June 23, 1926

LIB

Dugald Donaghy

Liberal

Mr. DONAGHY:

If there is any other charge in connection with this man which can be proved in the criminal courts, no one will stand up and say that proceedings Should not be taken against him. Nobody has any sympathy with Gaunt or his manipulations. I am not addressing myself to the question for the purpose of justifying any action of this man Gaunt. It is for an entirely different purpose that I have presented the true details of this transaction. It is to refute the accusation made by the hon. member for Centre Vancouver that the government had improvidently made a settlement with a man who, he alleged, owed this country $58,000 in duty.

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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

Hear, hear-duty and

penalty.

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LIB

Dugald Donaghy

Liberal

Mr. DONAGHY:

The evidence refutes that charge.

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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

No.

Customs Inquiry-Mr. Donaghy

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LIB

Dugald Donaghy

Liberal

Mr. DONAGHY:

My hon. friend says no. Mr. STEVENS: Absolutely no.

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LIB

Dugald Donaghy

Liberal

Mr. DONAGHY:

My hon. friend cannot follow the intricacies of the delicate manipulations of this man Gaunt-manipulations which I do not attempt to defend, but which apparently were within the four corners of the letter of the law.

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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

Perhaps I cannot follow the intricate circumlocutions of the legal mind.

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LIB

Dugald Donaghy

Liberal

Mr. DONAGHY:

Unfortunately for my hon. friend, however, the greatest court in the world is composed of legal minds. I wonder if the hon. member will suggest that men with legal minds should not sit in the courts to interpret the law.

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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

No, not at all, but they should be free from political bias.

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LIB

Dugald Donaghy

Liberal

Mr. DONAGHY:

Does the hon. member suggest our courts are afflicted with legal bias?

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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

No. I say they should be free from political bias.

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LIB

Dugald Donaghy

Liberal

Mr. DONAGHY:

We all believe our courts are free from political bias. That suggestion is gratuitous and unwarranted.

I now come to the consideration of conditions in regard to the Customs department which have existed from the time of confederation up to a year ago. The Customs Act as it has stood for years and years is based on this principle; that when an offender is caught smuggling goods into this country it shail not be the policy to prosecute him in the courts. That may seem rather singular. However singular as it may be, it has been the policy ever since the time of confederation. The standard policy of that department in cases of offences for smuggling has been to bring the matter up before the Minister of Customs and the Deputy Minister of Customs for consideration. That is in the statute which has stood for years. It was then left for the Minister of Customs to decide what punishment was to be meted out. To my mind that policy was wrong. Offences against the statute known as the Customs Act should be punished in the same way as offences against any other statute of Canada, namely by information in the court and a trial in court. The practice established by that statute and carried on since confederation, which sent this matter up for consideration before the Minister of Customs, was unwise. It resulted in the minister being importuned, perhaps, to minimize and ameliorate offences. Out of that statute and that

practice which has existed since confederation has grown the abuse concerning which we have heard so much in the last four or five months. The granting of favours by the minister on the importunities of members of parliament on both sides of the House, on the importunities of influential men in the country, on the importunities of friends and relatives of those caught in the toils, was a great strain upon any Minister of Customs. It is a strain that it is unwise that he should be subjected to. It is out of that practice that these evils have grown as the accumulation of years whereby favours have been granted by one Minister of Customs after another on the importunities of members of the House of Commons, members of the Senate and other influential men in this country. In saying that I am not putting forward any excuse for any weaknesses that Ministers of Customs may have shown in the past, but it is quite proper that I should call the attention of the country to the causes in order that we may seek the remedy.

That being the case, we find that in 1924 a large and influential group of business men from various cities of this country were brought together and formed into an association called the Commercial Protective Association, Limited. Their object was to establish a clearing house for procuring information regarding smuggling. They approached the government. The Minister of Finance (Mr. Robb) lent them his best investigator, Inspector Walter Duncan. Within a year they had accumulated a vast amount of useful information. In the session of 1925 they came before this government and informed them that as a result of the investigations they had made and the information they had acquired, it was desirable that the lawr, as I have indicated it stood since confederation, should be repealed and that an amendment should be introduced during that session to force the trial of offenders into the courts of justice instead of sending them up to entreat the Minister of Customs. The government gladly accepted the suggestions of that group of business men. That legislation was introduced last session and it became the law of Canada on the 27th June, 1925.

