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UPAC boss Robert Lafrenière says nobody is above the law, defends independence

UPAC commissioner Robert Lafrenière arrives to testify before the National Assembly’s institutions committee on Thursday, May 4, 2017.
Jacques Boissinot / THE CANADIAN PRESS

QUEBEC — The head of Quebec’s anti-corruption unit has aggressively defended the agency’s independence and says that just as nobody can influence its work, nobody is above the law.

But Robert Lafrenière’s appearance Thursday before the National Assembly’s institutions committee did little to appease the skepticism of the opposition and the ragtag clutch of corruption whistleblowers who turned up to see the show.

In a departure from his normally reserved nature, a loquacious Lafrenière tackled the questions everyone is asking: Is his unit — which costs taxpayers $39 million a year — vulnerable to outside political influences, and is it sitting on politically explosive files involving prominent persons?

“Nobody is above the law,” Lafrenière told the committee, answering a question from the Liberal MNA for Champlain, Pierre-Michel Auger. “Our results speak for themselves. Nobody gets immunity.”

In fact, if a person suspected is an elected official, that gives even more incentive to act and act quickly, he said.

For the last two weeks, the opposition has been pushing the theory that Quebec’s Liberals enjoy immunity from UPAC’s investigations. More specifically, they allege an operation called Mâchurer — which is probing illegal party financing and is focused on the Liberals — has hit a logjam before due to political interference.

The operation was launched in 2013. It is looking into the activities of 30 people, including former premier Jean Charest and former Liberal money man Marc Bibeau.

“Nothing is blocked,” Lafrenière said, vowing to see Mâchurer complete its mandate. 

“What creates that impression (of blocked files) is the length of time our files take. But we will get there, and I really have the impression we’ll be slapping the handcuffs on people,” he said, without naming any names.

He said when cases are stalled it’s often because lawyers are invoking legal challenges to defend their clients, not because of outside meddling.  

But he said UPAC is not about to start cutting corners on the complex work that goes into successfully bringing someone to trial and getting a conviction.

“People want to see handcuffs, but also convictions,” Lafrenière said. “Citizens want results. I am very aware of this.”

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Lafrenière then addressed the other simmering issue: whether anyone in the political machine, from the premier’s office down, meddles in the hot cases.

Lafrenière said that does not happen. He said he has spoken to Premier Philippe Couillard’s chief of staff, Jean-Louis Dufresne, twice since UPAC was created in 2011, and it was regarding technical issues about government programs.

He went further, saying woe betide anyone — such as a political operative — who tried to change the course of a case. In the modern world, word would get out fast, he said, and the person would be completely discredited.

“There has never been a tendency or an attempt to influence an investigation that is underway, to make it go faster or slow it down,” he said. “I feel completely independent. I have no political agenda. We work on our own — politics is not us.”

But Lafrenière couldn’t escape tough questions on UPAC’s operations, particularly a series of highly compromising leaks of the Mâchurer file to the Québecor media group, which includes Le Journal de Montréal and TVA.

For the first time, he confirmed that the leaked documents — which became front-page news — emanated from his office.

“I was furious,” Lafrenière said. “A leak like this is unacceptable.”

He said the finger-pointing started immediately in the small, close-knit team, but they decided to soldier on. Two retired police officers have been hired to investigate the leak — a first in UPAC history — and will get the answers, he said.

“It was an act of total disloyalty,” he said, raising his voice. “There are things I can’t talk about in this investigation, but I ardently hope we reach a conclusion and we find the crook who did this.” 

He moved rapidly to correct the impression his unit was intimidated as a result of the leak, saying it had no effect whatsoever on the team’s work.

“If the person who did this wanted to destabilize us, all they managed to do is distract us,” he said.

Neither Lafrenière nor Sûreté du Québec head Martin Prud’homme, who attended the same committee hearings, had much to say about fresh corruption allegations made by Montreal police union chief Yves Francoeur.

Last week Francoeur told 98.5 FM radio he is aware of two Liberals — one sitting and one who left politics — whom UPAC was ready to charge with fraud and corruption. Francoeur said the cases were blocked by someone in the Crown prosecutor’s office.

