OTTAWA

COURT FILE NO.: 13-20008

DATE: 20151117

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

HER MAJESTY THE QUEEN

– and –

BRUCE CARSON

Jason Nicol, for the Crown

Patrick McCann and Tala Khoury, for Mr. Carson

HEARD AT OTTAWA: September 14 and 15, 2015

Warkentin J.

REASONS FOR JUDGMENT

[1] In a country known for its abundant freshwater resources, many rural First Nations communities do not have access to running water, safe drinking water or indoor toilets. The disparity between water quality on-and-off reserves has been a long-standing issue for Canada and First Nations communities.

[2] Some First Nations communities have faced water-related challenges such as long-term boil water advisories for years—and even for decades in some cases.

[3] The factors contributing to the water-related challenges in any given First Nations community are complex and varied. Although the contributing or causal factors vary, the result is the same: unsanitary water and the absence of indoor plumbing are known to cause adverse health effects and increase the risk of waterborne diseases. Beyond the physical health risks arising from these conditions, the absence of a reliable clean water source diminishes the quality of life and causes significant inconvenience unknown to Canadians off reserve.

[4] Water and wastewater systems challenges facing First Nations communities are addressed by a number of parties. The Federal Government, through Aboriginal Affairs and Northern Development Canada (formerly Indian and Northern Affairs Canada), provides funding for certain types of water services and infrastructures to First Nations communities. More recently, the Federal Government enacted the Safe Drinking Water for First Nations Act. The Assembly of First Nations’ Environmental Stewardship Unit assists First Nations in improving their access to safe and sufficient water supplies. Health Canada works to ensure that drinking water quality monitoring programs are in place; provides wastewater programming and monitors and provides advice on drinking water quality to First Nations communities.

[5] Despite the involvement of these and other institutions, access to running water and safe drinking water remains a daily concern for many First Nations communities across the country.

[6] In 2010, knowing about the water treatment and waste disposal issues in First Nations communities, the accused, Bruce Carson, together with his then girlfriend, Michele McPherson and a company in the business of selling point-of-use water treatment systems, H2O Professionals Inc. began to work together with the goal of providing safe drinking water to First Nation individuals living on reserves.

[7] H2O Professionals Inc. (H2O) had in the past unsuccessfully attempted to interest First Nations communities in their water treatment systems. They believed that with Mr. Carson’s involvement and his many close connections with the Federal Government and with the Assembly of First Nations (AFN), they would succeed in selling their product to First Nations communities.

[8] Mr. Carson had a long history of involvement in issues relating to First Nations and was strongly motivated to work with the Federal Government, the AFN as well as First Nations communities in addressing water quality issues and attempting to find solutions. The evidence in this trial demonstrated that Mr. Carson’s objectives were twofold. On the one hand, his motivation was due to his personal interest in the plight of many First Nations communities without access to clean water.

[9] At trial, Mr. Carson admitted that he was also motivated to promote H2O and its products in order for his girlfriend, Ms. McPherson to obtain a benefit by receiving a share of the profits of sales of H2O’s water treatment systems to First Nations communities.

The Offence and Conduct of the Trial

[10] Mr. Carson is charged with a Fraud on the Government under section 121(1)(d) of the Criminal Code of Canada. He is accused of being “a person having or pretending to have influence with the Government of Canada, or with a minister or an official of the Government of Canada, [who] did directly or indirectly demand, accept, or agree to accept for himself or Michele McPherson, a reward, advantage or benefit as consideration for cooperation, assistance, exercise of influence, or acts in connection with a matter of business relating to the Government of Canada,...”

[11] Mr. Carson has admitted that he was a person who had influence with the Government of Canada at the time of the alleged offence and that he demanded a benefit for Michele McPherson as consideration for his assistance in utilizing his government contacts on behalf of H2O.

[12] Mr. Carson denies however, that his assistance was “in connection with a matter of business relating to the Government of Canada”. The charge relates to Mr. Carson’s interactions with Indian and Northern Affairs Canada (INAC), as it then was in 2010 and 2011 (now Aboriginal Affairs and Northern Development Canada). Mr. Carson claims his interactions with INAC and government officials were for the purpose of seeking information in connection with a matter of business with First Nations Bands, not the Government of Canada.

[13] A preliminary hearing in this matter was conducted from June 2 to 4, 2014 before Justice J. Brunet of the Ontario Court of Justice. Crown and Defence counsel agreed to import all of the evidence from the preliminary hearing into this trial. The evidence and transcripts from the preliminary hearing were made exhibits in this trial. The Crown did not call any witnesses; however, one additional document was filed as an exhibit that had not been an exhibit at the preliminary hearing. The Defence called no evidence at the preliminary hearing and did not call evidence in this trial.

[14] Crown and Defence counsel each provided me with summaries of the parts of the evidence they were relying upon and those summaries were also made exhibits in the trial. The trial itself consisted of each side reviewing the relevant evidence and making submissions.

Bruce Carson’s Background

[15] Between 2006 and 2008 and briefly in 2009, Mr. Carson worked in the Office of Prime Minister Stephen Harper as a Senior Advisor.

