Ottawa crackdown on P.E.I. immigration scheme

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PEI Legislature

At first, it was a quiet, bureaucratic struggle, but by 2008, the gloves came off as Ottawa forced an end to P.E.I.’s Immigrant Partner program.

The King's Investigative Workshop – May 8, 2012

The Prince Edward Island government resisted years of efforts by Ottawa to have it change an immigration program that federal officials increasingly saw as a threat to the integrity of the country's immigration program.

The plan allowed foreign nationals to obtain expedited entry to Canada by making a payment, some of which went to a business in Prince Edward Island.

PEI Legislature
Province House in Charlottetown, Prince Edward Island (photo by King's Investigative Workshop)
Editor's note: This is one of several stories on P.E.I.'s controversial immigrant partner program, written in partnership with the King's Investigative Workshop, a group of journalism students from the University of King's College in Halifax.
To see the students' complete investigation, including a searchable database of Island corporations, go to: immigrate.kingsjournalism.com

Federal officials eventually took the unprecedented step of using its regulatory power to force a shutdown. This led to a showdown in the spring of 2008 as P.E.I. raced to nominate as many immigrants as it could before the new regulations took effect, while federal officials became increasingly alarmed at what the sudden surge would mean for processing times and due diligence in selecting applicants.

By the time Ottawa forced the shutdown, P.E.I. was nominating so many immigrants from China that Island nominees accounted for 88 per cent of all provincial nominees applying though Canada’s mission in Hong Kong.

Much of what went on between the two levels of government was largely kept confidential, but journalism students at the University of King’s College in Halifax pieced together a picture by reviewing public records, reading legislative transcripts and speaking to officials who were involved.

Co-operation

The immigrant partner program was born out of an agreement signed between P.E.I.’s Progressive Conservative government and Jean Chretien’s federal Liberal counterpart in 2001.

Similar to agreements with other provinces, it gave P.E.I. new rights to nominate foreign nationals for entry into Canada. These “nominees” were to be selected to meet specific labour market needs and to contribute to economic and industrial development.

Ottawa retained responsibility for ensuring nominees were otherwise admissible to Canada but promised to expedite the processing of their applications.

But when Lt.-Gov. Leonce Bernard rose in the P.E.I. legislature to read the 2002 speech from the throne, the part about meeting labour market needs wasn’t even mentioned. Instead, the focus was on money.

“The Ministry of Development and Technology will aggressively market a new provincial nominee program to potential immigrants,” Bernard read. “The objective of this program will be to make available investment capital to new and existing Island businesses.”

Responsibility for running the program was given to a Crown corporation called Island Investment Development Inc., which was already responsible for approving investment of P.E.I.’s share of money from the federal immigrant investor program.

But Ottawa didn’t want P.E.I. to create a provincial carbon copy of that program, partly because it felt those who simply invested money in hope of a return would have little incentive to remain in the province that nominated them, and partly because it would undermine the federal program, which makes immigrants wait much longer for approval and requires a larger investment.

Officials didn’t want a provincial nominee program, with its promise of speedy entry into Canada, to be a way for immigrants to bypass the normal channels for general immigration to Canada. But P.E.I.’s program became exactly that, and offered a cut-rate price of as little as $105,000.

Federal officials began tightening the provincial nominee program rules almost from the day P.E.I.’s program started up.

New immigration regulations, introduced in 2002, following the implementation of the new federal Immigration and Refugee Protection Act, added restrictions that were intended to preclude what are called “passive” investments by requiring that immigrants be actively involved in the companies in which they invested and disallowing any program that allowed an immigrant to get his or her money back after a period of time (as P.E.I.’s did, at least in theory).

But relying on a federal Justice Department memorandum, P.E.I. took the view that being a member of the board of directors of a company was sufficient to make the immigrant active in the affairs of the business.

