Mr. Chairperson (Ben Sveinson): Good afternoon. Will the Committee of Supply please come to order. This afternoon this section of the Committee of Supply meeting in Room 255 will resume consideration of the Estimates for the Department of Consumer and Corporate Affairs. As had been previously agreed, questioning for this department will follow in a global manner, with all line items to be passed once the questioning has been completed. The floor will be open for questioning.

Mr. Jim Maloway (Elmwood): I would like to ask whether a member of the Consumers' Bureau would be in attendance today.

Hon. Shirley Render (Minister of Consumer and Corporate Affairs): Unfortunately, we were not able to get Marjorie.

Mr. Maloway: Perhaps then the minister and the deputy could answer the questions I have that would actually pertain to the Consumers' Bureau. The minister should be, I would think, aware of the issue that I wanted to talk about.

The member is aware that a multilevel marketing scheme has been operating in the province for some time now referred to as the Community Party, which is a multilevel, home-based political party. Based on the information that we have, it would appear that this concept is probably borrowed from similar schemes in the United States. Some of the documents seem to indicate that the money for the party has to come in U.S. dollars, U.S. funds. Nevertheless, a group of people I believe based in Ste. Anne, Manitoba, has been advertising on CJOB now for some months and has been having meetings at the Travelodge for some months now in an effort to sign people up to a party.

Basically it appears to me as though it is probably a pyramid marketing scheme. In fact, in its documentation it has two types of membership. One option is that you could join for $30 a month. That allows you, I believe, just to be a member of this party. You would receive, I think, $3 for every member you sign up. Option two, this one is the big one, is $50 a month. That one gives the option of being a candidate. You can actually run for the party and you get $5 a member.

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Now, I know this party has been advertising for a leader. They do not have a leader at this point, so they are looking for leadership material. Anyway, page 13 of their documentation indicates they have got a down line here of seven generations. The potential, if you were to sign up I guess just $2 or $3 members, would be to make a million dollars a month if all went well. If you sign people up as option two, the $50 a month, you could make $5 a member or you could make $1.6 million a month by joining this scheme.

This party has some policies. It has a separate brochure on some of its policies. In some ways it is a bit of a populous approach. I will not get into the policies of the party, because the reality is that this is really probably a get-rich scheme similar to others we have seen in the province over the years involving the sale of gold coins or any other product. The difference, though, I think, with this one is that in the case of the gold coins and others, the documentation was technically and legally correct in the sense that they had gone to a lawyer in advance and got the thing to be legally and technically correct on paper, and the illegalities occurred when they attempted to sell the idea at the International Inn or whatever hotel they were working through at the time.

In this case, this particular party plan is, I believe, in question from the beginning. I would like to ask the minister what the current status of things is because I would like to know the number of members that they have signed up, how many candidates they have, whether they have a leader yet. I would like to know just where the investigation is going. I understand that last night there were charges laid against three of the participants. I understand that they are to appear in court in August. They are charged under Section 206 (1)(e) of the Criminal Code, which, I believe, could be serious enough that they could be given two-year jail sentences. Clearly, there has been some progress made in this case, but I am concerned about the number of Manitobans who may have in fact lost money in this scheme and whether or not there may be some copycat operations operating in the province that could be putting Manitobans at risk.

Could the minister give us an update as to what her department has done in this whole area and just where we will go from here?

Mrs. Render: I think the member answered part of the question himself when he referred to the fact that this was a possible pyramid scheme which makes it illegal as such. This office, the bureau, referred the matter to the City of Winnipeg Police Vice Division for possible action.

Mr. Maloway: Can the minister tell us then how many members were signed up, how much money was raised, how many candidates do they have, do they have a leader? Can the minister answer those questions?

Mrs. Render: No. This matter, as I say, has been referred to the City of Winnipeg Police Vice Division, and, as a matter of interest, it was also referred to Industry Canada Competition Bureau for their review under the Competition Act. So that information, if it is available, they would have it.

Mr. Maloway: Could the minister then release to me a copy of the letter from Industry Canada to the department indicating that this scheme is illegal?

Mrs. Render: Actually, did you just say a letter from Industry Canada?

Mr. Maloway: There is a letter from Industry Canada. The matter was referred from the Consumers' Bureau to Industry Canada for an opinion. Industry Canada sent back a letter to the Consumers' Bureau, indicating their opinion that this was illegal under a section of, I believe, the Criminal Code. The charges are under 206 (1)(e), so I am assuming that that is the section they were referring to. There was another section they were concerned with under the Competition Act. What I was looking for was a copy of the letter from Industry Canada to the Consumers' Bureau that would indicate which sections they were dealing with and how they based their opinion that this was in fact a pyramid scheme.

