1985-05-06

Hon. Barbara McDougall (Minister of State (Finance)) moved: that Bill C-50, an Act to provide for the continuance of payments under certain guaranteed income averaging certificates issued by the Pioneer Trust Company, be read the second time and referred to the Standing Committee on Finance, Trade and Economic Affairs.
She said: Mr. Speaker, before I begin, could I indicate that discussions have taken place among all Parties and I would like to move that this Bill be discussed at next reading in Committee of the Whole.


Mr. Speaker:: Am I to take it that there was consent that the motion be changed to reference to Committee of the Whole?


Mr. Gauthier:: No.


Mr. de Jong:: Not that I am aware of.


Mr. Speaker:: I see no such agreement. It would take the consent of the House to make the change, I believe.


Mr. Hnatyshyn:: Mr. Speaker, I mentioned, as you recall, in the course of the statement on business that my initial impression from all Parties was that they would be prepared to let this matter go through all stages of the House today, including Committee of the Whole. There was at that time no indication to the contrary. If the Official Opposition or the NDP want to delay this matter, then perhaps I will have an opportunity of learning that in further discussion. But I had raised it specifically during the question on House business to make sure it was clearly understood that it was our intention to proceed with all stages of this Bill today so that the Senate could deal with it. I think it is in the interests of not only the people of Saskatchewan but a good number of people who have investments in this company to have the matter resolved quickly and I would hope we could get the approval of all Parties.


Jean-Robert Gauthier: Mr. Speaker, the Government House Leader made two comments. He said it was his impression that there was an agreement that this Bill would go through this day; we
do not deny that impression. I understand that there have been negotiations between the leaders of all Parties, but they concerned the need to have the Bill passed this day. What the Minister just did was to bypass second reading of the Bill and go into Committee of the Whole now. I am saying to the Minister we did not agree to that.


Ramon John Hnatyshyn: That is not what the Minister asked.


Jean-Robert Gauthier: I understood the Minister to want to move to Committee of the Whole now.


Mr. Speaker:: Perhaps I can try and help. The normal proposal which is put to the House at this point is that the Bill be read a second time and referred to the normal standing committee. What I understood to be proposed was that the Bill be now read a second time and referred to Committee of the Whole House as opposed to the normal committee. That was the motion on which I was told there had been some discussions. That would still leave second reading before the House, and on completion of second reading the Bill would remain here for reference to Committee of the Whole House. I took it there was some agreement on that.


Jean-Robert Gauthier: There is agreement that there will be no delay, that the Bill will proceed through second reading and Committee of the Whole in this House today, and then third reading this day. What I understood was that the Minister told us that she wanted second reading approval now.


Mr. Speaker:: Having therefore sensed that it probably was the way the Chair read the motion which caused the confusion, may I have the consent of the House to withdraw the earlier motion and replace it with the following? I take it this is what is preferred.
Mrs. McDougall, seconded by Mr. Hnatyshyn, moves that Bill C-50, an Act to provide for the continuance of payments under certain guaranteed income averaging certificates issued by the Pioneer Trust Company, be now read the second time and, by unanimous consent, referred to Committee of the Whole.


Simon Leendert de Jong: Mr. Speaker, I am rising to indicate that we in the NDP are concerned that the Bill be passed today and we concur with that agreement. However, we are as well concerned that in Committee of the Whole we have an opportunity of asking some questions of the Minister and her officials, because it is our belief that certain things surrounding this Bill have not been made public. Hopefully we will be able to do all of that today and we will be able to pass this Bill later on today.

May 6, 1985
Pioneer Trust


Mr. Speaker:: Is it the pleasure of the House to adopt the motion?


Some Hon. Members:: Agreed.


Barbara Jean McDougall: Mr. Speaker, I rise before the House today to speak on Bill C-50, the Pioneer Trust Payment Continuation Act. I am delighted that all Hon. Members have agreed to give this Bill speedy passage, and for that I thank them.
The source of the Company's difficulties are by now, I think, quite well known. Pioneer Trust had encountered severe financial problems as a result of a large proportion of its mortgage portfolio being in arrears and also as a result of the need to write down the value of certain real estate investments. Given that capital could not be raised through a preferred share issue as originally proposed, and could not be successfully marketed in the absence of a guarantee from the Province of Saskatchewan, the continued operation of Pioneer Trust no longer seemed viable and it therefore ceased operations.
On learning of management's decision and the proposed action, I immediately directed the federal Superintendent of Insurance to take control of Pioneer's assets so that the interests of the depositors would be best protected. Officers of the federal Department of Insurance went to the company's offices and the Canada Deposit Insurance Corporation was informed of the situation. An application to have the company wound up pursuant to the provisions of the Winding-Up Act was filed in the Court of Queen's Bench of Saskatchewan on February 11 and the court issued a winding-up order on February 15, 1985.
Prior to the granting of the winding-up order the Canada Deposit Insurance Corporation began making arrangements for the repayment of all demand deposits, including savings accounts, chequing accounts, and demand deposit receipts up to the $60,000 insured limit. Cheques in payment of savings, chequing, and other demand deposits dated February 18, 1985, which included interest to February 20, were made available to the depositors at the branch where the account was maintained.
In total, the Canada Deposit Insurance Corporation has made payments of approximately $203 million in respect to the Pioneer Trust deposits which were insured. These payments were made promptly and efficiently and, judging from the comments I received, in a manner that caused as little inconvenience and disruption to insured depositors as was possible in such circumstances.
Unfortunately, Mr. Speaker, Pioneer Trust had approximately $36 million of deposits that were not protected by deposit insurance. About $25 million of the $36 million of uninsured deposits are savings and chequing accounts, guaranteed investment certificates, and insured RRSP accounts that were in excess of the $60,000 insurance limit. The remainder of the uninsured deposits consists of $600,000 of U.S. dollar deposits. Under the CDIC Act only deposits in Canada and in
Canadian currency are protected by the deposit insurance. There was also some $10 million of guaranteed income averaging certificates that were not insured by the Canada Deposit Insurance Corporation because they were for a period in excess of five years.
As Hon. Members will be aware, the insurance limit provided by the Canada Deposit Insurance Corporation for each of its member institutions is $60,000 per depositor. Indeed, each member institution is required to post in a promiment location in each branch a decal of design provided by the corporation which bears the legend "$60,000 maximum insurance per person per member institution".
Since its enactment in 1967 the Canada Deposit Insurance Corporation Act has stipulated that deposit instruments for periods longer than five years are not protected by deposit insurance. Given this fact, the Canada Deposit Insurance Corporation had no authority to make insurance payments in respect of Pioneer's guaranteed income averaging certificates.
Soon after the winding up of Pioneer Trust I became concerned about the position of the approximately 650 holders of the guaranteed income averaging certificates that were for periods in excess of five years and were, therefore, not insured. Many of the certificate holders are elderly Canadians who sold their farms, their homes and their businesses and, encouraged by the provisions of the Income Tax Act as they existed at that time, invested the proceeds in guaranteed income averaging certificates. Many are dependent on the payments promised by the certificates for their daily living expenses. I became most concerned very early during this process and began almost immediately to have discussions with the Province of Saskatchewan and with my officials as to how this matter could be resolved.
[DOT] (U15)
We then began to receive numerous representations from many of the certificate holders that they did not realize their certificates were not protected by deposit insurance. In fact, they claim that some of the markings and wordings of the certificates led them to believe that they were protected. Upon further investigation I determined that many of the certificates prominently display on their faces a facsimile of the seal of the Canada Deposit Insurance Corporation as well as the words "Member of the Canada Deposit Insurance Corporation".
It is important that depositors be in a position, when they are making a deposit, to know whether or not that deposit will be protected by deposit insurance. The by-laws of the Canada Deposit Insurance Corporation Act stipulate that uninsured instruments should be clearly marked on their face: "This is not an insured deposit as defined by the Canada Deposit Insurance Corporation Act". Unfortunately, the Act does not impose any penalties for non-compliance with the by-laws.
The experience with the Pioneer Trust guaranteed income averaging certificates has demonstrated to me that much more must be done to ensure that depositors are aware of the exact limits on deposit insurance coverage provided by the Canada Deposit Insurance Corporation.
May 6, 1985

Admittedly, as a result of changes in the Income Tax Act, guaranteed income averaging certificates are no longer being issued by trust companies. Nevertheless, I think it is most important that steps be taken to ensure that the public is informed about the limits on deposit insurance on all financial instruments.
As Hon. Members will recall, even before the Pioneer Trust problem I appointed a private sector committee composed of three people, chaired by Robert Wyman of Vancouver, Chairman of Pemberton, Houston and Willoughby Inc., to study and provide me with advice on all aspects of the Canada Deposit Insurance Corporation Act and the operations and organization of the corporation. In the context of the events of the past few months, I have specifically asked the committee for its advice on legislation and other measures that may be desirable to ensure that depositors are adequately informed about the deposit insurance coverage. In the meantime I have also very strongly requested of the board of the Canada Deposit Insurance Corporation that it instruct its member institutions as expeditiously as possible to ensure that depositors are informed about deposit coverage and restrictions.
I am determined to proceed with whatever legislative or administrative measures seem desirable to ensure that depositors are better informed in the future about the limits of deposit insurance coverage. In this context I might mention that three weeks ago I released a discussion paper entitled "The Regulation of Canadian Financial Institutions: Proposals for Discussion". One of the important principles on which this paper is based is improved protection for consumers. This Government is committed to this principle and the paper puts forward a number of proposals aimed at improving the regulatory framework.
The short-term administrative actions that I have described and the proposed revisions of the Canada Deposit Insurance Corporation Act and the financial institutions legislation should ensure that depositors are better protected and informed about what is insured and what is not. However, this provides little comfort to holders of the guaranteed income averaging certificates of Pioneer Trust. As I indicated, these persons, many of whom are elderly and dependent on the certificate payments for their daily living expenses, thought that they were protected by deposit insurance. I have been very disturbed about the circumstances of the some 650 certificate holders of guaranteed income averaging certificates who appear to have good reason to believe that they were insured.
It is my concern about the circumstances surrounding these certificate holders that led me to enter into the recently announced arrangement with the Government of Saskatchewan for a plan to compensate uninsured depositors and to propose the legislation that is the subject of discussion today. The objective of the legislation is to authorize me to enter into arrangements to continue the existing payments to holders of uninsured guaranteed income averaging certificates up to a limit of $60,000 that would have been applied had the certificates been insured. In other words, my objective is to provide a federal contribution to the plan to compensate Pioneer Trust
Pioneer Trust
uninsured depositors in an amount necessary to put the certificate holders in a position that they thought they were in, namely, protected up to the $60,000 deposit insurance limit. The Government of Saskatchewan has undertaken to assure the liability to make payments required by the original guaranteed income averaging certificates for amounts in excess of $60,000.
In addition, the Government of Saskatchewan has also undertaken to compensate with accrued interest to the liquidation date depositors with U.S. dollar accounts and all depositors who had amounts in excess of $60,000 on deposit in savings accounts, chequing accounts, guaranteed investment certificates and RRSP funds. The Bill asks for an appropriation of $5 million. My officials are satisfied that this amount, together with the amounts to be contributed by the Government of Saskatchewan and the amounts expected to be recovered from the liquidator, should be sufficient to enable the payments promised in the guaranteed income averaging certificates to be continued. In fact, depending on the distribution that the court-appointed liquidator of Pioneer Trust is able to make, the cost to the federal Government hopefully may be less than $5 million.
If this legislation is passed, the intention is to make arrangements as quickly as possible with another financial institution to start making the payments due and outstanding under the guaranteed income averaging certificates so as to prevent any tax disadvantage to the certificate holders. The plan is to continue the contractual periodic payment rather than pay the holders a lump sum payment.
The Government of Saskatchewan will be making arrangements to have lump sum payments made to U.S. dollar depositors and to depositors who have more than $60,000 on deposit in the form of chequing accounts, savings accounts, GICs and insured RRSPs. All depositors will be required to assign their claims in consideration for the payment.
Given the circumstances I have described, I think it is reasonable that the Government of Canada take action to see that the holders of garanteed income averaging annuity certificates are in the position that they had every reason to believe they were in, namely that they are protected to the extent of the $60,000 limit. As I have mentioned, this is part of a plan that will involve the Government of Saskatchewan compensating all other uninsured depositors, including those with deposits in excess of the insured limit. I am, therefore, recommending passage of this Bill.
Our Progressive Conservative Government is committed to responsible management of the affairs of this nation. The Bill before this House demonstrates in no uncertain terms that we accept that responsibility to ensure that our citizens are protected while at the same time we proceed with reforms to bring our financial institutions regulations in tune with the realities of the 1980s.
It is my intention to have as broad a public discussion on that topic as possible and to ensure that the Canadian people

May 6, 1985
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are kept informed of their rights and benefits, as they should have been in the past.


Miss Aideen Nicholson (Trinity):: Mr. Speaker, this is the kind of Bill which one has no alternative but to approve and to facilitate its passage. But that does not mean one approves of the way matters have been handled up to now. Obviously there were many depositors who did not realize that there was a $60,000 limit. Equally so, there were the guaranteed certificate holders who did not realize there was a five-year limit. I am advised that many of those people were retired farmers who had put the entire proceeds of the sale of their family farms into this trust company. In other words, their entire savings and the result of a lifetime of hard work was there and had disappeared.
Under those circumstances, 1 would agree with the Minister that the taxpayers of this country might reasonably be asked to help compensate those people, as we are being asked to do by this Bill, but, Mr. Speaker, there are many, many questions that need answering. We are being asked to put the Bill through quickly. We are not, therefore, going to be able to have full answers today. I trust that the Minister, who thus far has shown herself to be open, will in fact provide additional information to the House and provide an opportunity, perhaps by the Standing Committee on Finance, Trade and Economic Affairs, to discuss some of the issues which really need to be dealt with.
The Minister referred to the green paper on financial institutions. Of course, that will allow a discussion on many broad issues, as will the paper on the role of the Canada Deposit Insurance Corporation. But, apart from the broad principles there are some very specific matters concerning this trust company on which we should have answers.
There are many questions concerning the role of the Government of Saskatchewan and, in particular, there is the question as to why this particular trust company had its licence renewed by the Government of Canada on December 31, 1984, although it had not succeeded in increasing its liquidity. The federal Government on August 1 allowed the company to continue to operate under restrictions, on the understanding that it would have to increase its liquidity by December 1, 1984. To my knowledge that requirement was not met, yet the licence was issued. This is a serious matter on which we should have some answers to our questions. Did the Government of Saskatchewan provide some kind of backing which satisfied the federal Government? If so, what was the nature of that guarantee, and was it met?
The question of legislation to increase the amounts which can be paid by the Canada Deposit Insurance Corporation keeps coming up. It is increasingly unsatisfactory to operate in this ad hoc fashion. With the Canadian Commercial Bank we had one large bail-out just a couple of months ago. Now comes this one. Again there are many unanswered questions. Why was it not known that these institutions were in such difficulty? Why was there not earlier action?
I was pleased to hear the Minister say that CDIC will in future be requiring better and clearer notification to customers of the limits of the insurance coverage. I hope this will be in place immediately and that we will not have to wait for the full paper on the CDIC.
Since we gave un undertaking to let this Bill pass quickly, 1 will not take up much time of the House. I know there are Hon. Members who wish to speak, but I merely reiterate that although there is no option but to use taxpayers' money to repay some of these depositors who are not rich people but have their life savings tied up, agreeing to rapid passage of the Bill should not be interpreted in any way to mean that we are agreeing with the process or that we are at all satisfied that the matters were dealt with effectively either by the Government of Canada or by the Government of Saskatchewan.


Simon Leendert de Jong: Mr. Speaker, I wish to echo the remarks of the spokesperson for the Liberal Party that while we have agreed to speedy passage of this Bill, that in no way should be construed as meaning that we are happy with all of the events surrounding Pioneer Trust. There are many unanswered questions. I have been requesting the Minister to hold public hearings so that many of these questions could be answered. It is important at some appropriate public forum that a full hearing be held concerning the events surrounding Pioneer Trust.
It is important from the point of view of the public. The public needs to be assured that private and public officials know what they are doing. Surely the events surrounding Pioneer Trust are, if anything, a comedy of errors and mismanagement on the part of the federal Government and its agencies, on behalf of the provincial Government and the Minister of Finance and, I suspect, on behalf of some of the practices of senior management of Pioneer. Therefore, I submit that an appropriate public inquiry is very much in order.
The taxpayers of Canada and the shareholders and depositors of Pioneer Trust need some answers to some important questions. We would like to know about the management of Pioneer. It is important to them as well. The senior management are prominent business people in Saskatchewan. It is important for them to clear their names as they continue to do business in the Province of Saskatchewan.
Questions have to be asked and answered. Was the collapse of Pioneer at all due to bad business decisions? Were there any substantial loans made by Pioneer to business concerns on which the interest charged was below the fair market value? These are important questions that need to be answered for the sake of management and its reputation as well as for the Canadian public. The Minister has proposed extending the powers of trust companies. Let us see how the trust companies have operated in the past. We need answers to these questions.
The Minister talked about a stronger regulatory body. Let us find out what the practices have been in the past and what
May 6, 1985

the specific need is for new regulations and a stronger regulatory body. These questions deserve some clear answers.
We would like to know as well from the time the decision was made by the provincial Government, which 1 understand from the Minister's letter to me dated March 7 where she said "On February 4, the Superintendent was informed by the Government of Saskatchewan that it would likely not be proceeding with the guarantee of the preferred share option", to when Pioneer closed its doors on February 7 if there was any trading in shares or any extra trading in shares. Did some people who had inside information that the provincial Government would not be continuing with its guarantee use that information? We would like to know if there were withdrawals of deposits from Pioneer Trust.
These are legitimate questions that have to be raised and answered in a public forum. At this stage of the game, just to hand over more millions of dollars to clean up the mistakes that have been made without answers to these questions is not right. As representatives of the people with the responsibilities that we have as Members of Parliament, we have to try and get answers to these questions.
The Bill essentially deals with one part of the uninsured group, those people who had put in money under the guaranteed income averaging certificates lasting over five years. My colleague from Yorkton-Melville (Mr. Nystrom) raised this in the House, as did I. We pointed out to the Minister that people had bought the certificates and that on the application forms, and so forth, the CDIC stamp appeared. This insinuated that CDIC was insuring the certificates. Many people became quite shocked when they realized that they were not guaranteed by CDIC. Many of these people are not rich. A fair number are retired business people or farmers who have no pension scheme. They have saved all their lives and have sold their businesses or farms. The amount of cash they received is their sole asset, their sole source of income.
Many of these people had invested in these certificates and were living off the interest. The interest was like their monthly pension cheque. With the collapse of Pioneer, these people soon discovered that their source of monthly income, their security, had been wiped away.
It is obvious that the Superintendent of Insurance and the CDIC had some responsibility in this. After all, they were the policing agents. They had the responsibility of making certain that trust companies like Pioneer Trust did not suggest to their depositors that their investments were covered under insurance when in fact they were not. The federal Government has a responsibility to be a policing agent. It was obvious that it had not fulfilled that role, that it was not aware that Pioneer Trust was issuing income averaging annuities with the CDIC stamp on them, suggesting that they were insured when in fact they were not.
There is no doubt that the federal Government had a responsibility. The Minister's Bill is an acceptance of that responsibility. If these forward averaging annuities did not have the CDIC stamp on them, I doubt that we would be seeing this Bill in front of us today. The Minister asks for $5
Pioneer Trust
million in compensation, yet by her account some $10 million has been invested in these certificates. The Minister said this morning that she hopes that the other $5 million will come from the sale of the assets of Pioneer Trust. We are still not quite certain what people are to do in the meantime. When will the assets of Pioneer be sold? When will we know how much money has been collected under the sale of the assets of Pioneer? What do people do in the meantime?
Since the Bill recognizes the responsibility the federal Government has for this $10 million that has been invested in these guaranteed income averaging certificates, why does the Bill not ask for $10 million? What the federal Government could get back out of the sale of the assets of Pioneer could then be recovered by the Government later on.
The events surrounding Pioneer Trust are worth mentioning here today. I rose during Question Period on February 7 to ask the Minister a pretty general question. At that time, I asked her if it was true that her Department was concerned about Pioneer Trust and other trust companies in western Canada. My question was based on a report that originated in The Globe and Mail earlier this year which suggested that there had been some investigation by the Superintendent of Insurance into trust companies in western Canada. The Minister assured me that there were no problems and that none of the trust companies was experiencing difficulty.
Later on that same afternoon, I received a message from the Minister's office stating that the Minister of Finance of Saskatchewan was about to announce publicly that the Province of Saskatchewan would not continue with the guarantee of Pioneer's public share issue that the Saskatchewan Government had publicly made. Therefore, Pioneer Trust closed its doors later that afternoon. In the months of February, March and April, we heard of more Financial institutions in western Canada going under.
I appreciate why the Minister stated in the House that none of these financial institutions was in trouble. I suspect her reasoning was that she did not want to see a run occur on these financial institutions. However, when one takes that position, one also pays a price. Perhaps the price one pays is that one creates a false sense of security which leads investors and depositors to put money into institutions when in fact those institutions are in great difficulty. The other price one pays is the price of a lack of honesty. The Minister felt that she should not answer a legitimate question put to her by an Hon. Member because the answer might engender a run on some of these financial institutions. The price to be paid must include a lack of full disclosure by a Minister to Members of Parliament.
When looking at the events, one must come to the conclusion that the provincial Government and its Minister of Finance made some grave errors. The Saskatchewan Government publicly committed itself to guaranteeing an equity share issue, a commitment made public by the Premier of the province. We find out later that the Government made that

