2008-2009 Integrated Market Enforcement Program Annual Report

• Director’s Message
• Integrated Market Enforcement Teams
• Strategic Initiatives
• Operations
• Intelligence
• Human Resources
  • Staffing
  • Employee Experience
• Financial Position
  • Financial Position - Year Ending March 31, 2009

Director’s Message

When the Integrated Market Enforcement Team (IMET) program was launched more than five years ago, we knew it would take some time to see results. This year, in five separate project investigations, seventeen individuals were charged with a total of 979 counts of Criminal Code of Canada offences.

Although these results may not repeat themselves to the same extent next year, I am certain that we will continue to see progress as other investigations come to fruition. Momentum is building and the investments made in the program are paying off.

The RCMP has implemented recommendations made in the Le Pan Report to increase the effectiveness of the IMETs. Over the next year, we will be evaluating these efforts. One area of importance is ensuring the program is fully staffed.

A related area is attracting and retaining experienced personnel. Currently, 13% of regular members (RMs) and 17% of civilian members (CMs) have been with the program for at least five years. Maintaining and expanding this expertise on board increases IMET’s ability to pursue white-collar criminals.

The criminal side of market misconduct is increasingly sophisticated and often involves organized crime components. As such, the investigative techniques involved often require police-based techniques, along with a policing infrastructure for support.

Through the dedication of staff and the commitment of partners, we are seeing results and having successes. While a lot of hard work remains, particularly in the current economic environment, I am confident that the IMET program will continue to deliver results and exceed expectations.

We will continue to build strong relationships and raise awareness of the program from prevention, to investigation, and to prosecution.

Supt. Dean Buzza

Integrated Market Enforcement Teams

Over the past decade, Canadians and investors have become acutely sensitive to the impact of corporate scandals. In 2003, the IMET program was established by the Government of Canada to exert a firm commitment to protect Canada’s capital markets and enhance investor confidence. The IMET program is composed of ten teams: four in Toronto and two each in Montreal, Calgary, and Vancouver. They are supported by a branch in Ottawa which also has the ability to place an investigative team in the field. The teams include investigators, investigative analysts, secondments from various stakeholder agencies, counsel from the Public Prosecution Service of Canada and forensic accountants.

In Budget 2007, the Government of Canada renewed its commitment to the IMET program, and clarified the mandate to ensure that the full range of offences that threaten investor confidence and economic stability were included.

Together, the IMETs will:

• Investigate serious Criminal Code capital markets fraud offences that are of regional or national significance and threaten investor confidence or economic stability in Canada;
• Work to ensure that those who commit these offences are brought to justice in an effective and timely manner; and
• Collaborate with other law enforcement agencies and securities regulators to ensure that all complaints and inquiries received by the IMETs pertaining to other market offences (e.g. money laundering in capital markets, securities law violations and other commercial crimes and violations) are addressed by the appropriate body. In particular, infractions by the Criminal Code not within the mandate of IMETs will be referred to the RCMP Commercial Crime Branch.

For more information on IMET, visit http://www.rcmp-grc.gc.ca/imet-eipmf/index-eng.htm.

Strategic Initiatives

Following the recommendations made in the Le Pan Report, Enhancing Integrated Market Enforcement Teams, Achieving Results in Fighting Capital Markets Crime, the RCMP and its federal partners developed implementation plans for change.

By March 31, 2009, the RCMP had not only created a plan to implement Le Pan’s recommendations, but had finished implementing the initiatives over which it had sole responsibility including:

• Strengthening leadership, accountability, oversight and program organization;
• Enhancing operational support to address bottlenecks;
• Implementing measures to enhance IMET human resources; and
• Improving cooperation with partners.

The IMET program is at a crossroads, moving away from the planning and implementation of enhancements, to monitoring the effectiveness of these changes.

Over the next year, the RCMP will assess effectiveness by undergoing a comprehensive program evaluation and will implement additional adjustments to the program as required.

Operations

The Integrated Market Enforcement Branch (IMEB) works closely with the four IMET locales in focusing investigative resources on project investigations consistent with the program mandate. In addition, the IMEB ensures that each team has sufficient financial and human resources in order to remain consistent with the “one project per investigative team” concept.

The program works to ensure that those who commit capital markets fraud offences are brought to justice within the realm of the Canadian judicial system in an effective and timely manner. In the period from IMET’s establishment in 2003 to March 31, 2009, the following results have been achieved:

	Individuals charged*	Counts	Convictions**	Estimated loss to investors
2004/05	2	5	1	$1.5 million
2005/06	3	9	3	-
2006/07	4	15	1	$368.1 million
2007/08	-	-	-	-
2008/09	17	979	-	$144.4 million
TOTAL	26	1008	5	~$514.0 million

*Individuals charged were either subjects of the same or separate investigation.
** Many investigations are still before the courts and as such, have not seen convictions.

Over the years, IMET investigations have led to charges of the following Criminal Code offences: false prospectus, fraud affecting public market, fraud over $5,000, falsification of books and documents, laundering proceeds of crime, forgery, assault, robbery, theft, and conspiracy to commit an indictable offence. Additional charges are anticipated in the foreseeable future as current investigations come to a close.