Mrs. Render: We will check and see whether we can release the letter. It may possibly be that, if the matter is under investigation we are not allowed to, so this is something we will have to check into.

Mr. Maloway: I do not really see why there should be a problem, because I think it is just basically a technical letter from Industry Canada simply reviewing the documentation and expressing an opinion as to the legality of this scheme according to a section of the Criminal Code and a section of The Competition Act. I guess I already know what the letter says. I just do not actually have a physical copy of it. That is what I am looking for.

Mrs. Render: Certainly, as I said, if there does not seem to be a problem, if we can, we will certainly get you a copy.

Mr. Maloway: How soon could the minister endeavour to do that?

Mrs. Render: We will check into it as quickly as we can.

Mr. Maloway: I would like to ask the minister then whether there are any other ongoing investigations involving similar schemes of this type currently ongoing in her department?

Mrs. Render: Are you talking about pyramid schemes. Can you be a little more specific?

Mr. Maloway: Mr. Chairperson, I think what I am talking about here is the multilevel marketing plans, because just last week when we dealt with this issue dealing with the long distance telephone scheme, that is considered and approved by the department in January. The department has licensed, given direct sellers licences to, I do not know, probably several hundred people. So that one is viewed as being okay.

This one is not being viewed as okay for different reasons, but the point is, in the mind of the public, there are all kind of similar, right? They are multilevel marketing. So the question is: what differentiates one from the other? What sort of characteristics would the minister say are peculiar to one over another?

Mrs. Render: I am sorry. Would the member repeat his question, please.

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Mr. Maloway: I am looking for the characteristics of what constitutes an actionable plan by the law versus one that is approved by her department and sanctioned as being okay to proceed. We have seen a variety of these things over the years. We have seen different multilevel marketing plans involving sales of coins or other plans that were once again, as I said, technically correct because people were smart enough to go to a lawyer and get the lawyer to draft it all, but it is only when they tried to sell it that they committed the illegal acts. So on paper Industry Canada gave the approval for some of these and said, your paper is okay, you can proceed. The illegal acts were committed when they were selling the product.

So in this case, of course, Industry Canada is saying, no, even your paperwork does not conform to proper specifications. So I wonder what the characteristics are of one that is approved versus one that is not approved. At the end of the day, they basically end up with the same result.

Mrs. Render: As the member knows, the Consumers' Bureau does license vendors who are direct selling their goods or services to consumers. A number of these vendors market their goods or services by means of a multilevel marketing plan. When a vendor selling in this particular way applies for a licence the bureau looks at the multilevel marketing plan. It does review the plan. Sometimes an advisory opinion from Industry Canada is sought to ensure that the plan is not a pyramid scheme. If a pyramid scheme is identified, then these of course are referred to the appropriate enforcement authorities for investigation but, obviously, as the member knows, you can file something on paper, but then if you go and do something different, that is where the difficulties arise. It would be at that point then that the bureau would go out and investigate.

Mr. Maloway: The question then is: what is the mechanism for ensuring compliance with the plan because, once again, if you have knowledgeable people involved in these things they will take it to a lawyer? The lawyer will draw it up so that technically it is not illegal on paper and it gets them by the law, but the reality is that you know that in practice when you strip away the veils at the end of the day it is just a pyramid system. You can call it whatever shade you want. You can call it something different and dress it up differently, but when you strip away the veils, it is still a pyramid scheme.

The question is that when you get these schemes, unless you have somebody looking at how they market the actual plan, then how do you know what you are approving is in fact what the end result turns out to be?

Mrs. Render: Again I can only repeat that the bureau does review the plans. I do not think there is any 100 percent way that you can guarantee anything, whether it is this kind of a factor or something in any other area that we might want to speak about. If information comes back to us from whatever source that makes us suspect that there is a legal action being taken, then the bureau will investigate, but if a plan is on file and it has been reviewed, that is the first step that the bureau does.

Mr. Maloway: In this case the bureau did not vet this plan. This plan was not submitted to the bureau for vetting purposes at all.

Mrs. Render: Obviously, at some point, somebody reported this scheme, whatever you want to call it, and the bureau did step in, but it was then referred to the city police. That may be just another point. Whether you file a plan or not, once information comes back to the bureau, the bureau is prepared to step in and investigate. In this case, as I say, it was felt that it was a possible pyramid scheme and therefore referred the matter to the City of Winnipeg Police Services Vice Division.

Mr. Maloway: Mr. Chairman, well, if the bureau is waiting for plans, the plans may never show up. They may show up when it is too late. I mean, the basis upon which this scheme works and the basis upon which the person will make his million six per month, I think, is very rapid growth.

