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Breaking Fraud Cases March 2019

Breaking Fraud Cases from the Canadian Courts March 2019

Every week the staff of Canadian Fraud News collects and publishes breaking fraud related court decisions not otherwise reported by mainstream media. Below is our weekly summary for the week of March 25, 2019

R. v. Arthur Wong, 2019 BCPC 32

In a decision dated March 12, 2019, the British Columbia Provincial Court convicted the accused, Mr. Wong, of defrauding his employer of $147.00 by making one unauthorized personal expense transaction on his employer’s AMEX credit card. The Court acquitted Mr. Wong of various other alleged unauthorized transactions valued well in excess of $5,000 (Fraud Over) on the basis that the Crown did not prove beyond a reasonable doubt that the transactions were in fact personal expenses that should not have been charged to his employer’s credit cards or expense accounts. This long decision discusses the level of forensic investigation required to convict an employee of fraud in the context of misuse of corporate credit cards and expense accounts. The fraud was discovered when the company did not have sufficient funds to pay its AMEX invoice, and AMEX made a collection call to one of its directors.


R. v. Grace Angela Palmer, 2019 BCSC 342

In a decision dated February 22, 2019, the British Columbia Supreme Court sentenced a 45 year old bookkeeper, Ms. Palmer, to four and a half years in jail after she made a guilty plea to defrauding her employer out of over $2.2M. The Court also imposed a $2.2M restitution order, but did not address the issue of a fine-in-lieu of forfeiture. The sentence was on the high end of the range due to the refusal of the accused to pay back of any of the stolen funds, the duration of the fraud, the extent of the concealment, the destruction of evidence, the impact on the viability of the company, and due to the ramifications of her breach of trust on those who trusted her. Ms. Palmer did not have a criminal record or psychiatric issues. The fraud was discovered by virtue of Ms. Palmer insisting that she be the only employee to be paid by cheque as opposed to direct deposit, and an audit being conducted on payroll after audits had not been previously conducted on payroll.


Petrochemical Commercial v. Nexus Management Group, 2019 ONSC 1142

In a decision dated February 20, 2019, the Ontario Supreme Court dismissed a motion made by defendants to a civil fraud case to unwind a Mareva (asset freezing) order issued against them. The defendants also sought an order sealing their examination on their world-wide assets and sealing any further examinations on the basis that they were being investigated in a foreign jurisdiction (Iran). The asset freezing order against the Canadian defendants was not based on their actual involvement in the fraud itself, but on the basis that they knowingly assisted the alleged fraudsters and knowingly received the proceeds of the fraud. The Court dismissed the Canadian defendants’ allegations that the Plaintiff had not disclosed material facts when it obtained the Mareva order on an ex-parte (without notice) basis. As the asset freezing order was maintained, the Court granted the defendants access to the frozen funds for provable living and legal expenses. The defendants were granted the sealing order on the basis that Ontario’s deemed undertaking rule could not be enforced in a foreign jurisdiction. It was not mentioned, ironically, whether a criminal defendant has a right to silence in Iran. In any event, this is a helpful decision for understanding Mareva orders issued in various jurisdiction in an international fraud context.


Plate v. Atlas Copco Canada Inc., 2019 ONCA 196

In a decision dated March 13, 2019, the Ontario Court of Appeal overturned a $20M judgment issued against Mr. Plate, the general manager of Atlas Copco Canada, for breach of his fiduciary duties. The focus of the decision was whether it was appropriate to issue judgment by way of a motion for summary judgment where the only evidence was the Reasons for Sentence issued by a judge in the criminal courts.

The criminal judgment was for fraud as opposed to breach of fiduciary duty, and the conviction was made by a jury. While the criminal judge made a finding for sentencing purposes that the defendant Mr. Plate was a fiduciary, he did not make findings that he breached his fiduciary duties, and even if he did the judge did not find Plate breached his fiduciary duties for the entire loss period. The decision provides further insight into when the findings of a criminal court can be relied upon for judgment in a civil fraud recovery case. Ironically, at the summary judgment motion the judge dismissed a finding of civil fraud even though the criminal courts had imposed a conviction and sentence for criminal fraud. It would seem that criminal wrongdoing should lead to civil tort (wrong) liability.


Meharchand (Re), 2019 ONSEC 7

In a decision dated January 30, 2019, the Ontario Securities Commission issued its sanctions decision against Dennis Meharchand and his company Valt X. Holdings Inc. The Commission had previously found Meharchand liable for securities fraud for his role in taking funds from investors and using it for his own personal purposes. The Commission issued its usual mantra that “the purpose of securities law is to protect investors from unfair, improper or fraudulent practices,” and that “fraud is one of the most egregious securities regulatory violations.” The Commission also made its boilerplate statement that “the purpose of administrative penalties is to deter the respondents and those like them from other fraudulent conduct, and that fraudulent conduct will not be tolerated in Ontario’s capital markets.” The Commission imposed a disgorgement order against Meharchand of $1.45M CDN and $140K USD, along with an administrative penalty of $550,000. The Commission also ordered Meharchand to pay the Commission costs of approximately $165,000. Meharchand offered no evidence that he had paid any of the investors their money back. The most interesting part of this decision is the review of cases involving significant administrative penalties. There was no mention of concurrent criminal fraud or civil fraud recovery proceedings against Meharchand, or any intention of the Commission to actually collect on its orders.