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Report: more leadership and accountability

|Written By Jennifer McPhee

A report that examines the causes behind problems plaguing elite enforcement units set up to aggressively investigate white-collar crime calls for more leadership and accountability from the top.

Nick Le Pan was appointed by the federal government to look into the problem-plauged Integrated Market Enforcement Teams.

The newly released report from Nick Le Pan, a special advisor appointed by Ottawa, also says “under-promising and overachieving should become the new watchwords for the IMET, not the other way around.”

The Integrated Market Enforcement Teams bring together RCMP investigators with capital markets fraud experience, legal advisors from the Public Prosecution Service of Canada, and civilian experts.

The federal government, with great fanfare, created the program in 2003 after a slew of high-profile stock frauds and accounting scandals. But the hype failed to translate into real results, and the program has come under fire for its slow progress and disappointing track record.

“Legitimate criticisms center on the lack of results and questioning whether the program and its partners have the sense of urgency needed to succeed,” writes Le Pan. “Nor has IMET demonstrated the leadership, tone from the top, results focus, nimbleness, or consistent

cohesion of action or communication among the players that is necessary to succeed.”

Le Pan says the program operates in a very challenging environment that it is not equipped to succeed in. “The program is ‘playing in the big leagues’ and needs to act that way,” he says.

Since the program’s launch, the teams have started 13 major investigations, but only a single charge has been laid. On average, the teams take 2.8 years to investigate cases, even though the program initially promised to take a year - something Le Pan says has contributed to unrealistic expectations.

Edward Waitzer, a former chair of the Ontario Securities Commission and a partner at Stikeman Elliott LLP, is hopeful that Le Pan’s recommendations will lead to change and is pleased that he plans to stick around to help make the program more effective. Waitzer says there’s a growing realization that the organizations involved need to start delivering more.

“People at the senior level have to be prepared to take responsibility, be held accountable, show leadership, and be aggressive in what they are doing, as opposed to telling the world what a great job they are doing,” says Waitzer.

Le Pan’s report was quite nuanced, but reading behind the lines, it’s clear that employees are demoralized and disgruntled, says Waitzer. One reason is that the hype set the bar too high.

“You are better off setting the bar at something that is reachable and letting people feel a sense of achievement as opposed to setting the bar somewhere that isn’t reachable and having people feel constantly like they’re failing,” he says.

In his report, Le Pan writes that U.S.-style results are unrealistic because of Canada’s different legal environment.

Making recommendations about legislative issues was not part of his mandate; another working group is examining legislative issues, he says.

“While I have not done an in-depth study, it is clear to me that Canada’s legal system hampers timely investigation compared to what is possible in the U.S. or the U.K.,” he writes.

But he stresses there is room for improvement under the current legislative scheme. As examples of how Canada’s system stalls investigations, he points out that investigators cannot compel those not under investigation to provide pre-trial information and documents.

And, unlike in the U.S., charging people in stages in a major investigation is not feasible in Canada because of the rules about providing full disclosure to the accused, he says.

Former RCMP money laundering undercover investigator Chris Mathers says these are two of the real stumbling blocks encountered by top-notch RCMP investigators and prosecutors.

Stinchcombe requires the disclosure of so much irrelevant information that it completely bogs down and derails these cases, he says.

“What happens is defence attorneys have made use of the disclosure rules as yet another way to slow the process down or defeat the process,” he says. “Everyone has the right to disclosure . . . but let’s not be more Catholic than the Pope.”

The inability of police to compel witnesses to provide information is another major problem, he says. “In U.S. securities investigations, if they haul you in, you better give it up,” he says. “Here, you just give them the finger and say, ‘Screw you I’m not coming in.’ ”

The restrictions on compelling those not under investigation to give information applies to RCMP investigators, but not to securities commissions, says Waitzer.

“There are probably ways to work around some of those issues,” he says. “Sooner or later they will get fixed. But I don’t think those are the fundamental issues right now. [Le Pan] basically says, yes, there are legal changes that should get addressed, but that is not the base problem.”

Lawrence Kryzanowski, Concordia University’s research chair in finance, says the problems Le Pan points out about white-collar crime enforcement have existed for decades.

“The sad thing is that in 30 years things haven’t changed that much,” he says.

It’s possible to improve the troubled existing system by, as Le Pan recommends, making white-collar crime a much higher priority, he says.

But he doubts the necessary changes will actually happen unless Canada follows in the footsteps of other jurisdictions by creating a separate agency focused exclusively on targeting these crimes.

This agency should be staffed with experts with a sophisticated, theoretical understanding of these complex crimes that now cut across national boundaries, he says.

Such an agency would have defined targets and goals, and the person in charge would have to produce results because it would be their only function, he says.

Le Pan’s mandate did not include creating such an agency.

But Waitzer says the creation of a separate agency, or a national securities regulator for that matter, isn’t about to happen any time soon.

“There are lots of things you could do to make a real difference,” he says. “The problem in life is it rarely pays to hold out for the best result.”

“You are much better off, most of the time, to focus on a better result. Sometimes, if you can make incremental improvements, then gradually you build momentum towards the best result.”

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