It seems to me that the information that I have had over the years about these schemes is they are like tornadoes. They touch down in an area; they are very hot for two or three weeks, and then they are gone. When you run out of people to sell the plan to, then the plan basically dies because the people at the beginning are the ones that make all the money and the ones at the end are the ones that end up losing all the money. So potentially this operation could have set down shop in Manitoba, run its course, left town, and the minister still would not even know about it. That is the potential.

Mrs. Render: Again, the member said exactly what I was going to say. The bureau is proactive. I do not think the member is suggesting that the bureau be out spot-checking every house and going into every house and invading every house. If somebody does not come as a direct seller and get its plan or its party, whatever it is that they are doing, licensed, what business does the bureau have in going out and checking Mrs. ABC Smith to see whether or not Mrs. ABC Smith is operating an illegal pyramid scheme?

In this particular instance, as soon as information came to the bureau, the bureau very quickly responded, and action was taken. So I would totally disagree with the member that the bureau is not proactive, and I totally disagree that the bureau should be intruding into the privacy of people's homes to see whether they might be doing something illegal.

Mr. Maloway: Well, I know that action finally got taken at the end of the day, but it was by no means swift and decisive by any stretch. I mean, this operation, had it been more aggressive, could have left thousands of people out thousands of dollars in money, and we do not know at this point, I do not know, how many members. I asked the minister now twice. I would like to ask her a third time: how many members did this organization sign up to its plan?

Mrs. Render: Okay, I realize the member has asked me twice, and I will repeat for the third time: this is not a bureau matter. This is a City of Winnipeg Police matter. So, if the member wants specific answers to specific questions, go to the authority that has been investigating.

Mrs. Render: Because it was not the minister's department that was responsible.

Mr. Maloway: The minister's department referred the matter to Industry Canada, got an opinion, then came back and sent it to the City of Winnipeg Police department. Now it seems to me that the road comes back to the minister because the minister should have up-to-date information about the status of the investigation and should be able to provide the type of answers I am looking for right now.

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Mrs. Render: I believe that the matter was referred concurrently, at the same time, to both the police and Industry Canada. Once the matter is referred to another jurisdiction, that is where the information lies. I disagree with the member.

Mr. Maloway: Can the minister confirm that her department conducts joint investigations and joint activities with all these different bodies that she is now claiming to have no association with, that in fact they are really very intertwined together and they do co-operate in a very close fashion?

Mrs. Render: In some cases, the bureau does conduct joint investigations when there is uncertainty as to whether the particular activity is a criminal activity or not. In this case, it seemed clear that it was likely a criminal activity so, as I say, it was referred to the city police. There has been co-operation between the bureau and the police. It depends upon the particular incident as to whether it is joint or whether it comes back to the bureau or whether it goes over to the police. As I say, if there is a criminal component to it, it goes to the police.

Mr. Maloway: Can the minister then find out as to how many Manitobans lost money in this pyramid scam over the last few months?

Mrs. Render: I would suggest that, if the member wishes these kinds of answers, he direct his questions to the Winnipeg police.

Mr. Maloway: Is the minister saying then that, if she were to ask the police for a report on this matter, they would not respond to her request?

Mrs. Render: If the city police had felt that this was our matter, they would have come back to us. Since it has not come back to us, to my knowledge, the matter is a City of Winnipeg Police matter and they are not under an obligation to report back to us, and our staff are busy doing other things. This is not a matter that we would keep a record of, because it does not fall under our jurisdiction. We would have, to my knowledge, no reason to ask for a report back, because it does not fall under the jurisdiction of this department. So, again, I suggest to the member that if he has specific questions that he would like to have answered, he should go to the police and obtain those answers.

Mr. Maloway: I think it is time for the minister to be brave here and to try to get to the bottom of what the status of this investigation is right now. I think we would like to know how many Manitobans have lost money in this scheme and how long this organization has been operating and are there any other similar ones operating in the province. It is quite conceivable that if there is one of these operating, there is another one operating, so surely the minister should be interested in this matter, interested enough to try to get on top of the investigation and find out just where it sits right now and give us a progress report as to where it is.

We know that, as of last night, three people were arrested. They were released on appearance notices; their court dates are in August; and they are being charged under Section 206(1)(e) of the Criminal Code. So we know that it has gone that far, but what we do not know is how many members this organization has, how many people it has signed up, how much money it has taken in, and whether the people that have given money have any reasonable hope of recovering their what may be now lost funds.

Mrs. Render: I am not too sure whether the member is suggesting a duplication of services here. I come back to my answer that I have been giving. Obviously, the member already has a lot of the information that he is asking me. He obviously can get it. I do not think that the police would look too kindly at us looking over their shoulder. They have, to my knowledge, no obligation to report back to us. It is not our jurisdictional problem, and I am sure the member is not asking us to duplicate the efforts of the police. I am sure that he would wish the bureau to be spending the time on matters that pertain to the bureau, not trying to walk along beside the police and be asking questions about something that does not fall within the bureau's jurisdiction.