May 6, 1985
Pioneer Trust
commitment without a full appreciation of Pioneer's financial position. Members of the Government of Saskatchewan made that commitment without looking at the books of Pioneer Trust. I find that amazing. I am dumbfounded by the fact that such a commitment could have been made without first having a look at the books.
I understand that after that commitment was made public Members of the Government of Saskatchewan made requests of the officers of the company to see the books. As I understand it, senior management of Pioneer Trust simply did not comply with that request, or at least it took them quite a while to comply. I understand that some of the senior management people in that company went off on long, extended holidays during that period in December that was so crucial to the continuing success and well-being of their enterprise. Surely that was irresponsible behaviour on the part of senior management members and as well on the part of the Minister of Finance of the Province of Saskatchewan who made that commitment in the first place.
I understand that when no figures were made available from Pioneer management, the Province of Saskatchewan finally decided it had better act on its own and sent some of its people from the Finance Department to look at the books of Pioneer. Again, this is a somewhat odd situation because I am sure that those civil servants from the Saskatchewan Department of Finance were not experts when it comes to looking at the books of a financial institution. Be that as it may, these civil servants came back with the conclusion that Pioneer's situation was even worse than they had first thought it to be. That then became the public reason for the Province of Saskatchewan to decide not to proceed with its guarantee.
Some of us in political life try not to become too cynical. When seeing events occur on a day-to-day basis, it is all too easy for politicians to develop a sense of cynicism. I am afraid that I have great difficulty holding back my sense of cynicism when it comes to this whole sordid mess. I understand that one of the things the provincial Government did was to send out approximately 1,000 letters to professional people, lawyers and business people in the Province of Saskatchewan inquiring what they felt about the bail-out that the Province of Saskatchewan was proposing for Pioneer Trust Company. The response from these professional people was that they were against this bail-out. Therefore, 1 wonder whether the Province of Saskatchewan acted for political reasons when it decided not to proceed with the bail-out or whether it did in fact act in that manner because the books were so bad that the company was a bottomless pit, the bailing out of which was not in the interests of the public of Saskatchewan.
Another comical aspect of this matter-I suppose I could call it comical if it were not so sad-was the provincial Government and its Minister of Finance accusing the federal Government and the Superintendent of Insurance of being the villains in all this. The provincial Minister accused the Superintendent of Insurance of being a little too harsh on Pioneer management by indicating that he should have held back and given Pioneer more time. He indicated that the problem with
trust companies was that they were being over-regulated. In fact, the Saskatchewan Finance Minister was suggesting that the federal Government should relax its regulations. I Find that statement made by the Minister of Finance of Saskatchewan to be incredible. That is not what the events of the last number of months and indeed the last number of years have shown. In fact, the Province of Ontario has experienced a fair number of trust companies going belly up.
1 think it has been shown that the problem has been that there has not been enough regulation and that the CDIC has been woefully understaffed. It does not have the ability to carry out its proper mandated duties to regulate these trust companies. I think it has been shown that the Superintendent of Insurance and the Minister did not know the actual situation faced by Pioneer Trust.
Again, we heard this later through statements that the Minister made both in and out of this House regarding why she did not attempt to get some agency agreement so that Pioneer Trust could be saved. She has stated publicly that the reason they did not try for an agency agreement was that they first realized how bad the situation was when they looked at the books. So the federal Government did not know how bad the situation was and that is because the Superintendent of Insurance and CDIC did not have the ability properly to monitor these trust companies. For the Minister of Finance and the Province of Saskatchewan to suggest that the regulations have been too strict and should be relaxed, I find the ultimate in nonsense and irresponsibility.
We come today, therefore, to the sad situation where the public of Canada is asked to dish out even more money. The Minister admitted in her remarks that some $203 million already has gone into paying off the insured depositors. The federal Government is asking for $5 million more. The Province of Saskatchewan will have to dole out some $10 million more. That is a situation, Mr. Speaker, that I believe somehow could and should have been prevented. One would have thought that the federal Government, which prides itself on its business management, and a provincial Tory Government which prides itself on its business management, should not have allowed the loss of several hundred millions of dollars "oops" through their fingers; "oops, a mistake".
It is amazing to me how these astute businessmen and business-women paraded themselves in front of the electorate saying; "Elect us; we know how to run the shop". You should have heard them in the Province of Saskatchewan in 1982, Mr. Speaker, during that provincial election. They said; "Let's get rid of the New Democrats because they are the sloppiest administrators in this country. They are a spend-all party and have no sense of business and keeping the bucks". They said: "Elect us as experienced businessmen and business-women and we will have a businesslike Government". That was the rhetoric. But, Mr. Speaker, one just has to look at this fiasco to realize that these so-called businessmen and business-women who claim they really know how to run the shop and how to
May 6, 1985

prevent a waste of government money just had two hundred million some odd dollars go "oops" through their fingers.


Mr. Crosbie:: So vote against it. You're against the Bill, are you? Why don't you vote against it?


Simon Leendert de Jong: I hear the Hon. Member across the way bellowing as usual, Mr. Speaker. Does he not realize that under a New Democratic Government in the Province of Saskatchewan, we never had a cent of deficit? But the Tory Government in the Province of Saskatchewan in less than three years has accumulated a deficit of over $1 billion. So much, Mr. Speaker, for those responsible, businesslike people. And when one considers the fiasco of Pioneer Trust, we begin to realize why we have over a $1 billion deficit in the Province of Saskatchewan. The truth is, Mr. Speaker, that these men and women who parade themselves as being astute business people who know how to run the shop, in fact do not know how to run the shop. They gave a $30 million guarantee to a trust company without having looked at its books. That is being irresponsible to the taxpayers of the Province of Saskatchewan.
I have asked the Minister time and time again if she ever got in touch with the Province of Saskatchewan directly about the guarantee which it made to Pioneer Trust. I asked if she ever got assurances from the province directly. I have been met with silence, Mr. Speaker. If one goes through the court documents which were submitted in Saskatchewan under the Winding-up Act, one sees a total silence concerning the communications between the federal Government and the Province of Saskatchewan.
Perhaps during the committee stage we will get a little more information about this, but I suspect, Mr. Speaker, that they did not even talk to each other, that they did not even communicate with each other until it was too late and it was all over. I suspect that the federal Government, when it renewed Pioneer's licence in December, took Pioneer's management's word, the letter it waved from the Treasurer of the Province of Saskatchewan giving the guarantee, and never went back to the Minister himself and asked: "Do you really make this guarantee? Can we have it in writing before we renew Pioneer's licence?" I suspect that never occurred. 1 suspect there was never any of that type of communication.
So we find that not only were the federal Government and the provincial Government not very astute in their business dealings-which has now resulted in a cost to the taxpayers of this country of some $200 million-but they did not even communicate. And that is a party which claims it is going all out on communication and consultation. Perhaps Hon. Members opposite feel "What's another $200 million?"
I do have great difficulty in supporting this Bill.


John Carnell Crosbie: Well, don't. Vote against it.


Simon Leendert de Jong: I will support it because it was not the fault of the depositors that they lost. It is not their fault. But there is something inside of me which says that something is not right
Pioneer Trust
here. This Government has cut some $200 million out of unemployment insurance, restricting the benefits a little more, so that unemployed people will find their benefits from unemployment insurance a little more restricted. These are people who are living on a few hundred dollars a week and are desperately trying to make ends meet. The Government is all gung ho to cut down on these programs, this government fat, so to speak, to put the screws to ordinary working men and women, the retired, the disabled and the poor, but at the same time it can throw out $200 million here and so many hundred million dollars there for another trust company or another firm. And it all gets passed in a day, as smooth and easy as grease passing through a goose. There is something not right. Something inside of me says: "Hey, what's going on here?" What sort of world are we living in when the incomes and well-being of the poor people and the unemployed are always up for grabs, always being debated and always being sniped at? Something is just not right.
I hope that the Committee of the Whole will be able to ask the Minister and her officials some direct questions. I hope we will be able to get some straight and honest answers. I think it is in the interests of the Minister herself, as well as in the interests of the people of Canada, to give some straight answers so that she can attempt to restore the public trust in these institutions and bring about a new regime in this field. We want to feel that she knows what she is doing and is being honest with us. We will judge by the type of answers she will give us this afternoon whether we are to have confidence in her and in the changes she will attempt to bring about. I understand that some time later this year there will be legislative changes dealing with financial institutions. So I hope we will get some straight answers from the Minister and her officials, that the Bill before us will be the last of its type, and that in the future we will see our financial institutions better managed, better policed and more sturdy. Hopefully we will hear some intelligent comments this afternoon from the Minister of Justice (Mr. Crosbie), because I am sure he will have a lot to say.


Mr. Don Boudria (Glengarry-Prescott-Russell):: Mr. Speaker, I am pleased to participate in this debate this morning. I say that recognizing that all of us would rather not ever discuss such issues in that they would never happen; but it seems that ever since I was first elected at the provincial level in 1981 we have not had any more than a couple of weeks go by without having to discuss the failure of a financial institution. I remember that in the 1981 Ontario provincial campaign one of the major issues was the fall of Astra Trust and ReMor, two affiliated financial institutions in Ontario. At that time, the provincial Government told us that never again in this country would we hear about financial institutions collapsing in such a way. Of course, we all know better now. We all know that, unfortunately, financial institutions have had their share of trouble over the past few years. The most famous or infamous of these failures is that involving Crown Trust, Seaway Trust and Greymac Trust in Ontario. We all recall

May 6, 1985
Pioneer Trust
that the owners of those trust companies were participating in some rather incestuous transactions with the depositors' money. Some 10,991 apartments were involved in one group of transactions with the Cadillac-Fairview Company. We remember the effect that had on confidence in our financial institutions.
I had the privilege of being the consumer and corporate affairs critic of the Official Opposition at Queen's Park at the time. Needless to say it kept a number of us busy for quite a long time trying to unravel the mystery which surrounded the way these companies did business. Needless to say, officials are still trying to sort out what happened some two or three years ago. 1 recall that it was during the debate involving those three companies that the Canada Deposit Insurance guarantees were raised from $20,000 to the $60,000 in force today. That was done by the previous federal Liberal Government.
There are still quite a few issues which we as legislators do not have all the answers to. If we go back to some of the previous failures and the effect they had on investors in this country, we can see that every time these institutions failed, they left a very sad legacy behind. I want to recall the failure of Astra and ReMor, and one particular case involving a farmer who lived in the Brampton area of Ontario. This investor had sold his farm and, like many people, invested the money in what he considered a safe investment. You will recall that some financial institutions in the late 1970s were involved in the selling of investment certificates in organizations that were not really insured as they should have been. In some cases people would walk into the trust company to buy an investment certificate and were promptly offered a certificate in a mortgage company which operated out of the same office, in many cases having the same principals, but not having the same kind of insurance. When investors walked into the trust company the person at the counter would say they could have one of these investments and they would get one quarter of 1 per cent more interest. The customer would ask if this was just as good as the other one, and they were always assured there was nothing wrong with these certificates. They were as good as the Rock of Gibraltar. You could invest in these certificates and make more money. Of course, a retired person is always interested in putting the proceeds of the sale of his farm or small business into something that will give him the best benefit. That is only normal. But people were often taken in this way.
The particular case of the farmer I mentioned a while ago involved a large amount of money, perhaps in the order of $500,000, which was deposited in this particular way. After the failure of that trust and mortgage company, the farmer was left with perhaps $100,000. When he went to reinvest whatever he had salvaged from the previous failures, he got supposedly sound financial advice and was told the best thing he could buy is preferred shares in Crown Trust. Crown Trust, of course, was the most stable financial institution, so he was told, and he just could not go wrong with buying preferred shares. It was much better than buying GICs. In any case, the amount he had to invest was still larger than the then loss
guarantee of $20,000. So this individual bought the preferred shares in Crown Trust. When I met this gentleman in my office at Queen's Park he was drawing welfare, his shoes were tied with bailer twine, and I am sure he did not have a cent to his name. He had done nothing wrong. He had not invested his money in weird and unusual schemes. He had every time gone to what was supposed to have been stable financial institutions, and put his money there. But he got burned, not once but twice, and was left with nothing.
I cannot help but feel the same kind of thing for people who not only bought GICs, but those who bought such things as preferred shares in the Pioneer Trust Company and other financial institutions which have had some difficulty lately. That is a large number of people and we sometimes forget about them. Perhaps some people in this House will say that when you buy shares in a company, you are really gambling in a way; you are investing in the stock market and you have to expect that perhaps you will not always be a winner. When you buy preferred shares in a so-called reputable financial institution, the distinction is not always that clear. I am sure there are many people who own preferred shares or other forms of investment in trust companies and other institutions that are insured by the Canada Deposit Insurance Corporation who are of the belief that those are insured deposits.


An Hon. Member:: They shouldn't be.


Don Boudria: I hear an Hon. Member across the way saying that they shouldn't be. There are many things which lead to that kind of confusion. For example, the CDIC logo is right on the door of those institutions. Therefore, why would one not believe that an investment in that particular financial institution, in whatever way, shape, or form, is indeed a guaranteed investment? However, we know that that is not the case. We know that preferred shares are not insured. That distinction is not always easy to make.
In my view, Mr. Speaker, there must be a mechanism through which the consumers would be alerted far more efficiently than they are now. We must tell them what is and what is not insured with regard to investments in those financial institutions. As I said previously, the reputation of the institution is not at stake. As an example, we were led to believe that Crown Trust was one of the most solid institutions in the country and it went down. Actually, it did not quite go down, Mr. Speaker. It was seized by the Province of Ontario, but the net effect was the same. The property of the owners of those shares was expropriated without compensation. The preferred and common shareholders have still not received anything from that company.
A little earlier this year the Auditor General told us that the eventual losses in the case of Crown, Seaway, and Greymac would be in the order of $500 million to the Canada Deposit Insurance Corporation Fund. We also know of people who lost money through investments in preferred shares which were not insured. Many people were deceived by a system which did not
May 6, 1985

properly warn them of the fact that certain things were not guaranteed.
I am of the view that we, as elected people, must send a message that not all investments in CDIC approved institutions are insured. This is not to scare people or erode confidence in our financial institutions, but we must alert the people far better than we do now. When people discover that their investments are not guaranteed, after having seen the logo of CDIC on the door, on certificates, or on leaflets handed out by the financial institution, something has gone wrong. We must have a system which highlights that on those contracts, perhaps with a large stamp on them which says that it is an uninsured deposit or investment from a so-called insured institution. In that way consumers will be aware of what they are getting themselves into.
Unless we do that, Mr. Speaker, we will fail again, as we already have. People will again be in the same situation in which they are now. I do not say this to criticize the present administration. Governments at the federal and provincial levels must instruct and advise consumers better so they do not get taken in as they have in the past.
There is one other issue which we should all remember with regard to the Canada Deposit Insurance Corporation. All people are users of services of banks, trust companies, and other financial institutions that are insured by CDIC. We must remember that funds extended by CDIC for the purpose of reimbursing people are actually tax dollars by another name. If everyone pays for them, they are in fact taxes. We all pay for the failures of those trust companies and other financial institutions. We could convince ourselves that these are not really taxes. They are funds which are paid 25 per cent by depositors and 75 per cent by the banking institutions of which we are all customers. However, that is only a play on words. Since everyone uses those facilities, we are all paying for it in the end. The total loss of those financial institutions is really a loss to the consumers of the country. To call it anything else is to be not entirely honest with ourselves.
Because of the magnitude of these losses, Mr. Speaker, I hope that confidence in financial institutions is not too badly damaged. However, I also hope that consumers of the country will be better informed when they make investments in the financial institutions of our country.


Mr. Orlikow:: Mr. Speaker, I would like to ask the Member a question. We are talking about Pioneer Trust. Surely the Member knows that this is only the latest of about a dozen similar cases with trust companies. Does the Member know that in 1962 a royal commission headed by Professor Porter studied problems surrounding trust companies? He warned that since provincial and federal laws, regulations, and monitoring agencies were inadequate, this kind of thing would happen.
Does the Member not believe that a large part of the responsibility for what has happened in these cases should be put on the former federal Government? First, it should have brought in legislation of the type he has spoken about. It
Pioneer Trust
should have discussed the bringing in of laws and regulations by the provinces, particularly the Province of Ontario. It should have given the Inspector General the mandate to monitor the trust companies and banks. In that way the Inspector General could have discovered in advance that they were following improper procedures and making risky investments rather than finding out after the fact.


Don Boudria: Mr. Speaker, I am pleased to respond to the question of the Hon. Member. First, as the Member knows, we are dealing with areas of mixed jurisdiction. There are trust companies that are incorporated federally and some that are incorporated provincially. We are also dealing with the credit unions and caisses populaires provincially. The Civil Service Co-op is federally incorporated. Therefore, there are a variety of areas of jurisdiction.
I am aware of the Porter Commission report. There was also a provincial report in Ontario in 1980 after the fall of Astra and ReMor. There was also a provincial report started in 1983 in the Province of Ontario that took almost a year to prepare and which made certain recommendations. Frankly, that 1983 provincial report did not address such things as the 10 per cent rule in ownerships of common shares of trust companies such as exist federally for banks. I believe that the absence of such a rule was at least partially the cause of the fall of Crown, Greymac and Seaway. It could almost be said that the owners of some of these companies could use a process by which they could take a depositor's funds and, through a series of flips, convert it into equity in the company. Of course, that benefited the common shareholders in those companies. That is an example of real problems concerning these areas of mixed jurisdiction.
It is as a result of those reports that the federal Government became involved with Canada Deposit Insurance Corporation. That corporation which is almost parallel to the CDIC guarantees deposits in caisses populaires and credit unions. In 1981 and 1982, there were several runs on those institutions in industrial towns in Ontario that had severe problems, especially in the housing market. Many of those institutions faced severe difficulty as a result of taking over the buildings and suffering severe losses.
When I was a member of the Ontario Legislature I raised the question of the Canada Deposit Insurance Corporation giving consumers better warning. I believe it is the responsibility of the Government to ensure that, in the future, consumers are at least given better warning so that they do not experience difficulties such as those that exist today. Obviously this legislation will not prevent financial institutions from collapsing but at least those who have uninsured deposits will be better notified if and when there is a collapse.


Mr. Nickerson:: Mr. Speaker, I have some comments as a result of the Hon. Member's presentation. It is quite clear from the title of the Canada Deposit Insurance Corporation

May 6, 1985
Pioneer Trust
that it guarantees deposits. It has absolutely nothing to do with equity, preferred stock or any other kind of stock.
The Hon. Member for Regina East (Mr. de Jong) advanced a legitimate argument when we were talking about the Commercial Bank some time ago. People might have thought that certain deposits were insured, such as deposits over five years, which were in fact not insured.
In that particular instance, what the Hon. Member for Glengarry-Prescott-Russell (Mr. Boudria) says is probably quite true. The law should be improved to make sure that people realize that certain types of deposits are not insured by CDIC. However, I submit that his observation that certain people confuse deposits with equity and expect that the CDIC guarantees investments made in common stocks is absolute nonsense. I suggest that every Canadian knows the difference between making a deposit within a deposit-taking institution and investing in equity in that institution in which you become a part owner of that institution. If there is any confusion at all it lies entirely within the mind of the Hon. Member for Glengarry-Prescott-Russell.


Don Boudria: Mr. Speaker, if I am confused, I know that I am not the only one because the Hon. Member opposite will know that technically, if one puts money in a trust company one is not putting it on deposit but putting it in trust. Technically, the Hon. Member is wrong because one cannot actually put money on deposit in a trust company at all. It can only be put in trust and that is why it is called a trust company. While that may be a technicality, so was the issue raised by the Hon. Member.
The fact is that financial institutions sell certificates for others, sell certificates for longer than a guaranteed period and for amounts larger than the insurable limit. Consumers are not always aware of these matters and I do not believe that is right. While I am not casting blame on anyone for this, I believe the structure should be improved so that consumers are better informed.
The Hon. Member says that it is his view that consumers do not need to be informed when they buy preferred shares in a trust company. Perhaps that is his view of consumer protection but it is not mine.


Mr. Brisco:: Mr. Speaker, first I support the concerns expressed by the Hon. Member for Winnipeg North (Mr. Orlikow). In that context I will ask the Hon. Member for Glengarry-Prescott-Russell (Mr. Boudria) if his Party would support a substantial review of the role of the Inspector General of Banks with a view to tightening the provisions governing his responsibilities.?
Let me give a case in point. In my constituency the Inspector General of Banks has been virtually powerless to act in a number of cases that have arisen. For example, a man in my riding obtained a loan from a bank under the Small Businesses Loans Act. All correspondence and transactions with the bank and the Government of Canada were pursuant to the Small Businesses Loans Act. This man was in the business of insulating homes with urea formaldehyde foam insulation under the
former Liberal Government's UFFI program. When the federal Goverment suddenly snatched the rug from under him, his business declined over a two or three year period. After the bank had seized several of his assets, it only then discovered that the agreement under the Small Businesses Loans Act which had been adhered to by this man and accepted by the federal Government had not been signed by the bank at the time it was providing the loan. It is now considered null and void. Who is to be held responsible? Is it the bank? It is not the Government of Canada, but I hope to effect a change in that respect. The person responsible is the consumer.
The question I am asking the Hon. Member and others is: Would they support a substantial tightening of the regulations and provisions that will give greater authority to the Inspector General of Banks in carrying out his responsibilities?