“Basically, we had a legal opinion to say that this is not passive investment because the immigrant is taking a risk; they’re on the board of directors,” said Beverly McQuillan, one of the architects of P.E.I.’s program and its first program officer.

P.E.I. had found a loophole that it would take federal officials five long years to close.

Thousands of immigrants would be nominated by P.E.I, and with a great many having no tangible connection to the Island, many would leave for other parts of Canada (link to main) or even return home part of the time. Some never set foot on the Island. P.E.I. had created the very back door to Canada that federal officials had so wanted to avoid.

Robert Vineberg, a former director general of the Prairies and northern territories region for Citizenship and Immigration Canada, is now a research fellow with the Canada West Foundation, a think-tank, and has written one book and edited another on Canadian immigration policy.

Vineberg agrees that an issue with investor-type programs such as P.E.I.’s was that immigrants might simply accept the investment as the cost of getting into Canada, before moving on to somewhere else.

“In order to have quality, you have to limit the numbers, and P.E.I. had the wrong incentive. They were looking for lots of money instead of having a few more immigrants who would contribute to the economy of the province.”

In September 2003, during meetings of a federal-provincial working group that oversaw the nominee programs, Ottawa proposed changes to the provincial nominee regulations to further tighten up the language around passive investment and slam that back door shut. But P.E.I. was opposed to the changes, which it saw as being directly targeted at its program.

Further meetings followed, but the issues were not resolved, and P.E.I. kept running its program pretty much as it wanted.

Federal officials take pains to point out that the design of each nominee program is completely within that province’s purview. In fact, immigration is unusual in that in the Constitution Act, jurisdiction is shared between Ottawa and the provinces. The only proviso is that in cases of conflict, Ottawa prevails.

In many provinces, nominee programs were focused on filling labour requirements. P.E.I. was almost alone in creating a program that seemed indifferent to whatever the immigrant would do after coming to Canada.

“Other provinces, too, were concerned that P.E.I.’s actions would call into question the integrity of the entire provincial nominee program across Canada,” Vineberg said.

“Many provinces have taken their responsibilities with respect to immigration very seriously and have developed effective controls, and they were worried that the reputation of their nominee program would be tarnished by P.E.I.’s behaviour.”

The province’s opposition to the changes resulted in negotiations stalling.

For the next five years, the working group, made up of representatives of all of the provinces with nominee programs, as well as federal officials, met regularly trying to move the proposed amendments forward.

But challenges “had to be addressed on several occasions ... resulting in the lengthy consultation period,” according to a regulatory impact analysis that accompanied the regulations when they were finally published in March 2008.

At this point, only P.E.I. had such an immigrant investor stream and they were the most vocal in their opposition to the federal restrictions.

Although quick to point out that no laws were being broken, the officials said Ottawa was concerned that P.E.I. had lost sight of the immigrants providing the capital for those investments. They questioned what business P.E.I. was in, welcoming and integrating immigrants into society or going after investment capital.

In May 2007, the Liberals under Robert Ghiz defeated the Progressive Conservative government. Four months later, in September, after four years of talks that had produced only one small change to the proposed regulations, Ottawa formally notified P.E.I. in September 2007 that its nominee program would be in violation of the new rules when they came into effect.

The formal regulatory notice followed in March 2008, and the new rules were to come into force in September.

“The purpose of these regulations was to prevent abuse of the (provincial nominee program) via passive investment schemes,” Bill Brown, a Citizenship and Immigration Canada spokesman, said in written answers to questions submitted by University of King’s College students.

“Because passive investors don’t play an active role in the business, they have little incentive to remain in the province or territory. This contravenes the principal goal of the PNP, which is to encourage immigration to a specific region.”

In the formal regulatory filing, officials were unusually blunt in stating why they had to take action: “The only way this situation can be effectively resolved is if the regulations are amended so that visa officers can make consistent and defensible decisions that reject applications from provincial nominees who have handed over money in hopes of immigrating to Canada.”

