An interview with Irwin Cotler, minister of justice and attorney general of Canada

Irwin Cotler, minister of justice and attorney general of Canada, has a passion for protecting the rights of others - including those citizens hurt by corporate fraud and securities violations.  

Attorney Irwin Cotler, minister of justice and attorney general of Canada, is known throughout the globe for his human rights advocacy and international law expertise. He served as counsel to former political prisoners Andrei Sakharov, Nelson Mandela, and Natan Sharansky. Sharansky, who was imprisoned in the Soviet gulag for Jewish activism, went on to become Israeli deputy prime minister. But back home in Canada, Cotler is just as committed to protecting citizens from the ravages of fraud.

"We have seen a growing concern in both (Canada and the United States) with large-scale corporate fraud and securities violations - offences that seriously undermine confidence in capital markets and also jeopardize the savings and investments of individual Canadians," says Cotler.

Under Cotler's leadership, Canada has emphasized a renewed fight against fraud with more forceful legislation, "Integrated Market Enforcement Teams," and continued cross-border efforts.

Cotler spoke to Fraud Magazine from his office in Ottawa.

The first question is a three-parter: What are the frauds that are increasing in Canada? Are they similar or different than the United States? And are there different factors that affect the incidence of those frauds than those in the States or the rest of the world?We have seen a growing concern in both countries with large-scale corporate fraud and securities violations - offences that seriously undermine confidence in capital markets and also jeopardize the savings and investments of individual Canadians. Both countries have been compelled to address the problem with new legislation and other strategies. Fraud is also a crime that is evolving with technology, and we have to ensure that our ability to combat it also continues to evolve. Many fraud offences - telemarketing fraud is a good example - are often cross-border in nature, so we need to improve our understanding of how fraud occurs in other countries. This is why we have supported the UN resolution that calls for a global study of fraud and why we have provided funding and offered Canadian expertise in this area.

In the wake of large U.S. corporate scandals, the federal government of Canada and the provinces have taken steps (see sidebar article on page 40) to improve the framework governing Canada's capital markets. In your view, what are some of the major steps implemented and how can they be used to protect public markets and private citizens? What other legislation is still needed?
Large-scale capital market fraud can only be effectively addressed through a combination of criminal law, regulation, and even voluntary compliance measures. For example, federal Criminal Code provisions dealing with insider trading can complement regulations at the provincial level and the efforts of such key organizations as the Ontario Securities Commission.

Within my department specifically, we based our approach to capital markets fraud on four pillars: a legal framework to establish appropriate sanctions; dedicated teams of investigators with specialized knowledge of financial markets; a stronger capacity to prosecute offences; and, appropriate sentencing of perpetrators of corporate and securities fraud. These principles guided the amendments we proposed in Bill C-13, which have now become law.

The 2004 Canadian Bill C-13, which amends the Criminal Code, targets prohibited insider trading and deters intimidation of employees reporting unlawful conduct in their workplaces. Before the implemented measures of Bill C-13, insider trading wasn't a criminal offence and whistleblower protection wasn't as comprehensive and broad. Besides the influence of the U.S. business fraud debacles, why weren't these two issues as much of a concern in Canada before 2004?Canada's Criminal Code has always contained offences targeting fraud. One of the key issues here is that the nature of fraud offences is constantly changing. So our challenge is to ensure that the justice system has effective measures in place to deal with these new crimes. Now in relation to insider trading, it has been prohibited by the Canada Business Corporations Act, and considered an abuse by provincial securities regimes for a long time. What we did with Bill C-13, is make it a distinct offence with appropriate criminal penalties.

We absolutely agree that whistleblowers should be protected. While the Criminal Code has contained offences related to intimidation and obstruction of justice for many years, we believed we needed to be more specific. That is why we have made it an offence to threaten an employee, or retaliate against an employee who speaks out.

Recently the federal government of Canada created six Integrated Market Enforcement Teams dedicated solely to capital markets fraud cases. What progress have you made with these teams? Who comprises the teams?
Stronger investigation capacity is one of the four pillars I mentioned earlier. The Integrated Market Enforcement Teams (IMETs) help enforcement agencies detect, investigate and deter capital markets fraud. With these teams, we can mobilize skilled and experienced law enforcement personnel to go after the big cases of corporate fraud. Three IMETs are in place in Toronto, and others are in Montreal, Calgary, and Vancouver. More teams will be established. They are composed of police officers, securities experts, experienced investigators, and Justice Canada counsel, who provide legal advice. The Teams will work closely with provincial prosecution services and securities commissions. Also, we now have new laws to help investigators gather evidence more efficiently.

