Regulators and prosecutors in the U.S. chalked up another victory in their crackdown on corporate crime with last month's conviction of former Enron executives Ken Lay and Jeff Skilling. Canadian market enforcers haven't been quite so lucky.
As jurors in the Enron trial were deliberating, an Ontario judge slammed the RCMP's Integrated Market Enforcement Team and ruled that Greg Sorbara's name must be removed from a search warrant looking into allegations of fraud at Royal Group Technologies Inc. Ontario Superior Court Justice Ian Nordheimer criticized IMET for not providing enough evidence to justify the inclusion of Sorbara, Ontario's former minister of finance and a member of Royal's audit committee, and for not doing enough investigative work before applying for the warrant.
The ruling is the latest disappointment for the corporate crime squad. The squad has been rocked by the departure of Craig Hannaford and Bill Majcher–two of the team's high-profile investigators. And while IMET has made a lot of noise since it was formed three years ago, it has managed to lay only two minor charges.
“It's frustrating for investors to watch U.S. prosecutions proceeding in a very timely manner, while up here in Canada we are still dealing with old cases like Bre-X and Livent,” says Poonam Puri, a professor at Toronto's Osgoode Hall Law School. Puri has written extensively about enforcement in Canada's capital markets.
Excuses that Canada's cops and prosecutors lack the powers of their U.S. counterparts are wearing thin. The pressure is on IMET to deliver on their promise–and fast. Following the judge's ruling against IMET last month, Sorbara told reporters that his faith in Canada's justice system had been restored. Now it's up to the elite IMET cops to restore the faith of every other Canadian investor.