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Canada New Ontario initiative targets complex, white-collar crimes

Kari Dart and John Corelli from the new Ontario Serious Fraud Office.

Tijana Martin/The Globe and Mail

The Ontario government has quietly launched an initiative intended to solve a problem that has vexed Canadian law enforcement: the successful prosecution of complex, white-collar crimes.

With little fanfare, the province has created what it is calling the Serious Fraud Office (SFO), with a structure that is novel to Canada: teaming up investigators and prosecutors and dedicating them to financial crimes that are too sprawling for any one municipal police force to handle.

The basis for the new law-enforcement office is a confidential 2015 report by former Ontario Court of Appeal judge Stephen Goudge. The government has barred the release of Mr. Goudge’s report, but his conclusions were based on months of interviews with investigative agencies around the world, including the famed U.S. Department of Justice office in the Southern District of New York. That agency has been responsible for some of the most high-profile prosecutions in recent history, including a sweeping crackdown on Wall Street insider trading and the 2018 guilty plea of U.S. President Donald Trump’s former lawyer and fixer Michael Cohen.

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The launch of the SFO also comes on the heels of British Columbia’s efforts to crack down on money laundering, which British Columbia Attorney-General David Eby has characterized as a “crisis.” The province is set to launch a public inquiry into money laundering next year.

Ontario’s office, however, will investigate an array of financial crimes, not just money laundering but large-scale fraud and corruption. It was created to fix long-standing issues with how the government combats such crimes, the two officials in charge of the initiative said in an interview.

“There is an urgent need for us to create an office like this,” said Ontario Provincial Police Superintendent Kari Dart, the director of investigations for the SFO, who oversees it with its chief counsel, Crown attorney John Corelli.

One of the primary goals is to bridge gaps between investigators and prosecutors, which Supt. Dart and Mr. Corelli say will prevent cases from languishing and forcing judges to throw them out because of unconstitutional court delays. Unlike a traditional police investigation, the SFO’s structure means prosecutors will be heavily involved from the outset of a case, rather than being handed stacks of evidence only after police have decided to lay a criminal charge. This collaboration is partly an effort to address the Supreme Court’s R. v. Jordan decision, which requires accused criminals to be tried within 30 months when facing charges in superior court.

The SFO is also designed to thwart an issue common to most police departments: the frequent shifting of resources away from fraud units whenever police are confronted with a more pressing public-safety issue, such as a threat of terrorism. Although the office has many police officers, they are independent of the police force from which they came and report to the leadership of the office. Mr. Corelli said this “ring-fencing” ensures that investigators are able to immerse themselves in their cases without worrying about being reassigned.

“We have been given … space to work more within our sphere," Mr. Corelli said. “Which means we can focus on that instead of being dragged out to other duties, which is a recipe for failure.”

Over the past few decades, a number of high-profile white-collar cases in Ontario have concluded in acquittals. In some cases of well-established deception in the capital markets, no individuals have been charged criminally at all. In 2013, three former executives of Nortel, the telecommunications giant that collapsed in bankruptcy, were acquitted of fraud charges after an Ontario Superior Court judge rejected a Crown theory that they had inflated the company’s books in order to manufacture millions of dollars in bonuses for themselves. Similarly, in 2010, six former executives of Royal Group Technologies were found not guilty of improperly pocketing millions of dollars from a land sale.

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In other well-known stock-market cases – such as those of Bre-X Minerals Ltd. and Sino-Forest Corp., in which the assets behind those publicly traded companies were found to be highly exaggerated – not a single person involved was charged under the Criminal Code. Executives at both companies were pursued, instead, under Ontario’s less-punitive securities laws.

Fraud experts in the private sector have praised the creation of the office. The automobile-insurance industry has lobbied for years for such a dedicated team, although Mr. Corelli and Supt. Dart stressed that the SFO’s focus is much wider than car-insurance fraud.

“It is a step in the right direction,” said Peter Dent, a partner and forensic specialist at Deloitte. “White-collar crime investigations are both complex and lengthy. Specialization and long-term experience of both prosecutors and the investigators will be critical to success.”

As part of its mandate, the office is also designed to hit fraudsters in the place they value most: their pocketbooks. The office employs specialists in seizing the proceeds of crime who will be assigned to every case the office opens, Supt. Dart said. (She would not say how many active investigations the office has open at this time.)

“Part of our strategy is if there were assets obtained through … crimes, we’re going after that,” she said.

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