How has the Sarbanes-Oxley Act and the resulting Public Company Accounting Oversight Board affected Canadian federal and provincial law and practice?
Canada has adopted a coordinated, national enforcement approach for serious capital market frauds. That means that the federal government is continuing to work with the provinces, regulators, law enforcement, and industry to ensure the integrity of our financial markets. As well, the provinces have done very good work in this field. Ontario, Quebec, Alberta, and Manitoba have all passed legislation to strengthen powers of securities commissions. We are always open to new ideas and we take the policy initiatives of the United States and other countries into consideration in developing our own policies, especially in areas where common approaches are important to provide a solid basis for international cooperation. But I would characterize our actions, legislative and otherwise, as responses to the problem of fraud as we see it in Canada rather than as a response to what our neighbours have done about fraud as you see it in your country.

Having said this, U.S. laws and standards do have some application in the cross-border context. Just as we would expect American accountants working in Canada or on Canadian accounts to comply with Canadian rules, Canadian companies and accountants must meet the U.S. requirements in many cases. Canadian companies listed on U.S. stock exchanges must also comply with applicable U.S. laws, standards, and oversight mechanisms. Some Canadian companies have registered with the PCAOB so that they can provide auditing services to Canadian public companies seeking registration with the U.S. Securities and Exchange Commission.

Domestically, the accounting profession in Canada has also established a number of governing bodies such as the Chartered Accountants of Canada and the Certified General Accountants, who work together with industry representatives to establish effective standards and measures to govern the industry.

Some believe that convicted Canadian fraudsters receive less prison time than convicted fraudsters in the United States. Have the sentencing terms recently increased for Canadian fraudsters? What's your philosophy on using prison time as a deterrent to fraud and white-collar crime?
The important issue is how sentences in our justice system fit into the overall practice of sentencing in Canada. Sentences must reflect the seriousness of the crime and the responsibility of the offender, and we have kept that principle clearly in view as we have developed Criminal Code amendments. As of September, the maximum penalty for fraud in Canada increased from 10 to 14 years - this is the highest maximum penalty available under the Criminal Code other than life imprisonment. As well, judges are now required to look at such factors as the extent of the economic damage - what has been the impact on investor confidence? How have the markets reacted? I don't deny that incarceration is expensive. I would certainly want to see the crime avoided if at all possible. That said, these are serious offences and those who commit them will face serious consequences.

Do you see some ways to work with the Association of Certified Fraud Examiners and the organization's Canadian chapters to fight fraud?
I certainly want to hear from these organizations and particularly have their views on the role that the criminal law, prosecution strategies, enforcement agencies, and the private sector should play. I know that the Association is involved in setting standards in their profession which will help with prevention. We are all part of a larger system of regulation and standard-setting. In this sense, our objectives and roles are complementary, particularly in preventing corporate market fraud and other corporate offending.

The ACFE emphasizes not only detection of fraud crimes but more importantly, deterrence. What do you think are some of the best ways that Canadians and the Canadian federal Government can deter fraud, now that there's so much awareness of the problem?
Viewing the challenge of corporate market and other frauds through the lens of the criminal justice system, we can agree that appropriate criminal laws can have a deterrent effect. Specific new Code offences such as insider trading heighten awareness of the criminal nature of conduct. Combining new offences with tougher penalties and stronger investigation capacity sends a powerful message. Given the white-collar nature of most frauds and fraudsters, and the fact that fraud is by its nature carefully planned, it may be that ensuring a high probability of punishment is as important to overall deterrence as the length of any sentence an offender fears may be imposed. Let's make sure that the cost of exploiting investors and consumers is too high for the criminals. At the same time, we can be strategic on other fronts. The key element in telemarketing fraud, for example, is the deception of individual victims. Public education and focused crime prevention campaigns can complement efforts by the private sector to set business standards, ensure consumer privacy, etc.

As the Canadian "sponsorship scandal" public inquiry continues (see sidebar article on page 57) there are reports that the investigation may cost close to C$80 million in uncovering the alleged C$100 million fraud. Some say it is "throwing good money after bad." What are your thoughts?
The Public Inquiry is an important element - and contribution - to a rather unique public law initiative in the combating of corporate crime and fraudulent conduct that includes the following:

establishment of an independent auditor general for every department and agency of government.

I realize that you aren't free to comment much on the sponsorship scandal, but do you see some systematic problems that could have allowed this alleged fraud?
We've asked Justice John Gomery to look at just this issue as part of his mandate, so I am sure he will be making recommendations in this area.