Don Boudria: Mr. Speaker, I agree entirely with the Hon. Member on some of the issues he has raised. I am glad to see that he disagrees with the Hon. Member for Western Arctic (Mr. Nickerson) who does not believe that consumer protection should be enhanced in any way but believes in the caveat emptor philosophy.
The Hon. Member is far more progressive than his colleague who is far more conservative. I support the Member for Kootenay West (Mr. Brisco). I have consulted with our critic in this area and it is her view that we should enhance and provide more services to the Inspector General of Banks so that he can better supervise the banks and other financial institutions of this country in order to give better protection to the consumer, as suggested by the Hon. Member, unlike the Member for Western Arctic.
With respect to the UFFI program, I would remind the Hon. Member that the provincial Governments are in charge of the building code and it is up to them to identify whether or not a substance adheres to that code.


Mr. Deputy Speaker:: I recognize the Hon. Member for Kamloops-Shuswap on debate.


Mr. Nelson A. Riis (Kamloops-Shuswap):: I am pleased to have an opportunity to rise today, Mr. Speaker, to say a few words regarding Bill C-50. This Bill is at the second reading stage and it is at that stage that Members are encouraged to reflect and comment on the principle of the Bill.
I would like to begin by suggesting I have some reluctance to join in the enthusiasm with which we are coming at this Bill. We recognize that for a lot of people it is important to pass this Bill quickly and we are doing it in that context. This is not in any sense to say we are condoning the over-all thrust of this Bill in terms of bailing out another financial institution using taxpayers' money either through the Canada Deposit Insurance Corporation or in this Case the Government of Canada and the Government of Saskatchewan.
I am reading now from a document headed "Pioneer Trust Company". It is an application for a guaranteed income
May 6, 1985

averaging certificate. It was filed by Mr. Raymond Schwartz from Saskatchewan in which he makes a $10,000 deposit to be repaid over a six-year period. By the laws of the land, this particular averaging certificate should not be covered under CDIC. That was a point ably stated by my colleague from Regina. I consider that to be a reasonable policy. However, on this same document it is stamped at the top alongside Pioneer Trust Company "The Canada Deposit Insurance Corporation". At the bottom of the page is written "A member of the Canada Deposit Insurance Corporation". In no way while this individual was discussing the return of his investment was he told that it was not covered by the federal deposit insurance scheme.
I might say his investment in this case came from the sale of grain as a western grain producer. He had retired from farming, discontinued his activity, sold off the farm and purchased a number of these guaranteed income averaging certificates to provide him and his family with a monthly income of a few hundred dollars. One of these certificates was for six years, one was for seven years, another for a six-year period and so on. This was done by hundreds of individuals in Saskatchewan at any one of the eleven branches of the Pioneer Trust Company. In every one of those cases, the implication given by the stamp on the document and the comments on the document was that these sums would be protected under the Canada Deposit Insurance Corporation program.
I think it is also important that we recognize that the individuals completing these forms on behalf of Mr. Schwartz failed to mention that this particular averaging certificate was not covered under CDIC. Again, as a gesture of good faith, one would certainly expect the person involved here-it looks like his name is Denis Delwich-would have mentioned to Mr. Schwartz that this certificate was not covered under the federal deposit insurance scheme, but that was not done, Mr. Speaker.
It is for this reason that we are rushing this Bill through today, to allow Mr. Schwartz and the hundreds of others like him to receive fair compensation for what they considered to be an insurable deposit all along.
In the last few days there have been others in similar situations whose plights have been brought to my attention and who will not be covered under this agreement. This is something we want to flag at the moment. I refer in one case to a recent immigrant to Canada from Hong Kong. This was an individual who had left that part of the world to come to the Canadian prairies to invest in a small business. He brought with him and his family $50,000 in U.S. funds. He opened up an account with Pioneer Trust to deposit those American funds to be used later to invest in a small business. He found out that his American funds were not insured and by the Bill we are debating today he will not be compensated in any form whatsoever. At no time was this individual informed that his deposit made in U.S. funds was not to be covered under the Canada Deposit Insurance Corporation program. Let us recognize that we are leaving individuals out in the cold.
Pioneer Trust
What we are doing today is bailing out another trust company. We have bailed out over the last three years a dozen trust companies. Some have been very large. I refer to the famous Greymac and Seaway Trust Company bail-out in Ontario. In 1983 the losses to CDIC were in the $650 million range, reflecting a system that is not working well. It reflects a system where the trust companies are not being adequately monitored by the provincial and federal authorities. The superintendent of Insurance responsible for federal trust company monitoring has only a handful of people on his staff, yet he is asked to keep on top of all these firms spread across Canada. He is finding it impossible to do the job that has to be done. These are very turbulent times in the financial community, reflected, as the Minister said earlier, in the introduction of a paper to find new ways and means of making it even more complicated basically in an effort to provide more competition in the financial community. This means that a more onerous task will be before the Superintendent of Insurance and his associate, the Inspector General of Banks. I will have more to say about that a little later.
Some strange signals are being sent out to the financial community these days. On the one hand we see certain trust companies that get themselves into trouble, and the Government steps in and essentially bails out most of the depositors who are not insured. We see other trust companies that experience the same fate and find themselves in financial difficulty. I refer specifically to the Western Capital Trust Company in British Columbia. It found itself in a position where it was forced to wind up. Again, it had a few million dollars in uninsured deposits. There was no effort by the provincial Government in this case or the federal Government to provide any assistance.
In British Columbia we have a group of people involved in the trust company business wondering why it is that the federal Government worked so hard to bail out Greymac and Seaway and other depositors, why the federal Government is working so hard now to bail out the uninsured depositors of Pioneer Trust, yet the federal Government did virtually nothing to bail out the uninsured depositors of Western Capital Trust. We seem to be treating some trust companies differently from others. We seem to be treating some trust companies in some parts of Canada differently from how they are treated in other parts of Canada.
A lot of people are asking questions such as, is there some sense of bias in the Government's reaction to trust companies in difficulty? It is difficult to respond to that allegation other than to suggest that there appears, on the surface at least, to be some discrimination and bias in how trust companies are being treated in different parts of Canada. What about an individual who sells off his or her farm and sees all kinds of forms that call for a guaranteed income averaging certificate, perhaps with the Pioneer Trust Company? It was supported by the Canada Deposit Insurance Corporation. It was not surprising that individual farmers felt that their funds were being adequately protected, that they were guaranteed; they were in trust and they were with the Canada Deposit Insurance Corpo-

May 6, 1985
Pioneer Trust
ration. They have faith in the financiers who make these arrangements, but the point is that they are not worth the paper they are written on. That is what we are saying about this particular Bill at second reading. We are not protecting depositors across the country. They are not receiving the protection which they have come to expect and for which in fact they are paying through the Canada Deposit Insurance Corporation.
If a signal is being sent today, surely it is that we must bring some equal treatment to the matter of "bail-outs" which have now been expanded into the financial community. We became used to the Government deciding which large corporation it would bail out over the years, whether it was Dome Petroleum or Domtar. That tradition continues today: certain firms are bailed out and certain firms are left to the wolves. However, it has now spilled over into the financial community where some trust companies are bailed out and others are not. We see where a western bank got itself into some difficulty, and once again the taxpayers of Canada were called upon to come up with their hard earned tax dollars to bail out a bank in which imprudent loan decisions had obviously been made.
I want to close my remarks so that we can get this matter into committee. There are penetrating questions which must be asked by Hon. Members on all sides of the House. Suffice it to say that I hope the Minister of Finance (Mr. Wilson) has considered the signal very carefully. In the proposal to merge the Inspector General of Banks with the Superintendent of Insurance, the Government, in its cutting and government reduction mentality, should see fit to ensure that individuals with the responsibility of monitoring our federally chartered financial institutions have the mandate and the ability in terms of staff to do the job which Canadians expect of them.


David Orlikow: Mr. Speaker, I know there is an agreement to finish this Bill at all stages today. It is important for people who have been badly hurt by what happened with this trust company; they deserve the assistance which the provisions of the Bill will give them.
I think we need to put on the record and to make clear that this was not just some accident. It is not an isolated case. In fact, we have experienced a whole series of similar cases going back many years. I should like to list a few of the more recent ones. In 1982, there was the District Trust case in which $44 million was paid out; in 1983, there was Crown Trust, $300 million; in 1983, Greymac Trust, $138 million; in 1983, Seaway Trust, close to $300 million; Seaway Mortgage, $39 million; Greymac Mortgage, $92 million; Fidelity Trust, $184 million; and A MIC Mortgage Investment Corporation, almost $3.5 million. This indicates that we have a very serious problem, a problem which has been known to the provincial and federal Governments at least since 1962 when the Royal Commission on Banking, headed by Professor Porter, looked into the banks and the trust companies. It warned that there were serious deficiencies in the law, in the regulations and the ability of supposed regulatory agencies, both federal and provincial, to deal with the difficulties which might arise before tragedies happen.
In the case of Pioneer Trust, people bought guaranteed investment certificates with the impression that the Canada Deposit Insurance Corporation guaranteed them. The Company was able to use the seal of the Canada Deposit Insurance Corporation on the documents it gave to these people. It is not surprising that they thought they were protected. This situation was brought to the attention of the House by the Hon. Member for Regina East (Mr. de Jong) and by the Hon. Member for Yorkton-Melville (Mr. Nystrom) over a long period of time.
I hope we are today dealing with the first small step in what needs to be done. We will pass legislation now to compensate people who lost as a result of the mismanagement of Pioneer Trust. However, we have to ask ourselves some questions. How many more situations like this will happen? What is wrong with the laws, federal and provincial? What is wrong with the regulations? What is wrong with the officials who are supposed to do the job of monitoring these matters? Are they remiss? Do they not have legal power and authority, or do they just not have the staff?
I understand the Inspector General had a staff of only seven people. How can we blame the Inspector General even if we had the laws, which we do not, even if we had the regulations, which we do not? How could we expect the Inspector General to do the job of protecting the people of Canada with a staff of seven?
One of my Liberal colleagues from Ontario said earlier that part of the problem was divided jurisdiction. Of course that creates problems, but if the Canada Deposit Insurance Corporation is expected, as it has been, to put up money for the losses, it seems to me that it should not be that difficult for the Government of Canada through the Canada Deposit Insurance Corporation to say to the provinces which issue charters to trust companies that it will not guarantee those trust companies. It should not be difficult for the Government of Canada to say that it will not pay the losses unless they pass legislation giving the provincial organizations which monitor these institutions the power and the ability staff-wise to do so. If we are to have repeated failures in Ontario or in any other province, the federal Government and the Canada Deposit Insurance Corporation have the right and responsibility to say to the Province of Ontario, or to whichever province is involved, that it was to get its act in order or the Government will not bail them out.
The losses which CDIC, the federal Government or the provinces pay in fact come from the people of Canada, either in the form of taxation or, if the banks pay the losses through higher premiums to CDIC, they collect the money in turn from their customers. We are talking about losses which the people of Canada have had to meet amounting to at least $2 billion. That ought not to have happened, should not happen in the future, and will not happen if the federal and provincial Governments pass legislation to establish the kind of regulatory agencies which are needed.
May 6, 1985

For the first time in many years we have a bank in trouble, the Canadian Commercial Bank, into which we have now put somewhere in the neighbourhood $500 million to $600 million to save it and its depositors. Not only did the officials in government who should have known not know, but as well the Inspector General and the Governor of the Bank of Canada stated, two months before we were told that the Canadian Commercial Bank needed a tremendous infusion of money or it would go bankrupt that the Canadian Commercial Bank was on a sound financial basis. What is wrong? Surely the Inspector General and the Governor of the Bank of Canada should have known the facts. If they did not know the facts, we are indeed in real trouble.
In the case of Pioneer Trust, it was public knowledge for some considerable time that this trust company was in trouble, but neither the Department of Insurance nor the Government seemed to be able to step in to stop the collapse. In this instance, the federal Government knew well in advance of the difficulties, but left it to the Government of Saskatchewan to effect a bail-out which, of course, never happened. I say that the federal Government should have been more insistent about this trust company. It should have known that this company, like Fidelity Trust, Greymac and Crown Trust, had involved itself in highly speculative loans.
This is a very serious matter. They had involved themselves in loans to major shareholders in the trust companies who were also involved in very highly speculative business operations such as real estate and oil and gas speculation. There was no arm's length look at this. Senior officials such as the Inspector General and the Governor of the Bank of Canada should have warned the Government and the Government should have taken action.
We are going to support this Bill, but I want to say to the Minister that if the record of the federal and provincial Governments is such that we have had a whole series of disasters such as bankruptcies of trust companies and now a bank, and the federal and provincial Governments did not have the legal power or monitoring agencies with the authority and staff to see what was happening, and we now have to put in somewhere in the neighbourhood of $2 billion to rescue those who have been hurt, I am very suspicious of what she is proposing for financial institutions in the future. The disaster could be much greater than what has happened with these trust companies or this small bank and could have much more serious implications for this country. If we cannot manage these, I am very skeptical that we will be able to manage better the much more complicated and greater institutions which she foresees for the future financial world.


Mr. Deputy Speaker:: Is the House ready for the question?


Some Hon. Members:: Question.


Mr. Deputy Speaker:: Mrs. McDougall, seconded by Mr. Hnatyshyn, moves that Bill C-50, an Act to provide for the continuance of payments under certain guaranteed income
averaging certificates issued by the Pioneer Trust Company, be now read a second time and, by unanimous consent, referred to a Committee of the Whole. Is it the pleasure of the House to adopt the motion?


Some Hon. Members:: Agreed.


[Stage Direction]
Motion agreed to, Bill read the second time and, by unanimous consent, the House went into Committee thereon, Mr. Danis in the Chair.
Simon Leendert de Jong: Mr. Chairman, I wonder if we could call it one o'clock? Noting that it is just about lunch-time, I would like to call it one o'clock.


Some Hon. Members:: Agreed.


Marcel Danis: Shall I rise, report progress and request leave to sit later this day?


Some Hon. Members:: Agreed.
Progress reported.


Mr. Deputy Speaker:: It being one o'clock, I do now leave the chair until two o'clock this afternoon.
At 1 p.m. the House took recess.


[Stage Direction]
AFTER RECESS

The House resumed at 2 p.m.


Hon.   Chas. L. Caccia@Davenport: Mr. Speaker, the Progressive Conservative Party was clobbered soundly last Thursday in Ontario for a number of reasons, one of them being its handling of the environment. The cuts made by provincial government Ministers to environment programs upset a lot of people. Their delay in proclaiming the Spills Bill cost them a great deal of support when the PCB spill occurred in Kenora. Their ineptness in controlling the movement of toxic waste material once it enters Ontario must be added to that list. Add also their decision to privatize provincial parks, thus commercializing areas that were never meant to be commercialized. Add also their lack of a sound sense of priorities when they found money for the purchase of Suncor but not for the cleanup of Toronto's beaches, or for improving municipal sewer systems across Ontario.
We on this side of the House urge the so-called Progressive Conservative Government in Ottawa to learn a lesson from what happened to their Ontario cousins, and to stop the

May 6, 1985
nonsense of cutting the environment budget, restore the wildlife service, restore environmental research-oriented programs to their original strength, and give environment issues the attention and priority the Canadian public expects from the Government of Canada.



THUNDER BAY TWINS-ALLAN CUP HOCKEY CHAMPIONS

Mr. Ernie Epp (Thunder Bay-Nipigon):: Mr. Speaker, Thunder Bay sports fans welcomed home another winning team on Saturday evening. The Thunder Bay Twins succeeded last Friday in winning the Allan Cup in Corner Brook, Newfoundland. The victory established the western Canada champs as the best senior hockey team in Canada for the second year.
The Twins came from behind one more time to win this final series. In each of three previous series this spring, the Thunder Bay team lost early games, but won four and three games straight to achieve victory. Again this time they were down three games in a best of seven series, and were forced to win four straight games, far from home, in order to keep the Allan Cup in Thunder Bay. This victory marks the seventh time the Allan Cup has been won by a Lakehead team since 1925. It is also the first time in 51 years that the same team has won two years in succession.
Thunder Bay is proud of the Twins. We recognize the determination required to keep a senior hockey team playing in our smaller cities and towns. We appreciate the determination required to organize leagues and to provide a high level of competition. We applaud the victories that reward this determination.



HELSINKI ACCORDS


Mr. Bill Attewell (Don Valley East):: Mr. Speaker, for those who care about human rights issues around the world, tomorrow is an historic day. Canada will host a conference of experts representing 35 countries which signed the Helsinki Accords. The final planning for this conference, which will last six or seven weeks, starts tomorrow.
The results of this conference will impact strongly on the hearts and minds of many people around the world. Many communities have suffered for years, and some for decades, from human rights violations.
Some members of this conference will address issues against Soviet bloc countries. We should remember, however, that the record of some western countries is not unblemished. Therefore it is essential to establish a proper tone and climate on the eve of this conference. New initiatives of trust, co-operation, and conciliation are essential if we truly desire thoughtful,
sensitive, solutions to human rights violations. I know the Hon. Members of this House recognize the complexities of such a conference. We wish the participants Godspeed in their deliberations.



UNEMPLOYMENT INSURANCE


Dave Nickerson: Mr. Speaker, the original concept behind unemployment insurance might well have made sense, but today it has become a welfare program rather than an insurance program. Increasing numbers of people regard the fund as something to be tapped on a regular basis, rather than something to be drawn upon as a last resort.
Many people expect, as a matter of course, to draw unemployment insurance for several months every year, and those whose pride would formerly have prevented them from making unnecessary claims now wonder out loud why they should not also recover some of their own premiums when so many others are milking the system.
The unemployment insurance account has to be provided with funds from general tax revenues. Administration costs are close to $1 billion per year. Premiums are ever increasing, and are becoming a distinct disincentive to employment. When, in his forthcoming Budget, the Minister of Finance (Mr. Wilson) looks for areas in which government finances can be improved, he might do well to look at the unemployment insurance system.



PROVINCIAL AFFAIRS


Don Boudria: Mr. Speaker, "Fight on my men," said Sir Andrew Barton, "I am somewhat hurt, but I am not slain. I will lie down and bleed a while and then I'll rise and fight again".
Let those who said the Liberals were dead stand up and face the facts. Last Thursday the people of Ontario spoke loud and clear. Ontarians said no to empty rhetoric, to broken promises, and to disappearing Premiers. Not even a personal appearance by "Brian the Wonderful" could save the day.
The results of the popular vote favoured not the Tories, not their propped-up friends the NDP, but favoured the Liberals. Cabinet Ministers went down to defeat to the tune of Another One Bites the Dust. Now across Ontario we hear Tories humming the lovesick blues.
Liberalism is alive and well. Liberalism is growing. The Right Hon. Leader of the Opposition (Mr. Turner) said it some months ago, and he was right. So disgusted were the people that even in Brampton, home of that great ambassador of acid rain, "Dollar-a-Year Bill", the Tories were rejected.
May 6, 1985

What will happen to the Tories and to "Miller Time"? In a quote attributed to her by The Toronto Sun, the wife of the former Prime Minister, Maureen McTeer, perhaps said it best when she said: "You're asking me what Tories do to their leaders when they lose?"



NATIONAL PARKS


Mr. John Parry (Kenora-Rainy River):: Mr. Speaker, government cut-backs have struck again. Economic development, jobs, tourism about which the Government talked so much, and human concerns, have come up again in second spot. Plans for a national historic park on the Rainy River which would preserve the historic Manitou Mounds near Fort Frances have been put on hold by the federal Government. This burial mounds site is believed to be the only existing example in Canada of mounds from the early Laurel culture, and is the northermost mounds complex on the continent.
The mounds complex is being eroded by the Rainy River, and an adjacent ancient village site is deteriorating because of a gravel pit operation. I call upon the Minister of the Environment (Mrs. Blais-Grenier) and the Minister of State for Tourism (Mr. McMillan) to go ahead with Parks Canada's plans to establish a national park there. These mounds have great spiritual and historic significance, and a park will also provide employment, economic development, and tourism benefits to the Rainy River Indian Band and the entire Fort Frances area.



EXTERNAL AFFAIRS


Mr. Alan Redway (York East):: Mr. Speaker, yesterday's news that Turkish Cypriots had overwhelmingly approved a new constitution for the self-proclaimed Turkish Republic of Northern Cyprus is most disturbing, particularly for Canadians of Greek origin, many of whom came here from Cyprus and still have relatives living there.
You will recall, Mr. Speaker, that since Turkey invaded Cyprus in 1974, the island has been divided into a Greek sector and a Turkish sector, separated only by a United Nations peacekeeping force that includes 515 Canadian soldiers. Turkey is the only country that recognizes the northern Cyprus Turkish Republic which declared independence from the Cypriot Government in 1983. Eleven years after the invasion, there are still 20,000 Turkish troops in the Turkish sector, 200,000 refugees in the Greek sector, and thousands of Cypriots missing and unaccounted for.
Hopes for a settlement soared last January when the U.N. Secretary General held negotiations with Cypriot leaders. Unfortunately, those talks failed. Now there is a new Turkish-
Cypriot constitution that makes no mention of the possibility of a unified Cyprus. In the light of this new development I call upon our Government and the United Nations to renew their efforts without further delay to bring about an end to the stalemate, the removal of all foreign troops, and a united Cyprus.



