[Recorded by Electronic Apparatus]
Tuesday, March 26, 1996
.1536 
[English]
The Vice-Chairman (Mr. Telegdi): Pursuant to Standing Order 108(3)(d), consideration of chapter 6 of the May 1995 report of the Auditor General, we have a number of witnesses today. From the National Transportation Agency we have Mr. Gilles Rivard, chairman, and Ron Ashley, counsel. From the Department of Justice we have Henry Molot, senior general counsel, and Donald Murphy, senior counsel.
Welcome all. We'll now have the statement by Mr. Rivard.
Mr. Gilles Rivard (Chairman, National Transportation Agency of Canada): Thank you,Mr. Chairman, ladies and gentlemen, mesdames et messieurs, for the opportunity to appear before the public accounts committee. This is the third in a series of agency appearances before this committee. It is my understanding that today the committee wishes to focus mainly on the question of whether or not the agency is empowered to determine the reasonableness of freight rates contained in the subsidy applications filed pursuant to the Atlantic region freight assistance program.
[Translation]
I welcome this examination because the question of jurisdiction has been pivotal to the decisions the Agency has made throughout the wind-up of the program. A decision-making body, the Agency can only base its decisions on the best available information, the governing legislation and regulations and the legal advice it receives. That is what the Agency has done with respect to its administration of the Atlantic Region Freight Assistance Program.
[English]
You are well aware of the history of this matter, so in my remarks I will touch only on those events that were dependent upon or driven by the fundamental legal question, that is, whether the agency had the authority to assess or question the level of freight rates charged by carriers for the movements contained in their subsidy claims. I hope this will help put today's issue in context.
As a preliminary comment, and as the members are aware, the Minister of Finance in the government's February 1995 budget introduced legislation that, amongst other things, effectively terminated the Atlantic region freight assistance program. The termination date was June 30, 1995. The agency office will be closing on April 30, next month. Of the 45 full-time employees originally working at the office, 10 remain today, all of whom will receive a surplus letter next Monday.
.1540
[Translation]
Throughout the operation of the Program, the Agency was consistently advised by its counsel that the legislation and regulations governing the Atlantic Region Freight Assistance Program do not contain any specific criteria or provisions authorizing the Agency to either assess or question the freight rates charged by carriers for the movements contained in their subsidy claims.
Given this position, I wrote to the Minister of Transport on April 27, 1995, requesting amendments to provide the Agency with clear authority to deny subsidy where it believes the freight charges involved are unreasonable.
[English]
On May 11, 1995, the minister wrote to me and advised that regulatory amendments to provide clear authority to the agency were both unnecessary and impractical in light of the imminent termination of the subsidy program. The minister went on to say that Transport Canada's legal counsel had advised him that since the applicable act and regulations do not contain any provisions preventing the agency from making decisions based on the reasonableness of claims, the agency would have the authority to reject unreasonable claims during the wind-up period.
Mr. Murphy, senior counsel at Transport Canada, is here today. I will let him speak to his reasons for expressing the view he did.
Suffice it to say, at that point in time there existed a range of legal opinion. Given the circumstances, I chose a course of action that would both seek to clarify the legal obligations of the agency and maximize our ability to protect public funds.
First, as a precautionary measure, I directed agency staff to implement the rate and activity review process. If it became clear that the agency did have legal authority to deny subsidy based on inflated rates, then I wanted to have the information on which the agency would base its decisions.
Second, I directed the agency legal counsel to seek an independent legal opinion on the agency jurisdiction from a well-known specialist in the administrative law section of the Department of Justice. I believed this was absolutely necessary to bring certainty to this issue and to allow the agency to decide which course it was going to pursue.
[Translation]
On the 24th of October, the Agency received a preliminary opinion for Mr. Henry Molot, Q.C. At this point, Agency counsel advised me that the opinion raised in number of issues that they wished to discuss further with Mr. Molot. It is my understanding that they had an opportunity to discuss all of the issues at a meeting with Mr. Molot and Mr. Donald Murphy on October 30th, 1995.
[English]
One month later, the agency received a final opinion from Mr. Henry Molot, Q.C. This opinion was provided to this committee and to the Auditor General. After reviewing all possible legal avenues and thoroughly examining the Atlantic region freight assistance program and the regulations made under the act, Mr. Molot concludes that there is no legal basis on which the agency could impose a reasonable rate requirement on carriers applying for subsidy.
.1545
This opinion clearly supports the agency's historical position with respect to its lack of authority to review freight rates. In my view, it lays to rest the issue of the agency's jurisdiction.
Mr. Molot is here today. I will let him speak to the reasons for his opinion.
In closing, I would like to say that Mr. Ron Ashley, agency counsel, is here with me today. We would be pleased to answer any questions you may have. As well, Mr. Seymour Isenberg is director general of the agency's rail branch and new director general responsible for the close-out of the ARFA program. Mr. Doug Rimmer, the former director general, is no longer with the agency. Equally, Mr. Keith Simpson, the agency's regional director in Moncton, is here today should specific program administration questions arise.
Thank you very much. Merci beaucoup.
The Vice-Chairman (Mr. Telegdi): Mr. Rivard, just to refresh my memory, the last time you were here we had from you an undertaking that unreasonable rates requested would be denied. Now you're telling us why they can be. That's why we're having this meeting.
I'll go on to Mr. Molot.
Mr. Henry Molot (Senior General Counsel, Administrative Law Section, Department of Justice): Mr. Chairman, I understand I've been invited to appear here today because of the legal opinion dated November 24, 1995, to which Mr. Rivard referred, I provided to the National Transportation Agency relating to its authority to administer claims for assistance under the various Atlantic region freight assistance programs.
Ordinarily solicitor-client privilege would constrain me from being able to freely discuss this legal advice to the agency. However, as the agency has provided the committee with a copy of the opinion letter and has thereby waved its solicitor-client privilege in regard to that advice, I seem to have been relieved of those constraints.
Given the link between the reason for my presence here today and the November 24, 1995, opinion letter to the agency, it may be useful in these opening remarks to summarize briefly the reasoning that led me to the conclusions reached in that legal opinion. Because there is more than one subsidy program at issue here, and discussed in that letter, for ease of presentation I will limit myself to the assistance authorized under section 3 of the Atlantic Region Freight Assistance Act and the Atlantic region freight assistance regulations.
The starting point in a case like this, where the scope of the authority or jurisdiction of an administrative body like the agency under a legislative scheme is at issue, is the basic public law principle that such a body may not act unless it has legal authority to do so. In this case, that authority has to be found in the act or the regulations that define that authority or jurisdiction of the agency with respect to the issue of ``the amount of assistance that may be paid to a trucker''. In large measure, then, the scope of the agency's authority here involves interpreting the act and the regulations.
Under section 3 of the act and section 3 of the regulations, first of all a ceiling is imposed on the amount that may be certified and paid out by way of assistance. That ceiling - 30% in the act, and in the regulations a prescribed percentage that does not exceed 30% - applies to the total amount of ``tolls, rates, charges or allowances charged or made by the trucker''.
