It has been nearly a decade since the Royal Canadian Mounted Police set up a crack force to laser-focus on corporate crime. Monday's acquittal in the trial of three top executives of Nortel Networks Corp., one of that team's biggest cases, is a harsh reminder of how little we have to show for it.
The RCMP set up the first of its Integrated Market Enforcement Teams (IMET) in Toronto in early 2004, with a $30-million annual budget and a promise to put the force of criminal fraud convictions behind the fight to clean up corporate financial skulduggery. (By 2010, the budget had risen to $40-million a year.) At the time, maverick law enforcers in the United States such as Eliot Spitzer were getting headlines for putting crooked executives behind bars, and Canadian authorities were falling behind in this new tough-on-corporate-crime environment.
Almost immediately, IMET began investigating its two biggest cases to date: Nortel and Royal Group Technologies Inc. It also made some very public moves, such as daytime document raids on banks, to underline the message that there was a new sheriff in town.
By the time IMET finally charged Nortel and Royal Group executives on the same day in June, 2008, it had been operating for more than four years and had more than 100 full-time police staff. It had laid only a handful of charges in that time. (The U.S. Corporate Fraud Task force had more than 1,200 convictions in its first five years of operation.) IMET faced considerable criticism from all sides for toothlessness, and suffered from high staff turnover; calls for a serious overhaul were ringing out like church bells on Christmas morning.
Yet the criminal charges in these two huge cases raised new hope that IMET's efforts might finally bear some very big, indeed precedent-setting, fruit, and finally change Canada's culture of impotence in making corporate scoundrels face criminal consequences.
Now, another 41/2 years having past, IMET must face the reality that the two cases on which its entire reputation hung have ended in acquittals (Royal Group in 2010 and Nortel on Monday). The bottom line is, IMET has been an expensive nine-year exercise in futility: the whole point is getting convictions of serious corporate fraud cases, and it's not getting them.
A little more than a year ago, then-new RCMP Commissioner Bob Paulson told The Globe and Mail's editorial board that IMET needed to change its approach to fighting corporate crime – to use traditional policing methods, including undercover work and cultivating informants, to hunt the criminals.
But perhaps the problem hasn't been so much the investigation techniques as the alleged crimes and criminals IMET chose to expend a considerable proportion of its resources pursuing. In Nortel and Royal Group, IMET focused on going after the White Whale almost from day one. Just ask Captain Ahab how well that approach works out.
There are plenty of smaller fish to go after. If IMET is going to survive and build any kind of credibility, it has to broaden its net in pursuit of more realistic and frequent catches – rather than continuing to launch spears at quarry that, its track record has demonstrated, it ultimately shouldn't be hunting. If it can't learn that lesson from Royal Group and, now, Nortel, its days may be numbered.
David Parkinson