Mr. Maloway: The investigation is already a joint effort. I understand these departments co-operate quite closely, so it makes sense to me that the department, if it is not, should be updated as to how this investigation is going with the possibility that, in fact, there may be more of these schemes operating. Clearly if there is one operating, there may be two, and so the minister should want to be interested in this and want to be updated as to how big an operation this was.

We may find that this organization was getting nowhere, that it had no members, that it had no money. We know it had a few meetings, but maybe it had not got rolling yet. We do not know that, so it could be a minor problem or it could be a major problem. We have no way of knowing. The minister is the Minister of Consumer Affairs in this province and should be defending the rights of consumers, defending consumers, and should be, I think, taking a proactive stand and trying to find out as much as possible about this investigation so that we can keep on top of the issue.

Mrs. Render: I do not know that the member is correct when he says that it was a joint investigation. I am not saying that he is incorrect, and I am not saying he is correct. It is my understanding that it was investigated by the police. In this instance, it was felt that it was a possible illegal pyramid scheme. It was, therefore, referred to two other authorities.

The member talks about the Consumers' Bureau being on top of things. This is a police matter, and if the police, at some point in time, wish to release information, and they do this many times whether it is something like this or other matters that affect Winnipeg residents, they will put a notification out.

Once again, the member talked about the possibility of people losing money. The courts can order restitution if that is the route that is going to be taken, but, as I say, this is a police matter and the police also have their methods of making information available to the public and also alerting the public to these kinds of possible schemes.

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Mr. Maloway: Is the minister saying that her department has not had any involvement whatsoever in the investigation of this pyramid scheme? Is she saying they have had no involvement whatsoever?

Mrs. Render: Obviously the bureau had some involvement at the very beginning, because they referred the matter to the police and to Industry Canada.

Mr. Maloway: Did any members of her department attend any of the Community Party meetings with members of the Winnipeg police force?

Mrs. Render: Not to my knowledge.

Mr. Maloway: Has the minister referred this matter to Elections Manitoba for their opinion as to whether there are any violations of The Elections Act?

Mrs. Render: The answer is no.

Mr. Maloway: And why not?

Mrs. Render: Perhaps the member would share with us what he thinks might be a potential breach of The Elections Act that would cause the department to refer this to Elections Manitoba.

Mr. Maloway: If for no other reason, I think they would like to know about it. I think any organization, in this case this party has an organization structure, has policies, has candidates, I believe have one or two, three candidates running in the provincial election coming up. They are looking for a leader. Maybe they have found one. They may be fundraising and promising people tax credits. I do not know. There are any number. Elections Manitoba has rules as to what political parties can and cannot do, what constitutes a political party, how a political party gets registered. It seems to me that it is just basically another facet of the overall problem here that you have a political party that is organizing but is not registered in the province of Manitoba as a political party. I think that should concern the minister and the minister would be wanting to refer this whole matter over to Elections Manitoba for their opinion as to whether or not there is any intention on the part of this party to get registered or whether it is planning to follow the rules concerning registration in Manitoba.

Mrs. Render: I guess I would hope that if the member, as an elected member himself, thinks that there has been a possible breach or something wrong, he might have taken the initiative and referred the matter to Elections Manitoba, but certainly listening to his comments, I will suggest that the bureau look at the information on file and refer this to Elections Manitoba.

It appears that the member has a lot of information, so it might be very useful to Elections Manitoba if the member, depending upon the information he has, also refers this to Elections Manitoba.

So would that not be a very unfortunate situation if the government had called the election and here we have this party declaring, well, three candidates that were running and Elections Manitoba was totally unaware of it? So I would think it would be incumbent upon the minister to refer this matter to Elections Manitoba immediately for their opinion as to what they think any possible breaches of Manitoba Elections laws might be and give the people some guidance.

You know, the minister talks about trying to solve problems before they get out of hand. Well, here you have three people, possibly, without great ill-intent, have now been charged under the Criminal Code and face two-year jail terms when perhaps all that needed to be done was the minister could have referred this to Elections Manitoba when her department was first notified of this some months ago. Elections Manitoba, perhaps, may have contacted the party in question and called them in and told them what the rules were and explained the facts of life to them, and they might not be in the big mess they are right now if that had been done. Now, what does the minister have to say about that?

Mrs. Render: Again, I will just suggest that the member has a lot of information at his finger tips, and if he felt that there might have been a breach of The Elections Act, I would hope that he would take the step of referring it. I do not know enough about The Elections Act, but I rather doubt that this so-called party could have got on the ballot papers without Elections Manitoba doing some investigation to make sure that this particular party complied with all the rules and regulations of Elections Manitoba.