.1550
Beyond this, and in the administration of individual applications for assistance, the agency has the authority: (1) to give an opinion or judge what portion of the total amount of the tolls, rates, charges or allowances apply to the movement of the goods within the select territory; and (2) to certify the amount of the assistance.
However, the ``tolls, rates, charges or allowances'' are those ``charged or made by the trucker''. The scheme therefore confers no express authority on the agency to second-guess or reassess those tolls and rates or to require reasonableness as a condition of tolls or rates charged by the truckers.
But - and this was my next question to myself - does the legislation confer any implied authority requiring reasonable tolls, rates, charges or allowances charged by a trucker? I concluded that there is no such implied requirement on the basis of the following factors.
First, notwithstanding the close relationship between the Atlantic Region Freight Assistance Act and the Maritime Freight Rates Act, the latter conferred express authority to regulate tariffs and tolls, whereas the Atlantic Region Freight Assistance Act did not. Thus, it can be inferred that Parliament did not intend to confer such a power in relation to tariffs and tolls under the Atlantic Region Freight Assistance Act.
Second, the information in relation to tariffs and tolls required to be filed under the regulations is the trucker's information. No information relating to reasonableness of a tariff or toll is required. Consequently, on the basis of the regulations the only source of tariff-relevant information is meant to be the trucker, leaving the agency with no authority in relation to this tariff information other than to verify its truth and accuracy.
Third, can any reliance be placed on the common law principle that imposes a duty on common carriers to carry all goods on being paid reasonable compensation? First of all, that limitation does not prevent a common carrier from charging different rates to different customers. In other words, discriminatory rates are permitted under this common law principle.
Moreover, and perhaps more importantly, that principle probably has no application here, because the legislative scheme makes no reference to common carriers, draws no distinction between the categories of common carrier and private carrier, and provides no basis for the agency to administer the scheme on the basis of this distinction.
Fourth, while it is implicit in paragraph 6(e) of the regulations that the scheme contemplated tariff regulation by provincial boards, the combination of the new Motor Vehicle Transport Act of 1987 and recent provincial legislation has resulted in the deregulation of tariff-setting with respect to both intraprovincial and interprovincial truck undertakings. In the absence of federal legislation to fill this regulatory gap, it can be concluded that no such federal rate regulation was intended.
Nevertheless - to move on to another issue - because of the status of the agency under its legislation, it is likely that the courts would pay a good deal of deference to the agency's interpretation of the act and the regulations. The standard of review by the courts would then be whether the agency's interpretation ``can or cannot be rationally supported''. Based on the factors referred to earlier, I concluded in the opinion of last year that an interpretation of the act and regulations by the agency that implied the condition of reasonableness as to the tolls and rates charged by truckers probably could not be rationally supported by the language of the legislation.
There's a fifth point I discussed in the letter. I concluded that there is nothing in the legislation from which it can be inferred that the agency has implied authority to require truckers to charge or claim only reasonable tolls, rates, charges or allowances.
.1555
Finally, though, the agency has no authority to pay claims based on fraud, collusion or bad faith. As the cases conclude, fraud unravels everything.
That, sir, is a summary of that opinion letter of last November.
The Vice-Chairman (Mr. Telegdi): Thank you. Mr. Murphy is next.
Mr. Donald Murphy (Senior Counsel, Department of Justice): Thank you, Mr. Chair, members.
When the clerk contacted me a few days ago, reference was made by him to the opinion I provided to my client, Transport Canada. I believe the assistant deputy minister when she was here in fact was the one who provided the opinion. So the solicitor-client privilege, as my friend Mr. Molot has mentioned, is waived insofar as my opinion is concerned as well.
My remarks will be very brief. When I was preparing the opening statement, Mr. Chair, I thought it might assist the committee if some background information were provided by me in terms of what led up to the preparation of my opinion.
On Friday, March 31, 1995, I attended a meeting called by my client, Transport Canada, to discuss the question of allegedly artificially inflated rates being submitted by some truckers under the Atlantic region freight assistance program for the express purpose of filing a claim for greater subsidy under the program. At that time it was discussed whether the agency could make a determination as to the reasonableness of a claim for subsidy payment being based upon an artificially inflated rate a carrier would have charged a shipper, and if the agency was able to satisfy itself as to the unreasonableness of a claim, whether it would have the authority to reject such a claim.
I reviewed the nature of the discussion and concluded that the submission of a claim based on an artificially inflated rate was not a lawful one and therefore was not proper or just, since such a claim was one that was based upon deceit or fraud. As my friend Mr. Molot said previously, it has long been recognized that in law, fraud unravels everything. I concluded that the agency could make a determination as to the unreasonableness of such a claim being so based on deceit or fraud by refusing to entertain any such application. I so advised my client on the following Monday, April 3.
At the meeting with my client on the previous Friday, March 31, I was informed that there was a great urgency in dealing with the request for a written opinion, since the client had arranged to meet with the agency and a spokesperson for the review group liaison with the Auditor General on Tuesday, April 4, to discuss the Auditor General's report on subsidies.
.1600
Given the extremely tight turnaround time for a written opinion, I therefore limited myself to a consideration of the essential question regarding reasonableness, that is, whether a claim based upon an allegedly artificially inflated rate was at law a just and proper one - whether it was lawful.
Since I viewed a claim based upon an artificially inflated rate as a deceit on the government to claim a greater subsidy, I concluded that the agency would have the authority to make a decision that it was not satisfied as to the reasonableness of such a claim and would refuse, or could refuse, to process any such a claim.
Thank you, Mr. Chairman.
The Vice-Chairman (Mr. Telegdi): Thank you.
Mr. Williams, you're the first one to go on this.
Mr. Williams (St. Albert): Thank you, Mr. Chairman, I appreciate the privilege.
Mr. Rivard, it seems to me you have had no dearth of opinions. You've had letters from the minister, you've had legal opinions and you've had direction from this committee. You must be wondering which direction you should really be going in.
I think where we left it last was that you were going to court to get this thing settled once and for all. Now you have legal opinions saying you have no basis to go to court. Can you give us just a brief summary of where we are today? Did we go to court, and why not?
Mr. Rivard: Mr. Williams, you have three lawyers before you today. Mr. Murphy, Mr. Ashley and Mr. Molot all agree on this. They all are of the same opinion, that we have no jurisdiction to question the reasonableness of any claims. Consequently, it's only in the case of fraud or deceit that we have.... I think all lawyers, not only the ones before us here - historically the agency has had many lawyers working for it; at one time there were fifteen - have agreed with the opinion that the agency had no jurisdiction.
Mr. Williams: But I thought we were going to go to court to get this thing resolved.
