Email from Hon. Ralph Goodale, Minister of Finance, Government of Canada

In addition, you may be interested to know that the Criminal Code of Canada contains provisions related to fraud as well as provisions that establish criminal rates of interest. Thus, if you feel that companies are engaging in practices that may violate the Criminal Code provisions, the most appropriate course of action would be to raise them with local law enforcement.

Email from Hon. Ralph Goodale, Minister of Finance, Government of Canada

To: Mr. Les Stewart, President, Canadian Alliance of Franchise Operators
From: Hon. Ralph Goodale, Minister of Finance, Canada
Date: May 25, 2005

Dear Mr. Stewart:

I am writing in response to your correspondence of April 25, 2005, regarding the difficulties your client, Mr. Andrei Oudovikine, has experienced in his dealings with his bank. I have noted your concerns and welcome this opportunity to comment.

I sympathize with the inconvenience that Mr. Oudovikine has faced as a result of this situation. However, it would be inappropriate for me as Minister of Finance to intervene in a dispute between an individual and their financial service provider. That being said, ensuring consumers are protected in their dealings with financial institutions is an important matter for the Government of Canada. To aid consumers and small businesses in their dealings with federally regulated financial institutions, the government requires all federally regulated financial institutions, including banks, to have dedicated procedures and personnel in place to address consumer concerns and complaints. In addition, each institution belongs to an industry-level dispute resolution mechanism, and I understand from your correspondence that Mr. Oudovikine has taken the appropriate steps in this matter, and is now appealing to the Ombudsman for Banking Services and Investments (OBSI).

With regard to your specific concerns regarding the independence and objectivity of the OBSI, I would note that the OBSI is an organization independent of the financial services industry, set up to investigate customer complaints against financial service providers including banks and investment dealers. To ensure its objectivity, the majority of OBSI’s Board of Directors are independent of the financial services industry and may not have worked for or been closely associated with a participating financial service provider, or have been a government employee, for a period of five years prior to being appointed to the Board. The independent directors also act as a committee of the Board and have special powers to safeguard the independence of the Ombudsman. For example, they have responsibilities for reviewing and recommending candidates for Ombudsman, as well as for putting names forward for independent directors. In addition, the independent directors have responsibility for reviewing and recommending OBSI’s budget.

You may also be interested to know that part of the mandate of the recently established Centre for the Financial Services OmbudsNetwork (CFSON) is to develop and promote industry standards and best practices relating to complaint-handling. You may wish to raise your concerns regarding OBSI’s independence with the CFSON, which can be reached via the following coordinates:

The Centre for the Financial Services OmbudsNetwork
1 Queen Street East, Suite 1605
Toronto, ON M5C 2X9
Telephone: 1-866-538-3766.
E-mail: ac.fscrc-nosfc|ofni#ac.fscrc-nosfc|ofni

Finally, with regard to the allegations you raise in relation to the practices employed by franchisors and lenders, let me begin by stating that while the Government of Canada is responsible for the oversight of federally regulated financial institutions, provincially incorporated financial institutions and franchisors, generally fall under the responsibility of the provinces in which they operate. As such, you may therefore wish to communicate your concerns to the responsible provincial authorities. In Ontario the Honourable Jim Watson, Minister of Consumer and Business Services is responsible for oversight of matters relating to franchising. Minister Watson can be reached at the following coordinates:

The Honourable Jim Watson
Minister of Consumer and Business Services
Government of Ontario
250 Yonge Street, 35th Floor
Toronto, ON M5B 2N5

In addition, you may be interested to know that the Criminal Code of Canada contains provisions related to fraud as well as provisions that establish criminal rates of interest. Thus, if you feel that companies are engaging in practices that may violate the Criminal Code provisions, the most appropriate course of action would be to raise them with local law enforcement.

Thank you for taking the time to write and I hope that this information proves useful.

Yours sincerely,

Ralph Goodale

c.c.: Mr. Nicholas Le Pan, Superintendent of Financial Institutions

-Original Message-
From: Les Stewart []
Sent: April 25, 2005 9:59 AM
To: MinFinance/s
Cc: Nick Le Pan; Andrei Oudovikine
Subject: Oudovikine & CIBC

Hon. Ralph Goodale, P.C., M.P.
Minister of Finance

I understand you received a copy of an email on April 22, 2005, sent by our member and my client Mr. Andrei Oudovikine to Mr. John Hunkin, Canadian Imperial Bank of Commerce, CIBC.

The improper lending practices that are very well documented in Oudovikine's situation may be quite widespread in Canadian financial institutions. The greatest wrongdoings occur within the small business lending market that serves franchises.

If the modern franchise relationship is understood correctly, statements that appear at first to be ludicrous, becomes quickly possible and then probable.

I have attached a paper entitled Franchising Opportunism and a diagram in excel format. This report provides a conceptual framework for the franchise relationship, shows the crucial role played by financial institutions and explains why a bank would react so maliciously.

Bias, Refusal to Deal & Delay
After ten months, Oudovikine's complaint is now with the Ombudsman for Banking Services and Investments, OBSI, and all indications are that their report will be biased, self-serving and irrelevant. Deputy Ombudsman Doug Weber continues to avoid a personal meeting with Oudovikine and relies solely on CIBC conversation while ignoring the total void of mandatory document production.

CIBC admits to taking and spending over $300,000 from Oudovikine's current account based on a contract in which they were not a party. Oudovikine has run afoul of the Canada Revenue Agency because CIBC can't produce a receipt for any of the assets they say they purchased.

Mr. Oudovikine is being severely harassed because he is unfortunate to be one of hundreds of franchisees that have suffered debilitating financial loss because of the banks' systemic abuse of their dominant position. My involvement makes him that much more of a target for an institution that you regulate.

I would ask that your office intervene to:
* instruct CIBC to stop intimidating Oudovikine,
* review the documents that the OBSI has received from CIBC, and
* commit to investigate predatory lending allegations within the franchise industry.

We would be pleased to assist your office with this matter and look forward to a quick reply.


Les Stewart
Canadian Alliance of Franchise Operators
1201 Bayfield Street North
Midhurst, ON L0L 1X1
705-737-4635 Tel

Mr. Nick Le Pan
Office of the Superintendent of Financial Institutions

Mr. Andrei Oudovikine

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