In the past, you've worked with U.S. officials in tackling telemarketing fraud, identity fraud, insider trading, and cross-border crime issues. Can you give us an update on your cooperative efforts with the United States and other countries?
I'm glad you've raised this. You're right to point out that, when dealing with fraud, the most effective approach is a coordinated one. As I've already mentioned, within Canada we have established a strong network among the federal and provincial governments, industry, and law enforcement. This horizontal approach to cooperation and integration also extends internationally to our work with U.S. officials organized around the Canada-U.S. Cross-Border Crime Forum. The Forum has a number of cross-border working groups, including for example, the Bi-national Working Group on Mass Marketing Fraud, a sub-group of the Canada-United States Cross Border Crime Forum (CBCF). A joint Canada-United States threat assessment on identity theft was prepared by the Working Group and was released in October 2004. The threat assessment sets out the scope and magnitude of identity theft and details coordinated efforts by law enforcement and various levels of government to address identity theft. For example, we have been working with our neighbours to the south, both at the law enforcement and government levels to address identity theft. But more work still needs to be done which is why Canada has taken a leading role in calling for a study of the problem by the United Nations.

Identity fraud is a huge problem in the United States. How does this type of fraud compare in Canada and what is the government doing about it?
In Canada, we have broadly defined identity theft as the criminal misuse of personal identification information. So, it can be the means by which fraud or other crimes are committed, or it can be the crime itself - when a person literally takes on another's identity for example.

The federal government has established a National Mass Marketing Fraud Strategy Group to address identity theft and mass marketing fraud conducted over the Internet, by phone or mail. The group is looking at a full range of strategies, including legislation. In considering possible Criminal Code changes, we are examining American laws such as the Identity Theft and Assumption Deterrence Act and the Identity Theft Penalty Enhancement Act. The government is also working with American officials to enhance the integrity of identification documents such as passports and thereby further prevent identity theft and abuse.

Have you yet spoken with the U.S.'s new attorney general, Alberto Gonzales? Are there plans yet on working with him on initiatives?
I have spoken with Attorney General Gonzales, congratulated him on his appointment - and discussed a number of issues of joint concern, including international terrorism, organized crime, cyber-crime, trafficking in women and children, corruption and economic crimes. We also enjoy a very collaborative relationship with the United States on criminal law and enforcement matters. There is the Cross-Border Crime Forum, which I mentioned earlier, co-chaired by the deputy prime minister in her capacity as minister for public security and emergency preparedness. This group addresses terrorism issues as well as shared crime concerns, including identity theft, drugs, firearms, etc. At the October 2004 session, ministers released a joint threat assessment on identity theft and a public advisory in "phishing" - a type of online fraud. This is an ongoing forum that does important work. Of course, there is a continuing relationship among law enforcement agencies in both countries.

You've been involved for years in combating crime and poverty, promoting human rights and international humanitarian law, and have been an advocate in the struggle against racism and discrimination. How does your fight against fraud correlate with your desire to apply the rule of law and to protect Canadian citizens?
Human rights and the rule of law will always be priorities for me. The momentum that has developed over the last several decades to address humanitarian issues through legal protections and strong legal institutions is encouraging, although we still have a lot of work to be done. Much of the effort has to be done on an international level and we may be able to build on the relatively new International Criminal Court as an important institution for the future. Likewise many fraud-related crimes, even though they affect us domestically, are "trans-national" in nature, and this reality dictates even more international cooperation. Money laundering, computer-related crime, telemarketing fraud, and other activity is often an international problem. As well, Canada and 101 other countries have already ratified the 2000 U.N. Convention against Transnational Organized Crime. The United States is still in the process of doing so, but is a leading supporter of the treaty and we welcome their efforts to ratify and implement it. In this area, the focus is not on international enforcement, but on cooperation and coordination in the establishment of appropriate criminal offences in national law and in the prevention, investigation, and prosecution of those offences when they occur on a transnational basis, so that offenders have no place to hide, avoid prosecution and punishment, or shelter their illicit proceeds. I believe that to protect our own citizens requires a global approach: to protect our citizens we must also protect yours, and vice versa.

In Canada, what do you see as the specific links between terrorism and fraud? Between organized crime and fraud?
Links certainly exist between terrorism and fraud and other economic crimes. The Anti-terrorism Act, passed in 2001, addressed terrorist fundraising and created new criminal offences in this regard. We have seen examples of charitable frauds in which money has been raised for ostensibly legitimate charitable purposes, only to be funneled into terrorism activity. We have also seen the misuse of credit cards or other common frauds used to fund terrorist cells. Similarly, there is a strong connection between fraud and organized crime. For example, a 1997 Canada-U.S. Report on Telemarketing Fraud noted the involvement of organized crime in telemarketing schemes. We have seen increased organized crime involvement in fraudulent loans and fraudulent credit card offer, as well as Internet fraud. I mentioned earlier the Cross-Border Crime Forum with the United States, which produced that report and which also includes an Action Plan to continue combating cross-border fraud. On May 21, 2003, then U.S. Attorney General John Ashcroft and Solicitor General of Canada Wayne Easter released the joint Canada-U.S. 5-Year Report on Mass Marketing Fraud at the 7th annual Canada-U.S. Cross-Border Crime Forum. The working group on cross-border market and fraud has found that cross-border telemarketing fraud has increased substantially from 1997 to 2002 in the areas of fraudulent lottery schemes, fraudulent loan offers, and fraudulent low-interest credit card offers. The report also highlights the growing involvement of organized crime groups in Canadian-based cross-border telemarketing fraud operations, using proceeds from fraudulent telemarketing to fund other illegal activities such as narcotics, trafficking in firearms, and prostitution. The report cites substantial increases in Internet fraud and identity theft in both countries.