Mr. Rivard: Following the opinion of one of the best administrative lawyers in Canada,Mr. Molot, who says we had no jurisdiction, I think it was clear that it would be a waste of taxpayers' money to go before the courts. The case would not have been settled before many months if we had had to go before the Federal Court of Canada and the Court of Appeal. To minimize expenses as this program is terminated, we are closing the offices in Moncton. The employees are being laid off.
If you asked me if I went to court.... I will let Mr. Ashley answer that.
Mr. Williams: No, I understand that you basically haven't gone to court. You've based it on the decisions of lawyers, on the opinions you've received.
Mr. Molot, you have given a written opinion to the chairman of the National Transportation Agency, a copy of which we all have. You didn't say in there, even though we've had Mr. Murphy express an opinion, that if there was broad collusion or bad faith in there, which would unravel everything - and it would appear we are dealing with several million dollars that have gone into the pockets of in-house trucking companies - perhaps this could be tested in court.
You seemed to be quite definitive, saying, no, there's no point in going any further. Why did you say, even though it confirmed the recommendation of this committee, that perhaps we should go to court here?
.1605
Mr. Molot: I wasn't asked about the litigation elements of it, quite honestly, sir. I was just asked to give an opinion on whether or not reasonableness was a condition for the validity of tariffs and tolls submitted by truckers and whether the agency could turn back an application based on the ``reasonableness of''.
As you can see from the opinion letter, I didn't spend a lot of time on the fraud and deceit element. It's a fairly straightforward point. But because fraud and deceit are usually fairly difficult to prove, you're talking about an intention to deceive as opposed to an objective standard as to whether a tariff or toll is reasonable, which is objective as opposed to subjective. That's where I thought the major concern of the agency lay, and that is why I devoted, I suppose, 95% of my attention to that issue.
Mr. Williams: Subsection 3(2), which deals with the tolls and so on, says:
- ...the total...amount of the tolls, rates, charges or allowances charged or made by the trucker''
- as the agency deems applicable. It doesn't include transfer pricing in there. If transfer pricing is
included as part of the subsidy request, wouldn't you have an obligation to ensure that it is
removed?
Mr. Williams: I'm looking at later on in your report, at the bottom of page 9, where you say:
- ``...the total of the amount of...tolls, rates, charges or allowances'' are those which are
``charged or made by the trucker''.
You mention here about charge by the trucker. I think the conglomerate is dictating prices to the trucker, not the trucker dictating to them. We are seeing significant effects of transfer pricing built into his price, and the agency has no authority to pay for transfer pricing.
Mr. Molot: I suppose, assuming that could be proved, you're into collusion and the Competition Act possibly applying as well. I'm not denying that this is a possibility, but it wasn't something I was asked to address. I'm not in the competition bureau.
If there's fraud or deceit, which of course is getting close to a criminal offence, that's another area, I guess, of the department's criminal law. These are just not matters with respect to which I was asked to comment or in which I have a great deal of expertise.
But you're right. If all of that amounted to collusion, deceit, fraud or what have you, then, as Mr. Murphy and I have said, there would be grounds for turning back the matter. But you have to be able.... You can't just look at....
.1610
The problem is they would obviously have to go behind the documentation, because the documentation itself wouldn't reveal any of that, and the regulations in effect don't require the kind of documentation that would in itself allow the agency, on the face of the material, to draw that conclusion.
Mr. Williams: But fairly reasonable statistical evidence was brought forth by the Auditor General that something of this kind was actually taking place. This is why this committee was concerned about the loss of taxpayers' dollars. As a committee member, I have a responsibility to try to ensure the taxpayer gets value for money. We could see a significant drain of money going down this hole.
We all recognize the legislation is dreadful in this particular case. It should have been cleaned up and amended along the way, and some people wanted to have it cleaned up. It didn't happen. All that is water under the bridge and taxpayers' dollars down the drain.
All this committee wanted was to try to stop it. We said go to court, because we feel there is a problem with the amount being charged. We didn't specify exactly what it is, but we did think it might be transfer pricing, because it was in-house trucking. Transfer pricing is dealt with at great length by Revenue Canada under its regulations and so on. I'm sure the competition bureau have a great deal on transfer pricing. I was wondering why, when you were dealing with reasonableness, you didn't bring these areas under consideration and say perhaps collusion, fraud, bad faith, and everything else are included here.
Mr. Molot: Well, a statement of the law is one thing; the need for obtaining the evidence, which isn't my responsibility, is quite another. Obviously if the agency had gone to court it would have had to have been on the basis of fraud or collusion or deceit. They would have had to have had the evidence, presumably, to establish some kind of prima facie case that in the case of the application they were denying there had been something of this sort. That is very different from the objective notion or principle of reasonableness. To go to court on the basis of fraud or deceit or bad faith or collusion presumably would require an awful lot more evidence than they probably had. I can't speak for the agency, because I didn't get into particular cases. I was just asked a legal question.
Assuming something was going on between the affiliated carriers and their parent shippers -
Mr. Williams: But the Auditor General has pointed out one specific carrier, who hasn't been named - but it is identified - was charging 200% more than the competitor rates. Yet nothing was done. This shipper was quite content to pay double the amount to his in-house shipper...than to a competitive rate. To me it would seem some kind of collusion was going on.
Mr. Molot: There might have been, but as I say, I wasn't asked to address a particular case. So I really can't answer your question.
Mr. Ron Ashley (Legal Counsel, National Transportation Agency of Canada): Mr. Chair, perhaps as agency counsel I can assist Mr. Williams, although the question was directed toMr. Molot.
The agency was aware of the study conducted by the Auditor General. Of the 10,000 claims examined by the Auditor General, while there was an apprehension that there was pervasive system-wide abuse, he identified only one instance as being evidence of abuse, and that's the 200% carrier you are mentioning. Upon further investigation, we understand that carrier was an exceptional move at an exceptional time with exceptional equipment. So although the 200% seems inordinate to me as a taxpayer, in the mind of a lawyer there can be explanations.
Notwithstanding that, when we talk about collusion and fraud, the record of the agency speaks for itself. In instances of fraud - and by ``fraud'' we mean where there were falsely sworn affidavits, where moves did not take place or invoices or bills of lading were shown to be in gross error - the agency went to the RCMP, and in those cases where there were errors the agency didn't pay the subsidy.
.1615
In respect of the transfer pricing, which deals with non-arm's-length shipper-carrier affiliations, if there is an issue of collusion or price-fixing, then that of course is an issue under the Competition Act. That was examined exhaustively by the competition bureau in 1991, at or about the time of the television program, and again, it's their jurisdiction. The very unfortunate position of the agency is it's faced with administering a dreadfully drafted law that forces it to accept the rates these carriers have filed.
We tried very carefully to push the envelope as far as we could, so that back in November, when the chairman appeared before you and said ``I will go to court'', two weeks later we got a very strong opinion from Mr. Molot that said it's patently unreasonable and it's unauthorized. But in addition, and notwithstanding that, the rate and activity review process was going on, which we had committed to undertake as of June of last year.
