plea and the memorandum pled to a Philadelphia court with respect to a case of YBM Magnex. If I may, I'll just quickly read a section that is very relevant to Canada.

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The Government of the U.S. says:

The government would establish that YBM joined an existing conspiracy that initially began in approximately 1993. The government would establish that C1 is an individual associated with organized crime activity in eastern Europe and the former Soviet Union. C1 directed a core group of individuals, who implemented plans to initiate trading of securities on the Canadian exchanges, because it was perceived by these individuals to be more lenient than those in the U.S. Once approval was obtained to begin public trading, first on the ASE and later on the TSE, and a financial track record established, the conspirators planned to secure approval to publicly trade in the United States as a NASDAQ listed security.

The reason I relate those two things together is that I have a very deep concern with, for example, the legislation the government just recently tabled on money-laundering. The government is responding to international concerns, but this isn't the only quote I could raise about the concerns of international investors about the very porous nature of not only Canada's security laws, but the whole issue of how we relate to these kinds of events.

Two crimes were committed in the Bre-X fiasco. One was the salting swindle, which happened offshore, and the other was the market swindle. What we did not learn from the commissioner's letter, unfortunately, is why the RCMP chose to go off to exotic places and try to find out about the salting swindle, which of course was directly related to the market swindle, when in fact the market swindle occurred very consistently and, at least at the outset, almost exclusively on Canadian soil. We didn't learn that from the commissioner's letter.

We didn't learn from the commissioner's letter why there was the decision to permit the shredding that I alluded to when we were first talking about this. There is speculation that the reason the shredding was not interdicted was that the Bre-X staff had already had lots of time to shred. But the point, and the point of the document I introduced earlier, is that aggressive shredding occurred for a full day and a half after the Strathcona report, which outlined and confirmed the salting swindle, was submitted to Mr. Walsh in Calgary.

There are a number of blanks here. The difficulty I'm having with this is very straightforward. We wrote to the commissioner of the RCMP. He has come back to us and said the RCMP in the province of Alberta investigates Criminal Code offences under the terms of the provincial contract. Of course the market swindle didn't happen exclusively in Alberta. It also happened, I submit to at least equal value, in Toronto.

I'm really perplexed. If this is a jurisdictional issue, if the investigation that took place in Alberta indeed does come under the Province of Alberta, with the federal force, the RCMP, providing the services to the province, I'm really confused with the jurisdiction, because you also have the problem that you have the so-called white-collar investigations by the RCMP in Toronto, in Calgary, and in other places.

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I want to get to the bottom of this. I really, really want to get to the bottom of this, because until we have an opportunity to get to the bottom of this, we aren't going to know how to avoid it in the future. By way of example, the YBM Magnex quote I gave you.... I'm sure the committee isn't interested in me droning on forever, but I could come up with two or three more quotes like that, saying we have a very porous system in Canada.

It behooves us as legislators, in the same way the government has responded.... I'll comment about the government's money-laundering legislation when it's debated in the House of Commons, but the government has seen there is a problem and they are attempting to respond with that legislation. It behooves us as the justice committee to take this issue of a $6 billion swindle seriously so that Canada is not the laughingstock and the whipping boy of the con artists, because at this particular point, nothing has happened, with the exception of Felderhof.

I recognize that Walsh and de Guzzman are dead, but you can't convince me that the only three people who were involved in the stock swindle, the market swindle that occurred in Canada, and profited from it were Walsh, de Guzzman, and Felderhof. That's just beyond any belief or imagination.

So to that extent, I'm disappointed with the letter from the commissioner, but I say that very gently, because it seems to me we have a jurisdictional problem here. And it seems to me that as legislators, on behalf of the people, the ordinary citizens, and the investors in Canada and on behalf of the companies of Canada, we have a responsibility to get to the bottom of this so that we can look at what we can construct in terms of legislation and regulation that will avoid this. Because right now I believe this could happen tomorrow as easily as it happened yesterday.

The Chair: Thank you.

Are there any comments?

Mr. Saada.

Mr. Jacques Saada (Brossard—La Prairie, Lib.): I have just one very quick comment.

My colleague is right when he says we have a problem of jurisdiction here. The Province of Alberta is the one making the decisions and calling the shots on this issue, not the federal government. The fact that it's the RCMP has nothing to do with the fact that it's federal. It's just the RCMP under contract for the province, and the province itself decides.

Whatever investigation we're going to conduct here, we're going to conduct an investigation on a decision made, not by the RCMP, but by the authority of Alberta. Is it within our mandate to examine the validity of decisions made by the provincial authorities?

The letter is very clear, and I want to formally put on the record that I thank Mr. Murray for the details he has put in there. Of course there are some concerns, which I can understand, but I don't think it's really up to us, as I see it at this point, to pursue that matter further. Maybe the Alberta authorities or the Alberta House will see fit to pursue it if they wish to, but I think it's beyond our own scope.