HELSINKI ACCORDS


Mr. Andrew Witer (Parkdale-High Park):: Mr. Speaker, in 1975, 35 nations signed the Final Act of the Conference on Security and Co-operation in Europe, better known as the Helsinki Accords. The guiding principles of the Helsinki Accords were to establish security in Europe and to promote mutual co-operation in the areas of economics, science, technology, the environment, and humanitarian concerns.
Canada is host to the CSCE Conference which begins this week. As representatives from the 35 nations gather in Ottawa it is incumbent upon the Canadian delegation to make every effort and take every opportunity to strengthen international peace. Special emphasis must be put on family reunification and human rights. Multilateral responsibility and accountability are the binding tenet of this international agreement. It is Canada's right and moral duty to help bring about greater mutual trust and understanding and to help secure the delicate balance of peace.



LABOUR RELATIONS


Mr. David Dingwall (Cape Breton-East Richmond):: Mr. Speaker, the Government, which was so quick in appointing its friends and supporters to the board of Air Canada, has been less than speedy in ensuring that the current strike of Air Canada ticket agents is brought to a just and equitable solution. After the federal mediator in the dispute failed to bring the two parties together, one might have expected the Government to step in, particularly the Minister of Transport (Mr. Mazankowski), to see that air travel continues to run smoothly. The Government, however, seems more concerned with providing party hacks with cushy patronage jobs than with standing up for the rights of these employees of Air Canada.
As we all know, Air Canada wants to do away with thousands of full-time jobs. It wants to increase the percentage of its part-time workers to 45 per cent of its total work force. Most of its ticket agents are women, many of whom are single and who rely on their jobs to provide them with a steady income on which to live. In a time when government ostensibly wants to increase the number of women in the workplace, we have the example of Air Canada which, in a very arbitrary and



HOCKEY-SUCCESS OF TEAM CANADA

Mr. Gabriel Desjardins (Temiscamingue):: Mr. Speaker, I am sure all Members of this House will want to join me today in praising the remarkable performance of Team Canada at this year's world hockey championships in Prague.
The members of the Canadian team played as a tight unit with great determination and enthusiasm, all of which helped them to return to this country with the silver medal for which they worked so hard.
Mr. Speaker, to find a parallel, we have to go back as far as 1962 in Colorado Springs. As we all know, conditions are particularly difficult for our Canadian players during these world championships. Coming from various teams in the National Hockey League, the players get together just before the beginning of the first game. After an exhausting and stressful regular season, they have to draw on their last reserves of energy and determination to put on a good show in a world championship series where the competition is becoming increasingly fierce.
Our Canadian players have more than earned our congratulations, and we are particularly proud of the fact that they defeated the Russians and also of the determination with which they played in the final game against Czechoslovakia, when they played valiantly up to the very last minute. Mr. Speaker, the members of Team Canada have every reason to be proud.
Finally, I have some words of special praise for Mario Lemieux, a 19-year-old Quebec hockey player who was selected as one of the players on the second team of stars. To all members of Team Canada, we say: Well done and thank you!



PARLIAMENT HILL


Mr. Mike Cassidy (Ottawa Centre):: Mr. Speaker, for more than two years a group of Canadians have been maintaining a vigil on Parliament Hill to protest Canada's decision to aid the arms race by permitting Cruise missile testing within our borders, and to express their concern about nuclear devastation. Most recently, Mr. Speaker, that group in the Peace Camp has been voicing the concerns of millions of Canadians over President Reagan's star wars project, a $30-billion initiative which will escalate the arms race, jeopardize the anti-ballistic missile treaty, and gravely destabilize the military balance between the United States and the Soviet Union.
The people of the Peace Camp have been exceptionally well received, both by the public and by people who pass near the Centennial Flame on Parliament Hill. They have weathered rain, snow, bitter winter weather and harsh conditions, to carry on their protest. The one thing the Peace Camp could not withstand, Mr. Speaker, was the opposition of an unfeeling Government which cared more about good housekeeping than it cared about peace. I record with regret the decision of members of the Peace Camp that, in view of the Government's intransigence, they are bringing their demonstration to an end. They have been forced out by a set of Draconian regulations which now permit the Government to stop any demonstration on Parliament Hill, with heavy fines as a penalty.
While the Peace Camp has disbanded, the concern for peace which it symbolized lives on in the hearts of almost all Canadians. On behalf of my Party and of this House, Mr. Speaker, I congratulate the people of the Peace Camp for their witness to peace.



PRESENCE IN GALLERY OF MINISTER OF AGRICULTURE OF MEXICO

Mr. Speaker:: Before proceeding to questions, may I signal the presence in our gallery today of Senora Edouardo Pesquier a Olea, the Minister of Agriculture and Hydraulic Resources of the United Mexican States, and his delegation.


Some Hon. Members:: Hear, hear!

May 6, 1985



ORAL QUESTION PERIOD


Hon. Jean Chretien (Saint-Maurice):: Mr. Speaker, I direct my question to the Prime Minister, but I would first like to welcome him back to Canada.


Some Hon. Members:: Hear, hear!


Joseph Jacques Jean Chrétien: If he had done as he had been well advised to do, stick with the agenda and deal with environmental questions and foreign aid, I think I would have been more than pleased to congratulate him on achieving something like that. But in the words of John Fraser, a Globe and Mail correspondent, today:
But the hype and silliness around the concept of the The Great Conciliator, which the Prime Minister unwisely fuels, undermines his real, albeit modest accomplishments.
I would like to tell the Prime Minister, Mr. Speaker, that his success at Bonn is a bit similar to the success of the Miller and Mulroney show in Toronto last week.
Seriously, I would like to say to the Prime Minister that we subscribe to his goal to urge the developed nations to put more money into foreign aid. In the light of what the Prime Minister discussed in Bonn, is it the intention of the Government to reinstate the money which was cut from foreign aid last fall in the economic statement of the Minister of Finance?


Right Hon. Brian Mulroney (Prime Minister):: Mr. Speaker, I thank my friend for his warm welcome. I am reluctant, of course, to take issue with anything written by such a distinguished journalist as Mr. Fraser of The Globe and Mail, but my hon. friend would forgive me in the circumstances, because of his question, for pointing out the entirely different versions which appeared in the front pages of the New York Times, and le Figaro, as well as a direct statement by the President of France, who said that the Prime Minister of Canada, and our delegation, played a very important role at that conference.


Some Hon. Members:: Hear, hear!


Martin Brian Mulroney: All we did was follow in the distinguished role of previous Canadian leaders, including my hon. friend when he was Secretary of State for External Affairs. Canada has consistently played, I think, a helpful and useful role.
With regard to the direct question, we were, I think, helpful in securing the third window with which my hon. friend is acquainted, and which would be very helpful to developing countries. And we have no intention of doing anything other than continuing in that vein of being helpful, financially and otherwise, to developing countries around the world.
Oral Questions


EXTERNAL AID
Joseph Jacques Jean Chrétien: Mr. Speaker, I think the Prime Minister would be well advised to speak to his Minister of Finance and re-establish the goals announced by the Canadian Government, namely, that we were going to spend 0.7 per cent of Canada's GNP on foreign aid. Could the Prime Minister inform the House whether communications with President Reagan have deteriorated to the point that the Prime Minister is no longer notified of decisions that shock Canadians, such as the embargo on trade with Nicaragua, especially since last year in the House, he said it was an insult that President Reagan had not given the Prime Minister advance notice of the invasion of Grenada? Does the Prime Minister not think he should take the same position on this latest decision, where the economic survival of the poor people of Nicaragua is at stake?


Martin Brian Mulroney: Mr. Speaker, I agree with my hon. friend. We have done much more than that. The Hon. Member is referring to a matter of form, but I would prefer to discuss the substance of the issue, which is far more important to the Members of this House. The U.S. Government unilaterally announced its intention to impose an embargo on trade with Nicaragua. Canada has taken a position against such action, and announced that it is neither in the interests of Canada nor consistent with our traditions. I think all Members of this House would agree with this position, which has been taken internationally.


GOVERNMENT STATEMENTS
Joseph Jacques Jean Chrétien: Mr. Speaker, if the Prime Minister is completely in accord with that position which was supported by the three Parties in this House and by the Secretary of State for External Affairs, why did the Prime Minister, in Bonn, take a stand which would humiliate the Secretary of State for External Affairs, saying that he did not agree with him that Canada should have been informed? Who is speaking for Canada when we are talking in this House and abroad about external affairs?


Martin Brian Mulroney: I think I just dealt with what is the important question, the question of substance. The Government of Canada, notwithstanding an initiative announced in Bonn by the President concerning their intention to impose a trade embargo on Nicaragua, indicated we were in disagreement with that move, we would not subscribe to that view, and we would oppose it because it was not in the Canadian national interest. I would hope that all Members of this House would applaud that declaration of independence in foreign policy by the Government of Canada.
4432

May 6, 1985
Oral Questions
With regard to questions that were asked, they were asked in different contexts and there was nothing said, if you care to examine the record-no, I said if you care to examine the record, not The Toronto Star.


Some Hon. Members:: Hear, hear!


Joseph Jacques Jean Chrétien: La Presse. Globe and Mail.


Jean-Robert Gauthier: How about The Toronto Sunl


Martin Brian Mulroney: If you care to examine the record you will find that what the Secretary of State for External Affairs and I said was completely consistent and in the national interests of Canada.


BONN ECONOMIC SUMMIT
Hon. Lloyd Axworthy (Winnipeg-Fort Garry):: Mr. Speaker, my question is directed to the Prime Minister. The failure of the Bonn Summit to arrive at any specific timetable on multilateral trade negotiations, I think he would agree, raises the real potential of a U.S. trade war which would have a great deal of serious impact on Canada. The Prime Minister is quoted again this morning, in a newspaper of record, as saying that he would be assured by President Reagan that Canada would be given special exemptions, otherwise, I think his words were, "we can cut him up into little pieces". I am afraid his friends in the United States have already started the cutting process because a week ago the Secretary of the Treasury, James Baker, said in a briefing to Canada journalists that President Reagan would not ask for special exemptions for Canada.
Can the Prime Minister explain this major contradiction between his statement and that of the U.S. Secretary of the Treasury? Can he tell us what guarantees President Reagan gave him that we would get special exemptions?


Mr. Clark (Yellowhead):: Run for Congress, Lloyd.


Lloyd Axworthy: Can he tell us why he is so sure that Congress will listen to President Reagan and give us those special exemptions, or when can we start cutting him into little pieces?


Martin Brian Mulroney: My hon. friend raises some important questions. I cannot give him a guarantee that Congress will respond to President Reagan on any given subject. He might want to ask him the next time he sees him. I cannot give that guarantee, nor can I explain each and every statement made by an American official. I can tell him that this Government recognizes the importance of our trading relationship with the U.S. Over three million Canadian jobs depend on maintaining the excellence of that relationship.
Why we worked so hard with everyone else to try to avoid a breakdown of a new GATT round is precisely because of the
spectre raised by my hon. friend, where there might not be a U.S. trade war but a breakdown in efforts toward liberalization of commerce and trade which are to the advantage of all the democratic countries.
We take this very seriously and we worked very hard to make that point because of Canada's national interests and our international obligations, and there is no inconsistency at all as far as Canada is concerned.


GERMAN AND JAPANESE ISSUES
Lloyd Axworthy: Mr. Speaker, I have to say to the Prime Minister that there is a major problem if this Government is assuming that President Reagan is going to speak for it, yet his Secretary of the Treasury says he will not. I think it is very important that this be clarified, and I ask him if he intends to clarify what the American position will be.
Furthermore, I would like to raise with him the assurances given in this House by the Deputy Prime Minister last week that the Prime Minister would undertake specific representations on behalf of Canada, in his role as the great negotiator, with the Japanese Prime Minister concerning Japanese automobile import guarantees, and with the West Germans on the problem of overfishing in Canadian waters. Did the Prime Minister speak specifically to the leaders of those two countries, and have we new agreements, or guarantees, or assurances from them that they will act in the Canadian interest and, if that is the case, why are the West Germans still fishing in Canadian waters at this very time that we speak? When is the Prime Minister going to put his great negotiating talents to work for Canada?


Martin Brian Mulroney: Mr. Speaker, there are two questions. Did I speak to the Chancellor of West Germany with regard to overfishing off the coast of Newfoundland? And the answer is yes, I did. I explained the Canadian position and advised him that the Minister of Fisheries would be there shortly hopefully to resolve this in an amicable way, as the Hon. Member would want.
With regard to the question of meeting with the Japanese Prime Minister, on a number of occasions I pointed out to him the growing problem in Canada, in Ontario in particular, and 1 laid out some thoughts for his consideration about further Japanese investment in Ontario specifically, and in Canada generally, in this regard, including joint ventures where we could create jobs and where there might be easier access for Japanese and Canadian products to the American market. 1 invited him to consider, in a very specific way, some major Japanese investments in Canada. To this end, I am going to Calgary next week to speak to 400 community leaders from Japan, to encourage them to maintain their investment plans in Canada.
I can assure the Hon. Member that 1 took a very strong position on behalf of the automobile and parts manufacturers with the Prime Minister of Japan, as I did on behalf of the
May 6, 1985

East Coast fishermen with the Chancellor of the West German Republic.


SPACE WEAPONRY
Hon. Edward Broadbent (Oshawa):: Mr. Speaker, my question is directed to the Prime Minister and also concerns the Summit. Following the Summit, President Mitterand of France announced that his Government, having considered the star wars project of President Reagan, came down on the negative side and decided not to participate. Did the Prime Minister use this occasion to discuss this project with President Reagan, and in the context of those discussions did he use the opportunity to tell President Reagan, one way or another, what the decision of the Government of Canada was?


Charles Joseph Clark: Mr. Speaker, the question of the Strategic Defence Initiative was naturally discussed informally among Heads of Government and Foreign Ministers. I indicated to Mr. Shultz there, as I have done indirectly through statements in this House and across Canada, that the Government of Canada was considering the invitation to participate in research and would announce that decision when our own inquiries and consultations had concluded, on our own timetable, in our own interests.


NATIONAL RESEARCH COUNCIL INQUIRY
John Edward Broadbent: I take it, unless the Prime Minister corrects the Secretary of State for External Affairs, that a decision has not yet been reached.
My supplementary question is then directed to the Minister of Science and Technology. Could he tell the House if the National Research Council of Canada has been instructed in any way to participate in the star wars project?


Hon. Thomas Siddon (Minister of State for Science and Technology):: Mr. Speaker, the answer to that question is no.


REQUEST THAT PRIME MINISTER INVESTIGATE SITUATION
John Edward Broadbent: Well then, my final question is directed to the Prime Minister, and I hope he will deal with it. I recently received a letter from a former senior scientist who worked for the Government of Canada, and he has informed me that just the opposite prevails. I have subsequently confirmed the authorship and contents of the letter with him on the telephone. He has said that the Government has not only made a decision to participate, but has done so in the context of assigning a leading role to the National Research Council. I would like to read a short part of the letter to the Prime Minister and ask him to respond. He writes:
Oral Questions
-the National Research Council has already been informed that Canada will participate in the American program of research for star wars, and that the National Research Council will act as the point of contact in Canada for co-operation between the two countries.


Martin Brian Mulroney: Who signed it?


John Edward Broadbent: I will be happy to provide the information to the Prime Minister. Given the seriousness of what this former distinguished scientist for the Government of Canada has said, will the Prime Minister undertake a personal investigation into this?


Martin Brian Mulroney: Mr. Speaker, I would be happy to undertake an investigation, provided the Member would identify who signed the letter. With deference to the individual, who is no doubt distinguished, the facts are completely at variance with the contents of that letter.


BONN ECONOMIC SUMMIT
Aideen Nicholson: Mr. Speaker, my question is also directed to the Right Hon. Prime Minister. Since high interest rates are the greatest obstacle to sustained non-inflationary growth, can the Prime Minister tell the House why the issue of interest rates was not prominent at the Bonn Summit, and why he did not join with other world leaders in pressing President Reagan to agree to a world monetary conference?


Hon. Michael Wilson (Minister of Finance):: Mr. Speaker, the question of interest rates was a very prominent one. It took up a considerable amount of time during the discussions among Finance Ministers.
With regard to the specific question about a world monetary conference, a report will be presented to Finance Ministers of the Group of Ten countries in Tokyo on June 21, I believe. Subsequent to that, there will be discussion of that report in different countries. It will be discussed further in Seoul at the IMF meetings. I imagine that there will be a decision taken at those meetings on how that matter will be dealt with further in the new year.


CONFERENCE COMMUNIQUE
Aideen Nicholson: Mr. Speaker, the communique issued at the conclusion of the Summit does not mention any joint undertaking to lower interest rates. Obviously any country that moves alone to lower its interest rates will see an exodus of capital in search of a higher return. It is presumably for this reason that in Washington last month the Minister of Finance stressed the importance of lowering real interest rates on a world-wide basis. Why was the consistency of this position not maintained in Bonn?

May 6, 1985
Oral Questions


Michael Holcombe Wilson: Mr. Speaker, the Hon. Member is trying to dig for something that simply was not there. The importance of interest rates, and of lowering them, was widely recognized. For that reason the time we spent discussing interest rates was quite considerable.
As the Hon. Member knows, you cannot simply wave a wand and say that interest rates will drop. However, if industrialized countries collectively introduce those policies which will lead to lower inflation, that in turn will lead to lower interest rates. That is the direction we are embarked upon.


NATIONAL RESEARCH COUNCIL
Michael Morris Cassidy: Mr. Speaker, my question is directed to the Minister of State for Science and Technology. It follows up on the question asked by my Leader with respect to possible instructions to the National Research Council for participation in the American star wars project.
The letter which my Leader referred to indicates that the NRC has been instructed to find $6 million for the purpose of star wars research, despite the very sharp cuts imposed on the NRC last fall. Will the Minister inform the House whether such instructions have been given to the NRC, or has it been told to set aside $6 million, or some other amount, for star wars, in the event that the Government's decision is positive?


Thomas Edward Siddon: Mr. Speaker, the Hon. Member and his Leader are on little more than a fishing trip. In fact the NRC is hard enough pressed to find funds for its existing programs.


Some Hon. Members:: Hear, hear!


Lloyd Axworthy: That's right.


Thomas Edward Siddon: The question is totally hypothetical and based on fiction rather than fact.


Michael Morris Cassidy: Mr. Speaker, the Minister neglected to say that it is the cuts imposed by his Government which have backed the NRC into that kind of a corner.


Some Hon. Members:: Hear, hear!


USE OF COUNCIL FUNDS
Michael Morris Cassidy: My Party and I hope that there will not be a positive decision on Canadian co-operation in the star wars project. However, in that event could the Minister assure the House that there will be no cuts in Canadian Government spending on research and development in existing programs in order to pay for the militarization of our defence efforts in participation in star wars?


Thomas Edward Siddon: Mr. Speaker, the National Research Council is
doing an outstanding job with the funds it has been voted by this Parliament. Any further use of those funds along the line suggested is a completely hypothetical fabrication of the Member's imagination.


THE ADMINISTRATION
Mr. John Nunziata (York South-Weston):: Mr. Speaker, my question is directed to the Secretary of State for External Affairs. It is with regard to his brother, Peter, who has been awarded all outside legal work for the Calgary Olympics.
I know that the Minister will say that this is not patronage, a conflict of interest, or Tory porkbarrelling, and that his brother, Peter, was appointed because he is a good, conscientious lawyer, and has an intimate knowledge of Olympic law.


Some Hon. Members:: Hear, hear!


John V. Nunziata: For the record, I would like to ask the Minister why the existing Olympics lawyer, Rob Rowley, was fired and replaced by his brother, Peter. Did the appointment have anything whatsoever to do with the fact that his brother, Peter, is the federal fund raising director for the Conservative Party in the Province of Alberta?


John Carnell Crosbie: Mr. Speaker, that matter comes within my jurisdiction as Minister of Justice. It has nothing to do with the Secretary of State for External Affairs who, I doubt, knows anything about the matter as he is not concerned with legal matters.


Some Hon. Members:: Hear, hear!


John Edward Broadbent: That's right.


John Carnell Crosbie: I get the impression, Mr. Speaker, that the question is not for the purpose of getting information, but to allow that crowd of hyenas to jeer, laugh, and roar.


Some Hon. Members:: Hear, hear!


John Carnell Crosbie: If the question is for the purpose of obtaining information, I can inform the House that I appoint legal agents for the Department of Justice. In October I appointed Mr. Peter Clark to provide legal advice with respect to documents associated with the funding of the Olympic Winter Games, capital contribution agreements, and other such work.
I knew the hon. gentleman would have some interest in this matter, he having been on the phone poking around Calgary. I had a report from my officials. They report that they are extremely pleased with the legal service provided by Mr. Clark, who will continue to provide them no matter what innuendo or insinuations the hon. gentleman brings forward in his usual rodent-like fashion.
May 6, 1985


REASONS FOR APPOINTMENT
John V. Nunziata: Mr. Speaker, the people of Canada are not laughing because they were hoodwinked by the Conservative Party on the issue of patronage. They said it was wrong then, but now they are saying it is right.
The question is, why brother Peter in this particular case? I would like the secretary of State for External Affairs to stand up and speak for himself.


Ramon John Hnatyshyn: He has no jurisdiction.


Mr. Speaker:: Order!


Some Hon. Members:: Order!


Mr. Speaker:: Order! order! I can stand here until all Members on both sides quieten down. May I remind the Member for the record that questions to the Ministry are put in their capacity as Ministers of their Departments. That is the only question that is appropriate in the House. I simply remind the Member of that.


Charles Joseph Clark: He doesn't care about the rules.


John V. Nunziata: Would the Minister not agree that Peter Clark, the brother of the Secretary of State for External Affairs, was given the government hand-out only because of the brotherly relationship, and only because he is a loyal Tory fund raiser? Would he not agree that this is a blatant and obvious conflict of interest, and Tory patronage?


