Canada - A safe place for corporate crooks.
Former Enron chief executives Kenneth Lay and Jeffrey Skilling were convicted on May 25, 2006 of a total of 29 criminal counts, and are likely to spend many years - perhaps the rest of their lives - in prison. Sentencing has been set for September 11, 2006.
The conviction of Kenneth Lay and Jeffrey Skilling has fueled speculation in Canada of what would have happen if they had run an energy-trading catastrophe based in Canada instead of Texas. Many people say that if this had been the case they would be heading to the golf course instead of prison.
“Canadian securities fraud enforcement is abysmal relative to the United States,” said investor advocate Diane Urquhart.
“Canadian executives committing securities offences in Canada of proportionate magnitude rarely receive criminal charges. These offences, in fact, rarely even get administrative sanctions.”
Urquhart noted that Canadian Imperial Bank of Commerce (TSX:CM) has paid more than $3 billion in penalties in the United States for its investment bankers’ role in Enron’s accounting malfeasance, but “there has not even been a reprimand” in Canada.
Canada is seen as being easy on corporate crooks. The examples of Livent Corp. and Bre-X Minerals Ltd. are cited to prove this contention.
Livent’s former chairperson, Garth Drabinsky, and ex-president, Myron Gottlieb, were indicted in New York in early 1999, but it wasn’t until October 2002 that they were charged with fraud in Canada in a case that continues to drag on in Toronto.
Bre-X collapsed in 1997, but an RCMP investigation ended in 1999 with no charges and an Ontario Securities Commission proceeding against former Bre-X senior geologist John Felderhof — for alleged insider trading — still has not been resolved.
As a practicing trustee in bankruptcy I never heard of a person being charged for a corporate insolvency crime until just recently. I am happy to see that in the last few months the RCMP and the Office of the Superintendent of Bankruptcy have cooperated in the laying of charges in connection with alleged bankruptcy fraud in Ontario. For more information on these charges please refer to these two blogs; of April 3, 2006 and January 26, 2006.
For more information on Canada’s lax enforcement please refer to this article.