At the time we appeared before you in November we had reviewed 600 affiliated carriers to determine whether or not there was evidence of rate abuse - we'll use the term ``abuse'' - or activity abuse. After putting all these carriers through the grinder, I can say the agency was unable to find any evidence of that abuse. Honestly, that doesn't surprise me because, of the 10,000 claims the Auditor General looked at, he too could only find one case of abuse, and that was the 200% carrier. My fear is if there were other instances of gross abuse, then surely the Auditor General would have identified those cases in his report too.
So it's not as if we didn't want to do anything. Mr. Rivard is extraordinarily sensitive to taxpayer money and was very clear in subjecting our opinions to scrutiny, and at the end of the day we unfortunately, in law, couldn't pursue it, and Mr. Molot confirmed it. It's very unfortunate, but that's where we are.
The Vice-Chairman (Mr. Telegdi): Thank you very much. I'll go on to Mr. Brien.
[Translation]
Mr. Brien (Témiscamingue): I'm new to this case. I'm quite shocked at learning about the issues involved in this process.
My first question is for Mr. Rivard from the National Transportation Agency. In your brief, you say that:
- Firstly, as a precautionary measure, I directed agency staff to implement the Rate and Activity
Review process. If it became clear that the Agency did have legal authority to deny subsidy
based on inflated rates, then I wanted to have the information...
[English]
Mr. Ashley: Mr. Rivard is responsible at the end as the chairman, but in terms of the day-to-day responsibility, it falls more directly on me.
It is correct to say that when Mr. Rivard came to the agency in April 1993 he knew nothing about this. I think it's fair to say the Auditor General has identified that the potential for problems for this rate abuse arose some time at the end of the last decade, around 1988 or 1989. That corresponds with the time when all the provincial regulatory boards had repealed their rate review legislation.
This federal program was constructed at a time when there was active rate review at the provincial level, so that before the rates, in respect of which subsidy had claimed, got to the agency, they'd already passed muster at the provincial level.
In 1989 the last - and I believe it was New Brunswick or Prince Edward Island - repealed its rate review. There was a couple of years there when there was no direct evidence of what was going on with the rates. However, the Auditor General, I believe, identified a carrier in about 1991 - and I think it was that 200% carrier - that was a non-arm's-length carrier with 200% rates.
If the question is when did we first become aware of the exact evidence of an abuse, I will have to say we became first aware of it in May of last year when the Auditor General identified it. Prior to that time we did not see that.
.1620
[Translation]
Mr. Brien: I have a question for Mr. Murphy. In the Agency's brief, it says that depending on the Minister's response, dated May 11th, it seemed that the Agency ultimately had the power to reject claims. But today, you seem to be saying the opposite. Did you change your mind along the way or did I misunderstand what Mr. Rivard said in his presentation?
[English]
Mr. Murphy: No, sir, I don't think I've changed my mind. What I did say was that where there were artificially inflated claims presented for the express purpose of getting out a greater subsidy, on that basis the agency would have the authority to question the reasonableness, directed to whether it's a deceit or a fraud being committed on the government.
As I said before, sir, fraud unravels everything, and quite frankly the agency would have the authority, where it was a deceit or a fraud, to refuse the application. That's what I'm saying and that's what I said before to my client.
It's more explanatory now, sir, due to the timeframe I had at that time. As I mentioned to you before, it was no more than half a day to a day maximum, because my client wanted to go before the Auditor General to discuss subsidies. So based upon that very short timeframe, all I had time to do was consider a very essential question, namely, reasonableness only and nothing else.
[Translation]
Mr. Brien: I have a final question for Mr. Rivard. Between May of 1995, when you first became aware that there were irregularities, as discovered by the Auditor General, and the end of the program, there was only one month. Were procedures implemented to take remedial action with regard to the final claims? Was the Minister told about this potentially dangerous situation and that there was only one month left in the program?
Mr. Rivard: First, the Auditor General said there was a potentially dangerous situation, especially since the program was ending.
Between now and June 30th, we will publish our final report, and you will be able to see for yourself that the anticipated dangerous situation, or the Auditor General's fears, never materialized.
As well, we warned every carrier and everyone who received subsidies that we would be studying their claims closely. Unless I am mistaken, we sent out two notices stating that we would be going over claims with a fine tooth comb because the government had decided to end the program.
Mr. Brien: You said you implemented a mechanism to determine which claims were unreasonable. What criteria did you use to deem a claim unreasonable? For instance, did you compare later claims to previous ones? After warning carriers that you would be monitoring their claims, did the claims change compared to previous ones?
Mr. Rivard: Mr. Brien, one act has been in effect since 1927, I believe, and the other since 1969. As well, when I took over as chairman of the National Transportation Agency, I went to Moncton, where the program was administered, and I realized that the system was still very old fashioned.
.1625
I therefore asked to see every written claim concerning the quality and the nature of transported goods, as well as the distance covered. I even put out a call for tenders for a computer system which could give us an overall view of the situation, as well as a detailed outlook on every case.
It was necessary to bring in this kind of system because of all the paperwork involved. A claim can cover anywhere between 200 and 300 movements of goods. It would take awhile to implement the system. We awarded a contract for the design of a system that met our needs and which would give us a complete analysis of the situation.
However, as the system was being assembled, we had to cancel it because the program was ending. Mr. Ashley might like to add a few words to answer your question.
[English]
Mr. Ashley: I know in quite some detail the nature of the process that has been implemented during the wind-up period.
The question was on what factors the agency examined as part of its rate review. The agency constructed a process that, in draft form, was presented to the Auditor General for his comments, and we went through this last November. The Auditor General's correspondence to us said that generally speaking our process would be acceptable.
The process contemplates a series of reviews whereby all the affiliated carriers in the program....
I might add that probably this Friday you'll get in detail what we did, because pursuant to your fifteenth report you asked the agency to give you before the end of this fiscal year an indication of what we've done during this wind-up period. On Friday you'll see in detail what we've done.
If I may just briefly present the process, it involves an examination of all non-arm's-length carriers and shippers and a review of their rates. If their rates go up by more than 10% or their activity has gone up by more than 10% more than that which took place last year, in their last filed claims, then the computer will kick those out.
We then went to the carrier and said, ``Your rate is higher than 10% - or your activity level is higher than 10% - could you please explain to us why this is the case?'' In law, that had to be done; that had to be done on due process, on questions of fairness.
You will see that quite a few of the carriers' numbers did kick out - I don't have before me the number of dollars involved or the claims - but in each case there was a plausible, objective, believable explanation, anywhere from ``I got a new contract supplying shipper X; that's why my activity level has gone up by 10% this year'' to ``My labour costs have increased by x percent; therefore my rates have gone up by y percent''.
That's the nature of the process we did. I have to say that you'll see the results in some detail on Friday.
The Vice-Chairman (Mr. Telegdi): Your time is up, so we're going to go on to Mr. Crawford.
Mr. Crawford (Kent): You've stated that there are three lawyers here.
The Vice-Chairman (Mr. Telegdi): Four. Everybody's a lawyer.
