Ottawa concerned about 'potential misuse' of P.E.I.'s PNP years before program axed

Federal officials were expressing concerns about a controversial immigrant investor program run by the P.E.I. government as far back as 2013, documents reveal.  

Documents obtained by CBC News through access to information show officials referring to a "long history of program integrity issues" associated with the entrepreneur stream of P.E.I.'s provincial nominee program.

Those kinds of concerns led to the launch of a federal review begun in the spring of 2018. A spokesperson with the federal department of Immigration, Refugees and Citizenship Canada [​IRCC] said the review, referred to in documents as a "targeted integrity exercise," concluded over the summer, but the results still have not been finalized.

The province announced Sept. 12 it was shutting down the program.

'Department remains concerned'

The documents obtained by CBC News are heavily redacted, and it is not always clear who is writing or whom the intended recipient is. But all the documents are written by IRCC staff.

In an internal overview of P.E.I.'s provincial nominee program dated 2017-18, staff wrote "the department remains concerned about potential misuse of PEI's Business Impact Category of their PNP."

Those concerns were attributed to causes including the province's low retention rate of immigrants through the program, and the number of immigrants who defaulted on deposits made to the province.

In Ottawa those factors raised "concerns that the program may not be operating as intended."

$18M in revenue from defaults

Under the most recent rules governing P.E.I.'s entrepreneur stream, immigrant investors provide the province with a $200,000 refundable deposit and agree to live in P.E.I., start or buy a business there and operate that business for one year. In return the province sponsors them for permanent Canadian residency, which is granted upon arrival in the country.

In 2017 the province kept $18 million in default deposits from immigrant investors, most of whom had not even opened a business in the province, much less kept it going for one year.

A federal review of all provincial nominee programs published the same year pegged P.E.I.'s retention rate of PNP immigrants at 27 per cent, the lowest rate in Canada and well below the national average of 83 per cent.

These programs are vulnerable to misuse by intermediaries and applicants- Immigration, Refugees and Citizenship Canada briefing notes

In briefing notes prepared for the federal associate deputy minister of Immigration dated Dec. 2017, IRCC staff expressed concerns not just about P.E.I.'s specific program, but also the overall type of immigrant-investor program run by the province — one that provides permanent residency in exchange for a cash deposit.

"These programs are vulnerable to misuse by intermediaries and applicants who may not be motivated to operate a business in the province, and simply see the forfeiture of a deposit as a cost to obtain permanent residence," the document states.

Staff also noted all provinces with the exceptions of P.E.I. and New Brunswick had moved away from that model.

Canada Border Services has launched two separate investigations involving P.E.I.'s provincial nominee program, alleging more than 1,000 immigrants may have obtained permanent Canadian residency through fraud.

Two hotel owners have been charged in the first of those cases, with their trial set to begin in November. They have pleaded not guilty.

'Normal course of business'

P.E.I.'s Minister of Economic Development and Tourism Chris Palmer said the federal review of the entrepreneur stream of the PNP conducted over the summer had nothing to do with the province's decision to scrap that part of the program, and said the province has yet to see the results of that review.

"That review was just the normal course of business," said Palmer. "I believe that's our fourth review since 2016. It's a regular piece of business we go through."

Asked why the province only shut down the program in September after years of concerns from Ottawa, Palmer referenced a recent internal review he ordered from Island Investment Development Inc., the Crown corporation that manages the PNP for the province.

"We've been studying this for the last number of months and we made recommendations based on that, and we've been going through normal course of business reviews with Ottawa for this program for a number of years. We always learn something from those," he said. 

Béatrice Fénelon, a spokesperson for IRCC told CBC News via email that similar targeted integrity exercises "happen routinely and with different objectives," but that this was the first for P.E.I. She said the results would not be released publicly, but could be used "to mitigate any potential program integrity issues."

More applicants to come

Asked why the federal government continues to allow programs like the one P.E.I. just shut down, despite years of raising concerns, Fénelon wrote "there is a recognition that this type of stream can also carry significant benefit …​ IRCC recognizes that provinces and territories are best positioned to determine their specific economic and labour market needs vis-à-vis immigration, and to assess and nominate candidates that will meet those particular needs."

The federal government shut down a previous immigrant investor program run by P.E.I. in 2008, saying the program wasn't following federal rules that required immigrants be actively involved in companies they invested in.

A new investor program was launched by the province in 2011.

While the province has now shut down that program, it said approximately 400 applicants are still going through the approval process.

The province said it will continue to accept immigrant investors through the work permit stream of its provincial nominee program, which provides successful applicants with a temporary visa to allow them to come to the province. Once they've met program requirements, including operating their business for a year, the province would then sponsor them for permanent residency.

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