What other Department of Justice fraud-fighting initiatives are being developed?
As I have mentioned, there are distinct and important ways that the Department of Justice can contribute to the effort against fraud crimes. In general, I am responsible for the Criminal Code. The federal government, through the RCMP and various investigative and enforcement agencies, has important roles to play. The involvement of the Competition Bureau, a part of Industry Canada with that dedicated investigative equality, also investigates and pursues fraud-related offences. Of course, the international dimension of fraud activity requires significant efforts by a range of federal departments. At the same time, I want to emphasize the role of provinces. The primary responsibility under our Constitution for prosecuting criminal offences lies with the provinces. They also have their own law enforcement agencies. I respect that responsibility and you can understand that federal-provincial cooperation in developing criminal laws, in prevention activities and in enforcement is crucial. Bill C-13, to complement provincial authority over prosecution, authorizes federal prosecution of a narrow range of capital market fraud offences where the national interest in the integrity of capital markets is threatened.

Finally, let me say that we will monitor the use of the new legislation and other strategies in which we are involved. If further changes to the law are needed, we will certainly bring them forward.

Irwin Cotler known globally as 'counsel for the oppressed'

Irwin Cotler, a member of the Canadian Parliament, was appointed minister of justice and attorney general in 2003 and reappointed last year.  

He is on leave from McGill University in Montreal, where is a professor of law, director of its Human Rights Programme, and chair of InterAmicus, the McGill-based International Human Rights Advocacy Centre. He has been a visiting professor at Harvard Law School, a Woodrow Wilson Fellow at Yale Law School, and is the recipient of five honorary doctorates including one from York University, whose citation referred to him as "a scholar and advocate of international stature."

A leading public advocate in and out of Parliament for human rights, Cotler has served as chair of the Parliamentarians for Global Action (Canada), and member of its International Council; co-chair of the Parliamentary Human Rights Group; executive member of the Inter-Parliamentary Union; honorary member of the Women's Caucus; and special advisor to the minister of foreign affairs on the International Criminal Court, where he shepherded the War Crimes and Crimes Against Humanity Act through Parliament.

One of the founders of the "Poverty Law" movement in Canada and Pointe St-Charles Legal Aid Clinic some 30 years ago, Cotler also helped found "Project Genesis" - a community service storefront office - in Mount Royal, and was one of the original architects of what has become a Quebec- and nationwide legal services program.

Once described by Maclean's magazine as "counsel for the oppressed," Cotler is an international human rights lawyer who has served as counsel to former prisoners of conscience in the Soviet Union (Andrei Sakharov), South Africa (Nelson Mandela), Latin America (Jacobo Timmerman), and Asia (Muchtar Pakpahan).

A constitutional and comparative law scholar, he has litigated every section of the Canadian Charter of Rights and Freedoms including landmark cases in the areas of free speech, freedom of religion, women's rights, minority rights, war crimes justice, prisoners' rights, and peace law. He has testified as an expert witness on human rights before Parliamentary Committees in Canada, the United States, Russia, Sweden, Norway, and Israel, and has lectured at major international academic and professional gatherings in North America, Europe, Asia, Africa, and the Middle East.

Cotler has been a leader in the movement for arms control and has been an active participant in dialogues between Israelis and Palestinians. He has served as counsel to the Deschênes Commission of Inquiry in bringing Nazi war criminals to justice; filed amicus briefs before the International Criminal Tribunals for former Yugoslavia and Rwanda; and testified before the Senate Committee on Foreign Affairs regarding humanitarian intervention and the application of humanitarian law in Kosovo.

When Cotler was appointed in 1992 an Officer of the Order of Canada, he was cited for his "extraordinary contribution to the cause of human rights." He was the first academic to receive The Medal of the Bar of Montreal in recognition of his "outstanding contribution to the cause of justice" and is the first recipient of the Martin Luther King Jr. Humanitarian Award.

 Dick Carozza is editor of Fraud Magazine.