David Baines (Vancouver Sun) – Today I am providing a list of charges laid by the RCMP Integrated Market Enforcement Teams in Vancouver and Calgary since they were inaugurated in 2003 and 2004, respectively, as part of a national program to fight stock market fraud. It could be the shortest column I have ever written.
HERE’S THE LIST:
- Vancouver: Two people charged (one convicted, the other on the lam).
- Calgary: No charges.
While those statistics are depressing enough, they still don’t adequately quantify what a disaster this program has been.
You should know that the annual budget for the Vancouver team alone is $2.5 million, and that 23 people are working in the team’s office in downtown Vancouver. Here’s a list of staff members:
Eight RCMP members; one RCMP member on parental leave; three civilian investigative assistants; one civilian employee on sick leave; three public-service support staff; a department of justice lawyer; a full-time employee on loan from the Investment Industry Regulatory Organization of Canada; a civilian criminal intelligence analyst; a forensic accountant; a full-time officer on loan from the Vancouver police department; and two major case-management information processors, who are currently being hired.
The two cases that have resulted in charges are:
- In May 2006, Vancouver resident Kevin Steele was charged in a commodities trading scam. This case did not represent any sort of investigative or prosecutorial challenge. It was originally investigated by the U.S. Commodity Futures Trading Commission, and Steele made it clear from the outset that he would cooperate with the RCMP investigation. He pleaded guilty and was sentenced to six years in prison.
- In June this year, the Vancouver team charged former Victoria investment executive Ian Thow in connection with multiple securities fraud. There was nothing about this case that was subtle. Thow took money from his clients, promised to invest it in sundry unauthorized investment schemes and absconded with the money. But it took three years to lay charges. Alas, well before the charges were laid, Thow slipped across the border to Seattle. To date, RCMP have not been able to apprehend him.
And that’s it for the Vancouver team, which is celebrating (if that’s the correct word) its fifth anniversary this month.
In Calgary, where no charges have been laid, the annual budget is about $2 million, depending on the staff complement. Right now, there just over 20 people working there, and more on the way.
Targeting securities crime
When the program was established in 2003, the plan was to combine the resources of the RCMP, city police, provincial securities regulators, federal prosecutors and private forensic accountants for a coordinated assault on securities crime. The goal was to lay charges within a year of the offence.
Teams were established in Toronto, Montreal, Calgary and Vancouver. This year, the overall national budget will be $31 million.
After the Vancouver team had been in operation for a full year and no charges had been laid, I published my first report card: “It’s much too early to read anything into this,” I wrote at the time. “But with a second team to be added in March  or shortly thereafter, this is the year that the unfettered optimism I observed at the official opening must translate into criminal charges.”
By December 2005, the second anniversary, there were still no charges: “Obviously we haven’t met the expectations of the public,” Insp. George Pemberton, who heads the team, said at the time.
“I think that, in retrospect, the expectations that were set — the promise that cases would go from inception to referral within one year — were overly optimistic. That’s a really aggressive timeline. … I think it’s fair to hold our feet to the fire.”
By December 2006, the third anniversary, only one charge had been laid (against Kevin Steele). “I am the first one to admit that things are not going as quickly as I would like,” Supt. John Sliter, the program’s national director, conceded at the time. “I think it’s fair to hold our feet to the fire,” he added, taking a page from Pemberton’s song sheet.
By December 2007, the fourth anniversary, nobody else had been charged. “We’re starting to get things together,” Pemberton said, noting that the team had submitted two briefs to Crown for charge approval and was investigating alleged assay altering by former Southwestern Resources CEO John Paterson.
Since then, Thow has been charged, but not arrested. The police and Crown approach to his apprehension strikes me as very strange. Although Thow is a fugitive from Canadian justice, he is not on the RCMP’s “most wanted” list, and no attempts have been made to enlist help in Seattle to apprehend him. Instead, there has been much fiddling, with no result.
Meanwhile, the Vancouver team has submitted a charge approval brief to Crown counsel on the Southwestern file, but no charges have been laid yet. I must admit there is no urgency in this matter. Paterson, unlike Thow, is cooperating with police and doesn’t represent a continuing threat to the public.
Hotbed of crime
In assessing the Vancouver team’s performance, it is important to understand that getting stock market miscreants criminally charged is the primary purpose of the program. Anybody who follows my column will know that B.C., in particular, is a hotbed of stock market crime. Almost every week, I report on new instances of securities fraud. Although they add up to hundreds of millions of dollars of losses and untold human suffering, the perpetrators rarely have to account for themselves in court.
In the absence of charges, the IMET teams like to talk about tangential work they do. For example, Pemberton says one of his team’s “real successes” was working with the B.C. Securities Commission and the U.S. Securities and Exchange Commission to short-circuit U.S. over-the-counter promotions that are being run from Vancouver. (They have been dropping into company offices, reminding promoters of their reporting obligations under B.C. and U.S. securities rules.)
Similarly, Insp. Eric Mattson, head of the Calgary IMET, says his team has provided investigative assistance to other police units, such as the commercial crime and organized crime units. But when I asked him to name any cases they assisted in that resulted in charges, he replied, “I’m not going to comment on that.”
Why he wouldn’t comment is puzzling. It’s been my observation that, whenever criminal charges are laid, police and regulatory agencies are not at all shy about claiming credit. My conclusion is there isn’t much to comment on.
The public figure who has the biggest stake in the effective criminal prosecution of stock market crime is Doug Hyndman, chairman of the B.C. Securities Commission. He can only do so much to police the market. Any real punishment and deterrence has to be meted out by police, prosecutors and judges.
In an address to the Economic Club of Toronto in September 2007, Hyndman said the IMET’s performance had been “disappointing.”
“Despite spending about $100 million on this program so far, the federal government has achieved almost nothing,” he said.
Since then, the Montreal team (which hadn’t laid any charges at that point) announced charges in the case of Norbourg Asset Management, and the Toronto team (which had previously laid charges in just three cases) announced additional charges relating to Nortel, Royal Group Technologies, and Sulja Brothers (a pink-sheet company).
But we have had only one additional charge in B.C., which doesn’t appear to impress Hyndman. When I asked for a comment on the Vancouver IMET’s performance to date, he declined to provide one, and instead referred me to his previous speech.
He was disappointed then. Obviously, he still is.