John Carnell Crosbie: Mr. Speaker, it ill behooves a member of a Party that fired 26 Liberal MPs onto the bench and onto various positions in the Civil Service, including the Livestock Feed Board, which is where they belong, to question the appointment of legal agents. This is not patronage; this is the appointment of a lawyer to carry out certain very involved legal matters, to assist the Department in involved legal matters concerning the Olympics.
It is not patronage. The Secretary of State for External Affairs probably knew nothing about it, and I do not intend to penalize the brother of the Secretary of State for External Affairs just because he is the Secretary of State for External Affairs.


An Hon. Member:: What about Sheila's mother?


John Carnell Crosbie: Is she a lawyer?


Mr. Speaker:: The Hon. Member for New Westminster-Coquitlam.


Ms. Jewett:: Talk about the pot calling the kettle black. The Liberals are just jealous, obviously.


Some Hon. Members:: Oh, oh!
Oral Questions


BONN ECONOMIC SUMMIT
Pauline Jewett: My
question is directed to the Prime Minister. I wish to return to the position he took at the Summit regarding what is really America's disastrous policy vis-a-vis Nicaragua and the trade embargo. The Prime Minister said that he did not even discuss it with the American President because he had covered Canada's position on American policy in Nicaragua at the Quebec City Summit.
In view of the fact that this has taken place since the Summit, why did the Prime Minister not raise, as forcefully as possible with the President, the really disastrous consequences of the trade embargo not only for Canada but for the United States and, above all, Nicaragua? Why did he not press the President on this issue? Will he still do so before the embargo goes into effect tomorrow?


Charles Joseph Clark: Mr. Speaker, I raised the question of the American actions regarding Nicaragua, at length and vigorously, with the U.S. Secretary of State, Mr. Schultz. I indicated to him, as I indicated publicly earlier that, while that might be American policy, it was not Canadian and it was not policy that Canada could accept.
I expressed our concern about the impact that might have upon the Contadora process which we believe is the most likely process to bring stability to that region. I made it quite clear that Canada expected assurances that there would be no effect, upon Canadian exports, of the American sanctions.
Before leaving Bonn I received from the Secretary of State, and my colleague, the Minister of Finance, received from the Secretary of the Treasury, assurances that the American actions will not affect Canadian exports to Nicaragua.
We intend to carry on the policy that we had carried on toward Nicaragua before. We will contribute, and continue to maintain our trade relations. My colleague, the Minister for External Relations, will continue the trip that she has planned to that region in June.


REQUEST THAT PRIME MINISTER INTERVENE
Pauline Jewett: Mr. Speaker, that is all very well, but we want to know why the Prime Minister did not, and will not today, say directly and forecfully to the President of the United States that the policy being followed is disastrous not just from the point of view of our interests but the point of view of the security of this whole hemisphere, by the escalation of East-West conflict in throwing Nicaragua into the arms of the Eastern bloc? Why does he not say it forcefully now, and why did he not do so at the time?


Charles Joseph Clark: Mr. Speaker, the position of Canada was made forcefully at the time. The Prime Minister and the President

May 6, 1985
Oral Questions
knew that I had made that position forcefully, to use the Hon. Member's words, to the Secretary of State.


John Edward Broadbent: Why did the Prime Minister dismiss it then?


Charles Joseph Clark: Now the Leader of the NDP is helping out his foreign affairs critic.
It is the position of this Government that if a position is made clearly and articulately by the Secretary of State for External Affairs, as this one was-


Pauline Jewett: Did you speak to the President?


Charles Joseph Clark: -there is not a need for that position to be repeated by the Prime Minister.
The other point that I want to make is that our interest here-I hope that it is the interest of all Members of the House-is in moving toward a situation not only of some stability in Central America but also a situation where there might be some addressing of the elemental problems of hunger and poverty that are at the base of concerns there. That will be accomplished only if this Government, and other Governments, are prepared to make our positions known clearly and firmly and are also prepared to resist the temptation, after the issue has been made known clearly and firmly, to seek inflammatory forums, in the House of Commons or elsewhere.


Some Hon. Members:: Hear, hear!


THE ADMINISTRATION
Don Boudria: Mr. Speaker, my question is directed to the Minister of Justice. The Conservative patronage family compact has graduated from Ministers' brothers-in-law last week to Ministers' brothers this week. My question concerns the affair between the Secretary of State for External Affairs and his brother, Peter, with respect to that appointment in Alberta.
In view of the fact that the Government's expenditures on this particular contract involve some $300 million and that this particular award is indeed very lucrative for the solicitor in question, and in view of the fact that the political responsibility for this lies with the Right Hon. Secretary of State for External Affairs, will the Minister tell the House if he discussed any potential conflict of interest with Mr. Peter Clark, his colleague, the Right Hon. Secretary of State for External Affairs, and/or the Prime Minister of this country, before this job was awarded?


John Carnell Crosbie: Mr. Speaker, the hon. gentlemen, as usual, are straining at gnats. They are not very successful at straining at gnats.


Mr. Blackburn (Brant):: Gnats or nets?


John Carnell Crosbie: G-n-a-t-s. You would look it up in the dictionary under N, but it's G.


Some Hon. Members:: Oh, oh!


Some Hon. Members:: Hear, hear!


John Carnell Crosbie: Mr. Peter Clark is a practising barrister and solicitor in Calgary. He was appointed by me because I knew that he had the capability, legal knowledge, and the skill to do this work properly.
He was appointed in the same way as other people were appointed to do work in connection with the Olympic business in Calgary heretofore. I might say that the rate of pay that he has accepted is most reasonable, even being a little under what the person was receiving who had done some of that work earlier.
The whole matter is quite above ground, and I think it is in very poor taste for you to try to embarrass the Secretary of State for External Affairs because a member of his family practises his profession, as he is doing-


Mr. Speaker:: Order, please.


Don Boudria: This appointment would qualify for the patronage of the week award-the paw award.


PRIME MINISTER'S STATEMENT
Don Boudria: Mr. Speaker, my supplementary question is directed to the Minister of Justice. In July, 1984, the Prime Minister said:
I think what took place is completely unacceptable in an open democratic society. We are going to reform this instrument in our national life.
Does the Minister believe that that statement attributed to his Leader is still accurate and, if so, what will he do to stop this blatant abuse of power on the part of the Government?


John Carnell Crosbie: Mr. Speaker, there was a wholesale raiding of the ranks of Liberal MPs to put them on the bench, to put them in the Senate, and put them on the Livestock Feed Board, last June. The hon. gentleman could do a lot in connection with the situation that he decries if he would produce the letter that his Leader said that he had been sent by his predecessor. If that letter could be produced he would strike a blow for freedom in the Liberal Party. Why does he not get after his own Leader?
May 6, 1985


THE BUDGET
Mr. Robert Toupin (Terrebonne):: Mr. Speaker, my question is directed to the Minister of Finance.
Mr. Speaker, the people of the riding of Terrebonne have been asking me the same question for several weeks now. They want to know exactly when the next Budget will be brought down. I imagine this situation is not unique to my riding and, Mr. Speaker, 1 think it proves that Canadians are concerned about the economy of their country.
My question to the Minister is as follows: Could he inform the House exactly when the new Budget is to be brought down?


Michael Holcombe Wilson: Mr. Speaker, I am very much aware of the concerns of the constituents of my hon. colleague from Terrebonne, and I am sure that the Budget I shall be bringing down within a few weeks will be a very good Budget for all the economic problems this country is facing. Today, Mr. Speaker, I have the pleasure to announce that the Budget will be brought down on Thursday, May 23, 1985.


FINANCE
Simon Leendert de Jong: Mr. Speaker, my question is addressed to the Minister of Finance. I am sure the Minister is aware of the article in this weekend's Globe and Mail which revealed that some $2.8 billion has now been lost because of the scientific research tax credit scam. The article also reveals that senior officials of National Revenue have been aware that, in spite of the moratorium imposed on the credit last fall, the moratorium has been consistently violated by the tax credit users which overwhelmingly are the largest corporations. Why has the Minister done nothing to terminate this obvious rip-off?


Michael Holcombe Wilson: Mr. Speaker, I think that last fall we moved very quickly to terminate what was the most obvious, to use the Hon. Member's expression, rip-off of this scientific research tax credit approach. I think the Hon. Member must be conscious of the fact that it was not just the large companies that were taking advantage of this. A lot of small companies were receiving a lot of benefit from obtaining access to very sorely needed funds to finance very good projects in research and development.
1 read that particular article myself. I will look at it closely to see whether there is anything in there of which 1 am not
Oral Questions
aware. I thank the Hon. Member for bringing the matter to my attention.


AMOUNT OF REVENUE LOSS
Simon Leendert de Jong: Mr. Speaker, I have a supplementary question for the Minister of Finance. On November 28, I asked the Minister of National Revenue whether he would immediately impose a complete moratorium on the grandfather clause which left the door open to abuse of Canadian taxpayers' money. Since the Government has lost ten times more than was originally estimated in the Lalonde Budget on the R & D tax credits, will the Minister close the loophole and table the full revenue loss from the R & D tax credit immediately?


Michael Holcombe Wilson: Mr. Speaker, I do not want to disagree publicly with the Hon. Member. 1 think he should be very cautious about taking information that is in a Globe and Mail article and translating it immediately into the truth.
I am looking at the matter carefully and if there is any announcement that should be made, I will make it. In the meantime I would caution him that there are a number of small research and development oriented companies that are benefiting from this tax procedure, and it is generating some job creating research and development which is helpful to the country.


YOUNG OFFENDERS ACT
Alan Redway: Mr. Speaker, I have a question for the Solicitor General. The Minister is aware that because of Section 38 of the Young Defenders Act, the Metropolitan Toronto Police Department has been unable to warn the public adequately of the identity of a 17-year old who escaped custody after being charged with armed robbery with a sawed-off shotgun. The Metropolitan Toronto Police Department is most concerned about the danger to the public. Will the Minister agree to meet without delay the chief of police of Metropolitan Toronto, and or with the Canadian Association of Police Chiefs, in order to discuss their concern about the Young Offenders Act?


Hon. Elmer M. MacKay (Solicitor General of Canada):: Mr. Speaker, I have had discussions with some of the chiefs of police before. I would welcome the opportunity to meet with them again to discuss this matter.

May 6, 1985
Oral Questions CONSUMER AFFAIRS


TAX DISCOUNTERS
Hon. William Rompkey (Grand Falls-White Bay-Labrador):: Mr. Speaker, my question is for the Minister of Consumer and Corporate Affairs. In April he met with a consumers' affairs group from Quebec, l'association cooperative d'econo-mie familiale de Quebec. At that time he told them he would move soon to stop the rip-off of low income Canadians by tax discounters. I want to remind the Minister that the majority of those affected are Canadians with incomes under $8,000 a year. The majority are on welfare, or on unemployment insurance. The Minister has done nothing since that time. Why has the Minister done nothing? Why does he not move now to stop the rip-off of millions of dollars of taxpayers' money that should go to these low-income Canadians?
[ Translation]


Hon. Michel Cote (Minister of Consumer and Corporate Affairs):: Mr. Speaker, I am happy to inform the Hon. Member that we have completed our consultation sessions and expect to produce a consultation paper within the next few weeks. Subsequently, we shall be receiving comments and we shall act on those comments.


REQUEST THAT MINISTER TAKE ACTION
Bill Rompkey: Mr. Speaker, the Minister cannot get away with consulting any longer. He has heard from the National Anti-poverty Organization. He has heard from the Consumers Association of Canada. Throughout this year consumers associations from coast to coast have told the Minister exactly what they want. The Minister has done nothing.


John Carnell Crosbie: You were Minister of National Revenue. You did not do a thing.


Bill Rompkey: Will the Minister move now, immediately, to see that these economic and financial draculas are put back in their coffins?
[ Translation]


Michel Côté: Mr. Speaker, I can say that in fact the situation goes back to 1979, and the previous Government did absolutely nothing to deal with it. During the last seven months we have had a large number of consultation sessions. In fact, we have been consulting with all the agencies concerned, and as soon as we are in a position to take action, we shall do so forthwith.


LABOUR RELATIONS
Mr. Rod Murphy (Churchill):: Mr. Speaker, my question is for the Prime Minister. A number of groups this weekend asked the Prime Minister to intervene in a dispute between Air Canada and the union representing the 3,000 striking ticket agents. They have said Air Canada is taking full-time jobs, which are basically women's jobs, and making them into lower paying part-time jobs.
Since the Prime Minister was specifically asked to intervene, will he get up in this House and state whether the Government will instruct Air Canada to keep full-time jobs at a reasonable salary instead of turning them into part-time positions?


Hon. Don Mazankowski (Minister of Transport):: Mr. Speaker, that statement is a distortion of the facts. I think it can best be explained by the letter that went out from Air Canada officials to members of CALEA. Perhaps I can best respond to the Hon. Member's question by quoting from the letter as follows:
Our first priority is to settle the strike and get all of us back to our normal work activities. The Company remains prepared to meet with the Union in that spirit at any time, and to continue to show flexibility in seeking agreement on the improvements we believe are essential to our future as a Company.
I might say I have also had an opportunity to talk to the President of CALEA today. I suggested to him that it would be in the best interests of all to recommence negotiations, because Air Canada is prepared to sit down and negotiate in the spirit of flexibility as outlined in the letter.


HOURLY WAGE RATES
Rodney Edward Murphy: Mr. Speaker, if the Minister wants to read from Air Canada documents, the Air Canada document which I have admits that Air Canada is trying to reduce the starting salary from $7.42 to $6.13 an hour. With the drastic increase it wants in part-time workers, that will have the net effect of having less women working full time, and more working part-time at lower salaries. Is the Government supporting that policy?


Donald Frank Mazankowski: Mr. Speaker, since there is obviously a distortion, or a misunderstanding of the facts, I think the Hon. Member would agree with me that it would be in the best interests of all parties to get back to the bargaining table and settle this thing once and for all.


Some Hon. Members:: Hear, hear!

May 6, 1985


PRIVILEGE
Mr. Speaker:: I am now ready to rule on the question of privilege raised by the Hon. Member for Parkdale-High Park (Mr. Witer) on April 25. Let me emphasize, if I may, that the function of the Speaker is to determine, on the basis of the evidence presented, whether or not the matter raised should be given priority over all other business. It is not for the Speaker to determine the question of privilege itself; that is for the House to decide.
On April 25, the Hon. Member for Parkdale-High Park drew attention to an advertisement which appeared in the April 6 to 13 issue of Vilne Slovo, the Ukrainian newspaper circulated in Toronto. The advertisement was in Ukrainian, and the translation provided to the Chair by the Hon. Member reads as follows:
Christ has risen-With the Holy Holiday of the resurrection of Christ, sincere best wishes to all Ukrainians in Canada and specially to the readers of the "Free Word" from: Jesse P. Flis, (Member of Parliament for Parkdale-High Park).
Mr. Flis is in fact the former Member for Parkdale-High Park. The address given in the advertisement of the constituency office, which is given in English, is the same address of the constituency office Mr. Flis had when he was a Member.
It should go without saying that a Member of Parliament needs to perform his functions effectively and that anything tending to cause confusion as to a Member's identity creates the possibility of an impediment to the fulfilment of that Member's functions. Any action which impedes or tends to impede a Member in the discharge of his duties is a breach of privilege. There are ample citations and precedents to bear this out.
The House will remember that at the time I undertook to delay. I have now delayed for some days. I can tell the House that I have had a verbal conversation with Mr. Flis in which I indicated that I would be able to take matters into consideration only if they were sent to me in writing by those involved. I will say to the House that Mr. Flis indicated verbally to me that he had no personal knowledge of the matter, and I see no reason to distrust or not to believe his verbal view. I indicated that the Speaker could deal only with those matters which are produced for him in an evidentiary way and that therefore I needed more than a verbal conversation. Having received no correspondence from Mr. Flis or from any other source which might shed light on how the advertisement came to appear in Vilne Slovo, I feel in the circumstances that I am restricted and can only act on the evidence with which I have been furnished. In this case that evidence comes from the Hon. Member for Parkdale-High Park.
I have concluded, after long thought and a delay which I hoped would make the matter to some degree resolve itself, that I can wait no longer to rule, that it would be improper to wait any longer. Given the importance of questions of privilege, and given that I have only received the evidence I have
Petitions
received in writing, I believe I have no choice but to find that I must rule on the evidence which has been presented. I must therefore rule that a prime facie case has been established, and I invite the Hon. Member to move a motion.


Andrew Witer: Mr. Speaker, in light of Your Honour's finding, I move, seconded by the Hon. Member for Lanark-Renfrew-Carleton (Mr. Dick):
That all matters relating to the question of privilege raised by the Hon. Member for Parkdale-High Park on Thursday, April 25, 1985, with respect to an advertisement published in Vilne Slovo of the week of April 6 to 13, 1985, be referred to the Standing Committee on Privileges and Elections for investigation and reporting.


Mr. Speaker:: The motion is debatable. There being no debate, I shall put the question. Shall the motion carry?


Some Hon. Members:: Agreed.


[Stage Direction]
Motion agreed to.


Mr. John A. MacDougall (Timiskaming):: Mr. Speaker, on behalf of the chairman, I have the honour to present the first report of the Standing Committee on Indian Affairs and Northern Development, in both official languages.


FISHERIES AND FORESTRY-FOURTH REPORT OF STANDING COMMITTEE
Mr. Lome Greenaway (Cariboo-Chilcotin):: Mr. Speaker, I have the honour to present the fourth report of the Standing Committee on Fisheries and Forestry, in both official languages.
[Editor's Note: For above reports, see today's Votes and Proceedings.]


PETITIONS
Mr. Gerry St. Germain (Mission-Port Moody):: Mr. Speaker, just last month in the riding of Mission-Port Moody we lost one of our great clergymen who was brutally murdered within his own church. I urge the House to reconsider its position on dealing with murders in this country.
It is my duty to present to the House a petition signed by approximately 5,400 Canadians calling for the reinstatement of the death penalty for capital murder. This petition, spon-

May 6, 1985
Order Paper Questions
sored by the merchants of Kamloops, British Columbia, was ment, the total budgetary envelope has been increased from conducted over a two-year period.	$224.5 million to $264 million.
2. (a) (i), (ii), (iii):


QUESTIONS ON THE ORDER PAPER
[Stage Direction]
(Questions answered orally are indicated by an asterisk.)
Mr. Paul Dick (Parliamentary Secretary to President of the Privy Council):: Mr. Speaker, the following questions will be answered today: Nos. 148 and 277.


Mr. Boudria: 1.	What was the cost to the Government for the Christmas trees and decorations located on the grounds of Parliament Hill including the cost of decorators, movers, and any person directly or indirectly involved in the project?
2.	Did the Canadian taxpayer pay for any part of this?
3.	Were there any contracts awarded by public tender and (a) if so, in what amount (b) if not, for what reason?


Ramon John Hnatyshyn: 1, 2
and 3. The three Christmas trees on Parliament Hill were provided and installed under the supervision of the National Capital Commission. The costs of acquisition, transportation, erection, taking down and disposal of the trees was $1,891.27.
No contracts for this work were awarded by public tender for the reason that the amounts involved were too small.
The Christmas trees were decorated by Public Works tradespersons using existing lights from previous years.
CANADA/GASPfi AND LOWER ST. LAWRENCE ECONOMIC DEVELOPMENT PLAN


Mr. Ouellet: 1.	Did the Government implement the Canada/Gaspe and Lower St. Lawrence Economic Development Plan in May, 1983 and, if so, were federal expenditures amounting to $224.5 million approved?
2.	Which projects (a) were completed (b) are under way in the transportation sector and, in each case, what (i) is the location (ii) is a description of the works and studies undertaken (iii) amounts were allocated?


Ramon John Hnatyshyn: I am
informed by the Departments of Regional Industrial Expansion and Transport as follows:
1. Yes. The Canada/Gaspe and Lower St. Lawrence Economic Development Plan was launched in May, 1983, endowed with a $224.5 million budget for the first five years (1983-1988). The plan is a 15 year multi-sectoral economic development plan.
Since the launching of the plan in May, 1983, more than $87 million have been spent or committed by the various departments participating in the plan. On the basis that special budgets intended for the region under the plan should not replace the regular budgets already allocated to each depart-
Amounts allocated
Air Transportation	thousands	$
-Gaspe Airport
-navigational aids: installation of a VOR-DME	427.0
-repaving of runway	1,270.0
-Mont-Joli Airport
-reconstruction of flight service station	379.0
-installation of a hangar fume evacuation station	50.0
-energy conservation measures	40.0
-purchase of restaurant equipment	28.0
-Rimouski Airport
-paving of runway	723.0
-installation of runway identification lights	59.0
-Riviere-du-Loup Airport
-drainage of runway	156.0
Marine Transportation -Public Port of Gros-Cacouna
-construction of access road	1,000.0
-Public Port of Matane
-construction of access road	150.0
-Public Port of Rimouski
-development of storage area	1,000.0
(b) (i), (ii), (iii):
Amounts allocated
Air Transportation	thousands	S
-Gaspe Airport
-installation of safety fence	222.0
-Mont-Joli Airport
-extension and paving of taxiways	1,935.0
-Rimouski Airport
-development of a zoning plan	100.0
-Riviere-du-Loup Airport
-repaving of runway	1,948.0
-Ste-Anne-des-Monts Airport
-paving of runway	900.0
-Pabos-Chandler Airport (project being reviewed)	845.0
-Civil Aviation regional master plan	95.0
Marine Transportation -Public Port of Gros-Cacouna
-extension of wharf by 100 metres	5,616.7
-Public Port of Matane
-enlargement of storage area by 8,000 square metres	5,214.0
-Public Port of Gaspe-Sandy Beach
-reconstruction of wharf and facilities	11,566.0
Rail Passenger Services
-Restoration of 13 stations between Sayabec and Gaspe:
-reconstruction or renovation and interior and exterior improvements	2,148.0
May 6, 1985

-Restoration of 8 stations between Rimouski and Levis:
-reconstruction or renovation and interior and exterior improvements	1,852.0
-Establishment of a multi-purpose station at Mont-Joli by converting the existing station	900.0
[ Translation]


Paul Wyatt Dick: Mr. Speaker, I ask that the remaining questions be allowed to stand.


