June 22, 1926 (15th Parliament, 1st Session)


Henry Herbert Stevens

Conservative (1867-1942)

Hon. H. H. STEVENS (Vancouver Centre):

Mr. Speaker, I certainly appreciate the brevity of my hon. friend's address. As I followed him closely I think one might say that he was conscious that there had been serious dereliction of duty on the part of public men, and he entered a plea, coming, I am sure, from the kindness of his heart, that the House and the public should deal leniently with those who may have been guilty of some offence. As to the goodness of his heart I am sure we all agree. On the other hand, Mr. Speaker, I think at times we have a duty to perform when it is wise not to consult so much the heart as it is to consult what is right and what is fair to the country.
On February 2, last, I addressed the House charging maladministration of the Customs and Excise department, whereupon the House appointed a special committee to hold an investigation, or rather more correctly speaking to investigate the administration of the Customs and Excise department. For over four months, that investigation has been carried on and the report now offered to the House for its consideration represents the findings and recommendations of the committee. I feel, Sir, that for the stand I then took I am now warranted in claiming absolute vindication; the charges have been amply

Customs Inquiry-Mr. Stevens
justified and a state of affairs ha3 been revealed which demands the stern attention of this House.
Before proceeding, I wish to pay tribute to Mr. R. P. Sparks and his associates whose untiring efforts during the two years preceding the opening of the investigation contributed so largely to bringing to the attention of the government these serious abuses. Canada owes much to Mr. Sparks for his devotion to the task and his great public service. He and his associates for eighteen months acted with impartiality and without political bias. It was only when it became abundantly clear that the government did not intend to act that Mr. Sparks appealed to me to secure for him a public inquiry. The task was not a simple one, and entailed much anxiety and labour. I had hoped that with the presentation of the report my work would have been finished. However, such is not the case, and I have one other duty to perform, which I cannot allow to remain undone. It is never a pleasant task to attack those with whom one is in constant contact. One's motives will no doubt be misjudged and attacked. Nevertheless, as the one responsible for the launching of this inquiry, it is my duty to finish it to the last detail.
During the opening weeks of the investigation, there were some clashes of opinion, but latterly the members of the committee worked in comparative harmony, and, as the report indicates, sought earnestly to produce to the House some constructive and remedial measures.
The chairman the hon. member for St. Henri (Mr. Paul Mercier), one of the younger members of the House, had a difficult and onerous duty to perform. He presided over each and all of the 115 sittings of the committee, and I trust that the experience he has had and the knowledge he has gained will do much to equip him for larger fieldls of service and usefulness to the state.
With the report I am in accord with one reservation, namely, the failure of the committee to report a finding on the evidence referring to the conduct of the ministry. Its neglect to do so, if not now corrected by the House, indicates a likely continuance of those practices which so largely contributed to the collapse of the department. It is but fair to the committee to say that this failure is not due to absence of evidence, but to inability to agree to a formula which would adequately meet the case. This discrepancy I propose to remedy by offering to the House an amendment to the motion for the adoption of the report.
The vital part of the report may be apportioned into two main divisions:

That which refers to "findings", and that which makes "recommendations". A brief outline under the heading of "findings" would be as follows:-
1. That the Customs and Excise department had been degenerating in efficiency for some time, and during recent years at an accelerated rate, and that the Hon. Jacques Bureau had been derelict in his duties as a minister.
That is one of the findings and the one I shall deal with first. As to the ex-minister, I have this to say. He perverted his opportunities of service to the state to the distribution of indulgences to his favourites. The vast revenues of the country collected by this department and amounting to over 1300,000,000 annually, which he ought to have jealously guarded, were left unprotected the easy prey of mendacious individuals. High officials with a long career of faithful service to the country were debauched by him and must now pass out of the picture under a cloud more or less of shame.
His conduct and the conduct of these officials influenced, debased, I might say, by him as the responsible head, were well known to the Prime Minister and his associates. Yet he was allowed to resign his seat and his position as minister and he was rewarded with a seat in the Senate while his puppets have been driven out of the service in shame.
I pause here to emphasize this point of the knowledge of the Prime Minister and his associates of the general condition of the department for many months, indeed I think I am safe in saying for a year before this investigation started. I will read certain extracts from the evidence. For instance I have under my hand a letter written by Mr. Sparks to the Right Hon. W. L. Mackenzie King, Prime Minister of Canada, under date of February 4, 1925, just a year lacking two days before I m'ade my statement in the House and more than a year before the investigation started. I will not read the whole letter, but I will read a couple of extracts:
Dear Sir:
Some months ago-
That is some months prior to the date of the letter.
-a large representative deputation waited upon you and members of your cabinet pointing out that smuggling and under-valuation for duty purposes were causing an immense loss of revenue and serious interference with the business of legitimate traders and manufacturers.