[16] After leaving the Prime Minister's Office (PMO) in 2008, Mr. Carson became the director of the Canada School of Energy and Environment in Alberta (the School). One of the primary roles of the School was the coordination of clean energy research. Through his roles in the PMO and with the School, Mr. Carson had many friends and acquaintances involved in government, including Cabinet Ministers, then Prime Minister Stephen Harper and other high ranking non-government officials such as then National Chief Shawn Atleo of the AFN.

[17] In February 2010 Mr. Carson met Ms. Michele McPherson in Ottawa and they began a romantic relationship.

[18] In March 2010 an acquaintance of Ms. McPherson introduced her to then co-owners of H2O, Mr. Nick Kaszap and Mr. Patrick Hill. In the fall of 2010, Mr. Kaszap left the company and Mr. Hill incorporated a new company that continued operations as H2O Global.

[19] Ms. McPherson testified at the preliminary hearing that at some point in March 2010 she worked for H2O for a period of only two weeks. Neither Mr. Hill nor Mr. Kaszap could recall having hired her in March 2010, although they knew her socially and that she visited their business offices from time to time. Ms. McPherson also testified that she travelled on two marketing trips for H2O, one to Timmins, Ontario and one to New Liskeard, Ontario in the fall of 2010. Ms. McPherson did not have a high school education and had no experience in either marketing or in water treatment systems.

[20] H2O was in the business of marketing and selling point-of-use water treatment systems as well as water softener systems. Point-of-use water treatment systems are typically marketed to private home owners for the purpose of purifying water for use in the home. H2O did not sell water treatment systems that would supply clean water to an entire community or municipality.

[21] In the late spring or early summer of 2010, Mr. Carson told Ms. McPherson that he had recently met with National Chief Shawn Atleo about the water issues facing many First Nations communities. Ms. McPherson then told Mr. Carson about H2O and suggested that the company might be able to assist in addressing some of the water issues in First Nations communities. She informed Mr. Carson that H2O had unsuccessfully been trying to engage some First Nations Bands in Ontario to demonstrate its product.

[22] In the spring or summer of 2010, Ms. McPherson introduced Mr. Carson to Mr. Kaszap and Mr. Hill at a meeting set up at the Chateau Laurier Hotel in Ottawa. During that meeting Mr. Carson informed Mr. Hill and Mr. Kaszap that he could help them by making some important calls in order to connect them with the right people to push through their water treatment products to First Nations Bands.

[23] During that first meeting, Mr. Carson informed H2O that he was getting involved in order to help Ms. McPherson. To that end, in August 2010 Mr. Carson retained his lawyers to prepare a contract in which H2O appointed Ms. McPherson as their exclusive agent for sales of point-of-use water treatment systems to First Nations. As their agent, Ms. McPherson was entitled to a 20% commission and other benefits in relation to all sales of point-of-use water treatment systems to First Nations including future servicing costs. In February 2011 the agreement was amended to include, among other things, a commission on sales to First Nations communities whether the sales were purchased and paid for directly by First Nations or indirectly by a third party including the Government of Canada for the benefit of First Nations. The commission rate was reduced to 15%.

[24] Mr. Carson and then National Chief Atleo had become friends through their respective work on various First Nations issues, including residential schools, land claims and other matters. Mr. Carson undertook to discuss H2O’s water treatment systems with National Chief Atleo. In fact Mr. Carson set up more than one meeting with National Chief Atleo where he introduced Mr. Hill and Mr. Kaszap and H2O to National Chief Atleo and to other members of the AFN.

[25] The undisputed evidence was that Mr. Carson used his AFN and government contacts to obtain information about the process by which First Nations Bands might receive funding for water treatment programs and he advocated on behalf of H2O as a supplier of those programs.

[26] The evidence from Mr. Hill and Mr. Kaszap was that Mr. Carson repeatedly told them that with his contacts he could get them contracts to sell their water treatment systems to First Nations communities.

[27] A brief summary of some of Mr. Carson’s interactions with members of the AFN and government officials is as follows:

a. On August 6, 2010 Mr. Carson sent Mr. Hill and Mr. Kaszap an email advising them that:

I spoke with the PM last nite and with Atleo- the movement of John Duncan to INAC does not slow anything down. both Shawn and I know John very well- and I will be calling the new Minister this morning-so it is still full steam ahead - bc

b. In August 2010 Mr. Carson set up a breakfast meeting with National Chief Atleo and Mr. Hill and Mr. Kaszap to discuss water issues in First Nations communities and to introduce H2O to the AFN. National Chief Atleo suggested that they contact individuals involved in infrastructure at INAC and provided the names of individuals.

c. On August 19, 2010 by email, Mr. Carson contacted Ms. Gail Mitchell, the Director General of Community Infrastructure and Mr. Garry Best, the Director of Infrastructure Operations at INAC to set up a meeting to discuss “a 7 stage water purification process presently represented by an Ontario Company called H2Opros”.

d. In early September, 2010, Mr. Carson met with National Chief Shawn Atleo and others from the AFN where, among other things, they spoke about H2O and clean water initiatives for First Nations communities.

e. On September 14, 2010, Mr. Carson, Mr. Hill and Mr. Kaszap met with Gail Mitchell and others from INAC at the INAC offices in Gatineau, QB in which H2O made a presentation about their water treatment systems. At that meeting Ms. Mitchell explained that point-of-use water treatment systems were systems that would be purchased by First Nations communities and encouraged H2O to reach out to those communities.

