A Queen’s University accounting professor and auditing expert says judges and Crowns need more business knowledge to successfully win complicated trials like Nortel.
“I have no way of disputing whether the decision here was right or wrong, but I can tell you as long as we have generalist prosecutors and generalist judges in Canada dealing with these sorts of white collar corporate crimes we’re not going to see any difference in the outcome of future such cases,” says Steven Salterio, who is also director of the CA-Queen’s Centre for Governance.
He says as investigation and enforcement initiatives ramp up in Canada and white-collar crime comes forward to the courts, the challenge will be to have experts who have deep understanding of business practices.
He points to Quebec as an example of a jurisdiction where the system has been re-designed to better handle such cases and there have been convictions obtained with judges and prosecutors who have “significant backgrounds” in the area of corporate law and corporate criminal activities.
“It would seem one of the issues we face in Canada is the fact we have generalist Crown prosecutors and generalist judges attempting to understand very complex business issues. It’s not unsurprising, then, that they take a very conservative interpretation of these matters,” he says.
Salterio says he looked at the expertise of the judge in the Nortel case — Ontario Superior Court Justice Frank Marrocco — and that of Crown attorney Richard Hubbard.
“He [Marrocco] was a noted immigration law expert before he was appointed to the bench and the only corporate law experience I could find in his background was that he led the failed prosecution of Bre-X,” he says. “The Crown prosecutor had little or no experience in corporate law — he is an expert in wire tapping and evidence issues.”
When put up against expert defence lawyers who specialize in corporate law, he says it’s not surprising there are few convictions in English-speaking Canada in the realm of cases like Nortel.
“I’m actually of the view this judgment might counter that view a little,” says Brandon Barnes, a lawyer with Davis LLP in Toronto. “Justice Marrocco didn’t shy away from analyzing the facts very closely. There wasn’t any attempt to gloss over areas of weakness of understanding or uncertainty and the decision rests very heavily on the facts.”
However, in Barnes’ opinion, the Crown will get some blame given the outcome and the nature of the decision — the suggestion being the evidence prosecutors brought forward didn’t support their case.
“Even there I think that’s a little uncharitable. Prosecutions of financial matters are difficult — not because there aren’t experts at the Crown’s disposal. They’re difficult because the evidentiary burden is complex and the law is developing.”
So while there is always benefit to having a more business-literate Crown and judge, Barnes doesn’t think the Nortel decision lacked in those areas.
To illustrate how Quebec has been successful in creating a separate body to handle financial cases with specialized teams, Salterio references the 2005 Norbourg scandal, which was the first criminal conviction of its kind involving misstated financial statements.
He says the Autorité des marchés financiers in Quebec brought in a special prosecutor who had a background in corporate law and corporate criminal prosecution and supported him with an integrated team from the AMF and Sûreté du Québec.
“It was a very stable team instead of the teams we have with IMET [Integrated Market Enforcement Teams] in English-speaking Canada. One of the beautiful things about Quebec is there is a lot more stability. It was also a criminal conviction registered by a tribunal devoted to these sorts of regulatory matters,” says Salterio.
“In the last few years since Quebec separated the prosecutor from the judge role, unlike our securities commission in Ontario and most English-speaking provinces where they do everything, in Quebec the AMF is the regulator and the prosecutor and the judging panel is a separate panel — and they’ve had the most criminal prosecution success in Canada since they’ve done that.”
Barnes points out another aspect to consider is U.S. prosecutors are more willing to use inchoate offences to prosecute white-collar accused, such as mail fraud or obstruction of justice, which provide ways around the main offence.
“That culture doesn’t really exist in prosecution in Canada in any respect in financial crimes or anything else, so it looks like we’re doing less and the penalties are less severe when, in fact, I think we could say the Nortel decision is a sign the Crown is willing to confront the problem head-on. It doesn’t mean they always get a conviction,” he says. “It can’t be said they were attempting to secure a conviction at any cost by taking the route that they took.”
Recently the federal government has said it will pursue prison sentences for those convicted of violating certain criminal provisions of the Competition Act. But until the courts become better equipped to handle such cases, Salterio says it won’t change anything.
“Penalties aren’t going to make a difference as long as we have the people prosecuting and trying these cases with inadequate knowledge of business practices. They have a difficult time judging and determining what evidence to put into the system,” he says.