So the member has suggested that, if this government had not taken a step and an election had been called, certain negative things might have happened. I think that is incorrect because Elections Manitoba also has a responsibility to check into the parties that are running candidates.

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Mr. Maloway: Well, the government's position going back through the long succession of ministers under the current government, going back to ministers under the previous NDP government, I am sure, they have all had a consistent pattern wherever possible that, when irregularities are found, rather than using, as the Conservatives like to say, the heavy arm of the state, even the Securities Commission represented here makes attempts, when they find some breaches, if they do not see evil intent upon the people involved in the breach, they attempt to get the people to voluntarily comply with the law. Most people, when they found they have made a mistake, will do what is necessary to comply and will not face trouble with the authorities and charges and so on.

It may well come out that these people in this party and this little scheme here may have been a little greedy perhaps, but may not have been professional and may have just basically wandered into this situation sort of unknowingly. Now, when there was plenty of time for the government to take action and solve the problem before it became a real problem, and I am not talking about how many members they have signed up now, I am talking about themselves, these people are now charged with charges under the Criminal Code.

Back two or three months ago, had the minister's department simply referred this to Elections Manitoba, or got involved that way, then these people could have been approached. They could have been spared all the legal fees and the loss of reputation and all the grief that they are going to get as a result of these charges being laid. I always thought it was the intention of the minister to be proactive wherever possible and save people, sometimes I guess save them from themselves in this case, but to have basically called them in and got them straightened out before things got to this level, to the point where they may have to spend two years in jail under these charges.

I wonder if the bureau had suggested to this group that they go to Elections Manitoba and then if something was found wrong, if the member would then be sitting here asking me why did we not report this matter to the City of Winnipeg police, so I am really fairly confused just where the member is coming from.

They themselves, if they are going to set themselves up at as a true political party, there is nothing stopping them from going to Elections Manitoba. That seems to me to be a first step.

Mr. Maloway: I am certainly not suggesting that the police not be notified. In fact, that was the correct course of action for the department to do exactly what they did, refer the matter to Industry Canada, get an opinion, then send it to the police and then work with the police, which they often do, involved in their joint investigations whereby one of their officers attends with undercover police officers, which in the past, I believe, has happened on a regular basis. At the same time, the department has always said that they do believe in solving the problem as soon as possible, and if it means simply phoning the people and saying, you are doing something wrong here, quit doing it, oftentimes that is all it takes. But in any event, they did the right thing. They referred it to the police department, but the question is: why, at the time, was it not referred, because there was an impending election possibility at that point? Why was this not referred to Elections Manitoba by the minister for action at that point? The minister has to recognize that this investigation, you know, I do not think is all that complicated. It did not probably have to take as long as it did to come up with a solution. Several months have gone by here, and so I am not in any way suggesting that the department did the wrong thing. They did the right thing. I am just saying that maybe it could have been done a lot quicker and that it should have been referred. I mean, it is okay now to say: well, you know, nothing happened because there was no election.

Well, that is all well and good right now in hindsight. But we could have been into an election. That could well have happened, so I do not know why the minister would not have taken the bull by the horns here and sent this off to Elections Manitoba for a quick opinion, fired it off to the police, got her own people involved in it, and closed this thing down right away. This organization had several meetings, and it could have been all done in one meeting. Instead, it dragged and dragged to the point where finally, as of last night, we have charges.

Mrs. Render: To my knowledge, this group did not come to us to be licensed so, in the first place, we were not aware of them. It was not until we received information. The bureau acted quickly. It referred the matter to the City of Winnipeg police. I do not know that the bureau knew that it was a potential political party which is likely why it did not refer it to Elections Manitoba. Certainly, if the City of Winnipeg police felt that it was a potential political party, they, too, might have referred it to Elections Manitoba, but I suspect the police were looking at it from the nonlegal position of a pyramid scheme, and we are looking at it from that particular fashion.

Again, I hearken back that it appears that the member has a lot of information at his fingertips. This is something that any elected member, for that matter I am sure, any resident of the province, would be able to refer, ask questions, phone Elections Manitoba themselves. I take the member's comments. Certainly on hindsight it may very well be that that might have been a step of the bureau, but as I say, we took the action that we did, and obviously the member has placed on record that there have been some convictions, so obviously there were charges. It appears that there were some criminal activities.

Mr. Maloway: The minister indicated that the bureau did not know it was a political party. Well, Mr. Chairman, the front page of their documentation starts out in very large print. It says: Community Party multilevel home-based political party. They talk about program for communities, members, candidates and sensible government which, I guess, would be a good thing to have, and the marketing plan. That is the entire assembly. The whole thing is all about a political party, so that is pretty obvious. It had to be obvious to anybody who read it, and some of the first people to read it were her department people.