f. In a September 16, 2010 email from Mr. Carson to the CEO of the AFN, Mr. Carson commented on his meeting with Ms. Mitchell as follows:

…On the water initiative-we had a very good meeting with Gail Mitchell and staff on tuesday-the govt has decided to fund the systems that the guys you met are involved with--govt actually has developed a funding protocol

So we can meet or chat tomorrow afterNoon about possible sites and access if that is possible--bc

g. In September there were a variety of meetings with members of the AFN. Some of these meetings included Mr. Hill and Mr. Kaszap, however most were meetings that Mr. Carson had arranged on a variety of issues in his role with the School and he then brought up the water treatment issues and promoted H2O point-of-use systems.

h. Towards the end of September Mr. Carson, Mr. Hill, Mr. Kaszap, members of the AFN together with Garry Best and Sebastian Labelle from INAC met to identify First Nations communities in need of water treatment systems.

i. On October 7, 2010, Mr. Carson invited members of INAC to attend a tour of a plant in Regina, Saskatchewan, Water Group, which manufactured the point-of-use water treatment systems. No INAC officials accepted that invitation.

j. On October 25, 2010, Mr. Carson, Mr. Hill and two members of the AFN, Mr. Irving Leblanc a water specialist and Mr. Roger Jones the CEO, were provided a tour of the plant in Regina where the water treatment systems were manufactured. Prior to agreeing to attend the plant tour, Mr. Leblanc, by email, informed Mr. Carson as follows:

I want to make it clear that AFN does not endorse any product nor accept any liability on the performance of the product marketed by H2O. This is intended only to inform H2O of communities as potential pilot projects. The community would be expected to carry out their own due diligence, access if necessary their technical service providers for technical, financial and legal advice. INAC was very clear that any project proposal must come from the community.

k. On December 16, 2010, Mr. Carson, Mr. Hill and Mr. Kaszap again met with Gail Mitchell and others from INAC to discuss the possibility of setting up a pilot project for their water treatment systems in First Nations communities. Ms. Mitchell suggested H2O should review an initiative they were involved in with the Province of Ontario to test out different technologies. She explained that this process was a competitive bidding process in which the First Nations Bands would be doing the procurement.

l. At Mr. Carson’s suggestion, Mr. Hill attended the AFN Christmas dinner in order to promote H2O. Mr. Carson first asked H2O to purchase a table for $15,000.00, but reduced the price to $5,000.00. Ms. McPherson attended that dinner with Mr. Carson and Mr. Hill. The $5,000.00 was paid to Mr. Carson, who gave the money to Ms. McPherson. The AFN was never paid.

m. Between January 2011 and March 2011, Mr. Carson met with then Cabinet Minister John Duncan, Minister of INAC and then Cabinet Minister Peter Kent, Minister of the Environment as well as their staff to discuss the means by which H2O’s water treatment systems could be funded and placed in First Nations communities.

[28] On March 1, 2011 Mr. Carson wrote to Ms. Stephanie Machel, the Chief of Staff of then Cabinet Minister Peter Kent, Minister of the Environment:

Just one more thing - when I met with Minister Kent we discussed a matter I have been working on for some time-that is clean drinking water on reservations-drinking water and waste water seem to be of great interest to him

I have been working with Shawn Atleo-National Chief of the AFN and INAC to try to implement their new policy wherein point of use water purification systems are eligible for govt funding-these systems which are installed in the individual houses are cheaper than municipal systems and immediately effective

but nothing has moved on this as officials at INAC won’t push any systems at all when dealing with Bands-the result is that mid spring there will be a Report that actually the drinking water issue on reserves has actually become worse since we formed the govt and Prentice announced clean water as a priority

so we thought to try and break this bureaucratic knot that is holding up progress on this matter we get Ministers Kent and Duncan together with Atleo and a provider of this system to see what we can do to push the bureaucrats into some form of action before this Report is released--

[29] By letter on March 16, 2011, Mr. Raymond Novak, then Principal Secretary to the Office of the Prime Minister wrote to Mr. William Elliott, the Commissioner of the RCMP asking for an investigation into allegations against Mr. Carson. The RCMP conducted an investigation and the charge culminating in this trial was laid against Mr. Carson in 2012.

Relationship between INAC, AFN and First Nations Communities

[30] Gail Mitchell, Garry Best and Lysane Bolduc, all employees with INAC, testified at the preliminary hearing and provided an overview of the relationship between the AFN, INAC and First Nations communities in 2010. There were also a number of emails from Ms. Mitchell and others from INAC to Mr. Carson that set out INAC’s position with respect to funding of projects on First Nations communities.

[31] The AFN and INAC work closely on specific projects where INAC funds the AFN for some core operating costs and undertakes a variety of specific projects such as land claims resolution, economic development projects or infrastructure projects. The AFN is a conduit through which information about various First Nations communities is provided to INAC. The AFN provides some policy advice and performs certain coordinating functions to bring the Chiefs of First Nations communities together to discuss these projects and other issues.