Customs Inquiry-Mr. Stevens
Then there is a long recital of certain specific instances. Thr letter concludes with this paragraph:
It is respectfully submitted thet the conditions herein set forth are sufficiently well known to the government and to its departmental officers and the requested forms of relief so necessary and reasonable as to justify the government to take immediate action by instituting the required departmental changes and submitting to parliament bills providing for necessary legislative enactment. . . . It is respectfully submitted that a parliamentary committee should be appointed immediately to inquire into the necessity of departmental and legislative changes.
On the 21st February this was followed by another letter dealing with the acquittal of the notorious Bisaillon in Quebec. This letter is addressed by Mr. Sparks, as chairman of this businessmen's organization, to the Prime Minister:
The acquittal by the Quebec courts of J. E. A. Bisaillon, the chief preventive officer at Montreal, who was charged with conspiracy, creates a new situation in reference to the prevention of smuggling. I think you should be in possession of certain information which we have in reference to this matter, as he is the key to the whole smuggling situation. . .
Might I again repeat what I think I have said to you before that, from the standpoint of loss of revenue, I think the smuggling business is second only to the loss occasioned from the operation of the Canadian National railways.
Warning the Prime Minister, urging him in conference, confirmed by letter, of the necessity of changes and remedial measures. On February 26, there is a letter stating:
After four months' investigation by a staff of trained criminal investigators, we are convinced that at least half of the smuggling now going on could be prevented within a month iby an energetic policy on behalf of the department, and further that, with necessary amendments to the act-
Which were given by this House, endorsed by this side,
-90 per cent of the smuggling could ultimately be prevented. Might I further express the opinion that smuggling is increasing at an alarming rate, rather than decreasing, as the minister states.
Thus even in February it was brought to the attention of the minister and his colleagues that these were the facts and it was pointed out that the responsible minister at the time was neglecting his duties in that respect. The letter goes on:
I took up with the Minister of Customs the question of the continuation of Mr. Bisaillon, as chief preventive officer at Montreal. I pointed out that the business community had lost confidence in Mr. Bisaillon. I had with me at that time a number of reports on this man, one of which I read to the minister.
And so forth. On March 20, 1925, there was a letter reviewing the situation at length and supplying the Prime Minister with a tabulated list of offences of this individual. The reason I mention this is because around

him at the time as chief preventive officer at Montreal, which was the pivotal point then, centred the weakness of the department. This letter addressed to the Prime Minister on March 20, 1925, reads:
In reference to the case of Bisaillon, there are certain facts, some of which are set out below which form a part of the public records and which, if they are not already known to the Minister of Customs and Excise, confirmation of them can easily be obtained. In our opinion these facts of themselves furnish sufficient evidence to warrant the immediate dismissal of Bisaillon.
Then it recites the oase of Rex vs. Lortie, the Tremblay barge case and a number of others. Then we have the following paragraph :
We would respectfully submit that the facts as above set out, together with information conveyed to you in a confidential memorandum, are sufficient of themselves to call for this man's dismissal, and, over and above all this, is the fact that this man has lost the confidence of the business community of Montreal and, as a consequence, his usefulness is at an end.
This was acknowledged by a letter dated April 16, 1925, and addressed to Mr. Sparks, from Mr. E. J. Lemaire, Olerk of the Privy Council, in the following words:
Dear Sir:
I am, iby direction of the Right Hon. the Prime Minister, to acknowledge your letter of the 20th instant with reference to Mr. J. A. E. Bisaillon, and to say that the same will receive due consideration.
I repeat what I said a moment ago that the conduct of the minister of the department, the laxity of his administration and his countenancing of evil-doers were well known to the Prime Minister and his colleagues long ago.
The second finding of the committee to which I desire to refer is in somewhat the following terms:
The committee also found that not infrequently important decisions have been made -which were repugnant to the facts, resulting in serious losses to the revenues, as well as placing a premium on dishonest practices.
The chairman of the committee (Mr. Merrier, St. Henri) who took his seat a moment ago, as I intimated, made a plea for toleration of public men who were derelict in their duty. Here we have the finding of the committee in these terms, that the minister, or officers of the department under the influence of the minister, under pressure from the minister, made findings, made decisions affecting the public revenue, affecting the treasury of this country, which were repugnant to the facts, to use the words of the report itself. Under this heading would come a discussion of " political expediency." I do not intend to enter into that this afternoon as I understand the hon. member for Kent (Mr. Doucet) and the hon. member for West