Mr. Speaker:: The questions enumerated by the Parliamentary Secretary have been answered. Shall the remaining questions stand?


Some Hon. Members:: Agreed.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed consideration in Committee of Bill C-50, an Act to provide for the continuance of payments under certain guaranteed income averaging certificates issued by the Pioneer Trust Company-Mrs. McDougall-Mr. Danis in the chair.
On Clause 2-Agreements and arrangements generally
Simon Leendert de Jong: Mr. Chairman, I have a series of questions and I would appreciate your guidance. This is a very short Bill. Am I correct in assuming that it is at the beginning of the clause that general questions are to be placed, that this is the appropriate time to ask general questions?


Ramon John Hnatyshyn: Don't filibuster the Bill. The people of Saskatchewan want this Bill passed.


Marcel Danis: The Hon. Member for Regina East may proceed with his questions.


Simon Leendert de Jong: Mr. Chairman, we are concerned as well to have this Bill passed in a very expedient manner. 1 understand the Government House Leader is anxious for me not to ask questions because it might embarrass him and some of his friends. First, when did the Minister become aware of the problems that existed with the guaranteed income averaging certificates that Pioneer had issued with the CDIC stamp on them, those that were for over five years?


Barbara Jean McDougall: Mr. Chairman, we became aware of the income averaging annuities very shortly after the company
Pioneer Trust
closed its doors. In our preliminary analysis of their assets and liabilities, this came to our attention. It was fairly early in a sort of ongoing review and analysis of the balance sheet.


Simon Leendert de Jong: Mr. Chairman, when it was raised on March 28 by my colleague, the Hon. Member for Yorkton-Melville, the Minister had already been made aware of the situation. While the Government is anxious to have this legislation passed today, and we appreciate why it would like to have it passed in a speedy manner, the question is why it took three months for the Government to introduce this legislation. The Government has known about it since a week or so after February 7 when Pioneer closed its doors. It has been almost three months now. Why the delay?


Barbara Jean McDougall: Mr. Chairman, we spent a considerable amount of time looking at all the problems associated with the trust company. We wanted some analysis of the liquidators' views on what would be left over after the assets. We were in discussion with the Province of Saskatchewan. Unfortunately, these things cannot always be resolved as fast as one would like.


Simon Leendert de Jong: Mr. Chairman, it is unfortunate that this was not brought up earlier. We have a bit of a gun at our heads situation today because the Government wants to have this legislation put through in one day when it took quite some time getting the legislation in front of us.
Let me move on to the question of licensing. The court documents filed make reference to the date that the licence was renewed, December 31. Was the licence again renewed at the end of January? The licence that was issued December 31, was it a monthly licence? If so, was it renewed at the end of January?


Barbara Jean McDougall: Yes, Mr. Chairman, it was renewed at the end of January. My predecessors had put a deadline of December 31 on the licence on the condition that the company raise additional capital. When the Province of Saskatchewan indicated that it would guarantee a preferred share issue, we extended the licence pending that financing.


Simon Leendert de Jong: Mr. Chairman, at the end of January the provincial Government still had not made up its mind, so it was further renewed at the end of January for another month?


Barbara Jean McDougall: Yes, Mr. Chairman.


Simon Leendert de Jong: Mr. Chairman, I wonder if the Minister could table the Pioneer Trust licence that was issued December 31, the licence that was issued at the end of January and the previous licence? In other words, the licence that existed for Pioneer up to the end of December. Is it possible to make that licence and the conditions of that licence public?


Barbara Jean McDougall: Mr. Chairman, I have no problem tabling it, but I do not have it with me. We can arrange for that.


Simon Leendert de Jong: Mr. Chairman, I would appreciate if that were added to the minutes of the Committee of the Whole. Accord-

May 6, 1985
Pioneer Trust
ing to the court documents, as of May 10, 1984 it became plain that Pioneer already had some difficulties. One would presume that the Government was aware of Pioneer's difficulties before that date. Otherwise they would not have asked for a special report. Was there any attempt at that time or in the months after May 10 through to the fall, November, 1984, to get into an agency agreement? 1 recognize that this occurred at a time when the Minister was not the Minister, when the Liberals were in charge, but did the Liberals attempt to get an agency agreement?


Barbara Jean McDougall: Mr. Chairman, I cannot speak for the Liberals. I know that at that point the Superintendent of Insurance was in touch with the trust company on a continuing basis. There was reason to believe that they would be able to raise some capital. They were looking for capital in the market-place. Whether they looked for an agency agreement or not, I cannot tell the Hon. Member. It was a liquidity problem and they had a need for additional capital.


Simon Leendert de Jong: Mr. Chairman, we note in press clippings, for example, part of the reason why the Saskatchewan Government initially stated it was anxious to support Pioneer Trust. It wanted to be certain there was a financial institution in Saskatchewan essentially owned and controlled by people in Saskatchewan. For example, I have a quote here from the Saskatoon Star-Phoenix of January 11, 1985. It quotes Premier Devine as saying: "Then some big dude comes in and says I'll pick it up. Most chances are he would be from Toronto or eastern Canada and we would lose the head office." Does the Minister feel that Saskatchewan's attempt to secure financing within western Canada or within Saskatchewan prevented other financial institutions in other parts of Canada from working out an agency agreement with Pioneer which could have saved Pioneer Trust?


Barbara Jean McDougall: Mr. Chairman, that is judgment after the fact. I do not have any reason to believe so. Whatever discussions were held between the Province of Saskatchewan and the company I think were appropriately held, from what I can gather. As far as I know, there was no impediment to an agency agreement, but I am not sure if that would have been possible before either. That is why I do not like dealing with that kind of hindsight judgment.


Simon Leendert de Jong: Mr. Chairman, when the Minister took over her responsibilities, there was nothing in the files that would have suggested the previous Minister alerting the provincial Government as to Pioneer's situation or any attempts by other financial interests in other parts of Canada attempting to reach an agency agreement with Pioneer Trust. In other words, the Minister is saying none of this existed in the files when she took over.


Barbara Jean McDougall: Mr. Chairman, I am saying I have no reason to believe that at the ministerial level there were discussions. My understanding is no, but once again I cannot answer for other people. Whether there was informal contact, I have no way of knowing.


Simon Leendert de Jong: Mr. Chairman, concerning agency agreements and the attempts to secure one for Pioneer Trust, I note that in the Minister's letter to me of March 7 she made mention of the Bank of British Columbia as well. Can the Minister tell us what attempts were made and with what financial institutions? I understand that several financial institutions were approached about trying to achieve an agency agreement and that essentially all of them backed off because they felt, after looking at the books, that there was not much chance of achieving such an agreement. Perhaps the Minister could explain to the committee what attempts were made and what other financial interests were approached to have a look at the books of Pioneer.


Barbara Jean McDougall: Mr. Chairman, there were two institutions, the Bank of British Columbia and a group out of Winnipeg known as the Can-West group. I think they had a fairly cursory look at the books and that there was an indication by that time that the company's solvency was in such a position that it would have been very difficult to deal on an agency agreement in an appropriate and non-disruptive way.


Simon Leendert de Jong: Mr. Chairman, I note as well that in her statement of February 7 the Minister said that the federal Government and the Government of Saskatchewan had been co-operating and trying to find a solution to Pioneer Trust's problems. Did the Minister mean there that the Bank of British Columbia and the Winnipeg group were the two groups with which the Minister had some involvement in connection with exploring ways of reaching an agency agreement?


Barbara Jean McDougall: Not precisely, Mr. Chairman. Our role had been to accommodate the financing that was to be guaranteed by the province. Our discussions with the province to that point revolved around its anticipating that it would guarantee a preferred share issue and that that was the proposed solution with which the company seemed happy. That seemed to be an appropriate solution. We were facilitating it through the licence extension until the financing could be completed.


Simon Leendert de Jong: Mr. Chairman, let me get this straight. In other words, because of the commitment made by the Province of Saskatchewan in the letter of November 21, the federal Government essentially felt that there was a solution to Pioneer's problems and no active attempts were made to find an agency agreement because the federal Government thought that the problem was in hand?


Barbara Jean McDougall: Yes, Mr. Chairman. We had had concerns about the company but those concerns dealt with its capital base. We felt that this was an appropriate route to take. We continued to watch the company on a regular basis and were in touch with the provincial Government from time to time as it attempted to pull the financing together.


Simon Leendert de Jong: Mr. Chairman, I would like to deal briefly with the federal-provincial relations. Did the federal Government offer to share information with the Saskatchewan Gov-
May 6, 1985

ernment before the Saskatchewan Government wrote the letter of November 21? In other words, before the provincial Government made its commitment in writing to Pioneer Trust, the commitment contained in the famous letter from the Minister of Finance of Saskatchewan, was the provincial Government in touch with the federal Government at all about Pioneer's situation?


Barbara Jean McDougall: Mr. Chairman, the Superintendent, as a matter of routine, sends monthly reports on certain institutions to provincial Governments. There had been no specific request from the province for additional information and there was no real need to offer any. There was no basis on which we would initiate a contact. The provincial Government dealt directly with Pioneer Trust itself. It was in the same city as Pioneer Trust and dealt directly with the company. There was no reason for the provincial Government to come to us at that stage.


Simon Leendert de Jong: Mr. Chairman, was the federal Government ever in communication with the Province of Saskatchewan after the letter was sent and before Pioneer closed its doors? I am referring here to the period of time between November 22 and February 7. We understood from news statements that the Saskatchewan Minister of Finance had difficulty getting a financial statement from Pioneer. Eventually he had to send people from the Saskatchewan Finance Department to look at Pioneer's books. It seems to me that if the provincial Minister had trouble getting a true financial picture from the management of Pioneer Trust, he should at least have gone to the federal Government to ask if it had any more up-to-date information on Pioneer Trust.


Barbara Jean McDougall: Mr. Chairman, the Superintendent of Insurance confirmed with the province that it had agreed with the company to undertake the guarantee of the preferred shares and our assistance was offered through the Superintendent to officials in Saskatchewan. I had one or two informal conversations with the Saskatchewan Minister of Finance. We certainly offered our best assistance, and at that point he did not seem to require any special assistance.


Simon Leendert de Jong: Mr. Chairman, this brings me to another point which confused me. When Pioneer closed its doors, the Minister used the figure of $24 million as being the amount of money in uninsured deposits. News statements from both Regina and Ottawa seemed to indicate that the amount was indeed some $24 million. In the House today, the Minister mentioned the fact that the figure is closer to $36 million and we have heard as well from other sources that the figure could be as high as $40 million.
From where did the initial figure of $24 million come? Was it the figure supplied to the Minister by her Department? Was it a figure that came from the provincial Government? Where exactly did the figure of $24 million in uninsured deposits originate?


Barbara Jean McDougall: Mr. Chairman, it was the provincial Government together with the company that was making this
Pioneer Trust
assessment. Our examiners were not present at that time. They went in later to do their own assessment. There was no reason for our examiners to be there when the provincial Government and the company were dealing with each other on the basis of the preferred issue. As the Hon. Member knows, the size of deposits is a movable feast; it changes from day to day. This was the best assessment of what they were.


Simon Leendert de Jong: Mr. Chairman, does the Minister know what the amount of uninsured deposits was on December 31 ?


Barbara Jean McDougall: No, Mr. Chairman, I do not. There was no reason to assume that we would be covering uninsured deposits on December 31. The company had had some liquidity problems that looked as though they could turn into solvency problems, but with the new capital those problems would have been solved. On the understanding that there would be new capital, there was no need to start assessing the deposits.


Simon Leendert de Jong: Mr. Chairman, there is no need, then, for a company like Pioneer, when it makes its financial reports to you, to indicate what amount of uninsured deposits and certificates it has? This is not part of the information trust companies are required to report?


Barbara Jean McDougall: Mr. Chairman, in their annual reports to the Canada Deposit Insurance Corporation, that information is listed, but it is not called for on a more regular basis.


Simon Leendert de Jong: Mr. Chairman, in other words, we will not know whether the amount of uninsured deposits decreased or increased from December 31 to February 7 or in the period of time about which I am quite concerned of February 4 to February 7? It seems to me that the Saskatchewan Cabinet made the decision not to proceed with the guarantee on February 4 though Pioneer closed its doors on February 7. Is there any way of finding out whether the amount of uninsured deposits decreased or increased in those crucial three days?


Barbara Jean McDougall: Mr. Chairman, the liquidator will be looking at the activities of the company within its last few days. That is part of his role. He will assess any movement that may have occurred into or out of the trust company that was inappropriate or out of line.


Simon Leendert de Jong: I wonder as well, Mr. Chairman, if the Minister might comment on some of the statements made by the Minister of Finance of Saskatchewan, particularly on the March 5 CBC program Venture. He stated, "The federal Superintendent of Insurance was going to pull the licence out on January 1 unless we gave a guarantee". In other words, the Minister of Finance of Saskatchewan felt that the Superintendent of Insurance had been too harsh with Pioneer and he felt that the federal Government should have eased up a bit. Do you think the federal Superintendent of Insurance was too harsh with Pioneer and perhaps should have given it a few more months to try to find another source of capital?

May 6, 1985
Pioneer Trust


Barbara Jean McDougall: Mr. Chairman, I will try to answer the question. I will not comment on the program because I did not see it. The Superintendent of Insurance has a very stringent role to play in advising the Minister on the state of particular companies. I think that the Superintendent of Insurance acted most appropriately and I have every confidence in the actions he took.


Aideen Nicholson: Mr. Chairman, I also have a number of questions for the Minister. The first question concerns the guaranteed income averaging certificates. A statement has been made in the House that in at least two cases people owned such certificates which had "insured" stamped on them even though we know they are not. I am aware that the CDIC regulations require disclosure but that there is no penalty for failure to disclose. In these two cases, however, it would seem that this is more than a failure to disclose. This is misleading information. I would be interested to know if any steps are being taken about that situation.


Barbara Jean McDougall: Mr. Chairman, along with the evidence sent to me, some of it by Hon. Members of this House, some of the deposit certificate holders, who I think were quite naturally upset as well as confused, sent me copies of their certificates. But none of these certificates said they were insured. The statement on those certificates said, "Member of the Canada Deposit Insurance Corporation", which is a different statement. It is obviously a very subtle distinction in the minds of members of the public.
These problems also went back quite a long way because the CDIC did catch up with this in 1979 and started requiring the company to indicate on the face of the certificate that these were not insured under the meaning of the Act.
Certainly, if I had been the Minister in 1979, I would have jumped on that an awful lot faster in terms of what happens around other institutions. I have directed the CDIC that it is to make very clear to the institutions how much is insured and how much is not. Income averaging annuities are not issued any more, but there are a lot of them out there. There may be others who have run into this problem and I am very disappointed that the former Minister did not deal with this.


Aideen Nicholson: Mr. Chairman, I also have some questions about the renewal of the licence in December, 1984. The sequence of events was that in May, 1984 a report was made to the then Minister. In June, 1984, a hearing was held and limitations were placed on the company's licence. There were a number of limitations which restricted its investments and reduced its borrowings. There was also a requirement that it improve its capital position. The company was given until December 31, 1984, to comply.
We have just heard that the licence was extended on a month-by-month basis after December 31, 1984. I would like to know on what basis this was done and what kind of proof it provided that it had complied with the requirements over the six months. Or was it simply a request for additional time in
which to do it without any guarantee or any evidence that it had made a serious effort?


Barbara Jean McDougall: Mr. Chairman, the only part of the directives which had not been complied with by the company was the need to raise additional capital. The other requirements were complied with and the Superintendent of Insurance monitored the company on a regular basis to ensure that that was happening. When the licence was extended, it was extended on the basis of a forthcoming provincial guarantee of a new preferred stock issue. We had no reason to believe that this would not resolve the need to build the capital base.


Aideen Nicholson: Is it true then, as has been stated in this House, that the Saskatchewan Government undertook to guarantee that process just described by the Minister without looking at the books, and when it did look at the books, it took flight and retreated?


Barbara Jean McDougall: Mr. Chairman, I cannot answer for the action of the Province of Saskatchewan. I think that it believed it was acting in a responsible way. It was in touch with the company. I was not present when its officials talked to the company and I do not know what examinations they undertook. However, I am sure that the Treasurer of Saskatchewan is a responsible man and that he make the undertaking in good faith.


Aideen Nicholson: Mr. Chairman, I am sure the Minister can understand that it is a little difficult to believe that the Province of Saskatchewan gives certain undertakings on the basis of which the federal Government extends a licence and then, within a matter of weeks, backs off and says, "No, we cannot do this". Surely there must have been some explanation or reason for the change?


Barbara Jean McDougall: Mr. Chairman, I think the Treasurer of the Province of Saskatchewan should speak for himself. I think the Province of Saskatchewan discovered that it might cost a little more than expected. It had given a letter of undertaking, but on a detailed examination it determined that it was not in the interests of the people of Saskatchewan to go forward. But I do not want to stand in this Chamber and speak for the Treasurer of Saskatchewan.


Aideen Nicholson: Mr. Chairman, I am not trying to put the Minister on the spot. I am not trying to ask her to speak for the Government of Saskatchewan. But surely if the licence was extended on the basis of commitments made by the Government of Saskatchewan, then when the Government of Saskatchewan decided to withdraw from those commitments, it must have given some explanation. Can the minister make that explanation public? Can she tell Hon. Members of the House what it was, or table the correspondence?


Barbara Jean McDougall: Mr. Chairman, I cannot document or table our conversations at that stage because our discussions were on the telephone. Obviously, time was of the essence at that stage. 1 have indicated my understanding of the Treasurer's reasons at that point. The Province of Saskatchewan
May 6, 1985

thought it was going to cost more money and it felt it was not in the interests of the people of Saskatchewan to proceed.


Aideen Nicholson: It is a strange business, Mr. Chairman. Why would the Conservative Government of Saskatchewan which, we are told, has many very experienced business people in it, feel confident enough of the situation to ask for the licence to be extended one month and then, a month later, come back and say, "No, we cannot afford it"? That is really very puzzling and I hope that those members of Government are giving some explanation to their own constituents even if they are not prepared to give any to us here.
The Saskatchewan Government decided on February 4 not to guarantee, and then Pioneer closed its doors on February 7. Could we know exactly what happened in those three days? Was there much activity? Are you now in a position to tell us, based on the liquidator's report, that there was no insider trading or unusual movement in those three days?


Barbara Jean McDougall: First of all, Mr. Chairman, it was not a definite decision on February 4. The Province of Saskatchewan indicated that it expected it would back out of its guarantee. It proceeded with discussions with the company for a couple of days in an effort to come up with some solution. It was at this stage that Can-West and the Bank of British Columbia were contacted as well. So that, yes, there was a considerable amount of activity in those two or three days, and then the company took the only step it could take when none of that worked out, which was to close the doors.


Nelson Andrew Riis: Mr. Chairman, the Minister need not feel that we are attacking her or anything.


Barbara Jean McDougall: I don't.


Nelson Andrew Riis: Particularly when she had nothing to do with most of this whole process. These questions are posed in that spirit.
The decision was made to compensate some of the deposits beyond the $60,000 limit. Could the Minister explain to us why this particular company was treated differently from Crown Trust and others in Ontario all the depositors of which were in a sense covered? Why was there some difference between the two groups?


Barbara Jean McDougall: Mr. Chairman, the CDIC Act is very clear on what can and cannot be covered and when an agency agreement can be invoked and when it cannot. The legislation states that this can only be undertaken if it results in less cost to the insurance corporation. Obviously I was not around when the decision on Crown and Fidelity was taken at the time. I do not think, however, it has worked out that way, and I think the CDIC, rightly, is very careful in how it looks at agency agreements.
There were two differences here. The first was that we did not have an agency agreement, and the second is that I think the CDIC, in light of those events, probably looks more carefully at agency agreements now than it would have before.
Pioneer Trust


Nelson Andrew Riis: Mr. Chairman, as the Minister said, it did not work out that way in Ontario. Would the CDIC have acted differently had it known there would be additional costs for the people of Canada via this Bill? If this requirement had been known at that time, would the same decision have been made?


Barbara Jean McDougall: 1 am sorry, what requirement?


Nelson Andrew Riis: The Minister said that the CDIC makes the decision in favour of what is least costly at the time. We are now debating the Bill which is going to add another few million dollars to the burden of the taxpayers of Canada, and probably Saskatchewan is doing the same. Was this kind of action taken into consideration when the superintendent made his decision on what is going to be least costly?


Barbara Jean McDougall: I am sorry, I am still not quite clear on what information the Hon. Member is looking for. He means the decision to-


Nelson Andrew Riis: The decision to proceed in that particular way.


Barbara Jean McDougall: Once the company is closed-


Nelson Andrew Riis: Yes.


Barbara Jean McDougall: -the decision either to pay or not to pay?