[32] INAC provides two streams of funding to First Nations communities. The first stream relates to the operation and maintenance of existing facilities and is provided on an annual basis. This type of funding is formula-driven based upon a calculation of the size of the community, the inventory of assets and the relative lifecycle of those assets. This is the bulk of the funding that is provided to First Nations communities. The First Nations Band or community has complete autonomy with respect to how to allocate those funds each year. Neither INAC nor any other government department or official has input into how the community spends those funds.

[33] The second stream of funding is for capital investments such as building new or conducting major renovations to existing facilities. This stream of funding is allocated based upon priority, need and risk levels. Proposals from First Nations communities are submitted to INAC which then considers each proposal in relation to the needs and proposals submitted by other First Nations communities. If approved, the proposal is placed in a queue with other proposals of this nature to be awarded when funds from this stream are available.

[34] Ms. Mitchell explained that, in terms of water treatment systems, a smaller type of decentralized system such as a well, cistern, or point-of-use water treatment system such as those offered by H2O would be purchased by the First Nation from either the first stream of INAC funding, being the annual operating fund provided to the First Nations community, or from the resources the community raised on its own. If the First Nations Band desired to purchase a point-of-use water treatment system, it would be up to the Band to undertake its own procurement for that product or service.

[35] If the water treatment system contemplated was a centralized or municipal system to supply water to the entire community, it would be a major project which would fall under the second stream of funding. She confirmed that First Nations Bands could not afford to purchase such a system from their annual operating fund. The First Nations community seeking this type of system would have to submit a proposal to INAC that would then undergo a rigorous review, analysis and ranking and then make a decision about whether to proceed with that project. Ms. Mitchell indicated that the point-of-use water treatment systems marketed by H2O did not fall into this category for funding.

[36] Ms. Mitchell testified at the preliminary hearing that neither she nor her staff at INAC informed Mr. Carson or H2O that H2O would receive funding for water treatment systems, nor did they recommend H2O as a service provider endorsed by INAC.

[37] In Mr. Best’s evidence at the preliminary hearing he opined that Mr. Carson did not listen when they told him that it was the First Nations Bands that H2O had to approach and convince to purchase their product. Mr. Best expressed his frustration, both in his testimony and in his email correspondence to his INAC colleagues, that Mr. Carson was taking INAC’s advice and information out of context. He was concerned about Mr. Carson’s continued engagement with INAC officials regarding H2O.

[38] Mr. Best stated that from his perspective, he and others at INAC explained very clearly to Mr. Carson and to H2O that it was up to the Bands to decide whether or not to purchase the point-of-use water treatment systems.

Pilot Project

[39] There was also some discussion about H2O participating in a pilot project in one or more First Nations community that began in late October 2010 and continued until February 2011. Mr. Carson and H2O were attempting to obtain funding whereby H2O would install its point-of-use water treatment systems in one or more First Nations communities in order to demonstrate the technology with a view to increasing their business within these communities.

[40] The evidence about the pilot project was somewhat unclear. Mr. Carson first mentioned the prospect of a pilot project in November, 2010 when he remarked in an email that four Bands had been identified as potential locations for pilot projects. Mr. Carson’s reference to these Bands as possible sites for pilot projects does not appear to relate to any pilot project being contemplated by INAC at that time, but rather to a proposal that H2O was making in order to test the effectiveness of their water treatment systems in various settings.

[41] It was not until the end of November and early December 2010 that INAC began to comment on whether or not a pilot project would be practical for H2O’s systems. Ms. Bolduc wrote to some of her regional colleagues from INAC on December 10, 2010 after an earlier meeting with Mr. Carson, Ms. Mitchell and members of H2O. In that email, Ms. Bolduc expressed certain concerns about the type of water treatment system offered by H2O and was seeking input. She also mentioned a new protocol for decentralized water and waste water systems that had come into effect, but noted there was a lack of available data comparing decentralized systems with centralized systems and suggested they might consider pilot-testing programs.

[42] In early February 2011, Mr. Carson wrote to Ms. Mitchell about the possibility of setting up a pilot project with the Bay of Quinte Mohawk First Nation for between 50 and 100 homes on the reservation.

[43] Ms. Mitchell referred the prospect of this pilot project with the Bay of Quinte Mohawk First Nation to both Garry Best and Ms. Lysane Bolduc for their review and comments. Mr. Carson’s use of the term pilot project for the Bay of Quinte Mohawk First Nation in his email to Ms. Mitchell appears to have also been in relation to a proposal that H2O was making rather than to any specific project being contemplated by INAC.

[44] On February 17, 2011, Ms. Bolduc sent an email to Mr. Carson after a telephone conference call regarding H2O and the Mohawks of the Bay of Quinte’s interest in proceeding with utilizing H2O’s water treatment systems as follows:

Garry Best explained that FN [First Nation] infrastructure planning processes begin with FN’s identifying their needs and presenting projects to INAC’s Regional offices for consideration for funding. INAC Regional offices have the responsibility of evaluating all FN proposals and prioritizing the needs as per the various Department’s Guides, Policies and Protocols. Generally, priority is given by the Regions to projects addressing health & safety issues. INAC Headquarter’s role is to manage the national Capital and Operation and Maintenance (O&M) budgetary envelope, and to produce and enforce guidelines, policies and protocols outlining proposal requirements for funding eligibility.

