In a first for Canada’s Competition Bureau that illustrates the high degree of co-operation between Canadian and U.S. law enforcers, it announced yesterday that two Canadians who had been extradited to the United States in 2007 to face U.S. charges of conspiracy, mail fraud, and wire fraud had received lengthy prison terms in U.S. federal court.
The Bureau’s release indicated that the defendants operated an entity called First Capital Consumers Group of Toronto that targeted some 40,000 American consumers with poor credit histories through telemarketing “boiler rooms”. The operation was reported to have generated approximately $8 million (U.S.). Interestingly, the defendants were originally arrested in 2002 and were subject to charges under Canada’s Competition Act and Criminal Code, including conspiracy, fraud, deceptive telemarketing and possession of proceeds of crime. However, those charges were superceded by an extradition request made by the U.S. Department of Justice on July 15, 2003. The Canadian proceedings were stayed shortly after.
The defendants appealed their extradition proceedings to the Ontario Court of Appeal and the Supreme Court of Canada, where their applications were ultimately dismissed. Key to this case was the requirement under Canadian law that, before extradition could be ordered, the government must consider whether there was a realistic option for prosecution in Canada. The defendants’ position was that prosecution in Canada would have been a more viable or realistic option, particularly bearing in mind the Canadian charges that had been brought prior to the U.S. request for extradition. However, the government’s view was that an American prosecution would be “more effective and reliable” than the Canadian prosecution. The Appeal Court (and ultimately the Supreme Court of Canada) agreed that the government had applied the right test in determining that surrender to the United States should be made.
The Ontario Court of Appeal noted that the impact of the fraud was felt entirely in the United States, where all the victims were located, and that these individuals would have been necessary for the prosecution of the offences. These, together with other factors, provided ample grounds to support the surrender of the defendants to U.S. authorities. Appeals to the Supreme Court of Canada were dismissed on August 30, 2007.
A particularly interesting aspect to this case is the substantial differential in sentencing between Canada and the U.S. In a serious telemarketing case decided in 2004, the Competition Bureau obtained sentences of three years’ incarceration for two perpetrators of a fraudulent telemarketing scheme involving the sending of false invoices for payment. That case resulted in sales of approximately $1 million. While the criminal proceeds obtained in the more recent case were several times greater, the difference in prison sentences is dramatic (the two defendants sentenced so far received terms of 19 years and 7 months, and 23 years and 4 months and are required to make $5 million in restitution). One defendant is to be sentenced later.
While the Competition Bureau has not to date extradited any individual (nor requested the extradition of any individual) in an international cartel case, this case illustrates the high degree of co-operation between Canadian and U.S. law enforcers and will likely serve as a precedent for potential cases where U.S. antitrust authorities could request the return of individuals for participation in a U.S.-centered antitrust conspiracy. Whether Canada would decline to prosecute in circumstances analogous to this case will make an interesting challenge for law enforcement. These developments are worth watching.