The SQ is investigating his comments, which rattled the political class because no names have come out. Lafrenière and Prud’homme said they knew nothing about the allegations.

On Thursday, after many delays, Francoeur confirmed he met two SQ investigators to explain his story.

Lafrenière’s appearance came as the province’s political class has been rocked by allegations of corruption to the point that the legislature is experiencing unparalleled levels of suspicion and rancour.

Opening the hearings, Public Security Minister Martin Coiteux addressed the current climate, saying the credibility of Quebec’s institutions, such as UPAC and police forces, has taken a hit.

It is essential the committee clearly re-establish the separation between state, police and the judiciary, he said.

“The government does its work, the police must do its work,” he said.

But as the hearings wrapped up, the opposition complained the system is still flawed because the head of UPAC is named by the government. True independence would come if he was named by a two-thirds vote of the legislature, they said.

“I still have doubts (about his independence),” said Parti Québécois house leader Pascal Bérubé, who questioned Lafrenière at the committee.

“We need more concrete assurances that there is no immunity,” added Québec solidaire MNA Amir Khadir.

The day also had a sideshow with the arrival of a few key players from the Charbonneau Commission days who questioned the ethics of the Charest government.

“As a citizen, I don’t trust them (UPAC) yet,” said union whistleblower Ken Pereira.

Another who walked in was Lino Zambito, who appeared at the Charbonneau Commission, which examined corruption and collusion and has complained UPAC is coasting instead of arresting people.

“When I say we don’t have the truth (about these cases), we didn’t get it this morning,” Zambito told reporters.

pauthier@postmedia.com

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90% firms see social media as a big risk area for cyber crime: EY report

New Delhi: Over 90% of Indian businesses identified social media as a “precarious platform spurring new-age cyber threats”, according to a report by consulting firm EY Fraud Investigation and Dispute Services.

According to the report titled “responding to cyber crime incidents in India”, employees are the second-largest source of risk after unknown hackers.

“Employees post extensive details regarding their work profile on social networking websites. These social media platforms act as a gold mine for cyber criminals to identify and target key individuals for a successful breach,” it said.

The report quoted a McAfee study to say that India is estimated to be losing 0.21% of its gross domestic product (GDP) to cyber crime and the numbers of incidents were increasing each year.

About two-thirds of businesses were unable to detect a cyber incident in real time due to insufficient understanding of the motive behind the attack. While 55% of respondents said that cyber security laws need to be strengthened, 34% said regulations in the cyber law space need to be clearer, the report revealed.

The report is based on more than 160 interviews with senior and middle management executives. Over 50% of the respondents are employed in listed companies.

A majority of 72% of the respondents believe their company’s IT security teams lack specialists to deal with cyber crime incidents, while just 40% believe their techniques around proactive monitoring of cyber crime are adequate.

40% of respondents plan to spend more on investigation and forensic capabilities in their organisations.

The report identifies five key sectors affected by cyber crime—technology, media and telecommunication (26%), financial services (24%), automotive and transportation (8%), government and public sector units (8%) and real estate, construction and hospitality (8%).

First Published: Fri, May 05 2017. 01 46 AM IST

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Stocks end flat: Plunging oil prices hurt energy firms, but other sectors edge up

Oil prices and energy companies plunged Thursday, but other stocks didn’t move much as investors waited for more signs about the state of the economy.

Household goods makers and healthcare companies rose after some solid company earnings reports. Most other parts of the market made little gains, but energy companies took sharp losses as the price of crude oil fell almost 5% — its biggest one-day loss in about two months.

“We may be seeing signs that global production is strong, and whenever markets see a decline in oil prices they worry it’s actually an indication of weak demand,” said Kate Warne, an investment strategist for Edward Jones.

Warne said oil prices have slipped recently because of an accumulation of concerns about rising energy production in the U.S. and slower economic growth in both the U.S. and China.

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Services firms grow faster in April

WASHINGTON — U.S. services companies expanded at a faster pace in April, good news for the overall American economy.