Ottawa’s fall 2007 notice and its regulatory notice in the spring of 2008 were designed to give P.E.I. time to wind down its program.

But rather than wind down, the Island moved to bring as many people — and as much money — into the province as possible under the old rules, loophole and all.

“Our doors were being hammered on in terms of people wanting to come to this country, people wanting to invest in this program,” said Richard Brown, the minister responsible for the program when it blew into public view in the fall of 2008.

“The decision was made. Do we do it? Do we set it at 800? Do we set it at 1,200? Do we set it at 1,800? Do we set it at 2,000? My instructions, or the general instructions, were: It’s closing. Let’s try to process as many as we can. Let’s get as many as we can into the queue, into the program now,” he told the P.E.I. legislature’s public accounts committee in December 2008.

Federal officials became increasingly alarmed.

“In the spring of 2008, (Citizenship and Immigration Canada) learned that P.E.I. had already recruited more than 1,800 new investors,” said Bill Brown of Citizenship and Immigration Canada. “This far exceeded the 1,000 provincial nominees P.E.I. had indicated to CIC in fall 2007 when asked for its projections as part of the annual-levels planning for the (entire) year ahead.”

Tensions between the two governments then reached unprecedented levels as a war of words broke out, documented in emails and letters later tabled in the P.E.I. House.

Richard Brown wrote a five-page letter, dated April 4, 2008, to Citizenship and Immigration Canada complaining that the changes would have “a negative and irreparable impact to Prince Edward Island’s provincial nominee program.”

He pleaded for changes that would allow the program to continue.

Brown also expressed great dissatisfaction with the consultation process that had unfolded since Ottawa first started discussing the changes in 2003.

“Consultation, in Prince Edward Island’s opinion, has never occurred,” he wrote in his April letter. “This is puzzling, given the fact that this province is most drastically affected by these changes.”

Later, in his December committee testimony, Brown characterized Ottawa’s regulatory change as coming from sore losers.

“Our competition saw (the P.E.I. program) getting better and better and better, and they probably sat in their ivory towers and said, ‘How come a little company, a little place in P.E.I., (Island Investment Development Inc.) with 37 staff, beat us? Well, they’re beating us because they’re better. (We’ll) just change the rules, I guess.’”

On May 9, 2008, Phil Muise, then the director of immigration services, emailed Heidi Smith, the director of permanent residency policy and programs with Citizenship and Immigration Canada.

“With the regulation changes primarily affecting only the province of Prince Edward Island, it is somewhat strange you or your staff have not opened up communication with the province,” Muise wrote. “That leaves very little time with which to hold consultations with the only province that is fundamentally affected by these changes.”

Three days later, Neil Stewart, then director of corporate services for Prince Edward Island Business Development, sent an email to Smith that made it clear P.E.I. intended to keep taking applications, and wanted to keep doing so until the new regulations took effect in September.

But the Island’s tune changed just a few days later, and it officially stopped taking applications on May 16, 2008, according to another email from the Island to Ottawa.

After five years, the federal government seemed to have finally got what it wanted. And the victory couldn’t have come soon enough as federal officials were becoming increasingly alarmed at the sudden flood of P.E.I. nominations.

In an email to Island officials, Smith warned of slowing processing times.

“The numbers P.E.I. provided represent (three to) 10 years worth of normal inventory in some visa offices. ... It is imperative that applicants are made aware of the very strong likelihood of significant delays in the processing of these cases.”

Indeed, a handful of those nominated by P.E.I. in the last year of the program were still awaiting final decisions when this story was written.

"She knows, she memorizes all the answers, and then she gives me all the answers. I did not even ask the questions; she’s giving me the answers already. It was unbelievable. It is not an interview. It’s a joke."
    - Cora Plourd, former P.E.I. immigration official on interviewing potential Chinese immigrants

Federal officials were also concerned in 2008 about the sources of funds that immigrants were investing and the fact that P.E.I. was allowing brand new companies, which are more likely to fail, to receive investments. They were also concerned about whether P.E.I. was using proper due diligence in approving files and about how many of this massive surge of immigrants would actually remain on the Island.