Mr. Crawford: If everybody's a lawyer, then I'm in trouble. Usually one's right and one's wrong and you're even.
Mr. Rivard: That's why we have judges.
Mr. Crawford: The questions I would like to ask relate to the 200% mark-up. In the statement you just made, Mr. Ashley, if something went up by 10%, it's kicked out and you review it. Is this after the fact or before the fact?
I was a shipper. I always had to bid in advance and you couldn't be one percentage out or you didn't get the contract.
Mr. Ashley: Is the question, would this be after the award of the contract to the carrier?
Mr. Crawford: And then it goes up by 10%.
.1630
Mr. Ashley: My experience with carriers in this industry has shown that - you're quite right - a proportion of the contracts are awarded on a tender basis, but a significant portion are not. In the case where the rate may go up a particular percentage, it's after the movement has taken place; it's after the carrier has moved the goods from origin to destination. At some point after that, this carrier takes the bill of lading and all the other requirements under the law and under sworn affidavit as to the truth and accuracy delivers them to the agency.
So if the question is at what point, it's after the contract has been let, after the movement has been performed, but prior to the payment of subsidy on the movement by the agency.
I hope I've explained it.
Mr. Crawford: You've explained it properly, only I can't understand it.
If I have a contract - and I think that's why we've gone wrong in government or whatever - there's a price. If all of a sudden a bill comes in for 40% more or 80% more, we as a government seem to pay it.
When I was a politician, not federally but municipally, we went to the penny - not over. If you have a contract - and I don't understand this - and it's over, so what if they give us good reasons? I wouldn't care what their reasons were. If they went over, they were out that money.
Mr. Ashley: If I may speak for the chairman, the grilling I got on my legal opinions - I said the advice I gave him precluded him from going beyond - was quite severe, and it was with a great deal of reluctance that he listened to what I told him. It's on record before this agency that Mr. Rivard is extraordinarily sensitive to the money. Unfortunately, the advice I gave him was that he was hamstrung.
We won't get into why that didn't go further. Your eighteenth report says, in part, why it didn't go further.
About the rate, I might say there's only one case of a 200% rate I am aware of as agency counsel. As agency counsel, I had to advise the chairman on the evidence, and that was the only piece of evidence I saw of these grossly exaggerated rates.
In this wind-up period prior to the closure of the program, identified by the Auditor General in this committee as a risk period - everyone wants to get on the cash bandwagon before the money dries up - there was a potential that if there was an incentive to abuse the system before, it was even greater now. As a result, the chairman instructed us to institute a process that would review the rates, comparing them with last year's rates.
I'll admit that is somewhat flawed, but I don't think that makes the entire process bankrupt, or defunct of logic. What the process has shown is that for all the carriers - and I don't want to misspeak here - of the number of claims that increased relative to those last year, you'll be surprised that not so many increased. Some decreased. I think you'll see in the numbers that the total subsidy dollars paid in the wind-up period reduced compared with a comparable period last year.
So it's not that we're not sensitive to the nickels and the dimes. The advice I've given to the chairman is that we're victimized by a very badly written law - which, if I may add, is now repealed.
Mr. Crawford: Mr. Molot, I believe we had requested something, or the agency had requested a view, from you, and you went on the one view. You didn't go beyond that view. You felt it was not your responsibility. Fraud and that part you probably thought were not your responsibility.
Mr. Molot: I commented on the fraud, but about individual cases or what would be required to prove the fraud, it was moving out of my field, quite honestly.
Mr. Crawford: Yes, I understand.
Mr. Molot: Then we were getting into the Competition Act and Criminal Code administration, and that is not my world.
Mr. Crawford: That's the clarification I wanted. Unfortunately, when you instruct your legal adviser on what to do, they do only what you quote. I always leave it open-ended: if there's anything else you think should be done, you'd darned well better do it and carry it out.
.1635
Mr. Molot: As it is, it took me 25 pages to say that.
The Vice-Chairman (Mr. Telegdi): Mr. Molot, I find that you are a career civil servant.
Mr. Molot: Yes.
The Vice-Chairman (Mr. Telegdi): You're with the justice department. It seems to me that Justice would be particularly sensitive to the possibility of having a climate wherein a situation can occur whereby we end up, as the government, with the taxpayer being victimized by badly written law. If it's not your department that's going to be looking out to make sure that the conditions whereby we can be taken advantage of or the taxpayer can be defrauded don't exist, then I really don't know which department it is.
Certainly I, as a member of Parliament, look to your department, on behalf of the taxpayers, to do whatever is in your power to alert Parliament if a condition exists in which we might be victimized and to make sure that your department gives us advice so we won't find ourselves in the situation in which we are finding ourselves today.
This is just a disgrace. I could not explain to any of the taxpayers of this country how this has been allowed to go on and on. When I look at some of the written opinions, Mr. Murphy tells the agency that, yes, they have the jurisdiction to reject unreasonable claims. Really, I'm shocked by how ineffective the department seems to have been in guarding us against this kind of exploitation.
Mr. Molot: Mr. Chairman, could I respond to that? I think it's an unfair allegation against the Department of Justice.
The role of the Department of Justice in the criminal law sphere, to which I assume you are referring, is not to be a shotgun rider out looking for fraud or criminal offences. We have police forces to police; we have line departments responsible for administering regulatory schemes. If they find that there's some evidence of a criminal offence, they certainly bring it to the appropriate crown prosecutor. If it's a normal criminal offence, such as fraud or deceit, they would probably be instructed to go to a provincial crown attorney.
It's up to the Department of Justice, if it's something within our sphere, to see if there's evidence, in this case provided by a responsible department, to justify laying an information under the Criminal Code or some other statute providing for a criminal offence.
We don't go out like a sheriff in a western movie, looking for criminal offences. That's why we have police forces and why we have responsible departments administering programs, which have the evidence, see the facts, and then act upon the facts by coming to the appropriate either provincial or federal crown attorney.
The Vice-Chairman (Mr. Telegdi): I believe we're going to have fraud charges coming if we have legislation that allows a reasonable chance of detection. When we have a badly written law, surely to God it's up to our legal people to make sure that it's rectified. It seems to me that Justice would have a particular vantage on that, and if they are to be guardians -
Mr. Molot: If the evidence is brought to our attention, yes. But no evidence was brought to our attention.
The Vice-Chairman (Mr. Telegdi): But what I'm hearing you say is that criminal activity in the Competition Act, or what have you, is not your world or your bailiwick. Well, it certainly isn't the bailiwick of any of our committee members around this table, but our expectations are that we have a department within government that can deal with that.
Be that as it may, I will go to Mr. Williams.
.1640
Mr. Williams: Thank you, Mr. Chairman.
This committee arrived at two conclusions, I think. First is that perhaps we should go to court. Secondly, we were extremely critical of Mr. Rimmer's explanation of the audit processes he had put in place - I think it was Mr. Rimmer - to evaluate the in-house carriers' claims during the final years. If I recall, Mr. Rimmer explained, and you confirmed it today, Mr. Ashley, that you were comparing the claims in the final period with the claims from the same people in the previous year to find out if there was a difference.
