The Vancouver RCMP integrated market enforcement team was inaugurated with much fanfare more than two years ago. But, so far, it has yet to lay a single criminal charge.
“Obviously we haven’t met the expectations of the public,” concedes Insp. George Pemberton, who heads the Vancouver IMET. “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.”
However, it’s not just the Vancouver team that has failed to meet expectations. The Toronto team, which has also been operating for slightly more than two years, has laid only three charges, all relating to relatively minor cases:
> In May 2004, former HSBC Securities (Canada) Inc. employee Steve McRae was charged with stealing stock certificates and laundering the proceeds, estimated at $370,000.
> In June 2005, three officers of Betacom Corporation Inc., a now-defunct company formerly listed on the TSX Venture Exchange, were charged in connection with a relatively small accounting fraud.
> A third charge has recently been laid, but details have yet to be released pending location of the accused. However, Supt. Craig Hannaford, who heads the Toronto IMET, admits that it is “not a big case.”
None of the Toronto team’s larger, more highly publicized investigations, including those into the activities of Nortel Networks Corp. and Royal Group Technologies Ltd., have resulted in any charges. The other two IMET teams, located in Calgary and Montreal, have each been operating for a year and have not laid any charges, either.
That was not the expectation in early 2003, when the federal government announced it would allocate up to $30 million annually for the next five years to set up and operate a series of “integrated market enforcement teams.” The teams would consist of RCMP investigators, city police, securities commission investigators, forensic accountants, Justice Department lawyers and case management co-ordinators to make sure cases move quickly and efficiently.
The RCMP had previously operated market surveillance groups in certain larger cities, but these had been hampered by poor training, high staff turnover and prosecutors’ reluctance to take on complex and time-consuming cases that, due to the high threshold of proof required by courts, were fraught with uncertainty.
The IMET program, however, was to mitigate these problems by recruiting teams of well-schooled professionals with expertise in securities, accounting, finance and law. Recruits would also have to commit to at least five years service, thereby ensuring staff continuity.
The Vancouver IMET had its official opening on Dec. 1, 2003. It was attended by about 50 police officers, as well as government and securities industry representatives, many of whom predicted the program would provide a serious deterrent to would-be stock offenders. Among them was RCMP Deputy Commissioner Bev Busson, head of “E” Division Headquarters in British Columbia, who said the teams would pose “a genuine threat of being detected, investigated and prosecuted.”
The original head of the Vancouver IMET team was Bill Majcher, who had been catapulted from corporal to inspector for his stunning undercover work in the RCMP-FBI Bermuda Short sting operation. It resulted in the arrest of more than 50 individuals accused of wire and securities fraud. Although Majcher was much admired for his undercover accomplishments, his appointment raised eyebrows because he had no prior administrative experience.
Under Majcher’s stewardship, the Vancouver team began probes into several Vancouver-based public companies — including SilverStar Energy Inc., listed on the OTC Bulletin Board in the U.S., and Getty Copper Inc., listed on the TSX Venture Exchange — but was not able to get approval to lay charges. Last July, Majcher surprised people when he ran, unsuccessfully, for the federal Conservative nomination in the Vancouver suburb of Richmond. But why was he looking for a new job when his team had not yet laid a single charge?
Majcher told reporters he had become frustrated with his inability to persuade Crown counsel to lay charges in several cases and thought he might be more effective in politics. This response could not have been well received in Ottawa, where it is considered bad form to publicly criticize the Crown.
There was also a report, which Majcher did not deny, that he was going into a movie deal with Vancouver promoter Kevan Garner, one of the money launderers Majcher had busted in the Bermuda Short sting. The idea of a top cop consorting with a convicted felon probably didn’t impress his bosses, either.
@page_break@Whatever the reason, within days, Majcher was suspended with pay pending the outcome of an internal investigation. He was replaced by Pemberton. That investigation has degenerated into an unseemly spat. On Dec. 2, Majcher’s lawyer, Dale Pope of Davis & Co. LLP, sent a sharp letter to Busson charging that the force’s conduct toward Majcher “has been egregious, reckless and, in some cases, defamatory of him and has caused him undue emotional, professional and financial harm.”
Pope asked several pointed questions, such as: “Why do so many of the allegations deal with matters several years old and previously investigated? Why did the RCMP inform Insp. Majcher that if he took early retirement, the internal investigation would stop?”
The letter ends by stating that, if the RCMP is not willing to “amicably resolve this matter,” then more formal steps would be taken in preparation for “future potential litigation.”
But that’s not it. There has also been more staff turnover at even higher levels. Peter German, the RCMP’s director general of financial crime — a department that oversees commercial crime, proceeds of crime and the entire IMET program — has been transferred from Ottawa to an unrelated position in B.C. Supt. John Sliter, who runs the IMET program, is in the middle of a six-month leave to learn French. Hannaford, who heads the Toronto IMET — and is acting head of the program in Sliter’s absence — is retiring at the end of January and a replacement has not yet been announced.
Another concern is that the teams have been pursuing high-profile investigations that appear unlikely to result in criminal charges. One is Nortel, which may have been motivated by an emotional reaction to people getting beaten up by the stock rather than a reasonable apprehension of criminality.
Then, there is IMET’s recent decision to investigate the Alberta Securities Commission, prompted by a complaint by the leader of the Liberal Opposition in that province. It is highly unlikely this probe will result in any criminal charges. The bad news for B.C. residents is that, to avoid any suggestion of conflict, members of the Vancouver team have been seconded to conduct the investigation.
All of this may be eroding investor confidence rather than raising it. With so many false starts, the public may find it increasingly difficult to take to heart any IMET-inspired investigations, including the recently announced probe into possible leaks surrounding Ottawa’s tax treatment of income trusts.
To be fair, IMET members have many investigations and legal briefs in the hopper that may yet come to fruition. They have also informally intervened in many cases, and provided considerable assistance to U.S. authorities in their pursuit of stock market crooks with Canadian connections.
But the bottom line is criminal charges. And, so far, there haven’t been nearly enough to justify the outlay of money, which Hannaford expects to approach $30 million annually during the next fiscal year.
As Pemberton says: “I think it’s fair to hold our feet to the fire.” IE