< Judge Dismisses Civil Fraud Claim against Dirk Johannes Plate After the Criminal Court Sentenced Him to Five Years in Prison for the Same Fraud - Canadian Fraud News Inc. | Fraud related news | Fraud in Canada

Judge Dismisses Civil Fraud Claim against Dirk Johannes Plate After the Criminal Court Sentenced Him to Five Years in Prison for the Same Fraud

April 11, 2018 – On March 7, 2018, Justice SF Dunphy of the Superior Court of Justice, Commercial List, in Toronto, issued his judgment in the case of Atlas Copco Canada Inc. ats Plate et al, 2018 ONSC 1588. In this case, the plaintiff, Atlas Copco Canada Inc., had brought a motion for summary judgment against Mr. Plate for fraud, breach of fiduciary duty and conspiracy. The Court dismissed Atlas’ civil fraud claim, even though Mr. Plate had already been convicted by a criminal court of fraud.

The question may be asked – How is that a civil court, where the standard of proof is the balance of probabilities, cannot find a defendant liable for civil fraud, when a criminal court, based on proof beyond a reasonable doubt, had convicted the same person of fraud based on the same conduct? The history of the concurrent civil and criminal cases was reported in Justice Dunphy’s decision as follows:

Dateline of the Criminal and Civil Cases

In the 1990s, Atlas Copco employee Mr. Paul Caron began creating inflated bills and fake invoices to the company for Manulife insurance benefits. Forensic accounting evidence proved that between 2004 and 2007 alone Atlas Copco was overbilled $22M+. Paul Caron’s primary co-conspirator was Leo Caron. Obviously the fraud was far greater than $22M, as losses were not assessed for the period before 2004.

In 1997, Mr. Plate, the subject of the summary judgment motion we are reporting on, was a general manager of Canadian operations for the plaintiff Atlas Copco. Mr. Plate was later promoted to vice-president of global operations. Initially Mr. Plate was not aware of Mr. Caron’s scheme.

In 2001, Mr. Plate became involved in the fraud scheme as alleged in the claim. At the time, the overbilling scheme was facilitated by three insiders at Atlas Copco. These insiders received kickbacks. Mr. Plate became one of the insiders. Mr. Plate’s rationalization was that the pension that Atlas Copco provided him was insufficient. Mr. Plate’s involvement was approving the conduct of Mr. Caron and not reporting the scheme to his employer.

In 2005, suspicious circumstances were discovered. Mr. Plate was suspended. In 2007, Mr. Plate’s employment was terminated. On June 14, 2008, the Statement of Claim in the civil proceedings was issued. Various ex parte (without notice) asset tracing and freezing motions were brought. Further facts were discovered exposing the true extent of the fraud.

On April 11, 2011, the Statement of Claim was amended. The claim sought judgment of $20M based on declarations that Mr. Plate was liable for fraud, breach of fiduciary duty, breaching his duties under section 122 of the Canadian Business Corporations Act, conspiracy and other torts. Atlas Copco also sought an order for tracing and an accounting, their costs, and prejudgment interest.

The claim alleged that in the course of his employment, Mr. Plate had been involved in a scheme with his co-employees to misappropriate funds by way of false advances and bonuses, approvals of illegitimate expense reimbursements, and inflating or creating false invoices. Atlas Copco alleged that Mr. Plate breached his duties that he owed to the company by not reporting to the company, the fraud engaged in by his co-employees.

On January 11, 2010, Mr. Plate served his Statement of Defence. A criminal complaint was filed. The civil action then appears to have gone into hibernation while the criminal investigation unfolded.

In October 2012, Mr. Plate was arrested and charged with criminal fraud and conspiracy. From 2012 to 2016, the criminal process unfolded, with Crown disclosure and preliminary hearings. Various motions took place. Mr. Plate and his co-accused were committed to trial. It appears the civil case was stayed.

In April 2016, the criminal trial of Mr. Plate commenced. The trial before a jury last ten weeks. On June 29, 2016, Mr. Plate was convicted of criminal fraud by a jury. On October 25, 2016, the criminal judge released his reasons for sentence.

In his reasons for sentence, the criminal court held that Mr. Plate “grossly betrayed the trust of his employer”, as he was in the best position to stop the scheme, as he was aware of the means used by Mr. Hiller to conceal fake invoices.  Mr. Plate’s fraud was, for the most part, that of fraud by omission for failing to report material facts to his employer.