Mr. Peter MacKay (Pictou—Antigonish—Guysborough, PC): Well, I want to put on the record that I think Mr. Murray's letter is a crock. It poses more questions than it answers, quite frankly.

What responsibility do the RCMP have? They have the fiduciary responsibility as a national police force, not just to oversee what happens in Alberta.

Mr. Abbott is right when he says this took place in and affected far more people than in one province in this country. These are pat answers about procedure and how they investigate and where they derive their authority and that the investigation has been completed.

He goes on to say the reason it was broken off had nothing to do with budgetary restrictions. Well, methinks he doth protest too much. I didn't see the term of reference of the letter that was sent by you, Mr. Chair, but I'd be very curious to see if you even raised the issue of whether that was in fact a possible explanation as to why they broke off the investigation.

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I can't recall ever in this country the RCMP publicly stating, for no apparent reason, that they had finished investigating. In fact we've been hearing for years why they were still investigating—or not why, but just the fact that they were.

So my suggestion, given this type of answer, is that when we bring Mr. Elcock back, we have a perfectly legitimate reason now to bring along Mr. Murray as well. And if Mr. Abbott isn't moving that, I would be prepared to move that we have Mr. Murray appear before this committee as well, based on this and not limited to just this.

The Chair: Mr. DeVillers, Mr. Abbott, then Mr. Lee.

Mr. Paul DeVillers (Simcoe North, Lib.): In answer to Mr. MacKay's concerns about the financial aspect, from the record of the last meeting, I think that was Mr. Reynolds' point. He was questioning whether this investigation was terminated—which we now learn it isn't, but we were under the belief that it had been terminated—for financial reasons. So the commissioner is perfectly justified in answering that, because obviously he has a record of the committee meeting.

I agree with Mr. Saada that yes, this certainly warrants some investigation, but it's under the Securities Acts of Alberta and Ontario, which are not within the jurisdiction of the RCMP to investigate.

As for the fiduciary duty Mr. MacKay refers to, I'm not familiar.... I'd be interested to see under what legislation there's a fiduciary duty on the RCMP as the federal police force. That's foreign to me.

The Chair: Mr. Abbott.

Mr. Jim Abbott: If I may, I'll read from a commentary in the National Post yesterday that summarizes my point and Mr. MacKay's point, I believe:

In this case, the RCMP assembled a crack team of commercial crime officers. The roster included Constable Gordon Fraser, one of the best stock market investigators in Canada. An effort was made to recruit Inspector John Sliter to head the team. He has written a seminal MBA thesis titled, A Policy Review of the Role of the RCMP in Securities Fraud Enforcement. But Mr. Sliter suffered a traffic accident. [...]

Another white-collar crime expert, Inspector Peter Macaulay, was parachuted in from Ontario to head the Calgary-based team. “There was never a question of resources, whether it was financial or bodies,” Insp. Macaulay says.

This does not square with the position Mr. Saada and Mr. DeVillers are taking. They're saying this doesn't have anything to do with the RCMP—that is, the national level. If so, why were these people I just named from this quote being flown around the country? Why were they being parachuted in from all over the place? Did the Calgary squad all of a sudden say, “Gee, we need some help. Where are we going to get them?”

There is an issue here that is not being explained, and as long as it's not explained, we are never going to get to the bottom of ensuring that this doesn't happen again.

I have another quote from a gentleman by the name of Bob Preston, who is the director of investigations for western Canada for Deloitte & Touche. Deloitte & Touche are the bankruptcy trustees in the Bre-X case. I happen to be aware that they have 20 or 25 binders full of evidence from an investigative organization that actually started taking a look at this whole process, FIA. FIA started to take a look at this whole process from the point of view of criminal culpability, and Deloitte & Touche have this. I know FIA directors would be very pleased to come here and explain why there should be criminal charges.

One of the interesting things Mr. Bob Preston says is as follows. Referring to the 40,000 Bre-X documents to parties suing Bre-X—the data was assembled by investigators through hundreds of man-days of RCMP—he says:

We believe the documents will be instrumental in establishing the culpability of those responsible as the fraud developed.

There are just a plethora of questions surrounding this, and what I'm trying to do is implore my Liberal colleagues, in good faith, to look at the fact that we have a $6 billion fraud, a salting operation in Indonesia that the RCMP chose to go and take a look at, and nothing on the market swindle.

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So yes, I agree with Mr. MacKay. I'm giving 48 hours' notice of motion to call the commissioner to try to help us work this thing through, because there are more questions than answers here.

The Chair: Mr. Lee.

Mr. Derek Lee (Scarborough—Rouge River, Lib.): Thank you.