Yet we go back to the statistical evidence provided by the Auditor General, which says the in-house trucking firms were 40% higher. This was the specific comment or direction by this committee to Mr. Rimmer. It was to go and compare not the in-house shippers' claims in the final period with the previous year but to compare them with those of competitive trucking firms and see what kind of difference we were talking about there.
Was that done?
Mr. Ashley: I can answer that, Mr. Williams. The flaw you are referring to is that if the benchmark you are comparing the new 1995 rate to is high, then surely you should go beyond that benchmark to determine whether or not that indeed was high in the first instance.
The chairman showed he was very concerned about that. I believe the chairman went on the record to say he would seek assistance and advice to determine whether or not that could be done.
That brings with it a couple of points. Can he go back retroactively? The legal advice I gave him was based on the Federal Court of Appeal decision in 1984, which says when those claims were legitimately paid under the law as it then stood, you do not have any authority to go back. That deals with the retroactivity.
About the ability to resurrect a stronger review process, we did not have that ability. We did not have the strong Molot opinion. Nonetheless, the chairman investigated the possibility of contracting with a forensic accountant, who would be able to do that. I will tell you now the very difficult conclusion is that the forensic accountant may say yes, I might be able to do that for you, assuming for the moment you have the legal authority, but it's going to cost you $1 million.
We had no clear evidence of how many dollars were involved here. As counsel I kept saying ``show me the evidence''. Moncton could never show me the instances of abuse the Auditor General said he thought he saw.
So the answer is we concluded we could not do that. I want to make it clear, though, that the Auditor General's report in May - I know your report said we read that narrowly - said, of all the actions I want you, the agency, to take, it is to take special action in the wind-up period. Notwithstanding all the hyperbole about the pre-wind-up period, 10,000 claims, as a lawyer, I saw one piece of evidence. There was none other.
So if you ask me how pervasive and system-wide it was, I cannot say, as a lawyer, I have evidence that it was pervasive or system-wide. For me, like the taxpayer and Mr. Rivard, it gnaws at me to recognize that there might be taxpayer dollars here; but I haven't seen that concrete evidence.
So about going back in previous years to take a look at these other rates, I will have to say that in terms of cost-effectiveness, it would have cost us $1 million. In terms of the law, we couldn't do it anyway. In conclusion, after Mr. Rivard was given the advice, it was concluded it would not be done, and indeed couldn't be done.
Mr. Williams: This is most unfortunate. We hear Mr. Molot saying his area of law is administrative law. He restricted his opinion to the area in which his expertise lies and he didn't think about transfer pricing, perhaps, because that's the competition bureau and so on. We knowMr. Rivard unfortunately has come in late in the game and has done the best he can - but as I say, very late in the game. We have had different legal opinions. We have had direction from the ministry. You've had direction from this committee.
.1645
The final analysis is that the taxpayer's left holding the tab. We don't know for how much, but the inference by the Auditor General was that about $10 million to $15 million a year has been disappearing into these in-house trucking firms, by his statistical analysis.
We seem to have beaten this project to death almost, Mr. Chairman. There seems to be an illusion, or a bad taste left in my mouth, that there is some kind of fraud, collusion, bad faith, deceit or whatever the terminology may be. We can't prove it. We don't have the legal mechanisms to go after it. We never had the legal right to collect the information to even detect it up front. We didn't have the legal right to go and ask for the information later on. We didn't organize the department in such a way to ensure that data would be readily collated or analysed without spending $1 million on a forensic scientist. It still comes back to the fact that the taxpayer is left holding the tab.
I understand Mr. Rivard's concern for the taxpayer, but this is a situation where lawyers, departments and the NTA, the National Transportation Agency, have known for some number of years, going right back to the time of deregulation in 1988 or 1989, that if you're going to pay a subsidy as a simple percentage of the freight rate, you are asking for problems. You're just asking for people to take you to the cleaners.
This problem has been bubbling somewhat under the surface, but a large number of senior people have been aware of this problem, and yet nothing was done other than the minister writing a letter to the chairman saying ``Don't worry; just fix it''. Then we have Mr. Molot saying you can't and Mr. Murphy saying perhaps you can. Where are we?
We have to send a very strong message to the government that this committee isn't going to tolerate this type of stuff any more in this department or in any other department for that matter. The taxpayer can't be taken for a ride in this way.
I'd just like to finish up on one question, Mr. Ashley. You mentioned you went to the trucker with a 10% increase. Let us say you didn't get a satisfactory answer for the extra 10%. What would you have done?
Mr. Ashley: As a lawyer, I'm always loath to respond to hypothetical questions, but if the chair will permit me, I will.
When the chairman appeared before you in November he said there would be no question; he would have taken that to court. In light of Mr. Molot's clear and unequivocal opinion, my advice to the chairman was if we did get that type of rate, we would have to seriously consider whether we would take it to court. That's about as far as I can take the hypothetical, because we never did get that.
Mr. Williams: It seems to me that Mr. Molot -
The Vice-Chairman (Mr. Telegdi): Mr. Williams -
Mr. Williams: I have one final point.
The Vice-Chairman (Mr. Telegdi): I've given you great latitude already.
Mr. Williams: If I may say so, Mr. Chairman, it seems to me that Mr. Molot's opinion, which was narrowly based, brought this whole thing to a screeching halt.
Your opinion, Mr. Molot, was strictly on administrative law. You never addressed the wider range of areas outside your expertise and asked why these things shouldn't be investigated as well. It seems rather unfortunate that your opinion brought things to a halt.
Mr. Ashley: Mr. Chair, with your permission, I'd like to respond to that.
Mr. Molot's opinion was dictated by the questions we gave him. The questions we gave him related strictly to what our mandate was. We wanted to know, with what our mandate was, whether we could do anything about it. We were familiar with fraud and we were familiar with collusion, but as an agency....
I agree, as a taxpayer, it seems somewhat arbitrarily narrow, if there's a problem out there, to restrict yourself to what you think you can do, but as a regulatory tribunal, we can only do what Parliament has allowed us to do. We asked Mr. Molot whether or not we could do what you wanted us to do, and he said it would be patently unreasonable. He said to do that would be based on an interpretation of the law that is patently unreasonable.
So in all fairness to Mr. Molot, he was responding to our questions about what we could do, not about fraud or collusion.
.1650
The Vice-Chairman (Mr. Telegdi): Mr. Ashley, were you aware of the letter to Mr. Lawson in Transport from Mr. Murphy?
Mr. Ashley: Is that his opinion dated -
The Vice-Chairman (Mr. Telegdi): April 3, 1995.
Mr. Ashley: I am, sir, yes.
The Vice-Chairman (Mr. Telegdi): Well, it seems to me that in the letter Mr. Murphy, senior counsel, advises that you do have the power to reject claims.