On October 26, 2016, Mr. Plate was sentence to five years in prison. Mr. Plate was ordered to pay restitution in the amount of $1.5M being the funds that he obtained in a $20M+ fraud perpetrated on his employer. As mentioned above, in the civil fraud case the plaintiff sought judgment for $20M as against Mr. Plate. As is typically the case in Canada, fraudsters do not serve their full sentences.

Sometime in 2017, the Plaintiff brought a motion for summary judgment as against Mr. Plate.

The Issues as the Civil Judge Saw Them

Atlas Copco sought summary judgment on the basis of the findings of fact of the sentencing judge from the criminal proceedings. Justice Dunphy held that the main issue before him, was the extent to which the findings of fact in the criminal proceedings can be relied upon to find the same defendant civilly liable for fraud based on the same complaint.

Justice Dunphy held that just because the criminal reasons should be given considerable weight it does not mean that the criminal reasons are “beyond question.” Justice Dunphy cited the test for civil fraud as:

  1. the defendant made a false statement of fact;
  2. the defendant made the false statement knowing it was false;
  3. the defendant made the false statement with the intent that the plaintiff would rely on it;
  4. the plaintiff relied on the false statement; and
  5. the plaintiff incurred a loss.

 

Justice Dunphy held the issue to decide was whether Mr. Plate actually made a “false statement”. Justice Dunphy went on to state:

There is no evidence and no finding that Mr. Plate made any statements whatsoever in relation to all of the remaining payments that make up the $22M loss of Atlas Copco as found by the sentencing judge. The statements made by the co-defendants cannot be attributed to Mr. Plate absent a finding of conspiracy. The fraud that is necessarily implicit in the jury’s verdict in relation to Mr. Plate (being the $1.5M) has not been shown to have contributed to or cause any other loss.

On the basis that Mr. Plate did not make direct false statements to his employer, Justice Dunphy held that Mr. Plate was not liable for civil fraud.

Conflicting Decisions

Lawyer Norman Groot, of the law firm Investigation Counsel PC, whose practice focuses on civil fraud recovery, indicates that other judges have held that civil fraud includes what is recognized as criminal fraud. For example, in the case of Harland et al ats Fancsali et al (1993), 13 OR (3d) 103, where a civil fraud case was brought against a defendant rogue who did not make an explicit “false statement” to his victim, but rather omitted to disclose material facts which caused the plaintiff Harland a loss, Justice Ferguson held:

If conduct constitutes fraud under the criminal law it certainly constitutes a wrong for which a civil court can grant relief.  The criminal case law (R. v. Theroux, 1993 CanLII 134 (SCC), [1993] S.C.J. No. 42) has established the following propositions concerning the crime of fraud:

— “other fraudulent means”, is a third category of conduct separate from deceit or fraud which includes what reasonable people consider to be dishonest dealing. The non-disclosure of important facts may fall into this category: R. v. Theroux , at pp. 25-26;

Mr. Groot also cited the case of BLM Investments v. FCMI, 2017 ONSC 7327 (254065), where Justice C.S. Glithero published a concise summary of what conduct constitutes civil fraud which included:

Incomplete disclosure, amounting to half-truths, may constitute the necessary deceit, and silence as to a change in circumstance which renders untrue a previously true representation may constitute actionable deceit.

Mr. Groot underscored that he was not present at the motion in this case of Atlas Copco Canada Inc. ats Plate et al, and that there may be something that he is not aware of which affected Justice Dunphy’s decision.

Mr. Groot also advised that the issue may be more academic than real for the rogue Mr. Plate, as Justice Dunphy went on to hold that Mr. Plate breached his fiduciary duty that he owed to his employer, and that judgment was issued in the amount of $20M, being the maximum amount claimed by the Plaintiff.

The Reported Decision

The Court’s decision in Atlas Copco Canada Inc. is publically available on-line at:

https://www.canlii.org/en/on/onsc/doc/2018/2018onsc1588/2018onsc1588.html?searchUrlHash=AAAAAQAXQXRsYXMgQ29wY28gQ2FuYWRhIEluYy4AAAAAAQ&resultIndex=1

 

 

Deborah McCoy – Is an investigative journalist and has over 17 years of investigation experience in both the private and public business sectors. Since joining CFN, Ms. McCoy has become a true advocate for victims of fraud and increasing the public’s awareness in fraud prevention.