Canadian institutions rife with greed, author says
Published Tuesday, April 10, 2012 6:27PM EDT
Canada weathered the 2008 economic downturn on claims its financial institutions were above the fray, but the author of a new book says money and corruption are as closely linked here as anywhere in the world.
In his book Thieves of Bay Street, Toronto-based investigative journalist Bruce Livesey argues that Canada's financial, legal and regulatory institutions are as rife with greed, incompetence and fraud as any.
"There's this myth that we're sound," Livesey said, recalling the almost mythical status afforded the Canadian economy since 2008.
But Livesey credits the federal government's banking rules more than the banks' practices and policies.
"The Canadian banking industry is sound in one respect," Livesey told CTV's Canada AM Tuesday. "Not so much because the bankers were more prudent, but because the federal government had the wisdom to force them to put money aside."
That capital in hand helped the banks -- and the brokerage houses they owned -- to weather the downturn, Livesey said.
He is not so positive in his view of the consumer side of the investment business, however, where he says Canadians are being ripped off in many ways.
"More subtle ways which are less about theft, but really affects people's investments," he said, pointing to the hidden fees and commissions often charged when average citizen investors purchase products such as mutual funds.
"The reality is, when it comes to investment products that they sell, there they will scalp people."
Livesey also chronicles a litany of headline-grabbing white collar crime in his book including: a B.C. mutual fund dealer who lived like a king until his rampant fraud was uncovered and he fled the country; the Nortel managers who steered the one-time tech powerhouse into oblivion; and even the Mafia laundering money through a Montreal hedge fund.
Livesey believes one of the key factors contributing to the investment fraud and scams he estimates cost Canadians $20 billion annually is this country's lack of a national securities regulator.
Instead, each of the 10 provinces and three territories has its own agency or commission tasked with overseeing the public sale of shares and investments.
In Livesey's view, the patchwork regulatory approach combined with the lack of timely communication between the provincial agencies is a breeding ground for crime.
Fraudsters can target investors in one jurisdiction then move to another before they're caught, he says, suggesting they can just set up shop and start anew before anyone catches on.
Since the Supreme Court of Canada ruled in December that rolling them into a single federal body would overstep Ottawa's constitutional jurisdiction, it appears the status quo will stand.
Livesey says there's little will from the banks or the corporate Canada to push for change.
"For the Canadian business community the current system works really well because they're not held accountable by the provincial securities commissions -- they're too weak," he said.
It's up to Canadians to inform themselves, Livesey said, advising potential investors to "be very, very careful." Same quote issue here
"People do not spend enough time looking at what industry is selling them," he concluded. "I'd be very, very suspicious about all the assurances that they give you."