I want to say the letter from Commissioner Murray provided some pretty helpful information to me that I didn't have before, and I was glad we asked for the letter. It certainly put me in a better position to understand some of what happened. Some members may not take all of the information in there at face value and may think there's more information along behind it that they would like to know about, but let me point out the following.

Why did the RCMP bring individual officers with expertise into the investigation? The answer is because it was a task force initiative, and our provinces that contract the RCMP are fortunate in having access to a national police force with a fair bit of expertise, and they get the benefit of having that. When it's needed in province A for a task force, that expertise is made available. That's what happened here.

It's critically important to note that the investigation has not been broken off, as Mr. MacKay mentioned earlier. It has not been broken off. The task force has been broken off. The investigation apparently continues. There would be some personnel assigned to that investigation.

That raises another issue. If there is an ongoing investigation, we should recognize that it might not be our place to be working into an investigation.

Mr. Jim Abbott: Then whose place is it?

Mr. Derek Lee: Well, there's a criminal investigation going on. Parliamentary committees just don't go into existing investigations and try to reinvent the wheel. It's possible of course to do it when all the dust has settled and it's all over.

Mr. Abbott suggested that one of the reasons we might want to look more closely at this stock fraud is so that it doesn't happen again. That's a good reason, but is he talking about the criminality? Are we trying to prevent the criminality, or are we trying to prevent the stock problem from happening again?

Let's assume it's both. Well, let's look at the Air India procedure, if I may use that example. And forgive me for using the term “Air India”. We can call it the explosion and sabotage of a passenger jet over the Atlantic Ocean, a jet that had a whole lot of Canadians on board. That was a murder, a multiple murder.

That investigation has gone on for over 10 years. This committee in the House of Commons has considered looking into it, but every time we think about it, it is very clear that we are not in a position to do the kind of investigation the police are capable of doing, and we've never done it.

If the object of the exercise is to prevent that kind of thing from happening again, we can't wait for the end of the investigation. Just as in Air India and in all of the other airline security issues, authorities have changed their procedures, upgraded them, and taken steps to deal with those threats so that it doesn't happen again, securities commissions, financial institutions, and the people involved in the mining and resource industry—all of those parties—have already taken steps to try to prevent this kind of thing from happening again. They're not going to wait for the end of the investigation. They are acting now in Alberta, in Ontario, in New York, and wherever, and that's what is supposed to happen. But that is a securities-focused envelope. I'm not saying we should never, as a justice committee, look at it, but that's more of a securities thing, so that that kind of thing doesn't happen again.

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I, in this case, see the RCMP as being given direction appropriately by the Government of Alberta. If an executive decision was taken jointly between the RCMP and the prosecutors, I'm not prepared to second-guess it at this time, and I'd question whether it's our place in this Parliament to second-guess a joint decision by the Province of Alberta and the police who serve them there. I don't think we should. And I'm not prepared to accept that we should get into the securities envelope. Maybe one of the other committees of the House might, but it's pretty much a provincial jurisdiction right now, and we should avoid it.

I'm not going to close the door on this, just as I've never closed the door on the Air India issue, but I'm not compelled to go any further at this point in relation to the commissioner.

The Chair: Is there any further discussion on it? All right.

Mr. Abbott has given notice of motion to request Commissioner Murray to appear before this committee. That will be dealt with probably at the same time Mr. Marceau's motion is dealt with in the fall. There's a consensus.

On a final point, I've received a number of calls from newspapers about this letter. A copy of this letter is in the possession of all the committee members. It has been referred to and discussed in this meeting, and as far as I consider, it's a public document. If anyone makes an inquiry from me, they will get a copy of this letter.

Mr. Jim Abbott: Okay, thank you.

Just for my own curiosity, where was the mention of the letter? Was content of the letter quoted?

The Chair: I did not return the phone call.

Mr. Jim Abbott: Oh, I'm sorry. I thought you said it had been published.

The Chair: No.

Mr. Jim Abbott: Good.

The Chair: No, no, no.

Mr. Jim Abbott: That was what I was concerned about. We have a lot of goodwill at this table, and I know we're honourable people.

The Chair: There was an article in the National Post that followed the points in the letter rather coincidentally.

Mr. Jim Abbott: Oh, really? Okay.

Mr. Derek Lee: Mr. Chairman, there's nothing to prevent the RCMP from making the letter public. We requested it publicly, if I'm not mistaken. We weren't in camera when we—

The Chair: No. In a public meeting, I was requested to send a letter out. I did so. We had the response. It's been referred to in another meeting.

Mr. Derek Lee: Yes. In fact I'm sure Commissioner Murray wouldn't have pre-empted delivery of the reply here to the committee.

In any event, thank you, Mr. Abbott, for taking up the matter.

The Chair: There being no further business, we are adjourned. Have a good summer, everyone.