The Institute for Supply Management, a trade group of purchasing managers, said Wednesday that its services index rose last month to 57.5 from 55.2 in March. Anything above 50 signals the services sector is growing – something it’s done for 88 straight months.

Sixteen services industries reported growth last month, led by wholesalers and utilities. Only one industry grouping – covering agriculture, forestry, fishing and hunting – contracted in April.

Production, new orders, prices and export orders all grew faster last month. Hiring grew but at a slower pace than it did in March. Anthony Nieves, chair of the institute’s services survey committee, said the hiring slowdown partly reflects a shortage of available labor now that the U.S. unemployment rate is down to 4.5 percent, the lowest level in a decade.

Overall, the report suggests that “economic activity appears to be starting (the second quarter) off on a steady note,” Jennifer Lee, senior economist at BMO Capital Markets, wrote in a research note.

Private services companies account for more than 70 percent of American jobs.

Uncertainty bothered some services companies responding to the ISM survey. One cited the murky outlook for an overhaul of the Obama administration’s health care law; another, geopolitical instability, including tensions surrounding North Korea.

Other recent service sector indicators haven’t been as upbeat as the ISM’s index. The Commerce Department reported last week that consumer spending on services rose from January to March at the weakest pace in four years. And services companies have added 1.82 million jobs over the past year, the smallest annual gain in four years.

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Bar 3rd placer wants to practice law in hometown

‘There are offers from law firms in Manila, but I haven’t considered them yet. I really love Dipolog (City), life here is simple, no traffic problems,’ Liong says

Gualberto Laput

Published 8:04 PM, May 04, 2017

Updated 8:07 PM, May 04, 2017

BAR PASSER. Athalia Briones-Liong meets Sancho S. Amatong, president of Andres Bonifacio College in Dipolog City. Photo by Gualberto Laput

BAR PASSER. Athalia Briones-Liong meets Sancho S. Amatong, president of Andres Bonifacio College in Dipolog City. Photo by Gualberto Laput

ZAMBOANGA DEL NORTE, Philippines – Athalia Briones-Liong, third placer in the Bar exams, wants to practice law in her home town, no matter if she gets “chickens, eggs, goats, camote, saging (banana) for legal fees.”

“There are offers from law firms in Manila, but I haven’t considered them yet. I really love Dipolog (City), life here is simple, no traffic problems,” Liong told Rappler. (READ: List of passers: 2016 Bar exams)

She added her late father, who became a lawyer after leaving the priesthood, was also paid with chickens, banana or other produce for legal fees and sometimes “pro bono publico,” but he went on helping those who have less in life because he loved them.

“I look up to (my father), it’s really my dream to be like him,” Liong said.

Liong and Alanna Gayle Ashley Khio, Bar second placer, are from Dipolog. Khio took her law from Silliman University in Dumaguete City while Leong took up law from Andres Bonifacio College (ABC) in Dipolog. (READ: Highest in decades: Over 59% pass 2016 bar examinations)

A mother of three, Liong resigned as branch manager of a bank in 2014 to focus on law school.

“It was difficult, being a mother and at the same time having studies, there were times when I had to skip classes to attend to my family’s needs, I just focused on the bar subjects,” she added.

Her dean noticed it, but she was able to get the 3rd place in her school’s “mock bar,” and just studied hard during her review.

“There was a time when I was 7 months pregnant to my youngest daughter, and had premature contractions, I had to ask my dean to let me take the examination at the first floor because I could not take the stairs,” Leong recalled.

She did not expect to get the third place, adding, “my only prayer was to be able to pass the bar.”

After arriving from Hongkong on May 4, Liong made a call to the owners of ABC – Sancho Amatong, the president, and Ernesto Amatong, chair of the Board of Trustees.

ABC’s law school started in 1949, and so far has already produced 241 lawyers.

The college started as a small institute in 1940 with 7 students and 5 faculty members. – Rappler.com

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Many firms have been hesitant to spend their cash. Would tax reform change that?

WASHINGTON — The sweeping tax overhaul plans from President Donald Trump and House Republicans attempt to address an enduring mystery of the economic recovery: Why are U.S. businesses, flush with cash, so unwilling to spend it?