Aside from the normal capital and O&M funding processes described above, Garry Best confirmed that INAC is actively partnering with the Province of Ontario (MOE) to evaluate and pilot-test drinking water technologies. He explained that the Pilot-Project Team is currently in the process of preparing a list of potential technologies and vendors, that this list may include H2O Pros, and that final technologies/vendors selected for evaluation through pilot-testing would be chosen by the Project Team through a tendering process that will consider both technical merit and anticipated life-cycle cost (LCC). H2O Pros may be on the list of potential vendors invited to bid on this pilot-project.

[45] This was the first mention by INAC to Mr. Carson of a possible pilot project. In her evidence at the preliminary hearing, Ms. Bolduc testified that the pilot project with the Ontario MOE was only in the conceptual/planning stages in late 2010 and early 2011. She stated that the pilot project was eventually introduced (after the investigation into Mr. Carson’s conduct had begun) and it proceeded by way of a public tendering process. It was her evidence that it was ultimately up to First Nations Bands to take action in either participating in or advancing the project.

INAC Protocol for Funding Decentralized Water Systems

[46] The only evidence submitted at trial that had not been introduced in the preliminary hearing was a document titled: Protocol for Decentralized Water and Wastewater Systems in First Nations Communities updated on April 15, 2010, published by INAC (Protocol for Decentralized Water). The purpose of the Protocol for Decentralized Water was “to set minimum standards and codes that must be followed for the design, construction, operation, and maintenance of on-site water and wastewater systems that are to be funded in whole or in part by INAC. The term decentralized system refers to a group or groups of band-managed (as opposed to individually-managed) on-site water or wastewater systems.”

[47] Because this document was not introduced at the preliminary hearing, none of the witnesses who appeared, particularly those from INAC had an opportunity to comment on this document and how the funding model applied or under what circumstances.

[48] Ms. Mitchell testified that in 2009 a protocol was put in place that set out the conditions in which communities could use departmental funding with small point-of-use water treatment systems to be managed by the Band centrally. She stated that Bands could use their annual funding to pay for those types of systems.

[49] Ms. Bolduc appears to have been referencing this Protocol for Decentralized Water in her email to INAC colleagues on December 10, 2010.

[50] Mr. Carson, in his September 16, 2010 email to the CEO of the AFN commented on the government having developed a funding protocol.

Positions of the Parties

[51] Section 121(1)(d) of the Criminal Code is set out in parts. For the purpose of the offence with which Mr. Carson is charged, it incorporates s. 121(1)(a)(iii). For ease of reference, the section taken together reads as follows:

Every one commits an offence who, having or pretending to have influence with the government or with a minister of the government or an official, directly or indirectly demands, accepts or offers or agrees to accept, for themselves or another person, a reward, advantage or benefit of any kind as consideration for cooperation, assistance, exercise of influence or an act or omission in connection with the transaction of business with or any matter of business relating to the government.

[52] The only issue for determination in this trial is whether or not when Mr. Carson used his influence with the government to obtain a benefit for Ms. McPherson in connection with a “transaction of business with or any matter of business relating to the government”.

[53] The Crown acknowledged that the evidence of the INAC witnesses was that INAC does not actually procure point-of-use water treatment systems for First Nations communities. Whether to purchase these systems is the individual Band’s decision to make. The Crown agreed that INAC’s role included providing advice and direction as well as the two streams of funding as already described and other funding as may be available from time to time, such as that in the pilot project that was being considered in late 2010 and 2011 in conjunction with the Ontario MOE.

[54] The Crown argued, however, that the manner in which water treatment systems are purchased is irrelevant with respect to the charge against Mr. Carson because the interaction between INAC, the First Nations communities and the supplier of water treatment systems, in this case H2O was a three-way business relationship. The Crown submitted that the phrase “the transaction of business with or any matter of business relating to the government” is very broad language that captures the three-way relationship as established on the facts of this case.

[55] The Crown submitted that regardless of whether or not INAC’s role extended to the final decision regarding the purchase of water treatment systems; the fact that it is the agency providing taxpayers’ money to Bands for their use, which may include the purchase of water treatment systems, is sufficient to be captured under section 121(1)(d) of the Code because of the interrelationship between the First Nations communities and INAC. By extension, companies or individuals who do business with First Nations communities are in fact involved in “the transaction of business with or any matter of business relating to the government” and a three-way business relationship is formed.

[56] Counsel for the Crown also submitted that Mr. Carson’s actions, by continually contacting INAC, meeting with them and keeping them informed as to the progress of H2O with Band Councils, confirms that INAC was a necessary element in the sale of the water treatment systems to First Nations communities. Crown counsel argued that this conduct therefore demonstrates that Mr. Carson was using his influence with members of the government in “the transaction of business with or any matter of business relating to the government”.

[57] Finally, Crown counsel maintained that by seeking to implement a pilot project first in four communities and then with the Bay of Quinte Mohawks, Mr. Carson knew that approval of these projects was dependent on INAC for funding. In support of that position, counsel referenced the Protocol for Decentralized Water and Wastewater Systems in First Nations Communities.

[58] It was the position of the Defence that in pursuing business connections with the government, the phrase in s. 121(1)(d) “transaction of business with or any matter of business relating to the government” must be restricted to actual commercial business dealings with the government.