Customs Inquiry-Mr. Stevens
Hamilton (Mr. Bell) will deal at length with this phase of the question. But losses and discrepancies as disclosed by the investigation could have been effectively controlled if the existing statutes had been properly enforced by conscientious officers uninfluenced by ministerial interference. I pause to emphasize that. In other words it was not the legislation that was wrong; it was the administration that was at fault.
Another decision deduced from the evidence is that motor thefts and smuggling are intimately associated. Case after case was submitted which showed that professional auto thieves found in the Customs department a haven of refuge wherein to cover up their nefarious traffic. Of that, Sir, there can be no question. Scores of such cases were brought to light until the public grew weary of the monotony with which they were unearthed, and the question was asked, when will the end of these auto cases be reached? The purpose in bringing them forward was to try if possible to drive home to the ministry and to the members of the House on what a wholesale scale this business was being carried on. It was a thoroughly organized traffic, and the officers of the department, as well as the department itself, by its actions and by its rulings, connived at or participated in it.
In the fourth place, it was demonstrated that wholesale commercial smuggling was being practised on an extensive scale and that customs and excise duties and sales taxes were being systematically evaded. The audits, admittedly very incomplete, disclosed losses subject to possible recovery of a sum approximating $1,750,000. This is in respect of cases regarding which there is now to hand, and available to the House, such evidence as would warrant immediate action being taken for the recovery of the amount stated. 1 would point out here that the ground covered by these audits was undoubtedly but a fragment of the area which ought to be covered and which in my opinion must be covered if justice is to be done. The ex-Minister of Customs, the Minister of Marine while acting minister (Mr. Cardin), and the present minister (Mr. Boivin) have all displayed a callous indifference to the rights of the public treasury, but a touching solicitude for the liberty and well-being of defrauding offenders.
I come now to the fifth point: I refer to a practice which has reached tremendous proportions, namely, the smuggling of liquor into the United States. It was found that liquor smuggling from Canada into the United States was a serious incentive to return
smuggling of other goods into Canada, and that this Dominion has become a mere conduit through which a constant stream of liquor flows into the United
3 p.m. States. Much of this liquor pays no revenue into the treasury of either country and is admittedly unfit for human consumption. At this point I wish to refer briefly to the treaty between Canada and the United States. On February 2 last when discussing this phase of the question I gave expression to a sentiment similar to that which I shall now voice. With the laws of the United States I have nothing to do; they are not my business, nor is it my duty to criticize or to approve of them. But, Sir, when the Dominion of Canada enters into a solemn obligation with the United States, then I submit, altogether irrespective of any opinion I may hold of the laws of that country, that it is the duty of the administration of this country to see to it that the terms of that treaty as well as the spirit of it are honoured. I will not read the treaty in toto; I will quote merely the opening paragraph or a portion of it. It declares that this Dominion and the United States-
-being desirous of suppressing smuggling operations allong t/he boundary between the Dominion of Canada and the United States of America, and of assisting in 'the arrest and prosecution of persons violating the narcotic laws of either government, and of providing as to the omission of penalties and forfeitures in respect to the carriage of alcoholic liquora through Alaska into the Yukon Territory-
-have agreed to certain things. In other words, the three subjects of agreement in this treaty are first, the suppression of smuggling; secondly, the prevention of, and the prosecution of those engaged in, the narcotic traffic; and, thirdly, the carriage of liquor into the Yukon Territory. The treaty is dated June 6, 1924. There is in it a clause which I know some will contend is ineffective and renders the treaty not binding on either country in so far as the smuggling of liquor is concerned. I had better read this clause inasmuch as it will probably be advanced as an excuse for the failure of the government to observe the spirit of the agreement. Article II provides:
The high contracting parties agree that clearance from Canada or from the United States shall be denied to any vessel carrying cargo consisting of articles the importation of which into the territory of Canada or of the United States, as the case may be, is prohibited-
As properly pointed out by my hon. friend from Vancouver North (Mr. Donaghy) ir-the committee, had the article stopped there it would have been effective. But it goe! on:
-when it is evident from the tonnage, size and genera character of the vessel, or the length of the voyagt