Nelson Andrew Riis: No. I will attempt to explain it. The Minister pointed out that Greymac Trust was treated differently from Pioneer Trust with regard to what depositors were insured in the end. That decision was based on what would be the least costly solution to the problem. When that decision was made, this Bill we are debating today was not introduced in the House and presumably the costs to the people of Canada had not been contemplated at that time. So when the Minister comments that the decision to move in this direction regarding Pioneer Trust was made because that was going to be the least costly to the corporation-maybe I misunderstood her response.


Barbara Jean McDougall: I was trying to explain that there were two differences. One difference was that there was no agency agreement to consider. You can consider an agency agreement if that is the least costly, but you have to have the agency agreement there in order to consider it. I then went on to explain, in answer to no one's question, that the agency agreements, in light of what has happened in the past, would probably be scrutinized very carefully. As it has turned out, sometimes that has not been the least costly, it has been the more costly by quite a bit. But there was not one to consider in this case.


Nelson Andrew Riis: Mr. Chairman, really what we are debating at the moment is a provision which will enable those uninsured depositors, who were in a sense given the impression they were insured, compensation for the losses of Pioneer Trust. Earlier today I mentioned a situation which is not dissimilar, where a young immigrant from Hong Kong had come to western Canada planning to open up a small business. He had opened a

May 6, 1985
Pioneer Trust
deposit in American funds, which are not covered by this particular Bill before us, yet he was never told that this $50,000 deposit was not covered. So this person who was hoping to open a small business had been caught and has lost the major part of $50,000. Was the Minister aware of these problems when the Bill was introduced?


Barbara Jean McDougall: Yes, Mr. Chairman. The Province of Saskatchewan is covering all those accounts.


Nelson Andrew Riis: So this individual will be covered by the Saskatchewan contribution in this process? Thank you.
When the decision to proceed with this Bill was introduced, I had some discussions with people from what used to be called Western Capital Trust in British Columbia. They asked why we were introducing legislation to use taxpayers money to compensate those people whose deposits were not protected when, at the time Western Capital Trust got in some difficulty in British Columbia, in their estimation there was little encouragement or assistance. There seemed to be, in their minds, at least, a bias in how the Government approached this.


Barbara Jean McDougall: Mr. Chairman, as I understand it, there are no income averaging annuities in Western Capital Trust so there are no people there who lost everything. My concern was for retired farmers who had lost everything. The CDIC has to stand on its own to some extent. I felt this was an anomaly because people who had retired had their life savings, their retirement income, everything at risk. 1 felt that since 1 am responsible for the CDIC, it was my responsibility to do something about that. I am not happy about it and you will see that I am doing it outside the CDIC; I regard this as an obligation of the Government. But it is on that basis that I was prepared to support this.
Obviously you cannot go through, one, two, three, four, and say you lost all your life savings, but you did not because you have an account somewhere else. So we decided that we would protect a group which had been confused and had the most to lose. 1 am unhappy that that is what the institution did and I intend to change it in the future. I think the deposit insurance system should work on its own to the extent it is legislated to work, and that is the objective I am working towards.


Nelson Andrew Riis: To continue from the point the Minister was just making, there appears to be some confusion now in the financial community. The Government appears to be willing to come to the assistance of certain trust companies. I mention Greymac again because it is such a famous example. We are now introducing special legislation to deal with some very special problems associated with Pioneer Trust. Many people in the financial community are asking if it is a pattern. If we are unfortunate enough to have financial institutions fail in the months and years ahead, which is a possibility given the difficult times, which firms are going to get assistance and which are not? There seems to be some confusion in the community. Could the Minister say something which might provide some direction or ease that confusion?


Barbara Jean McDougall: I do not know whether or not I can ease the confusion. I have been in the financial business all my life. I am not enchanted at being in the position of bailing out financial institutions. I believe that we should have had legislation on financial institutions and on the Canada Deposit Insurance Corporation a long time ago. I wrote my first paper in the private sector on financial institutions 10 years ago. That is why I have asked a private sector group to study the CDIC. We will have that report shortly. That is why 1 produced the green paper on financial institutions. I made it a real priority, as did the Government, to provide a better legislative farmework, stronger supervisory and regulatory authority, and a framework in which we have an even hand through the system. I am very anxious to do that.


Jean-Robert Gauthier: Mr. Chairman, I would like to congratulate the Minister on those words of encouragement for consumers and depositors and on her undertaking to better protect people and better inform them as to what is and what is not insured. 1 think that is a step in the right direction.
There is some confusion. Possibly 1 should not be admitting this, but I would like to understand a few points. We were told that about $36 million is outstanding in terms of uninsured deposits. Of that, $24 million will be recovered by the liquidation of the assets of Pioneer Trust. Is that exact?


Barbara Jean McDougall: I do not have the precise figure. One reason that the figures are not terribly precise is that we can estimate that the uninsured deposits amount to $36 million. The return on the liquidation of the assets is something that we can only guess at that will come back to cover whatever deposits are paid off.


Jean-Robert Gauthier: I take it that the liquidator will table a report with the Minister and make public certain documents. Will the Minister make an undertaking today to make these documents public so that we can at least have an idea of what was there?


Barbara Jean McDougall: The liquidator does not report to me, he reports to the court. Therefore, it will be a public document. It is not there yet, but it will be.


Jean-Robert Gauthier: It would still be a public document if it were reported to the Minister.
Let us assume that there is $24 million in assets that can be recovered. There is $1 million left. The Minister is looking for authorization to transfer $5 million to the Consolidated Revenue Fund to cover our part of the deal with the Saskatchewan Government. I understand also that we may not go up to the maximum of $5 million, depending upon how much there is outstanding. Is the Saskatchewan Legislature studying the same legislation simultaneously with us?


Barbara Jean McDougall: It is producing legislation. I do not know whether it is simultaneous or not. I do not believe so. 1 do not know what its timing is.
May 6, 1985


Jean-Robert Gauthier: I guess it will be forthcoming, and it will be for about $10 million. I did not catch in the Minister's speech exactly what Saskatchewan is doing. I know it is paying the U.S. investors and it is paying certain depositors who have losses in excess of $60,000 that would normally be covered by the CDIC. Over and above this, what exactly is Saskatchewan doing?


Barbara Jean McDougall: As I understand it, Saskatchewan is paying off $24 million immediately, whereas the payments to the income averaging annuities will be paid over time. It will be paying off the non-income averaging annuities immediately. We are covering about $10 million of income averaging annuities, and our assessment is that $5 million, conservatively, will cover that. It is covering $25 million and it is expecting that the ultimate cost to Saskatchewan will be $10 million. So it expects about $15 million back.


Mr. McCrossan:: Mr. Chairman, I notice that this Bill covers only income averaging annuities from this one institution. Are there any restrictions on the size of income averaging annuities in this institution, or are you covering all income averaging annuities regardless of size?


Barbara Jean McDougall: Mr. Chairman, the Government of Canada is covering them only to the extent of $60,000, the extent to which they would have been covered had they not been confused about the insurance. The Government of Saskatchewan is covering amounts over and above that. There are not many income averaging annuities that are over and above that. There are only 19 over and above that.


William Paul Joseph McCrossan: Do I gather that it would be the Government's intention to extend similar guaranteed facilities to any other averaging annuities issued by any other institution that is a member of the CDIC?


Barbara Jean McDougall: Mr. Chairman, I am not anticipating that we will have a large number of claims on our hands. Second, the reason grew out of the confusion. When people bought these they were given the impression that they were insured. I have asked the CDIC to ensure that member institutions are far more responsible concerning the information they give out. That should have been done a long time ago but it was not.


William Paul Joseph McCrossan: Mr. Chairman, were there any registered retirement income funds or registered retirement savings which exceeded the $60,000 limit which are not covered?


Barbara Jean McDougall: Yes, there were. All I am covering is that confusion of people who lost everything on the income averaging annuities to the extent that they would have been covered. The RRSPs and all other deposits are being covered by the Province of Saskatchewan. That was its decision.


William Paul Joseph McCrossan: Were there any RRIFs issued by this institution?


Barbara Jean McDougall: Registered Retirement Income Funds? No, not as I understand it.
Pioneer Trust


William Paul Joseph McCrossan: Does this particular failure suggest that the capital and surplus requirements of trust companies, as they are currently in the legislation, are inadequate?


Barbara Jean McDougall: That is a very difficult judgment to make. The ratios become important rather than the size of the capital and the surplus. This company ran into a particular economic problem within its territory which is well known to anyone who is familiar with deposit taking institutions in western Canada.
I think it tells us something about the importance of diversification as well. No one had foreseen the decline in the real estate market to the extent that it happened. Therefore, these were mortgages in arrears as well as people walking away from mortgages on an asset that was declining in value. It would have been nice if people had had the foresight to diversify more, but no one did at that stage. There were other people as well who were speculating that the oil boom would go on forever.


William Paul Joseph McCrossan: You mentioned the term "ratios" rather than "absolute limits". I understand that the European Economic Community has changed the solvency and capital requirements for its financial institutions to reflect ratios rather than absolute limits. Is it your intention to make such a change in Canada?


Barbara Jean McDougall: It is certainly something that we are discussing within the context of the financial institutions.


Simon Leendert de Jong: The Minister has stated that the Bill covers the forward averaging annuity of five years and of $60,000. Does the fact that Pioneer Trust issued these with the stamp of CDIC mean that the federal Government believes it has some responsibility regarding these people?


Barbara Jean McDougall: Mr. Chairman, there is no legal responsibility. There is nothing in the legislation that indicates that anything should have been done.


Simon Leendert de Jong: Is there anything in the regulations that would have required Pioneer Trust to send a copy of the form to the federal Government when it made these issues and offers? Is there nothing in the regulations that would allow the Minister to monitor what they are doing in the market-place to ensure that they comply with the regulations?


Barbara Jean McDougall: There is nothing in the Act that indicates that forms must pass an examination by the regulators. The legislation creaks and groans with age.


Simon Leendert de Jong: Is the CDIC being sued by anyone holding the certificates and, if so, is this why the Government is moving at this time? Are there any court actions being pursued at this time?


Barbara Jean McDougall: Mr. Chairman, no, not that 1 am aware of.

May 6, 1985
Pioneer Trust


Simon Leendert de Jong: This morning the Minister mentioned the total absence of any penalties. Obviously, what Pioneer did in issuing these certificates with the CDIC stamp on them goes against the spirit of what should be done if not against the letter of the law. Is the Minister considering introducing legislation or can she do so by amending the regulations through Order in Council to provide for penalties? If they are not required to submit their forms to the Superintendent of Insurance, surely when they are caught doing something that is illegal or morally wrong there should be some penalties to prevent them from carrying out these practices. Without any penalties, some of these financial institutions could have a field day by selling securities that are not insured but given the appearance of having been insured.


Barbara Jean McDougall: Mr. Chairman, that is one reason why I am anxious to move with changes to the legislation. There are some regulatory changes that can be made, and I have an official studying that now in connection with some other matters. I am anxious to overhaul that piece of legislation because I think it is long overdue.


Simon Leendert de Jong: I have a question with respect to how the $10 million worth of income averaging annuity contracts work. Will these people be paid off over a period of time as though the contract were still in existence and they will be given their monthly payments? Will this continue until the contracts run out, so that some will run out in 1987 and so on?


Barbara Jean McDougall: That is correct. I believe the last one runs out in 1997. Approximately 40 per cent will run out in the next few years. It is a declining curve.


Simon Leendert de Jong: Who will be sending out these cheques? Will it be the federal or the provincial Government?


Barbara Jean McDougall: Mr. Chairman, it will be another financial institution. I thought the liquidator would be appointing the institution, but it will be myself.


Simon Leendert de Jong: The Minister will be sending out the cheques?


Barbara Jean McDougall: The institution will be sending the cheques.


Simon Leendert de Jong: With respect to the liquidator, what will Touche Ross be charging? I had the opportunity to have a discussion with a lawyer whose expertise is in this field. He suggested to me that Touche Ross has what they call in the trade, "a dripping roast". By the time Touche Ross is finished with this, there will be some hefty fees as a result of acting as the liquidating company. Does the Minister know what it will cost?


Barbara Jean McDougall: Mr. Chairman, I do not know that. The liquidator must submit his bills to the court. He is appointed by the court, responsible to the court and will send his bills to the court. It is totally out of my hands.
1 do know, however, that during the past three or four years, next to family law, bankruptcy has been the biggest growth
industry in the country, and it would be nice to bring it to an end.


Simon Leendert de Jong: Could the Minister indicate when the liquidation process will end?


Barbara Jean McDougall: Mr. Chairman, it could take several years. It depends upon the recovery in the market. It is a dreadful process that takes a long time.


Simon Leendert de Jong: As a result of the legislation before us and what the provincial Government will do, will no depositor either have to wait for the money or lose any money? Will the only ones harmed be the shareholders? Will they not know until this process is finished how much will be left for them? Conceivably there will be very little because I imagine there will be nothing left once everyone else has had a chance to recover what is theirs.


Barbara Jean McDougall: Mr. Chairman, I do not want to speculate on the outlook for the real estate market but I doubt that there would be anything left for the shareholders. The depositors, as opposed to the investors, will be looked after immediately. All of them will receive 100 cents on the dollar for their deposits.


An Hon. Member:: Will they hold it against us?


Simon Leendert de Jong: No, these are questions that my constituents have asked me and I am acting on their behalf.
Am I to understand from what the Minister said earlier that Touche Ross may makes recommendations or comments on any wrongdoing, if it is discovered? If there is any wrongdoing on the part of the management, is it the responsibility of the liquidator to discover this, document it and provide it as part of its report? Or is this the responsibility of the Superintendent of Insurance?


Barbara Jean McDougall: According to the Winding-up Act, it is the responsibility of the liquidator to examine what had happened immediately prior to the insolvency and attempt to assess the possibility of any irregularities. The liquidator reports to the court.
I might also point out that according to the Bill that Saskatchewan will be producing, there will be no payment against the deposits of shareholders or insiders until everyone is paid off. For example, if the president or senior vice-president of a company had a deposit, they are not included in this package.


Simon Leendert de Jong: What would happen if a retired farmer who had sold his farm had deposited that money in Pioneer and also happened to own some shares? Would he be excluded then?


Barbara Jean McDougall: Mr. Chairman, there is no one like that. It is on legal advice that we provide the public support. To our knowledge, there are no insider problems. The liquidator will
May 6, 1985

be examining that and in the meantime there is no payment to those depositors.


Simon Leendert de Jong: Mr. Chairman, concerning the management of Pioneer, having understood what the Minister has just said on the role of the liquidator and looking at the events immediately preceding the demise of the trust company, I would imagine that the Superintendent of Insurance has been concerned with the company over a period of time and has had a look at its books. Has the Superintendent of Insurance come across any situation where the trust company provided loans that were under-secured or unsecured in the two years prior to February 7, 1985? If so, in what amount, and on what specific dates were those loans negotiated and approved? In terms of identifying those involved to the extent possible, were any of those under-secured loans or unsecured loans approved to individuals whose influence could be construed as having a direct or indirect bearing on the ability of Pioneer Trust to elicit the 27 million share issue guaranteed from the Government of Saskatchewan or in any other way be perceived to influence the future stability of Pioneer Trust?


Barbara Jean McDougall: Mr. Chairman, that was a very lengthy question. I will try to answer it as best I can.
In the Trust Companies Act where it defines investment there is a basket clause whereby you can lend money on an unsecured basis. Seven per cent of total assets can fall into the basket clause, which means that within that there can be unsecured loans.
To our knowledge there are none that went to any insiders who would have been in a position to influence the company. Was that the Hon. Member's whole question?


Simon Leendert de Jong: Mr. Chairman, not just insiders within the company. Rumour back home had it that there was a provincial Cabinet Minister who received an unsecured loan. I would like to lay that rumour to rest if that is the case. If the Minister has the information, I would like her to comment on it.


Barbara Jean McDougall: Mr. Chairman, I do not have that information. That is the first time I have heard it and I would be very surprised if it were the case. That is exactly the kind of thing the liquidator will be looking for. We do not go through the individual names of all lenders on a regular basis. The liquidator will be looking for that kind of thing.
An awful lot of rumours get started under this sort of circumstance, and I do not want to add to that in this Chamber. To my knowledge it is not true.


Simon Leendert de Jong: Mr. Chairman, I hope the Minister understands as well my position. I am representing the people from the area where this situation happened. They look to me as the person from whom to get some answers.
Would the liquidator then be obliged, if that is the case and he comes across some wrongdoing, to make it public?
Pioneer Trust


Barbara Jean McDougall: Mr. Chairman, the liquidator would have to report to the court if there is-I think I am putting this correctly-an unfair advantage to one creditor over another. The liquidator would be obliged to report that to the court. The liquidator would then take action to try to recover some of the funds if that were the case. I do hope the Hon. Member will tell his constituents that in our examination, or our part of this, we have not seen any evidence of that kind of irregularity.
I know how these stories start. I know exactly what happens. I am sympathetic to his constituents and to the Hon. Member and I hope he will carry that message back.


Simon Leendert de Jong: In the same vein, Mr. Chairman, in the two-year period prior to February 7, 1985, did Pioneer Trust engage in the provision of loans at unusually low rates of interest below the then current market rate?


Barbara Jean McDougall: Not as a matter of routine, Mr. Chairman. If you went through the list you may or may not find one or two, but there is no evidence that Pioneer Trust was lending money at other than market rates.


Simon Leendert de Jong: If the liquidator does come across this, Mr. Chairman, would the liquidator also make this part of his report?
Between the dates of November 22, 1984, and February 7, 1985, how many demand deposits or other funds held by Pioneer Trust in whatever manner, namely guaranteed income certificates, RRSPs, annuities, etc., which exceeded the $60,000 insured limit or were uninsurable, for example, American fund deposits were either withdrawn or in some way removed from Pioneer which thus ensured that in spite of the closure of the company those funds were fully protected? In other words, has the Minister come across, in the period from November 22 to the demise of Pioneer, any movement of funds that were uninsured into more insured types of deposits, or has the Minister come across funds that were withdrawn? Has the Minister come across any unusual activity like this?


Barbara Jean McDougall: Mr. Chairman, we do not have any way of knowing that. It is that three-month period the liquidator is looking at for any irregularity. He would be the one to report on that.


Simon Leendert de Jong: Mr. Chairman, in terms of the trading of shares, has there been any extraordinary trading or selling of shares in the period from November 21 to February 7, particularly from February 4, when the provincial Government seemed to have started its internal discussions about backing off from the guarantee, to the time when the matter became public on February 7? In those three days, was there any unusual trading of shares?


Barbara Jean McDougall: The trust company itself is not a public company, Mr. Chairman. It is owned by a management company. As far as I know, there was no irregular trading in the stock.


Simon Leendert de Jong: Of Pioneer management, Mr. Chairman?

May 6, 1985
Pioneer Trust


Barbara Jean McDougall: Of Pioneer management, Mr. Chairman.


Simon Leendert de Jong: Mr. Chairman, my colleague from Prince Albert brought up the question of constituents who have had a mortgage with Pioneer Trust. Their mortgage is up for renewal. Touche Ross, in essence, refuses to deal with them saying that the company acquiring their mortgages will be the one to look after them. People are finding that if they want to change mortgage companies, they are stuck with the changeover fee. They themselves are not given the opportunity of buying out their mortgages. Touche Ross is saying, "We are selling all these as a block", even though a mortgage at 12 per cent or 13 per cent interest might be sold to an institution for only 10 per cent interest. The mortgage holder himself or herself is not able to benefit from that.
Has the Minister addressed herself to this problem, and particularly to the problem of those people who will have added legal costs in transferring their mortgages because of Pioneer's default?


Barbara Jean McDougall: Unhappily, 1 do not have any jurisdiction to do that. Under the Winding-up Act the liquidator has two obligations. One is to liquidate the assets as quickly as possible and the other is to maximize the return to creditors whom he represents. It would be helpful if he could accommodate all the individuals, but he is charged with those two responsibilities. In terms of my jurisdiction, I just do not have any.


Aideen Nicholson: Mr. Chariman, I have just a couple of questions for the Minister concerning sanctions and enforcement. For instance, I am advised that in looking at Pioneer Trust, the Department of Insurance noted several statutory infractions including an investment in a Denver real estate project which was outside the Department's guidelines. If this is true, what action will follow from it?


Barbara Jean McDougall: Mr. Chairman, there is not much action which can follow from it. The company was instructed to bring that down to within the limit. Unfortunately, there was not a big market for Denver real estate, and that was a problem. It was a business decision and it was over the limit. It was instructed to bring it down to within the limit that it could. Unfortunately, I think the bidding on Denver real estate was not terribly active.


Aideen Nicholson: The Minister is saying that nothing can be done, presumably because the company has now been wound up. If the company had been staying in business, presumably it could not just ignore guidelines or instructions from the Department of Insurance without some kind of sanction.


Barbara Jean McDougall: Unfortunately, there are not a lot of teeth in the regulatory function. The Superintendent can reduce the borrowing ratio of a company or can instruct it to reduce interest rates offered on deposits. There is not a whole lot else. Of course, most companies comply. In a situation where the value of the assets has declined considerably, there is not much
market for them. This makes it very difficult on the other side to get into line quickly. I personally think there should be a lot more teeth. There should be more the regulators can do, and we have indicated in our discussion paper that we would like to see a lot more power, a more pro-active role and a lot more prevention. At the moment there is very little we can do until there is actually insolvency, and we are working very hard to try to revise that.


Aideen Nicholson: I also have a question about the parent company, Canadian Pioneer Management Limited. Were the two companies so structured that the parent company has been able to walk away completely from any responsibility for what happened with the trust company?