[59] The Defence submitted that business dealings with entities outside the government that may receive funding from the government do not fall within this section of the Criminal Code.

[60] Counsel for Mr. Carson argued that for H2O to place their product in First Nations communities, they had to deal directly with those communities. The communities had complete autonomy on whether or not to purchase the devices, regardless of whether there was a pilot project that tested the water treatment system. The only involvement by the government was to provide lump sum annual funding for infrastructure that the bands could use along with their own resources to acquire the devices.

Legal Issues and Analysis

[61] Having reviewed in detail the evidence presented in this case, I must now apply the evidence to s. 121(1)(d) of the Criminal Code. Neither the Crown nor Defence was able to find jurisprudence that has considered s. 121(1)(d) of the Criminal Code as it pertains to the element of “the transaction of business with or any matter of business relating to the government”. It is necessary therefore to consider the manner in which this element was written within the entire context of this section of the Criminal Code having regard to the scheme of the Code and the intent of Parliament in enacting this section.

[62] Crown counsel submitted that s. 121(1)(d) must be interpreted broadly to include the three-way relationship between the First Nations communities, the government and suppliers such as H2O, in order to preserve the integrity of the government. The Crown argued that the intent of Parliament in enacting this section was to deter the precise conduct in which Mr. Carson has engaged.

[63] It was the Crown’s position that narrowly interpreting this section would result in the appearance of condoning Mr. Carson’s actions. The Crown submitted that an appearance of impropriety is as harmful as actual impropriety and therefore activities that demonstrate an appearance of impropriety constitute criminal conduct.

[64] In support of a broad interpretation, Crown counsel pointed to s. 12 of the Interpretation Act, R.S.C. 1985, c. I-21 which states the following:

Every enactment is deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects.

[65] Counsel for the Defence submitted that a common sense approach to the interpretation of s. 121(1)(d) requires the Court to consider the phrase “the transaction of business with or any matter of business relating to the government” narrowly. He argued that the common sense wording of this section implies that there had to be some form of direct involvement by the government in the decision making of whether or not to purchase the water treatment systems in question.

[66] Counsel for the Defence argued that without that direct involvement, there was no “transaction of business with or any matter of business relating to the government” and Mr. Carson should be acquitted.

Statutory Interpretation

[67] The Supreme Court of Canada in R. v. Araujo, 2000 SCC 65, [2000] 2 S.C.R. 992, and the more recently the Ontario Court of Appeal in R. v. A.(A.), 2015 ONCA 558 direct that there are two principles to be considered when interpreting a statute.

[68] The first principle is that “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament." Thus the section in question must be given a fair and liberal reading. (Araujo, paragraph 26, A.(A.), paragraph 67).

[69] The second principle is the presumption of consistent expression. “This principle holds that legislatures use language carefully and consistently so that, unless the contrary appears, the same words have the same meaning within a statute and different words have different meanings.” (A.(A.), paragraph 68).

[70] In addition to the principles of statutory interpretation, there is case law that has considered the various components of s. 121(1). These cases are useful in interpreting Parliament’s intent in enacting s. 121(1)(d).

[71] The Supreme Court of Canada’s decision in R. v. Hinchey, 1996 157 (SCC), [1996] 3 S.C.R. 1128 dealt with subsection 121(1)(c) of the Criminal Code, namely frauds on the government by government officials, whereas s. 121(1)(d) deals with those “having or pretending to have influence with the government”. Madam Justice L’Heureux-Dubé interpreted the first component of s. 121(1)(c) of the Criminal Code, namely the giving of a “commission, reward, advantage or benefit of any kind” from a person who has “dealings with the government”. At paragraph 48, she commented that at first glance, the section seemed to have an unlimited application:

On a literal interpretation, it is difficult to find a person in modern society who does not have some form of dealings with the government. It cannot have been the intention of Parliament to encompass every person in Canada, and many living abroad, into the section. Given the important purpose of preserving integrity, it would appear to me that the section is not interested in regulating the ordinary dealings which go on between Canadians and the government, but is truly concerned with persons who at the time of the commission of the offence had specific or ongoing business dealings with the government and that the gift was such that it could have an effect on those dealings.

[72] She held, at paragraph 49, that Parliament intended to ascribe a narrower meaning to the word “dealings” in s. 121(1)(c). In reaching this conclusion, Justice L’Heureux-Dubé considered s. 121(1)(b) where the phrase “dealings of any kind” was used instead of the narrower wording “dealings”, omitting the words “of any kind”.

[73] Justice L’Heureux-Dubé at paragraph 50, reviewed the French version of s. 121(1)(c) and determined that the French wording described “dealings” more narrowly than the English version. It states:

pendant qu’il est fonctionnaire ou employé du gouvernement, exige, accepte ou offre ou convient d’accepter d’une personne qui a des relations d’affaires avec le gouvernement une commission, une récompense, un avantage ou un bénéfice de quelque nature […]

[74] Justice L’Heureux-Dubé held that the French text of s. 121(1)(c) implies that the person giving a commission, reward, advantage or benefit of any kind “must be conducting business dealings, or have business relations with the government”. She accepted this narrower meaning and concluded at paragraph 51 that “the proper interpretation of this term is the narrow one, whereby only where persons are in the process of having commercial dealings with the government at the time of the offence is the conduct trapped under the section.”