Customs Inquiry-Mr. Stevens
and the perils or conditions of navigation attendant upon it, that the vessel will be unable to carry its cargo to the destination proposed in the application for clearance.
It is argued that in view of that qualification Canada is justified in giving clearance to vessels known to be carrying contrabrand cargoes into the United States. My submission, however, is that Canada as a country, and this parliament as well, both understood and do understand now that this treaty was intended for the suppression of the smuggling of prohibited goods from one country into the other. That is the gist of the treaty, shorn of verbiage; and I believe that this administration, and the officials under the administration, ought to be condemned without any measure of consideration for deliberately conniving at the violation of the general terms of that treaty.
I should like now to illustrate the manner in which this traffic is carried on. Vessels laden with liquor would clear for some foreign port, such as Nassau or St. Pierre-Miquelon, but before such clearance the exporter, under the Canadian regulations, would have to deposit a bond equal in value to double the duty assessable on the cargo. That bond is not to be released unless the goods so exported shall have been duly landed and entered for consumption or for warehouse at the point named in the bond. This has been one of the most prolific sources of evasion of the law. I cannot speak too strongly on this point. In my opinion the administration- and in this I include the officers of the department as well as the heads-are either too simple to hold office or else they are deliberately conniving at this traffic, which is contrabrand so far as our friendly neighbour to the south is concerned. And it is beneath the honour and dignity of this country to be engaged in, or to connive with others who are engaged in, such a pursuit. One would expect that when the government exacted such a bond it would demand that it be respected. In practice, however, it is consistently evaded. False landing certificates are tendered and accepted and the bonds are released. Not only is it a fact that liquor, instead of reaching its ultimate point of destination, is diverted to the United States, but there is a strong presumption that a substantial portion or at. least some portion of this liquor, upon which no customs or excise duty has been paid, finds its way back into Calnada. This, I think, is the conviction of every member of the committee so far as this traffic is concerned, both on the Atlantic and on the Pacific. These vessels secure from the department a clearance for Nassau or Mexico;

they leave the Canadian port and when they get outside they either produce an absolutely false landing certificate or, in the case of St Pierre-Miquelon, it may be genuine. Then the liquor is bootlegged back into Nova Scotia, Prince Edward Island or New Brunswick on the Atlantic and into British Columbia on the Pacific. All of it does not come back, because the great market is Rum Row or Liquor Lane, as they call it on the Pacific, but a portion finds its way back into Canada and pays no revenue to the country. To effectively investigate the possible losses from such cases will require a searching examination of the books and records of the firms concerned as well as some clever police work to check up the documents tendered, as to whether or not they are genuine. In other words this inquiry, while it uncovered certain facts, has not by any means succeeded in discovering the magnitude of the losses to the revenue of this country through this traffic as well as other branches of a different character.
There was another method disclosed by the evidence as followed by the notorious Cooper, 'Hushion and George gang of bootleggers, by shipment on the Bernard M. and Frank H, as well as other vessels; these, however, were the two vessels most frequently mentioned. In this case cargoes of liquor would be billed from a foreign port via the St. Lawrence and Great Lakes to Port Arthur, and thence by rail and ship to Japan. That sounds like a decent traffic, simply passing through Canada; that was the pretence, but what are the facts? The facts are that such cargoes would be passed through the Lachine canal and there given a clearance for Port Arthur, but the vessels did not reach Port Arthur. These goods were landed somewhere on lake Ontario or lake Erie east of Windsor, and not a dollar of revenue came into the public treasury from the admission of these goods. I find, Mr. Speaker, that the evidence discloses at least four vessels carrying from six thousand to ten thousand cases in this way; there were many more but we had before us definitely these four. Had these vessels been compelled to pay duty on their cargoes it would have meant from $450,000 to $720,000 in revenue to the public treasury.
What guarantee did the minister or the department have that the exchequer was properly guarded? They only had the word of a bootlegger, a man called Harbert, and absolutely nothing more. I ask this House to consider this question for a moment, and we will put it in a little different way. Let us suppose some business man, some merchant, sought to bring in a cargo of hardware,

Customs Inquiry-Mr. Stevens
or furniture, of groceries or drygoods, or any other class of goods legitimately handled, in bond for transhipment through Canada to Japan. These goods are brought down the Lachine canal and given a clearance for Port Arthur, but they do not arrive there; they are landed at some unknown point on the lakes, possibly in the province of Ontario, with no payment of duty. Would the department permit that merchant to carry on in that way? The answer is obvious. Then I ask the House why it is that those engaged in the liquor traffic should have a privilege which would not be granted or countenanced for one moment in the handling of other classes of goods. Why is it, Mr. Speaker, that the duty of the minister in the protection of the revenue of this country was satisfied with the word of the bootlegger who brought in the cargo? These are serious matters, and these are the things the House must face in connection with this inquiry.
Before going to another point I want to say that these few incidents I have mentioned are only a modicum of what one might bring forward to illustrate the magnitude of this traffic, but they do show a serious condition in connection with that class of business. I submit, Mr. Speaker, that it is high time for this unholy partnership between the government of Canada and a gang of bootleggers to be dissolved. And I have a word to say to the old established distilleries of Canada. We have here five or six old, well-established institutions which in the past, and I believe at present, claim that they carry on their business legitimately and within the law. Indeed, they pride themselves on it, but to those old-established distilleries as distinct from others of the mushroom type which have recently eome into existence I say that it is high time they ceased to sin by proxy, because that is virtually what they are doing. It is time these well-established firms recognized that they must keep genuinely and sincerely within the law and must not, by feeding their products out to law violators, enrich their coffers. I say this with all earnestness and sincerity; if they persist in dealing with such people they must expect to receive a measure of the public indignation which will be aroused.

Full View