Barbara Jean McDougall: It has lost its total investment in Pioneer Trust. All its equity is just gone, so it has certainly created some difficulties for those shareholders.


Aideen Nicholson: Finally, I would like to return to the role of the Saskatchewan Government in this matter. As far as I can see-and the Minister has neither confirmed nor denied it because obviously she may not have the full information yet-the Treasurer of Saskatchewan issued a letter of comfort to this trust company indicating that the Saskatchewan Government would guarantee a preferred share issue up to $10 million. He did this, simply taking the word of Pioneer and perhaps being motivated in part by suspicion of eastern bureaucrats and eastern banks and an appeal to western pride. Those seem to be very poor motives for dealing with public moneys. However, apparently the Treasurer came to his senses later, when he was sufficiently incensed to find that he could not get clear information and that the president and someone else had gone on holidays to places like Hawaii and wherever. He sent in a team and found that the need was not for $10 million but for something between $20 million and $30 million, at which point he withdrew his offer of guarantee.
If the circumstances are as they have been reported and as 1 have said, all this sounds amateurish and irresponsible. It kept the licence there for a period of almost two months when it might otherwise not have been there. It dragged on a situation with no particular benefit to anyone. If indeed the Saskatchewan Government has acted as irresponsibly as the reports say, it seems to me that it becomes a matter for very serious discussion between the Canadian Ministers and their Saskatchewan counterparts, and that there should be a very clear understanding that any costs involved as a result of this kind of behaviour on the part of the Saskatchewan Government should be picked up by them.


Barbara Jean McDougall: I cannot undertake to explain the motivation or the examination which the Treasurer of Saskatchewan might have undertaken before the fact. I know Mr. Andrew and I regard him as a man of honour and a man of responsibility. I think some questions will be asked in his own legislature as to how this came about.
As a former western Canadian, I understand that people do care very much about their indigenous institutions. I worked
May 6, 1985

for one myself in Edmonton. There is a real caring. It is always a matter of judgment on something like this, whether it is a liquidity problem or a solvency problem. A liquidity problem can become a solvency problem, but there is a point at which an infusion of capital can be helpful.
I support the Treasurer of Saskatchewan in his approach. He felt a responsibility to attempt to fund the institution, and following recognition that that could not happen, he has taken a responsible position. He indicated that he will ensure that the depositors are not hurt. I think he recognizes that withdrawing that guarantee would have hurt the company so much that he was prepared to support the depositors.


Jean-Robert Gauthier: Mr. Chairman, I have just a very short question. The Minister indicated an appointment of a committee from the private sector, if I read her speech correctly, to study and provide advice on all aspects of the Canada Deposit Insurance Corporation Act and the operations and organization of the corporation. She said that the report would be tabled soon. Could the Minister be more specific? In the last two weeks we have had two bail-outs. This is not a bail-out, but we have had the CCB bailed out for a hefty sum of money. Now we have this thing. Could we have some commitment from the Minister that "soon" means before the Budget?


Barbara Jean McDougall: Mr. Chairman, I do not think I will be able to do this before the Budget. The report is in its final stages. Publication and translation will take a little time, so I really cannot promise a date. Coming from the private sector, I am always far too optimistic about dates.


Jean-Robert Gauthier: Mr. Chairman, I want to ask a final question for my own satisfaction. I understand that within six weeks all depositors will be pretty well satisfied. There is an exception, I understand. Management or the directors of Pioneer will have to wait until final liquidation. The officers of the company, and their relatives will have to wait until final liquidation. Is that correct?


Barbara Jean McDougall: It is the officers and directors, yes.


Jean-Robert Gauthier: Officers and directors?


Barbara Jean McDougall: I believe so.


Jean-Robert Gauthier: And relatives?


Barbara Jean McDougall: I apologize. I cannot remember the wording. I will take it as notice and let the Hon. Member know.


Simon Leendert de Jong: Mr. Chairman, I have a few more questions. The first concerns the Saskatchewan Minister of Finance. I know we have been hard on him, although I agree with the Minister. I have known Mr. Andrew for some time. He certainly is one of the brightest, if not the brightest on the government benches in the Province of Saskatchewan. I feel sorry that this happened in his backyard. We would have called for his resignation except that we were just too afraid of
Pioneer Trust
who would have replaced him. The whole episode in Saskatchewan, particularly the Premier's role in all of this, is still to be documented. It certainly makes the alleged statement by the former Premier of Ontario in describing the Devine Government of Saskatchewan as "amateur night on the Prairies" ring true. That apparently was Billy Davis' statement.
I want to go back to some of the statements the Minister made. She does not expect Touche Ross to finish its work for up to two years. Does that mean it would take two years for any report to be submitted to the court if Touche Ross did find any wrongdoing in terms of management practices, that we would not hear about it until two years down the road when the company finishes its work?


Barbara Jean McDougall: I am sorry, Mr. Chairman, I was having a certain amount of trouble with the vocabulary. Some of the money will go back to the creditors in the meantime. It does not mean that, if it goes on for two years, the funds will be held until the end. It starts moving back to the creditors on a pro rata basis as soon as some assets are sold. That is an ongoing process. I am aware that they are making regular reports to the court. I am just not sure what "regular" means, I'm sorry.


Simon Leendert de Jong: Mr. Chairman, when they look at the management practices, if they find any wrongdoing by either the directors or senior management, they would also include senior staff. If there is any hint of wrongdoing, using inside knowledge for example, that would also extend to senior staff in the company, I take it.


Barbara Jean McDougall: Mr. Chairman, I am not aware of the specific definition, but he would be looking to see if anybody had benefited. How he would define that, I cannot be more specific, I am sorry, but he would be looking to see if anybody benefited.


Simon Leendert de Jong: Mr. Chairman, I have a question concerning the Bank of British Columbia and its involvement. As 1 understand the events, on February 4 the provincial Government, although it did not make its final decision started to have second thoughts and the Bank of British Columbia was one of the companies that was contacted. Mr. Kaiser, the President, flew to Regina to do some negotiation. Am I correct in understanding that that was the sequence of events that took place?


Barbara Jean McDougall: Mr. Chairman, with the Bank of British Columbia it was somewhat unusual because Mr. Kaiser had been looking for an opportunity to expand into the other three western provinces. He was in Regina at the time. He was there and became involved because he was available on the spot and was asked to look at it right away. I think he looked at it as an opportunity to fill his own corporate needs at that point.


Simon Leendert de Jong: Mr. Chairman, I have a final question. When the Superintendent of Insurance looked at Pioneer's expenses and assets over the last number of years, did he come across any item that dealt with paying Decima Company money to

May 6, 1985
Pioneer Trust
conduct a poll in Saskatchewan? Again, street rumour back home in Regina has it that Mr. Klein, out of Pioneer Trust or Pioneer management paid for the Tory poll in Saskatchewan conducted by Decima Polling Company.


Barbara Jean McDougall: Mr. Chairman, I understand that Mr. Klein's politics change depending which way the wind is blowing, as I am given to understand. There is certainly no evidence of any benefit to the Conservative Party in Saskatchewan or Canada, Ontario, British Columbia, Alberta or any other place, as far as I am aware.


Marcel Danis: Shall Clause 2 carry?


Some Hon. Members:: Carried.


[Stage Direction]
Clause agreed to.
Clauses 3 and 4 agreed to.
Clause 1 agreed to.
Title agreed to.
Bill reported.
Mr. Deputy Speaker:: When shall the Bill be read the third time? By leave, now?


Some Hon. Members:: Agreed.


Barbara Jean McDougall: that Bill C-50, an Act to provide for the continuance of payments under certain guaranteed income averaging certificates issued by the Pioneer Trust Company, be read the third time and passed.


Mr. Deputy Speaker:: Is it the pleasure of the House to adopt the motion?


Some Hon. Members:: Agreed.


Simon Leendert de Jong: Mr. Speaker, I wish to say a few remarks at third reading.


Mr. Deputy Speaker:: With the unanimous consent of the House, we will revert to debate on third reading.


Some Hon. Members:: Agreed.


Simon Leendert de Jong: Mr. Speaker, I thought it was the practice at third reading that we make a few short comments about the Bill in a general sense.
As I said during second reading, we are not opposed to the Bill. The necessity of this Bill is unfortunate. It is something that we believe could perhaps have been prevented had the former Government taken more decisive action in the earlier part of 1984 when it became apparent that Pioneer was experiencing difficulties, when it became logical to assume that other financial institutions in western Candaa had so much of their capital assets based in western Canada, particularly in Alberta, which in turn was based at that time on a boom economy of rising oil prices. When that boom started to turn into a bust, it would have been reasonable to assume that some of those financial institutions would experience difficulty.
I felt that the former Government in particular should have played a leadership role at the beginning of 1984. Perhaps this could have been prevented if it had.
As well, one must look at the role played by the Premier of the Province of Saskatchewan and the Saskatchewan Minister of Finance. From press reports, we can only come to the conclusion that they might have prevented an agency agreement from occurring because of local pride. We understand that local pride. I feel that Saskatchewan does need a Saskatchewan-based financial institution. All too often in the past we have found that financial institutions that were not based in Saskatchewan did not understand our local financial needs and conditions and were not sympathetic to the needs of the people of Saskatchewan.
I think that economically, politically and socially it is desirable to have institutions like Pioneer Trust that are of a local nature and meet local needs. However, the actions of the provincial Government in providing a guarantee without taking a look at the books is indeed an indictment against it and shows that it handled this situation in an amateur way.
Because of that, the people of Saskatchewan will be paying millions of dollars at a time when public funds are scarce and when different sectors of the economy and society are asked to tighten their belts. This is occurring when the province is experiencing cut-backs to education, health and social programs, cultural programs and road construction. The Province of Saskatchewan can ill-afford to lose S10 million.
Another aspect of this situation that needs to be raised in this public forum is the need for extensive reform. The Minister has given us her commitment, and I believe her commitment, to bring forth a package of reform. Certainly if the Superintendent of Insurance and CDIC are to carry out their important functions, they need resources. If they are not able to carry out their important function, and if trust companies and particularly local trust companies like Pioneer go under, it will shake our faith in our financial institutions. If that occurs, the country and its economy are in trouble. Therefore, the Superintendent of Insurance and CDIC have an important role to play. It would indeed seem strange that our trust in the financial institutions of this country should be shaken because some extra dozen investigators were not hired by the CDIC or the Superintendent of Insurance.
There is a need for a major shake-up within the Department of the Superintendent of Insurance and the CDIC. I think they need accountants who are aggressive and knowledgeable of the ways of the street, so to speak. The last thing they need is young, green graduates fresh from accounting school. They need old, seasoned accountants who know the ins and outs of the financial market and the financial world so that they can play the role of tough cops in order to keep financial institutions honest and in order to restore the confidence of the Canadian people in our financial institutions. As such, we will be supporting this motion and we do hope that the Minister
May 6, 1985

will, in the very near future, bring forth appropriate legislation.



PROCEEDINGS ON ADJOURNMENT MOTION


Mr. Deputy Speaker:: It is my duty, pursuant to Standing Order 45, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the Hon. Member for Davenport (Mr. Caccia)-Environmental Affairs-Toxic chemical control program, (b) Request that program be renewed; the Hon. Member for Western Arctic (Mr. Nickerson)-National Defence-North warning system-Participation of northern contractors; and the Hon. Member for Trinity (Miss Nicholson)-Canada Deposit Insurance Corporation-Committee study, (b) Ceiling for insurance deposit.



GOVERNMENT ORDERS


[Stage Direction]
The House resumed consideration of the Motion of Mrs. McDougall that Bill C-50, an Act to provide for the continuance of payments under certain guaranteed income averaging certificates issued by the Pioneer Trust Company, be read the third time and passed.
Aideen Nicholson: Mr. Speaker, as I said at the outset when we dealt with second reading of this Bill, we on this side of the House are in favour of the Bill. We are in favour of providing relief to those depositors who in some cases lost their life savings, but we are uneasy about the entire process and the circumstances which led to this particular failure. We think it is extremely important that the basic problems be addressed so that this kind of thing does not happen again.
Apparently this particular trust company was operating in some ways that were beyond the guidelines and requirements of the Department of Insurance, as it was in the case of the Denver real estate project. There has been another recent failure which also involved imprudent investments outside of the country. It is difficult for Canadian taxpayers to be required to bear the brunt of unwise investments made in other countries. To be sure, these are value judgments. These invest-
Pioneer Trust
ments may have looked like wise investments at the time, but in the event they proved not to be.
The whole question of the Saskatchewan Government's involvement in this matter is worrisome. First it produced a letter of comfort and agreed to back a preferred share issue; then it looked at the facts and figures and decided that this would not be wise, so it backed off. All of this had the effect of delaying a resolution of the problem for a couple of months. It could be that a different kind of resolution might have been arrived at if there had been different kinds of negotiations.
The issue of the lack of disclosure to the depositors is serious. People who had guaranteed income averaging certificates with a life of six or seven years were not made aware of the fact that CDIC insurance only covers five-year transactions. The Minister has said that she is addressing these problems, and I am quite sure that she is. However, this is an additional indication of the fact that we need to see the Minister's discussion paper and to look in a broad way at all of the problems with CDIC. The private-sector group that was appointed by the Minister was appointed in January, and it really should be possible to have seen its report by now and to have taken some action on it.
The Minister has criticized the inaction of the previous Minister of State for Finance, but I should point out that that previous Minister was prepared to move on new legislation regarding financial institutions if we had been returned as a Government last fall. The new Government has chosen to proceed by way of a discussion paper on financial institutions. This paper has just been made public. I trust we will in fact see legislation next fall. I mention this merely to show that delays caused by one Minister or another are not unique to one Party. I am sure that such delays are always justified by the person concerned as being needed in order that there may be more consultation and a more careful evaluation of the options.
In short, Mr. Speaker, we support this particular Bill because it has become necessary. But so that we are not overtaken by events and that we do not have to deal with another rescue operation like this, I trust we will proceed quickly to the reform of the legislation on financial institutions and to the reform of the legislation on the Canadian Deposit Insurance Corporation.


Nelson Andrew Riis: Mr. Speaker, I also want to say a few words about this important Bill with which we have dealt today. First, I want to say to the Minister that her responses today were most encouraging in terms of her plans to enact the green paper recommendations as soon as possible. I think we have cleared up a number of questions we had and perhaps some misunderstandings which others have had about the process pursued by the Minister and her officials to provide relief to the people who were under the impression that they were insured when in fact they were not. Indeed, it would have otherwise resulted in destitution and extremely hard times for the many people caught unawares.

May 6, 1985
Pioneer Trust
I would like to make two or three observations, Mr. Speaker. First, we as parliamentarians tend to put a great deal of faith in the sophistication of our financial institutions. We almost inevitably assume that the people who manage our institutions and provide the leadership always know exactly what they are doing. I think one of the things we have found over the last number of months in considering the situations regarding Crown Trust, Greymac Trust, Seaway Trust, Seaway Mortgage, Greymac Mortgage, Fidelity, and it goes on and on, is that in fact, a lot of these individuals who, we simply assume, were making prudent loan decisions, acting in a very sophisticated way, recognizing the trends of the times and investing appropriately, in fact were not doing that. They were making some very poor decisions, which resulted in a variety of cases, including the Canadian Commercial Bank, of taxpayers having to come forward with hundreds of millions of dollars for what many people referred to as "bail-outs". Out in the financial market-place recently the Chairman of the Toronto-Dominion Bank was quoted as wondering about the wisdom of the bail-out to the Canadian Commercial Bank. A lot of people in the financial community, I believe, are wondering why it is that we are bailing out certain trust companies and not others, and while the Minister has explained today, I think quite adequately, why the decision was made to provide this support for the uninsured deposits for Pioneer Trust, I think there is a great deal of confusion out in the financial community as to just exactly what this Government is doing- or perhaps, to be fair, what this past Government had done.
1 listened carefully to a number of representations from the Official Opposition. I think those Flon. Members may have forgotten that their Party was in power for the last number of years. I can recall at least six times, Mr. Speaker, when the trust companies came before the Finance Committee of the former Government and begged for new legislation and action, explaining that we had not had an updated piece of legislation regarding trust companies for 40 or 50 years. They were operating in a vacuum out there. This is the vacuum we see now.
To be fair, I want to balance some of the criticism levied. When the Official Opposition was in government for some time, it had ample time to introduce legislation which might have made some of these misfortunes which have happened in the last number of months not occur. Of course, we have not discussed credit unions and we have not discussed the banks and other financial institutions. Now we will be seeing, hopefully, as a result of the green paper, changes which will bring in some competition. But with that competition, of course, come more difficult times. We certainly have to take steps which will provide more adequate monitoring by the Superintendent of Insurance and the Inspector General of Banks so that they can be on top of the situations in order to ensure that the depositors are protected and the financial stability in Canada is protected. I think that a lot of people were a little shocked when the Canadian Commercial Bank nearly went down and it was required that the other banks and the senior
levels of Government come in to rescue that operation. 1 think that cost some people some real concern.
I would just like to conclude my brief comments by suggesting that the provincial Government of Saskatchewan certainly has to be criticized in its operation when we look at how it reacted at a very sensitive and critical time. I have certainly not learned today that its behaviour was in the best interests of this institution. I suspect political motivation in terms of some of its behaviour and activity. I am not convinced, Mr. Speaker, that the Treasurer of Saskatchewan-and I don't know if it was necessarily his decision at the end-actually always acted in the best interests of the depositors involved.
We are pleased to have had an opportunity to participate in today's debate and we are pleased to see that we have been able to deal with this Bill adequately in one day, as the Minister requested. We hope we will never have to repeat this performance or this process ever again.


Barbara Jean McDougall: Mr. Speaker, on behalf of my friends in Saskatchewan, I just want to raise a couple of points; one on my behalf and one on theirs.
First, there is no point in having a major shake up in regulators until we have a major shake up in regulations. That is why I want to move very fast with the new legislation.
Second, I have been in the financial business a long time. I have been an analyst and forecaster. I would just like to remind my friends on the other side of the House, who were very helpful in getting this Bill through today, that when they are talking about the Treasurer of Saskatchewan, I have discovered time and time again that the best forecasting tool is hindsight.


Mr. Deputy Speaker:: Is the House ready for the question?


Some Hon. Members:: Agreed.
Motion agreed to and Bill read the third time and passed.


Mr. Deputy Speaker:: Is there unanimous consent to call it five o'clock?


Some Hon. Members:: Agreed,


Mr. Deputy Speaker:: It now being 5 p.m., the House will now proceed to the consideration of Private Member's Business.



PRIVATE MEMBERS' BUSINESS-MOTIONS

Mr. Deputy Speaker:: Is there unanimous consent that the House proceed to Item No. 132?


Some Hon. Members:: Agreed.
May 6, 1985


Mr. Lewis:: I rise on a point of order, Mr. Speaker. I believe the Hon. Member whose motion is being called will be here in a moment.


Mr. Deputy Speaker:: The Hon. Member for Simcoe South (Mr. Lewis) is rising on a point of order?


Philip Derek Lewis: Mr. Speaker, perhaps there has been some misunderstanding in the office of the Hon. Member for Athabasca (Mr. Shields). Rather than lose the opportunity to present his Motion under Item No. 132, I would ask for the indulgence of the House-I have just had a brief opportunity to discuss this with the Deputy House Leader for the Liberal Party and I would ask for the indulgence of the NDP-to adjourn the House at this time so that the Hon. Member for Athabasca would not lose the opportunity to bring his motion forward and have it properly spoken to. I appreciate that this would perhaps cause an inconvenience to members of the Opposition who are scheduled for the adjournment debate, and I undertake to make sure that those matters will come up for discussion tomorrow if that would be satisfactory.


Mr. Guilbault (Saint-Jacques):: Mr. Speaker, we have no objection to trying to help the Government put its act together, so we will lend our support to the proposal made by the Parliamentary Secretary. However, I would like to have an agreement that those Members listed today, and two of them are our Members, for the adjournment debate will have consideration of their question tomorrow.


Philip Derek Lewis: Mr. Speaker, I would be prepared to agree to that.


Nelson Andrew Riis: Mr. Speaker, in response to the request by the Parliamentary Secretary, we would be prepared to support it
Private Members' Business
on the understanding that the appropriate questions in the adjournment debate will be raised tomorrow. I would also like to make another offer. If the Hon. Member would like to have additional Members to assist in the organization of his caucus, perhaps we in the NDP can help out.


Philip Derek Lewis: Mr. Speaker, I appreciate the indulgence of both Parties in the Opposition. I advise them that Private Members' Hour is for private Members to organize, and we are just doing our best to help out this particular private Member.


Mr. Deputy Speaker:: I understand there was a motion before the House moved by the Hon. Member for Simcoe North (Mr. Lewis), seconded by the Hon. Member for Lanark-Renfrew-Carleton (Mr. Dick), to the effect that this House stands adjourned until tomorrow morning at eleven o'clock, and that the opposition Members scheduled to appear in the adjournment debate will have their day tomorrow. Is there unanimous consent?


Some Hon. Members:: Agreed.


Dave Nickerson: Mr. Speaker, because there are Members other than opposition Members who are to speak in the adjournment debate tonight, can we have the same undertaking with respect to them?


Some Hon. Members:: Agreed.


Mr. Deputy Speaker:: That is what 1 understood, all Members.
Motion (Mr. Lewis) agreed to.


Mr. Deputy Speaker:: 1 do now leave the Chair until tomorrow at eleven o'clock a.m.
At 5.05 p.m. the House adjourned.

Tuesday, May 7, 1985