[75] The Supreme Court of Canada in the decision in R. v. Cogger, 1997 314 (SCC), [1997] 2 S.C.R. 845 made the following comments with respect to the wording of s. 121(1)(a)(ii) at paragraph 16:

The wording of s. 121(1)(a)(ii) is quite clear. It is also comprehensive. It is designed to prevent government officials from undertaking, for consideration, to act on another person's behalf in conducting business with the government. This is both a clear and an honourable goal. Parliament has indicated that it is unacceptable for government officials to accept consideration from individuals for the purpose of conducting business with government on that party's behalf.

[76] Subsection 121(1)(a)(ii) of the Criminal Code includes the same language as s. 121(1)(d), (both make reference to s. 121(1)(a)(iii)). The difference between the two sections is that s. 121(1)(a)(ii) applies to government officials who commit a fraud against the government whereas subsection 121(1) (d) applies to anyone “having or pretending to have influence with the government”. On the facts of both Cogger and this case, for the accused to be found guilty he must have engaged in “the transaction of business with or any matter of business relating to the government”.

[77] Finally, in the Court of Québec and Québec Court of Appeal’s decisions in the matter R. c. Corbeil (2009), J.E. 2010-189, appeal allowed in part 2010 QCCA 1628, Mr. Corbeil pled guilty to committing a fraud on the government pursuant to s. 121(1)(d) of the Criminal Code.

[78] Because Mr. Corbeil pled guilty, there was no reason for the Court of Appeal to interpret the phrase “the transaction of business with or any matter of business relating to the government”.

Preserving the Integrity of the Government

[79] At paragraph 13 of Hinchey, Madam Justice L’Heureux-Dubé stated that “[t]here is little doubt that s. 121 was enacted for the important goal of preserving the integrity of government” and that “a glance at the surrounding Criminal Code ss. 119 to 125 reveals different methods by which the law attempts to deter conduct by persons dealing with or employed by government”. At paragraphs 16 and 17 respectively, she added that the purpose of s. 121(1)(c) is also “to preserve the appearance of the integrity” and that s. 121(1)(c) “recognizes that the democratic process can be harmed just as easily by the appearance of impropriety as with actual impropriety itself”.

[80] The Supreme Court of Canada in the case of R. v. Giguere, 1983 61 (SCC), [1983] 2 S.C.R. 448 at paragraph 30 commented on the intent of Parliament in enacting s. 110(1)(d) of the Criminal Code, now s. 121(1)(d): “The general purpose of s. 110 is to preserve the integrity of government. Those connected with government are meant to carry on the business of government without favours being bought by those who deal with government.”

[81] The matters in dispute in Giguere were not related to the phrase “the transaction of business with or any matter of business relating to the government”, but rather, the type of person having or pretending to have influence with the government that this section was attempting to control as well as the meaning of “benefit […] as consideration for” and “cooperation, assistance, exercise of influence”.

[82] Associate Chief Justice Cunningham, as he then was, in deciding R. v. O’Brien (2009), 2009 100209 (ON SC), 249 C.C.C. (3d) 399 (Ont. S.C.), commented on Parliament’s intention in enacting s. 121(1)(d) of the Criminal Code. O’Brien was a case involving the former mayor of Ottawa, Larry O’Brien, who was charged with fraud on the government pursuant to subsection 121(1)(d)(ii) of the Criminal Code, which prohibits offering or accepting a reward, advantage or benefit of any kind as consideration for cooperation, assistance or exercise of influence in connection with the appointment of any person to an office. Cunningham A.C.J. found that s. 121(1)(d) captured political advantage and that Mr. O’Brien’s alleged conduct was within the scope of the subsection.

[83] The critical phrase in O’Brien was “advantage or benefit of any kind”. The Court considered the meaning of that phrase within the context of s. 121(1)(d). In doing so, it contemplated the goals that Parliament had in mind in enacting that section. At paragraphs 48-49 respectively, the Court found that “conduct will only fall within the purview of s. 121(1)(d) if it is perceived by the Canadian public as blameworthy” and that “conduct will be perceived as blameworthy where it gives rise to the appearance of dishonesty”. The Court also stated at paragraph 49 that “the accuracy of public perception is irrelevant (it may be based purely on speculation and conjecture) as the perception itself, and not its factual foundation determines the criminality of the conduct”.

[84] Cunningham A.C.J., in paragraph 52 of O’Brien, made the following additional comments regarding the public’s confidence in the integrity of the government:

[…] Section 121(1)(d) is clearly aimed at preventing influence peddling in order to protect the public's confidence in the integrity and appearance of integrity of the government. […] In my view, if s. 121(1) is directed at preserving the appearance of government integrity, any offer of a benefit or advantage made by a person having or pretending to have influence with the government which, regardless of the nature of the benefit offered, would, from the perspective of an ordinary, reasonable member of society have the appearance of compromising the government's integrity, falls within the scope of s. 121(1)(d). […]

Analysis and Conclusion

[85] It is abundantly clear from his conduct that Mr. Carson was attempting to influence government officials within INAC, Cabinet Ministers and their staff as well as high ranking members of the AFN to promote H2O’s water treatment systems. Mr. Carson never promoted any other water treatment system, nor did he appear to contemplate a competitive process to include other suppliers. Mr. Carson admitted this conduct.