Mrs. Render: I am answering questions without the director here. I do not know what information the director had in front of her, so it may very well be that my response was not correct. I think I said I do not know why, and I said it may be because we did not know. At any rate, your comments have been taken. We will follow up and see what results from that.

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Mr. Maloway: What I was hoping to get from the minister today because the arrest and charges were just as a result of the meeting last night so it is rather recent, but I would have thought that the minister would have some sort of an idea by now as to how many people were affected by this and would have expected that she would have had it, if for no other reason, perhaps, than for Question Period today. So I assume that there was some sort of a briefing note that she has got that gives her an update on this situation. Is that not the case?

Mrs. Render: This is a police matter. It is no longer a bureau matter.

Mr. Maloway: Well, would the minister then endeavour to find out for us as to how many people lost money, if any, in this Community Party scheme?

Mrs. Render: I am sounding like a stuck record, but, as I have said quite a few times already, this is not a matter of this department. To my knowledge, the police do not have a responsibility to report back to us. There may be something in the media at some point.

I would like to remind the member that we do have a couple of staff people here. It would be nice to try to clear off a couple more areas.

Mr. Maloway: The minister actually read my mind. I was planning to move on here. Before we do, though, I wanted to know whether she would be referring this matter to Elections Manitoba tomorrow, then, for their opinion, and also to try to get me as much of an update as she can regarding the police investigation and what she finds out from Elections Manitoba. If she could do that, then when we meet on Monday we could pursue this a little further if necessary.

Mrs. Render: I have stated that we will review the matter and consider the member's request as to whether or not it goes to Elections Manitoba.

Mr. Maloway: I am sorry, I did not hear the minister's response.

Mrs. Render: We will consider reviewing the matter as to whether or not we send it off to Elections Manitoba. I am not too sure how quickly that will happen. Certainly I cannot promise an answer by Monday.

Mr. Maloway: In keeping with timely investigations, I did have a number of questions of the Securities Commission, but I am going to jump over some of them and go to a real estate industry scam that was of fairly major proportions in Manitoba from 1994 that actually was quite comprehensive. I am interested in knowing what the status of the file is and whether or not there are other house-flipping organizations operating. I have always believed there were at least three separate ones at the time. In fact the police investigation of this really only focused on the one big one. I do not know, once again I am quite disappointed in how long these things took.

I have a file here prepared for me at the time by the person who was the major push behind this investigation. His name is Mark McGrath. He used to live at 438 Kent Road. I do not know whether he is still there, but on October 12, 1994, I just want to give you a flavour of what this was all about, because there were probably about a hundred transactions, a hundred houses flipped in this manner. The loss of money is probably, I think, I could be wrong, in the $2-million or $3-million range. The principal in this scandal, scam, was charged and, I believe, has been convicted, although I am not exactly sure. While these people were being taken advantage of, the principal was living a few miles outside of town with a whole range of exotic animals, llamas and all sorts of other things, and was running a pretty good business. He could not do this without the complicity of respected members of the community in Manitoba, I mean by that, the real estate agent, a mortgage appraiser, a lawyer. He needed all these elements to make this scheme work.

With this in mind he paid $500 to Re/Max Real Estate as a deposit on the offer to purchase.

When the offer to purchase was accepted, we met with Vernon Barnes of the CIBC bank. Mr. Barnes told us we could not use our income tax refunds toward our down payment until we had the actual cheques in hand. He went on to say that as long as we provided him with a stamped bank balance receipt showing that we had adequate funds to cover our down payment, we could get the mortgage. We met with Mr. Epp again. This time we told him we could not purchase 438 Kent Road until we received our income tax refunds. Cecil went on to indicate that he could arrange for the Roselli Group, which is Leonard Tysowski, to lend us the $2,000, the down payment needed. He also stated that we would not have to pay any legal fees or any land transfer taxes.

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After discussing the situation with my wife, this appeared to be a good idea. As we knew that we were going to have the down payment shortly, Cecil arranged for me to meet with the Roselli Group, Leonard and Sharon Tysowksi, at which time they gave me a money order for $2,000. This money order was deposited into my chequing account at the Royal Bank. I received from the bank a stamped bank balance showing the adequate funds for the down payment for use by the CBIC. This $2,000 was repaid to Leonard the next day by a cheque made payable to Homes Unlimited as per Leonard's directions.

Now, what was happening here? Let me explain to you what was happening. Mr. Tysowski would put an ad in the paper, and he was basically selling real estate with no money down. So he was dealing with people who were least able to afford to buy a house. These were people who could not afford a down payment. What he was doing was giving them the cash so that they could put the money into their account overnight to show that they had money in their account. That is what he was doing. I had testimony from quite a number of the hundred-plus people that we interviewed in this matter. A good number of them told me stories about how they had never seen so much money in their lives. When they had to go, husband and wife, they put the money in the glove compartment, $6,000 in cash, and they drove it across the city to put in the bank account, and then the next day they had to put the same amount of money in a glove compartment and drive across the city again and return the money from where it came in the first place.