Under that law a dividing line is drawn making two classes of offences. First of all if a man is caught coming back from New York with a new hat of the value of ten dollars, he is not ordinarily arrested under this act. That is a case which may be settled by the department. He may be made to pay double duty on the hat or something like that. If a very severe penalty were

Customs Inquiry-Mr. Donaghy

provided by law for an offence of that kind the people would defeat the law. If a man is importing an article under the value of $200 he is not necessarily arrested and sent to gaol; but if goods amounting to $200 or over in value are being brought into this country by a man, he commits an indictable offence, a criminal offence, for which he must be prosecuted, for which he is liable to arrest and imprisonment. He receives a preliminary hearing before a police magistrate. If the evidence is sufficient he is sent up for trial before the assize courts of this country, and he has the option of being tried by a jury if he so desires. The consideration of cases of that kind no longer rests in the discretion of a Minister of Customs; they go where they belong-before the judges and the courts of this land. To that enactment this government lent its full support last session.

I am going to give the House a little of the history leading up to that. On April 8, 1925, the Commercial Protective Association wrote to the Prime Minister of this country. This was at the time when this bill was before the House. The letter contains this extract referring to the amendment to the law making it an indictable offence to smuggle anything over $200 in value;

While these suggested amendments may appear drastic,

I would like to point out that legislators have never before been called upon to deal with such a situation. The condition exhibited by the United States, a nation with about 16,000 miles of border or coast line, along practically all of which smugglers (commonly called bootleggers) by the hundreds of thousands are endeavouring .to evade the laws of the country, created a situation entirely unprecedented in the history of the woifld. Smuggling on this continent has become a huge industry. Along the international border between Canada and the United States thousands of men are making their living by illicit trade.

This is signed by the Secretary of the Commercial Protective Association, Limited Those were strong representations that were made to the government and the government gladly accepted them in its desire to increase the efficiency of the revenue collecting department of this country. That act became law at the end of June, 1925. The Toronto Board of Trade wrote the following letter to the Prime Minister on the 13th July, 1925:

Right Hon. W. L. Mackenzie Kino,

P.rime Minister, of Canada,

Ottawa, Ont.

Sir,-On behalf of the executive and council of the Toronto Board of Trade, I desire to express appreciation of the action of the government in introducing legislation at the recent session increasing the penalties for the smuggling of goods into Canada and including in the estimates a substantial sum to enable the preventive service to be so strengthened and improved as to be able to cope with this illegitimate traffic.

.

We are also gratified that the House of Commons and Senate have accepted the government's recommendations and that the new law is now in force.

You will remember that a deputation from this board waited upon you and your colleagues in the cabinet last fall and discussed the seriousness of the smuggling situation with you. You then expressed the desire of the government to do everything in its power to combat the inroads which the smugglers were making into the legitimate trade and revenues of the country and you welcomed the co-operation to this end of an organization of business interests which it was then proposed to form. Acting on this assurance, the members of this board comprising the delegation organized the Toronto branch of the Commercial Protective Association. We were very pleased to note from your remarks in the House with respect to the proposed new legislation that you appreciated the vast proportions of this traffic and the need for drastic action. We have been in dose touch with the association's work and it has been a great pleasure for this board to learn that the government has co-operated to the fullest extent with the result that adequate machinery to deal with the smuggling menace will, we undersand, shortly be in operation. We are informed the fact that the new penalties are already in force has had a very deterrent effect upon the traffic and we sincerely hope that in connection with the reorganization of the preventive service which is now under way, the dominant note will be the strict enforcement of the Haw in the interests of the lawful commerce of the Dominion and an increased national revenue which in turn will be reflected in an improvement in economic conditions generally.

We congratulate and thank you for your efforts in-the solution of this problem and assure you of the continued co-operation and support of this board in curtailing the smuggling traffic with the add of the new powers now available, I am,

Yours vary truly,

(Sgd.) S. B. Gundy,

President."

Now I come to a very interesting question; Did the new Minister of Customs (Mr. Boivin) who was appointed last fall, following that letter of congratulation from the president of the Toronto Board of Trade, immediately set about making a cleanup of smugglers and crooked officials in the Customs department? That is the pertinent question under consideration to-day, and I shall consider the answer to that question. I will give you dates and facts. On September 5, 1925, the new Minister of Customs was sworn in. He did not take over the active duties of his office until October 31, and inside of fifteen days he had an interview with the Minister of Finance (Mr. Robb). Was he acting quickly enough? The Minister of Finance was told by him that he had heard alarming rumours regarding the preventive service in Montreal, and the Minister of Customs mentioned the name of Bisaillon. He said, "I want an investigator but I am at a loss where to turn to get one." The Minister of Finance replied: "I have an excellent man who has been in the service of the Finance department for many years. I will lend him to v<*" " The offer was