[86] Mr. Carson also admitted that he used his influence in this fashion in order to obtain a benefit for his then girlfriend, Michele McPherson.

[87] Notwithstanding Mr. Carson’s attempts to exert his influence in government on behalf of H2O, the evidence supports the Defence position that it was the individual First Nations communities that determined whether or not to purchase the point-of-use systems being sold by H2O.

[88] The evidence from Gail Mitchell and others at INAC was that they did not offer funding outside of their annual formula based funding to First Nations to purchase this type of product. This is supported by the frustration Mr. Carson expressed in his final email to Ms. Machel, Minister Kent’s Chief of Staff when he stated that “officials at INAC won’t push any systems at all when dealing with Bands...”

[89] I disagree with Crown counsel that because INAC was the funding agency and served as an advisor to First Nations, that a three way business relationship was created between the government, First Nations communities and third party suppliers such as H2O.

[90] It would be incorrect to interpret s. 121(1)(d) so broadly as to include the three-way business relationship contemplated by the Crown. While I am aware that the intent of the Crown in making this submission was not meant to be paternalistic, the effect of a finding that such a three way relationship exists with respect to funding would be, in my view, most unwelcome by First Nations communities. They have long asserted their right to autonomy and indeed this is enshrined in our Constitution and Charter of Rights and Freedoms.

[91] Taking this analogy beyond the funding of First Nations communities, one could not say that because the Federal Government funds various charities or provides financial aid to certain corporate entities whose only involvement with the government is to accept the funding based upon certain terms and conditions of that funding, that individuals or corporations attempting to do business with those charities or corporations are in a three way partnership with the government and their actions are captured by s. 121(1)(d).

[92] On a common sense reading of s. 121(1)(d) of the Criminal Code, considering the words used “in their entire context in their grammatical and ordinary sense harmoniously with the scheme and object of the Act and the intention of Parliament” (A.(A.), at para. 67), Mr. Carson’s conduct does not fall within the purview of that section, because his assistance to H2O was not in connection with “the transaction of business with or any matter of business relating to the government”. Mr. Carson used his influence to set up meetings with INAC officials in which he tried to persuade INAC to support H2O as a supplier of water treatment systems in reserves. However, he was informed by INAC officials that they did not operate in that manner and that the First Nations Bands should be the point of contact if they wanted to sell their products to those communities. Consequently, Mr. Carson’s actions were not in connection with “the transaction of business with or any matter of business relating to the government” – there simply was no government business.

[93] The Crown’s argument that the Protocol for Decentralized Water demonstrated that there was funding that came through INAC for the types of water treatment systems marketed by H2O was not supported by the evidence of those who testified on behalf of INAC. This document was not put to any of them.

[94] It is not possible therefore to consider this Protocol for Decentralized Water in isolation without evidence from one of the INAC witnesses regarding how funding was provided under the Protocol for Decentralized Water; whether it applied to the type of point-of-use water treatment systems proposed by H2O and whether or not this Protocol for Decentralized Water had been part of the discussions between Mr. Carson and INAC.

[95] In light of my findings that there was no business with the government, it follows that the integrity of the government was not in issue. I do agree, however, that it was Parliament’s intent that s. 121(1)(d) of the Criminal Code should be applied so as to preserve the integrity of government. It may also be true that the public, viewing Mr. Carson’s conduct, would believe that there was, at the very least, an appearance that his conduct as someone with influence with the government compromised the government’s integrity and gave rise to the appearance of dishonesty as described by A.C.J. Cunningham in O’Brien.

[96] However, the difference between O’Brien and this case is that the government’s integrity was never in issue here because regardless of Mr. Carson’s attempts to persuade INAC officials to purchase water systems from H2O, INAC officials were not in the business of procuring these water treatment systems for First Nations communities.

[97] Mr. Carson appears to have erroneously believed that the government, particularly INAC, was able to assist H2O in selling their water treatment products to First Nations communities. He either never understood, or chose to ignore the information he received from his contacts at INAC and the AFN that they were the wrong entities to engage. Had I found that INAC had the authority to either approve or purchase H2O’s water treatment systems, beyond the provision of funding to First Nations, Mr. Carson’s conduct would have been blameworthy and I would have found him guilty of the charge of committing a fraud on the government pursuant to s. 121(1)(d).

[98] However, one cannot engage in “the transaction of business with or any matter of business relating to the government” nor damage the integrity of the government when the government is not the entity with which business must be conducted in order to achieve the benefit sought. In this case, the evidence supports only one conclusion and that is that First Nations communities were autonomous from the government with respect to any business transactions with H2O.

[99] I therefore find Mr. Carson not guilty of a fraud against the government.

Madam Justice B. R. Warkentin

Released: November 17, 2015

OTTAWA
COURT FILE NO.: 13-20008

DATE: 20151117

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

HER MAJESTY THE QUEEN

– and –

BRUCE CARSON

REASONS FOR JUDGMENT

WARKENTIN J.

Released: November 17, 2015