By investing more in factories, stores, equipment and new employees, companies could provide a sorely needed boost to the lackluster U.S. economy.

But many business owners have been hesitant to open their wallets. They are wary of another downturn, and some sectors are struggling against low oil prices and a rising dollar that makes exports more expensive.

Business investment has been weak for the last couple of years, dragging down economic growth.

“We’ve seen resurgence in business sentiment more recently, but you still see a lot of people running companies who are somewhat scarred from the Great Recession, so there’s still a lot of caution out there,” said Sarah House, an economist at Wells Fargo Securities.

Major tax changes — such as slashing the corporate rate, changing how companies deduct capital expenditures and luring billions of dollars of foreign earnings back to the United States — could spur businesses to spend more here, analysts and business executives said.

But the issue is complex. And aside from the difficult politics of enacting a major tax overhaul, the proposed changes might not be enough to get hesitant businesses to open their wallets.

Any business investment is a bet on the future — sales growth that will justify a new factory, or increasingly productive workers utilizing new technology.

As of three years ago, businesses seemed to be slowly regaining their investment confidence. Spending by businesses was approaching pre-recession levels. Then worldwide oil prices cratered and the dollar began rising as some key global economies struggled.

The low oil prices hit the mining sector hard, causing investment in new wells and exploration to decline sharply. The stronger dollar hurt companies that sell their products abroad, and exports fell.

The double-whammy caused overall spending by U.S. businesses to start declining again as a share of overall economic output. Business investment jumped in the first quarter of this year, apparently driven by an increase in oil and gas drilling as energy prices have rebounded.

But there also appeared to be other forces depressing business spending. Asked about it in the fall, Federal Reserve Chairwoman Janet Yellen was perplexed.

“It’s not clear to my mind why it is that investment spending has been as weak as it is,” she said when pressed at a hearing of Congress’ Joint Economic Committee.

Coming out of the Great Recession, the economy had “a lot of excess capacity” — factories not operating at full tilt, equipment sitting idle — and businesses didn’t see enough demand to justify investing in more of it, she said.

“More recently, with the economy moving toward full employment, you would expect to see investment spending pick up and it’s not obvious exactly why it hasn’t picked up,” Yellen said.

One answer lurked abroad — much lower tax rates in other countries.

Over the last couple of decades, Ireland and many other countries have cut their tax rates sharply to try to lure companies there. That left the United States with the highest corporate tax rate among the major developed economies in the Organization for Economic Cooperation and Development.

Many companies don’t actually pay the 35 percent rate; they use deductions and loopholes to reduce their tax bill. Last year, the effective tax rate for U.S. corporations was 26 percent, according to Wells Fargo Securities.

But effective tax rates vary widely by sector because companies in some industries make greater use of tax breaks, such as depreciation. Utilities had the lowest effective rate — 10 percent — from 2007- to 2011, according to the Treasury Department. Construction firms, retailers and wholesale companies paid the highest rate, at 27 percent.

The United States also is one of the few nations that taxes income no matter where it’s earned. Such a worldwide system requires companies to pay U.S. taxes on foreign income when it is brought back, or repatriated, to this country — minus the corporate taxes paid in the nation where the money was earned.

Most other countries have a territorial system that exempts foreign income, meaning it’s only taxed where it was earned.

There’s broad consensus that the combination of a high corporate tax rate and the way foreign earnings are taxed puts the United States at a global disadvantage. That has helped fuel the trend in so-called inversions, in which U.S. companies move their headquarters abroad to reduce their tax bills.

The tax system also has led companies to keep offshore earnings sitting abroad — invested in foreign subsidiaries — to avoid paying U.S. taxes on them.

As of 2015, U.S. companies had about $2.4 trillion in indefinitely reinvested foreign earnings, according to research firm Audit Analytics. The figure has more than doubled since 2008.

In 2004, Congress sought to tap the foreign earnings held by U.S. corporations to give a temporary jolt to the economy.