Customs Inquiry-Mr. Donaghy ,

accepted and Inspector Duncan was directed to report to the new Minister of Customs. At that time Inspector Duncan was finishing some work he had been doing for the Department of Finance and it was ten days or a week before he was able to complete it and undertake the investigation which the Minister of Customs was anxious to have him carry out. On November 27 Inspector Duncan was in the office of the Minister of Customs where he received instructions to begin immediately with an investigation for the purpose of cleaning up all smugglers and crooked officials in the Department of Customs. Three days after that he left for Montreal and the day following his departure he was examining witnesses under oath. In his possession he had a writ issued by the Exchequer Court of Canada empowering him not only to compel witnesses to give evidence but also to break open doors, locks, safes and to seize books, records and documents-the most extensive powers that could be delegated to anyone in this Dominion. This is what the Minister of Customs armed his investigation officer with. Was that action prompt enough? Was it efficient enough? Inspector Duncan was told by the minister to secure evidence against Bisaillon, and in ten days the inspector was back with that evidence. Is that expeditious enough? The minister then observed, "I cannot go before the cabinet with a verbal statement. You must set down your findings in writing." The inspector did so; he committed his report to writing. The Minister of Customs then asked the Prime Minister (Mr. Mackenzie King) to call a meeting of the cabinet and this was done immediately. An order in council was then passed for the dismissal of Bisaillon. This was necessary inasmuch as no civil servant may be dismissed otherwise. That order in council was passed on December 15. Again I ask, was that action quick enough to suit hon. gentlemen? After Bisaillon was dismissed Mr. Duncan was called in again, and given this order by the Minister of Customs: "Proceed with your work of investigation. Spare no one, no matter how high his rank." That is sworn to by Inspector Duncan in his evidence given before the committee and, as well, by the Minister of Customs in his testimony: "Spare no one, no matter how high his rank." In face of that will any hon. gentleman rise in this House and impugn the honour, the integrity or the efficiency of the new Minister of Customs?

Was the order of the new Minister of Customs obeyed? By the eighth day of February, after two months of consecutive work, the minister's investigator had examined over forty witnesses under oath and had seized various documents and records. He

had an expose of fraudulent and corrupt officials of the government which was simply bewildering. I shall show you some of the things that were exposed by the Minister of Customs through his agent. They comprise practically everything that was brought out before the Customs committee. Before that committee ever met, before it heard a word of evidence, practically all of these charge? of corruption, maladministration and defrauding of the revenues had been brought out by the order of the new Minister of Customs and were in writing, sworn to. Let me point out some of the things that were exposed. It was upon the record of the evidence which the inspector had secured under the direction of the Minister of Customs that we proceeded, and we called forty or more witnesses who had already been examined in his investigation. We went on repeating the same story, getting it all told the second time, for weeks and weeks.

Now what was exposed by the new Minister of Customs through his investigator? It will startle some of you to discover how wonderfully extensive the list is: (1) Bisaillon; (2) Officer Duval; (3) smuggled and stolen cars from the United States; (4) Officer Giroux; (5) The Lortie-St. George case; (6) Inspector R. P. Clerk, of gauger's whiskey fame; (7) The civil service commissioners who resigned under the circumstances disclosed in their evidence-the carrying of whiskey from the gauger's office to the Deputy Minister of Customs, to the Hon. Jacques Bureau, Minister of Customs, and to the two civil service commissioners. That was all brought out under the investigation ordered and carried on by the direct authority and instructions of the Minister of Customs whose conduct is now a matter of inquiry before this House. Further, there was brought out in the investigation ordered by the minister the Gaunt case, the barge Tremblay case, the theft of goods from customs bond and the Dominion Distilleries affair. Is not that enough to occupy our attention for some time?

Now, while this investigation was proceeding there was no beating of drums, the minister was not proclaiming from the housetops what he was doing, and the country did not know the service he was rendering. The members of this House, Mr. Speaker, with one or two exceptions, were ignorant of it on the 2nd day of February when the hon. member for Vancouver Centre made a very remarkable speech in this House, concerning which I have something to say. What was the result of that speech? The arm of the new Minister of Customs, through his investigator, was