There were all sorts of other inducements and incentives to operate this. In some cases, whatever it took to settle the deal, these people would do it. They would give free washing machines, free furniture. In fact, we had one case where the purchaser was in jail, had just come out of jail. If you have been in jail and you come out of jail, you have no work history, no job, the chances are you will not be able to buy a house, right?

So what they did was they came up with phony employment records to be able to show the mortgage lender and CMHC that in fact the person had a job. It was not a real company; it was not a real job. And so you can see I am trying to explain how people got into this, that if you came out of jail and you were given an offer that you could move into a house that you were the owner of, the down payment was paid, you got some free appliances, I mean, what a deal, what a terrific deal.

Now, on the other side, what was happening was that these houses were being bought fairly cheap. They were being flipped by Mr. Tysowski to these young people at very high, inflated prices. That kind of completes the circle.

So he then took the stamped bank balance to the home of Vernon Barnes, the CIBC mortgage department. He had a suspicion. I picked this up through a lot of these people, that they were a little nervous and suspicious, but they were first-time buyers. In many ways they thought this was a little too good to be true, but a lot of them knew that they were kind of complicit in this, that there was something not quite right about it, but they thought they were dealing with a reputable lawyer and a reputable real estate agent and a reputable bank and an appraiser. The appraisal came out, and it showed the figures that Mr. Tysowski wanted it to show.

So he, Mr. McGrath, had a suspicion that Vernon Barnes was very familiar with the way the transaction was handled, as he did not inquire as to how we got the money so quickly. The mortgage was approved, an appointment was made with Cecil Epp to meet and sign the purchase papers. During the meeting Cecil explained that CIBC had an interest rate of 8.5 percent, not 7.5 percent interest rate that was advertised for the mortgage. He stated that the Roselli Group would be willing to pay us the $2,500 on top of their paying all legal fees and land transfer taxes. Now, is that not a great deal? We would all love to be in a situation where we get a free lawyer, we get our down payment paid, our land transfer taxes paid, right? So they accepted the offer.

Also, during the meeting, Cecil referred us to Mr. Richard Stefanyshyn of the law firm of Wolch Pinx Tapper to use as a real estate lawyer. When they met with Richard, he advised us that he does about a hundred transactions a week and not to be nervous.

He went on to say that he thought that we had a great deal. One interesting point that came up was that he mentioned that we only paid $45,000 for the house. When the lawyer mentioned the $45,000 and these people thought that was kind of funny, but that was what the original person sold the house for, right, so it started at 45 and without taking possession of the house, these guys would flip it for a profit of maybe $20,000.

When we questioned him on this figure, he caught his error and said it was a secretary who must have retyped the figure, and then changed the subject. As Cecil had promised, our statement of adjustment showed that all lawyer fees, land transfer tax had been paid, also showed that our 1993 taxes of $1,663.37 had been paid by the Roselli Group. I have never repaid these amounts. The Roselli Group paid Richard Stefanyshyn the $2,500 owed for the difference between the mortgage interest rates and then Richard must have then used the money for our down payment, as he has never requested the money from us.

I am almost finished here.

I thought that something might be wrong when I moved into the house and immediately had problems with the furnace. He contacted his lawyer, Richard Stefanyshyn, who filed a small claims suit against Peter and Elizabeth Bartel for the cost of a new furnace. I had no previous dealings with the Bartels. I informed Richard of this and suggested that we should have been suing the Roselli Group. He advised me to let him handle it. When the matter came before a small claims judge, I was informed to sue the Roselli Group, who in turn could sue the Bartels. At this time Walter Bartel informed me that Richard Stefanyshyn was also the lawyer who represented the Roselli Group in their real estate transactions. So the lawyer was representing more than one side. That was common, by the way, in most of these deals, not all, but a lot of them.

Before this matter went any further Richard Stefanyshyn suggested that I settle outside of court for $550 as I probably would not receive much more by a judge. Hesitantly I thought it over, accepted his advice, not realizing there could be a conflict of interest on behalf of Mr. Stefanyshyn.

So that was the letter that started this whole thing, okay, and shortly after he wrote the letter, this was October '94, shortly after that he came to my office with this story. I have to admit, when I first heard it, I thought, you know, a lot of times you get complaints from constituents and you go around and do some investigating, and so on, and you find that the story is not exactly as they have painted it to be, but this was one of those occasions where in fact not only did it turn out to be correct, but it turned out to be even more involved and complicated than any of us thought was possible.