The Homeland Investment Act was a one-time tax holiday for money repatriated to the United States in 2005, slashing the tax rate to 5.25 percent. Companies were required to invest the money in the United States and lawmakers hoped the additional spending would create 500,000 jobs.

The holiday lured more than $300 billion back to the United States, a huge increase that amounted to about a third of all the U.S. corporate cash held abroad, according to the nonpartisan Congressional Research Service.

But a 2009 study published by the National Bureau of Economic Research found that the money “did not lead to an increase in domestic investment, employment” or research and development.

Instead, most of the money was returned to shareholders through stock buybacks or dividend payments, which provide a much smaller stimulus to the economy.

A 2011 review of the repatriation holiday by the Senate’s Permanent Subcommittee on Investigations found that the effect on job creation was nearly nonexistent. Ten of the top 15 companies that brought money back to the United States had job losses from 2004 to ‘07, the subcommittee said.

House Republicans and the Trump administration believe that a major overhaul of the tax code that includes a much lower corporate rate and an end to U.S. taxation of foreign earnings could unlock business spending.

“Our objective is to make U.S. businesses the most competitive in the world,” Treasury Secretary Steven Mnuchin said last week in unveiling the administration’s one-page list of principles for tax reform.

Trump wants to reduce the corporate tax rate to 15 percent and provide the same rate for so-called pass-through businesses that funnel their income through the individual tax code.

House Republican leaders have called for a 20 percent corporate tax rate, still a major reduction.

Both plans call for changing the way foreign earnings are taxed by switching to a territorial system, which would mean companies would pay taxes only where the income is made.

Both also want to lure back the approximately $2.4 trillion that U.S. companies have abroad by offering a sharply reduced rate for a limited time.

The House Republican plan calls for an 8.75 percent rate on cash and 3.5 percent on other investments. Trump administration officials haven’t specified their rate, but Mnuchin said it would be “a very competitive rate that will bring back trillions of dollars.”

The House Republican plan also calls for allowing companies to deduct the full cost of capital expenditures immediately instead of depreciating the expense over time.

Maxine Turner said she would love to upgrade the aging building that houses her Salt Lake City catering business, buy a couple of new stoves, replace some delivery vans and increase pay for her 120 workers.

But in a tight economic environment, she hasn’t been able to do that.

A cut in the tax rate for her and her three Cuisine Unlimited partners — her husband and their two sons — would enable them to make those investments, Turner said.

“We can buy some new equipment. That would really help us,” said Turner, who chairs the U.S. Chamber of Commerce’s Small Business Council.

Ideally, the tax rate would be cut to somewhere between 15 percent and 20 percent for corporations and down to at least 25 percent for so-called pass-through businesses that pay through the individual tax code, if not lower, said Caroline Harris, chief tax counsel for the U.S. Chamber of Commerce.

“We don’t have a magic number, but certainly where we are makes us a tremendous outlier,” she said of the 35 percent U.S. rate.

Eliminating U.S. taxes on foreign earnings also would provide a boost to spending by removing the tax incentive for keeping money offshore, said Marc Gerson, vice chair of the tax department at the Miller & Chevalier law firm.

“It drastically increases the competitiveness of U.S. business on a global basis, and I think that necessarily leads to greater economic activity and job creation in the U.S.,” he said.

But House, the Wells Fargo economist, doesn’t think the return of money stashed abroad will be a major economic stimulus because corporate profit margins are pretty good now.

“It might help in times when companies get financially stressed,” she said. “Without that, I don’t think it’s going to change the overall investment decisions here at home.”

Some companies already have indicated they would use that money for stock buybacks, which House said would largely just benefit more affluent Americans who own shares by bidding up the prices.

A CNBC survey of chief financial officers in December found that just 12.5 percent planned to use the money for hiring.

With the 2005 experience in mind, there has been talk in Washington of limiting how executives could use the repatriated cash.

Larry Fink, chief executive of money management giant BlackRock Inc., thinks businesses need to think more about how they’re going to grow and compete.

“While we certainly support returning excess capital to shareholders, we believe companies must balance those practices with investment in future growth,” Fink wrote to the chief executives of major companies in his annual letter this year.

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