4886 COMMONS

Customs Inquiry-Mr. Donaghy

paralyzed-Duncan was superseded by a committee appointed by this House. I repeat, Sir, that the arm of the minister, which had been so powerful in smiting the enemy, was paralyzed by the action of the hon. gentleman. We did not know that we were paralyzing the very efficient arm of the law when we voted on that resolution, and I am quite satisfied that many hon. members are aware of this now for the first time. Further, I say this, and I say it deliberately, that the statements and charges made by the hon. member for Vancouver Centre on February 2, last, were based on information which had already been gathered by the agent of the new Minister of Customs in that investigation, and before I sit down I think I shall be able to convince this House that a great deal of that information was revealed to the hon. member to enable him to make his speech, the facts which he then submitted as grounds for ordering an investigation being the facts that had been brought out by inspector Duncan under the order of the new Minister of Customs. I should not mind that at all if in his address and in the debate that followed the truth had been exposed and this House had been told candidly, as it had a right to know, that for two months the new Minister of Customs had been conducting a most vigorous campaign against corruption in customs matters, and that he had brought out all the evidence upon which the hon. member for Vancouver Centre had based his speech. But this information was concealed from the House on that occasion. Very few hon. members outside of the minister and the hon. gentleman from Vancouver Centre knew those things. Now that the motion of criticism of the actions of the new minister is before the House the opportunity should not be let pass to give him credit, even though it is somewhat late.

I say there is reasonably strong ground to suspect that the hon. member for Vancouver Centre was furnished with the information which Inspector Duncan was getting for his minister, and I am going to read 4 p.m. some documents in proof of what I say, and then leave it to the judgment of hon. members as to whether or not I have convinced them. I now turn to the motion placed on the order paper by the hon. member on January 20 last.

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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

May I interrupt my hon.

friend a moment? I can save him a lot of trouble by telling the House that I had a good deal of the information, but I did not get it from Inspector Duncan. Certainly I had information, masses of it, or I would not have

presented it to the House as I did on February 2.

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LIB

Dugald Donaghy

Liberal

Mr. DONAGHY:

Mr. Speaker, I thank

the hon. gentleman for his admission. I now ask him, why did he not take this House into his confidence on February 2 when he launched those charges against the new Minister of Customs, why did he not give him credit for the work he was proceeding with and the good he was doing?

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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

My hon. friend asks me

a question; I will answer him very frankly. Simply because the minister was not carrying out what the hon. member insinuates. As to the dismissal of Bisaillon, it was just simply a little stage play because the minister knew my resolution was about to be placed on the order paper. That is why.

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LIB

Dugald Donaghy

Liberal

Mr. DONAGHY:

Mr. Speaker, I am more than surprised at the extreme partisanship shown in that answer. Nothing the new minister could do, no matter how useful in cleaning up his department, can be construed as good by the hon. gentleman from Vancouver Centre., I now proceed with my proof. On January 20 the hon. member for Vancouver Centre put this motion on the order paper:

For a copy of report of Walter Duncan on the ad minis tra.tion of the customs service at the port of Montreal made during the month of December, 1925, together with a copy of all testimony and documents in evidence received by the said Mr. Duncan-

And hon. members will note these words:

-also interim report covering eleven definite charges.

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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

That was before I made

my speech, by the way.

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LIB

Dugald Donaghy

Liberal

Mr. DONAGHY:

At that time the interim report was made confidentially to the minister by his confidential investigator respecting Bisaillon for the purpose of having him discharged. It' had not been published yet, although action had been taken. Now I propose to show that the hon. member for Vancouver Centre secured secret information which should not have been given out beyond the minister himself. I turn to the report itself to show that, strange to say, this confidential document contains exactly eleven definite charges. The hon. member for Vancouver Centre either knew what was in the report or he is the best guesser in this whole Dominion. Now I turn to the report itself at page 1453 of our evidence, and I will be very glad indeed to pass it to any hon. member who doubts my statement. It is here, numbered from 1 to 11; anyone can see the record.

Customs Inquiry-Mr. Donaghy

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CON

Henry Herbert Stevens

Conservative (1867-1942)

Mr. STEVENS:

No one doubts it; why all the excitement?

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LIB

Dugald Donaghy

Liberal

Mr. DONAGHY:

The hon. member does not yet see my point. I am charging him with lack of candour in his failure -to tell the truth to this House, the whole truth, as to what the new Minister of Customs had been doing to clean up the officials of the Customs department who were guilty of corruption.

Mr. 'STEVENS: If my hon. friend would permit me, on January 20 by his own recital I placed on the order paper of this House a resolution calling for all this information with which he is now dealing. That was two full weeks before I made the speech in which he accuses me of not being frank. All this information was requested and could have been laid on the table by the minister two weeks before my speech was delivered.

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June 23, 1926