“As soon as you try processing a lot of numbers when there are complicated issues involving origin of funds, for example, you are risking approving people who have been involved in criminal or shady activities if you don’t have due diligence in determining that the funds were obtained legally in the first place,” said Vineberg.

He notes that the area where P.E.I. was sourcing many of its immigrants, Hong Kong and the area of mainland China that surrounds it, is one of the areas where there is a lot of questionable immigration.

However, Vineberg said, if P.E.I. had focused on another area, people may have taken advantage of it there, too.

He did not have any involvement on the P.E.I. file. But Smith was deeply involved.

In the summary of a June conference call between federal and Island officials, she wrote that P.E.I.’s 40 per cent retention rate “was not acceptable and questioned the due diligence of this large volume of applications being processed over a very short period of time, expressing the view that this could severely impact on retention rates.”

In the final months of its program, P.E.I. took several steps to increase the number of immigrants and the number of businesses that could be processed.

Rules on which businesses could participate were repeatedly relaxed, restrictions on how many investment “units” could go to related companies were dropped, program officers were paid bonuses for processing extra files, and in what became the most controversial move of all, P.E.I. flew program officers to Hong Kong and Dubai so immigrants could be interviewed there to avoid delays associated with flying them to Canada for interviews.

Any pretence of carefully matching businesses to immigrants was abandoned in the rush to get as many through the door as possible.

“There were more immigrant partners than eligible Island businesses,” Richard Brown told the public accounts committee.

Retail establishments were added. At first, stores were limited to just 10 in total in the whole program, but later this was changed to 20 per cent of all annual applications. Then tourist accommodations, restaurants, bed and breakfasts, and ultimately, just before the program closed, service industries were added “to address the potential shortfall,” Brown said.

In the last 11 days of business eligibility, 60 applications a day were being received from businesses, with another 66 received during a two-day period on Aug. 5 and 6, 2008, when applications were temporarily reopened.

Allegations

During last fall’s provincial election campaign, three women stepped forward with allegations of what had occurred during those months. At the most extreme, there was a suggestion bribes had been taken overseas, but much of the concern was over the government’s sloppy process and low standards.

The allegations were dismissed by Ghiz as politically motivated, and he went on to win re-election. But the women have not backed down from their claims.

Cora Plourd
Cora Plourd is a former employee at Island Investment Development Inc., the P.E.I. Crown corporation overseeing immigration. (ADAM SCOTTI

Svetlana Tenetko and Cora Plourd worked at Island Investment Development Inc. They reviewed hundreds of immigrant investor applications in those final months.

Plourd had worked for the corporation since 2006 and became concerned about the way the program was managed as early as fall 2007. She said program officers were no longer allowed to know which businesses were receiving investments from newcomers because it was “too politically sensitive.”

“We didn’t know where units were going, whether they were being matched up to businesses, or what businesses,” Plourd said.

By January 2008, the office received word the program would be shut down. With rules relaxed, she described the rise in applications after this as a flood. Each of the thousands of immigrant applications could contain as many as 600 pages and also required an in-person interview on the Island.

Throughout these busy months, the standards for documentation and fact-checking began to drop, the women said.

“Sometimes you weren’t told that things were changing,” Plourd said. “You would be talking to another program officer in the coffee room or at lunch and they’d say ‘No, no, you can do that now.’”

Few, if any, of the changes in procedures were formally documented, they said.

The P.E.I. auditor general would later find that, indeed, changes were made to program policies related to business eligibility, without proper approvals, although immigrant procedures remained consistent.

Plourd worked at a slower pace than the rest of the group. She said “more than 90 per cent” of the files she reviewed contained spotty work histories, incomplete financial statements, non-existent education certificates and a host of other issues.