Mr. Ashley: Yes, sir, and the chairman was very sensitive to that. When we received a copy of that opinion, in spite of the legal opinions our in-house counsel had given to the chairman, which went the other way, he said ``I don't want to go your way, Mr. Ashley. I want to go Mr. Murphy's way.'' I said ``Mr. Rivard, please, before you go Mr. Murphy's way, let's find out exactly whatMr. Murphy is saying. And in addition, because there are so many lawyers debating so many things, let's go and get a specialist to tell us whether or not, as an administrative tribunal, we can do anything.''
I might add, though, upon seeing this opinion from Mr. Murphy, which is the foundation for the minister's letter to the chairman - it says ``I believe you have the authority'', and that was in May - Mr. Rivard said ``Set up that rating review process. Do what you have to do.'' Not having the benefit of Molot yet, he said ``If something kicks out that's unreasonable, then don't pay.''
The Vice-Chairman (Mr. Telegdi): I think that's important for the committee to understand. The minister received that advice from senior counsel in Justice. The last paragraph says:
- In response to your question, the authority to reject claims as being excessive exists at present
and a proposed amendment of the Omnibus Bill is not required.
Mr. Paradis.
[Translation]
Mr. Paradis (Brome - Missisquoi): To follow up on Mr. Williams' last comment, I'm beginning to realize that Mr. Molot's opinion was on whether the claims were reasonable, and on nothing else, including whether the Agency had the right to question a claim. His opinion deals with one specific issue.
In the first pages of Mr. Molot's opinion, on page 2, section A, Atlantic Region Freight Assistance Regulations, the first paragraph says:
- 1. The materials left with me indicate that as far back as 1992 counsel in the NTA were asked for
an opinion on this matter in regard to "carriers who artificially inflate the rates charged to their
affiliated shippers in order to receive greater subsidies..."
I know that Mr. Rivard came to the Agency in 1993. Is that correct? I have a two-pronged question. The first question concerns the files on the carriers. The legal opinion says that the Agency was not allowed to study the reasonableness of a claim. Then, or at the same time, questions were raised about whether there was fraud. The opinion goes on to say that it is difficult to prove or disprove, under the Criminal Code, that indeed there were cases of fraud.
Would these cases qualify as civil fraud or duplicity? These irregularities may, at a certain point, lead to...
The concept of mens rea is not as important under the Civil Code. However, the concept of fraud may be involved because of the passage which states that "carriers who artificially inflate the rates charged to their affiliated shippers in order to receive greater subsidies".
.1655
I don't understand why we can't see through this reasoning and that we should dismiss this whole argument to support the notion thata trucker has the right to submit any kind of claim at any time. In my opinion, this mental gymnastics can hardly be reconciled with the good management of an agency such as yours.
So my first question is the following: has the situation been assessed not from a criminal fraud point of view but from the point of view that duplicitous dealings may have occurred, resulting in inflated claims for the purpose of receiving higher government subsidies.
My second question is what did senior agency officials do during this period. My impression is that - I was at the first meeting where Mr. Rivard testified along with other witnesses, includingMr. Rimmer, but I'll get to that later - people are trying to justify their actions after the fact by focusing on the issue of reasonableness. As I said, it's only impression. Did the Agency have the power to decide whether a claim was reasonable or not? When taxpayers' money is involved, agency officials like those from the National Transportation Agency must go beyond the issue of reasonableness. After all, we're dealing with taxpayers' money. We have to keep that in mind.
A little earlier, Mr. Ashley, the Agency's counsel said: ``I have not seen any evidence of fraud". Again, he was referring to criminal fraud. The issue of carriers who officially inflate the rates charged to their affiliated shippers in order to receive greater subsidies has been around since 1992. That seems quite obvious. As it relates to the first part of Mr. Molot's legal opinion, I feel that the Agency did not try to investigate the matter.
I have a specific question on that point. I would have been interesting to hear from Mr. Rimmer again today. I believe he ran the program for several years. He was the one who looked at the claims, was in contact with truckers and settled each case. Today, we are confronted with four lawyers explaining the legal aspects of the situation. My question is simple: Where is Mr. Rimmer now and since when has he been there?
Mr. Rivard may want to answer my questions. In conclusion, let me remind you that we're dealing with taxpayers' money to the tune of approximately $100 million per year. I think it is important that Canadians know how their money was spent.
Mr. Rivard: Mr. Paradis, I will answer your question and then I'll ask Mr. Ashley to complete my answer.
Let me begin by addressing your first point. Indeed, we said it was possible that some claims had been inflated for the purpose of receiving higher federal subsidies. You may remember that in May 19991-1992, The Fifth Estate broadcast a segment on how carriers charged inflated rates to their affiliated shippers. Mr. Ashley can tell you what action was taken after the television program was aired.
Second, you talk about powers. I am not talking about me, but on three occasions my predecessors asked the authorities to amend the Act giving them more powers, which in their opinion was essential to carry out their job.
You also asked whether it was possible to recover the surplus monies which were paid out. The Federal Court has ruled that we cannot retroactively recover those funds.
.1700
I know it's frustrating. I also understand Mr. Williams' and your position.Indeed, it's almost unbelievable.
When I agreed to become Chairman...you can't learn everything overnight and I did not know everything about business. However, over time, I became familiar with the Agency's various sections. When I went to New Brunswick I asked for information and I was appalled at the fact that it did not have the necessary tools to assess the huge subsidies which were being paid out. This had to change. I already told you what I did and I don't want to repeat what I said.
What can I say? The only thing you can hold against me is the fact that I listened to my lawyers. I did not try to be judge and jury. As a result, I took the advice of the 17 lawyers of the National Transportation Agency. They all said it was not the Agency's jurisdiction, that we had been asking for this power for years but had never received it. What can I say?
Regarding your first point, I will ask Mr. Ashley to complete my remarks by telling you about the inquiry which was undertaken after Mr. Molot submitted his legal opinion, which included that quote.
Mr. Paradis: In that case, I would also like to hear what Mr. Ashley thinks about the distinction between criminal fraud and duplicitous dealings.
Mr. Rivard: Let me tell you something, Mr. Paradis. There are many kinds of fraud: bankruptcy fraud, business fraud, civil fraud, criminal fraud.
Mr. Paradis, I understand what you're getting at, but counsel informs me that I do not have any authority. Not only does the Agency not have any authority, but even if it tried to act retroactively, the Federal Court has ruled that it is not allowed to do so.
Mr. Paradis: Mr. Rivard, you said that when you became Chairman of the National Transportation Agency, one of the first item brought to your attention was the fact that carriers were artificially inflating the rates charges to their affiliated shippers in order to receive greater subsidies. But today you're saying that you don't have any authority.
Mr. Rivard: No, no.
Mr. Paradis: I have a problem with that.
Mr. Rivard: No, no. The issue was not brought to my attention when I became Chairman. That aspect of the matter was raised when the program was aired around 1991-1992.