So we started chasing this around. At the end of the day, after a year or more, we had a huge chart with most of the names, and a lot of people had in fact gone bankrupt. In fact the houses were repossessed by CMHC, and in fact the people were not there. So we were going around to see empty houses. Of course this person is in my area and a lot of these houses were in the Elmwood area, but they were all over the place. I think the largest one was about a $21,000 gain. I believe it was on Scotland Avenue here in south Winnipeg. So a lot of them were in the Fort Rouge area, Crescentwood area as well.

The point is, why did it take from October 24, 1994, until 1999? I still have some people in my area that I see periodically, and this is still not solved for them. They have bought a house, $10,000, $15,000, $20,000 over value at the time. They will never, never, never sell their houses for anywhere near what they paid for them. So they are going to lose the money. This has been an absolute nightmare for these people. I have admitted right up front that in a few cases some of them did think this was too good to be true, and obviously it was.

What I would like to know is just what this department has been doing to sort this thing out and to speed this process up, because this has been a horrendous experience for these people and the nightmare is still not over for them. So would you give me an update please as to where we sit with this scandal basically five years later?

Mrs. Render: Mr. Chair, the Securities Commission referred it right away to the RCMP. This is a criminal matter. As the member himself has been putting on the record, by the magnitude of the transactions, you can tell that it is a very complex matter, and those kinds of things are not done quickly.

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Mr, Maloway: Mr. Chairman, I would like a little bit longer answer than that because I would like to know just where things are. Let me give you a few examples here. I would like to know what happened eventually with Cecil Epp. He is your responsibility. What did you do with him at the end of the day? Where is he? What is he doing today? I mean, what is he doing as far as the Securities Commission is today?

Mrs. Render: Mr. Chair, Cecil Epp had to give up his registration, and as the member I am sure no doubt knows, criminal charges of fraud of over $5,000 were laid against him in September 1998. He pleaded guilty to the charge in March of this year and received an 18-month conditional sentence.

Mr. Maloway: Mr. Chairman, then that raises some questions. Was he in a position or was he required to reimburse any money personally as a result of this settlement? And if not, why not?

Mrs. Render: Mr. Chair, the Securities Commission deals with the licensing aspect, not the restitution aspect. The clients were advised to seek legal assistance in that area.

Mr. Maloway: Well, can the minister tell us then how much money collectively was lost as a result of Mr. Epp's actions?

Mrs. Render: Mr. Chair, that question would have to be directed to the RCMP.

Mr. Maloway: Could the minister find out what the total quantum of the losses were? The reason I am asking the question is because the minister has just told us that this person got a conditional discharge, I believe.

Mrs. Render: Cecil Epp received an 18-month conditional sentence.

Mr. Maloway: Can you explain what a conditional sentence is?

Mrs. Render: My understanding is that means that you do not have to spend the full time in jail.

Mr. Maloway: So does that mean that he had to spend any time in jail?

Mrs. Render: Mr. Chair, I cannot answer that, but I believe that he was likely confined to his home. I do not know whether there would be hours limitations put on or not. We do not have that information. Again, that is a matter that, if you want the detailed information, you would have to ask the RCMP.

Mr. Maloway: Mr. Chairman, I do not think this is that common a happening, at least I hope not, so in this case I would be very pleased to have the Securities Commission or the minister's office or whoever try to determine just what the amount of money involved here was and exactly what the punishment was for this. I would like to get a kind of a sense as to whether the punishment fit the crime in this case because how much money was lost, and did this person get a slap on the wrist or was this person given a very solid punishment for the activity he was involved in?

Mrs. Render: Mr. Chair, it is not up to the Securities Commission to deal with the punishment. That is up to the judge. As for finding out how much money was lost, there would be hundreds and hundreds of transactions that would have to be gone through to get that information, and the Securities Commission cannot do that, and it would not help. There were be no purpose in that; it would not help the individuals who lost money.

Mr. Maloway: I am sorry, I wonder if the minister could repeat that answer.

Mrs. Render: I am glad to see that the member opposite also has memory problems or hearing problems.

An Honourable Member: Over 40.

Mrs. Render: Over-40 problems, right. I think he asked about the sentence and whether or not it was a harsh sentence or, I guess the song from The Mikado, did the punishment fit the crime. The punishment, if you want to use that word, was set by the judge. It is up to the judge to deliver that kind of a sentence. It is not up to the Securities Commission to determine whether or not the punishment is suitable. The judge determines whether or not the punishment is suitable.

In response to the member's question about finding out how much money was lost, that would entail going through hundreds and hundreds of transactions, and that would not serve a useful purpose. It would not help the individuals get back their money.

Mr. Chairperson: The time being six o'clock, committee rise.