By April 2008, Island Investment Development began discussing going overseas to conduct applicant interviews, but Plourd was let go in May, at the end of her contract.

Tenetko, who has a PhD, had herself immigrated to Prince Edward Island in 2001 under federal rules and said she worked in Ukraine’s immigration department after the collapse of the Soviet Union.

She echoed many of Plourd’s concerns and said she confronted Island Investment Development managers, deputy ministers and politicians about the ramifications of the push.

“At first we interviewed, and they gave us 10 questions to ask, and nothing else, ready-made questions ... the applicant doesn’t speak English. In reality, I’m interviewing (a) Chinese interpreter or Mandarin interpreter. She knows, she memorizes all the answers, and then she gives me all the answers. I did not even ask the questions; she’s giving me the answers already. It was unbelievable. It is not an interview. It’s a joke.”

When the decision was made to do immigrant interviews overseas, Tenetko spent three weeks, spread out over July and August in Hong Kong. An ambitious list of interviews was scheduled, leaving program officers with close to 10 interviews a day.

“It was (a) nightmare,” she said.

Tenetko claimed new applications were added to the interview list — ones whose files had not yet been received or reviewed. She said these applicants were joined in the interviews by the agents who recruited them, something Tenetko disagreed with.

Her most explosive allegation, made in a statement to the federal government, the RCMP and the Canada Border Services Agency, alleged that she saw “white envelopes” and “cash” changing hands.

The allegations have never been proven and the RCMP still hasn’t decided whether to launch an investigation, saying it looked into allegations against the program previously and found no wrongdoing, and it doesn’t want to reinvestigate material it has already gone over.

Jamie Aiken, the Island’s director of immigration, said he had no comment on the bribery allegations because they are the subject of a possible investigation.

However, Aiken denied that immigration agents had ever been in the room for the overseas interviews or that interviews were done for files not first reviewed in Canada.

He said he was “unaware” that translators were repeating back rote answers during the interviews. As far as the great rush of files of 2008 goes, Aiken said the government found ways to be more efficient and streamlined in its processing of files, and that all recommendations by the P.E.I. auditor general on better processing of business applications were later implemented.

King's College stories in this series – the full list:

During last fall’s election, the Liberal party released several documents containing private information about Plourd and Tenetko. These included an email Tenetko sent to then-P.E.I. Innovation Minister Allan Campbell after her contract was not renewed in which she said she would go to federal Immigration Minister Jason Kenney and the Globe and Mail if she did not get another job with the government.

Tenetko disputes the email, saying it was really a combination of two separate emails she sent to Campbell. She acknowledges a contract extension he promised her in 2009 never materialized, but that this is beside the point: someone, from within government, leaked an email about a private matter. The Canadian Civil Liberties Association denounced the leak of the email, saying it could have a chilling effect on whistleblowers.

The P.E.I. privacy commissioner, Maria MacDonald, began an investigation last September after Plourd and Tenetko lodged complaints. By late March, Plourd had still not heard anything about her complaint.

It is now four years since the frenetic events of 2008, and P.E.I. has developed new provincial nominee streams that comply with federal requirements. There are still investment streams, but they require either the outright purchase of a business for a minimum $150,000, one-third ownership for at least the same amount or an equity investment of $1 million. There has been only a trickle of applicants.

In the end, it may have been the shifting political winds that finally did in the immigrant partner program.

Vineberg said the Liberal federal government didn’t like to make waves, but that changed with the coming of the Conservatives in 2006. That, combined with the defeat of the Progressive Conservatives in P.E.I. by Ghiz’s Liberals, may have sealed the program’s fate.

“With a Liberal government there, I think they were willing to finally deal with the problems in the P.E.I (nominee) program one way or another,” Vineberg said. “The quiet bureaucratic protests that had been going on for quite some time had run their course and this government was going to make things happen.”

Original article on King's College website