Try to understand my point of view. I came to the National Transportation Agency and had to testify before your committee, which asked me, "What's wrong with the National Transportation Agency? What's the source of these comments?". Only then did I receive an explanation. Rest assured that I only heard of irregularities when the auditor general met with us in May of 1995. In fact, I did not believe him.
What can I say? We were told that we did not have any authority.
I will let Mr. Ashley talk about the investigation which took place after The Fifth Estate segment was aired and which gave the impression that there was a certain system in place.
[English]
Mr. Ashley: I was at the agency in 1992 when what we'll call the fifth estate program went on the air. There was an independent carrier in the Maritimes who complained that the large affiliated truckers were getting super profits on charging rates to their affiliated shippers. The carriers would then take this inflated bill of lading, go to the agency, and get extra dollars. They would therefore would be able to undercut the independent, or non-arm's-length, shippers who were competing with this complainant.
.1705
The complaint was examined in detail as to the nature of the rates. Were they too high or too low? The agency, I recollect - you'll bear with me as this is some four years ago - concluded, based on the evidence, that there were a lot of claims that the rates were too high, but upon examination of the rates, there was no proof that was so. The Bureau of Competition Policy, the Minister of Transport, and the RCMP were brought into it.
I will say at the end of the day - I'll go back to my first comment - that in terms of fraud, the agency's record is exemplary.
Consider whenever we dealt with an instance of fraud. That is to say: is there a falsely sworn affidavit, did a move not take place, or was the bill of lading falsified? Not only was no subsidy paid, but in three cases that I'm aware of, the RCMP was contacted, and of course they then have carriage in the case.
Now I understand that the line drawn between criminal fraud, civil fraud, collusion under the Competition Act, compliance with the regulations administered by the agency, and then a lack of back faith are all mumbo-jumbo to taxpayers, who have to pay for this at the end of the day. But unfortunately.... In 1992 we looked at what we could do to try to resolve the problem. We asked ourselves if we could visit these non-arm's-length carriers and say, ``This rate's too high, you're not getting subsidy on it, and by the way, give us all the subsidy you've got since 1969''. The opinion that's referenced in this, Mr. Molot's opinion, concluded, as Mr. Molot did ultimately four years later, that the agency couldn't do it.
The fact that's perhaps lost here is with respect to the sequence of events. The program the fifth estate was aired in the spring of 1992. At the provincial level, the last province deregulated in 1988-89. So it's fair to say that if there was a scam going on - again, I want to be very careful, as I'm not so sure there was a scam as pervasive as everyone believes there was - it took one to two years to manifest itself in the system.
So in 1991 there was a lot of smoke and apprehension, but the fifth estate couldn't find it, the RCMP couldn't find it, we couldn't find it, the minister couldn't find it, and the Bureau of Competition Policy couldn't find it. We tried to do what we could.
Then, the next year again there was no hard proof. There was a lot of smoke, but there was no evidence.
Finally, in May of last year the Auditor General said that he had a case for us that was a 200% case and that he'd examined 10,000 of them. That's when the chairman said to do something about it.
[Translation]
Mr. Paradis: I have not received an answer to a small question I asked. Where is Mr. Rimmer now?
Mr. Rivard: Mr. Rimmer was transferred. He is working elsewhere in the public service.
Mr. Paradis: Do you know where?
Mr. Rivard: He is with the Public Service Commission.
Mr. Paradis: With the Public Service Commission in Ottawa?
Mr. Rivard: Yes.
Mr. Paradis: Thank you very much.
The Vice-Chairman (Mr. Telegdi): Thank you very much. Mr. Brien.
Mr. Brien: Mr. Paradis noted that since 1992, people were wondering whether some claims were inflated. Did the Department of Justice at any point considered giving additional powers to the Agency authorizing it to study the claims and everything else? After 1992, did you think that the Agency needed additional powers to do that?
[English]
Mr. Molot: I think that question was answered by Mr. Rivard or Mr. Ashley, who noted that in the past there had been at least three requests from the agency to the Minister of Transport for those additional powers. However, they weren't forthcoming. The legislation wasn't amended to give them those powers. That sort of initiative would have to be made by the Minister of Transport as the responsible minister, not by the Minister of Justice.
.1710
[Translation]
Mr. Brien: You mentioned a ruling on retroactivity in terms of recovering over-payments of subsidies. I would like you to explain the ruling to us. It seems a little strange in view of the fact that taxpayers' money is involved. I am more familiar with tax legislation, where the principle of retroactivity does apply. However, it seems that it is impossible to retroactively collect subsidies. Are there any legal precedents regarding the recovery of subsidies? Was this ruling an isolated case or are there precedents?
[English]
Mr. Ashley: I share your.... I certainly would love to have had an enabling statute like the Income Tax Act, but Parliament gave us a far less comprehensive act. As you know, as a tribunal we're allowed to do only, expressly or impliedly, what Parliament has given us the power to do.
In 1984 the Federal Court of Appeal looked at this question exactly. Mr. Chief Justice Thurlow said very clearly - and I can supply the decision to this committee - that unless there is clear, express statutory permission allowing you to go back and assert retroactivity, you do not have it.
Mr. Molot: The only principle that common law would provide in addition to this is that if you could prove that the payment made was illegal - in other words, there was no entitlement to it at all - then you could recover it in court. But you obviously would have to prove, in this case, that there had been fraud or deceit - a rather heavy burden of proof.
[Translation]
Mr. Brien: This still brings us back to the fact that this is impossible to prove that there was collusion and fraud. It's still the same thing.
Under your reign or that of your predecessor at the Agency, did anyone consider changing the criteria for reimbursing claims, using another method to avoid potential fraud, in short, attempting to set up a new rate structure for determining the means of reimbursement? Was that envisaged during the last few years of the program?
Mr. Rivard: I will let Mr. Ashley respond, if you do not mind.
[English]
Mr. Ashley: That's a legal question. I want to keep this fairly direct. One, the agency has no responsibility to set any tariffs. That's what Mr. Molot says. But if the question is, what did the chairman do to try to detect - even though he didn't have these powers - unreasonableness, what about fraud? What can we do to look at fraud?
In 1992 and carried through to this day, forensic accountants were hired by the agency to visit the premises of carriers. On a yearly basis, approximately 60 or 70 carriers were visited, audited, investigated and examined, amounting to thousands of dollars of claims to detect the fraud.
I might add that this audit process, endorsed by the chairman, created a lot of savings for taxpayers. I believe one case did unearth fraud, which was referred to the RCMP. So we did act on that. I say again, we could only act as far as the law permitted us to.
[Translation]
Mr. Brien: Thank you.
The Vice-Chairman (Mr. Paradis): Thank you very much.
If there are no other questions,
[English]
this is the end of the current session. I would like to thank Mr. Rivard, Mr. Ashley, Mr. Molot,Mr. Murphy and all those who participated in today's session.
We are adjourned to the call of the chair.