Intelligence

Prevention is vital to restoring and maintaining faith in the capital markets. Within the program, the Securities Intelligence Units (SIUs) are depended on to conduct preliminary research on tips and referrals to assist ongoing operations and determine the feasibility of new investigations. Provincial securities regulators are also involved with the SIUs in identifying useful information. In Toronto and Montreal, they are known as Joint Securities Intelligence Units (JSIUs), as the offices are co-located with the regulators.

The IMEB provides an essential intelligence service to the program investigations known as economic profiling, which is based on open source information found on-line. As new projects are created and current investigations progress, demand for profiles inevitably increases. For instance, there were 91 additional profile requests from fiscal year (FY) 2007-2008 (345) to 2008-2009 (436).

Human Resources

A strong complement of fully skilled personnel is critical to IMET program success. To help build a foundation, efforts were heavily focused on addressing HR-related recommendations made in the Le Pan Report. This includes the creation of additional investigative and support positions for all locales.

IMET established 45 new positions including 20 RMs, 9 CMs, and 16 Public Servants. Additionally, 4 RM positions have been established within the RCMP’s Integrated Technological Crime Units to support IMET requirements. For this reason, the total number of staffed positions has slightly decreased from 2007-2008. The next challenge is to staff the new positions which began in earnest and will continue in the next fiscal year.

Staffing

A specialized skill set is essential to investigate complex capital market crimes. Attraction and retention of expertise remain critical to IMET’s success and is a challenge not only for this program, but for the entire RCMP organization. During the year, studies focusing on Regular and Civilian Members were conducted at how to best attract and retain personnel. In its fifth year of operations, IMET has seen a notable increase in the level of experienced employees. Continuing this momentum is a priority.

Employee Experience

Financial Position

The IMET program operating budget for the 2008/2009 FY was $16,124,805 with year end expenses totaling $14,392,115. This represented 90% use of the funds, but nonetheless created a free balance of $1,732,690.

Salaries were down from the previous FY due to vacancies and an overall reduction in overtime costs. O & M expenses also decreased due to the eradication of the $900,000 administrative support to the divisions. They now receive the total budgets directly at the beginning of the FY.

As of December 11th, 2008, Treasury Board has approved IMET’s submission ensuring the program received funding of $30,969,000 per year. This supports IMET’s initiative up to and including the 2012/2013 FY. 

Financial Position - Year Ending March 31, 2009

		2008/2009 Expenses	2007/2008 Expenses
PAY
R/M & C/M	Salary	6,586,415	7,106,426
	Overtime	333,588	411,730
TCE	Salary	632,162	395,380
	Overtime	236	236
P/S & Casual	Salary	956,393	1,248,406
	Overtime	23,202	43,244
TOTAL		$8,531,996	$9,205,422
O & M
Travel & Relocation	Travel - Administration	151,717	150,206
	Travel - Operational	78,239	226,438
	Travel - Training	109,751	110,695
	Relocation of IMET Employees	213,057	93,050
	TOTAL	552,764	580,389
Professional & Special Services	Publication Services	24,234	34,316
	Legal Services	-	91,920
	Training & Seminars	128,558	102,008
	Commissionaires	85,389	73,869
	TOTAL	238,181	302,113
Consulting/Forensic Services	Consulting Services	1,429,833	488,416
	Staff Accountants	-	387,122
	Project Forensic Accountants	-	629,711
	Profiling Data Purchase	-	80,557
	TOTAL	1,429,833	1,585,806
Divisional/Corporate	Administrative Support	-	900,000
	Operational Support	-	-
	Divisional Backfills Support	-	-
	Health Services	171,273	177,947
	TOTAL	171,273	1,077,947
Office Space	Land/Building Rental	2,739,699	2,857,534
	Rental Communications/Office Equipment	36,907	37,004
	TOTAL	2,776,606	2,894,538
Vehicles	New Vehicle Purchases	-	37,087
	Repair Vehicles	57,167	33,866
	Fuel Vehicles	66,245	72,277
	Rental/Lease Motorized Vehicles	-	7,688
	TOTAL	123,412	150,918
Set-up & Repairs	Set-up Costs (Repair Buildings/Works)	11,299	59,362
	Furniture & Fixtures	20,775	10,279
	TOTAL	32,074	69,641
Utilities, Materials & Supplies	Stationery	54,295	68,818
	Telephone	92,151	124,733
	Clothing & Kit	10,943	16,167
	Miscellaneous Materials & Supplies	114,957	121,429
	TOTAL	272,346	331,147
Other Equipment	Communication & Maintenance Equipment	46,422	58,235
	Audio Visual/Investigational Aids	-	26,136
	Office Machinery & Equipment	10,268	3,557
	Security Equipment	8,745	7,688
	TOTAL	65,435	95,616
Computers	Computer Workstations/Laptops	154,994	186,502
	Repair Miscellaneous Equipment	5,814	7,941
	Computer Communication Services	2,679	2,580
	Computer Software (MICA)	-	-
	TOTAL	163,487	197,023
Other	Ex-Gratia Compensation	-	150,000
	Other Expenditures	34,708	43,485
	TOTAL	34,708	193,485
TOTAL		$5,860,119	$7,478,623
GRAND TOTAL		$14,392,115	$16,684,045
BUDGET		$16,124,805	$18,895,000
TOTAL FREE BALANCE AVAILABLE		$1,732,690	$2,210,955