Manager in Sudbury benefits fraud case ordered to pay $20M to former employer

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March 23, 2018 (Courtesy of  Benefits Canada) – A former Atlas Copco Canada Inc. manager sentenced to jail time for his part in a benefits kickback scheme now faces a $20-million bill from his former employer after the multinational industrial giant won a civil judgment against him.

Dirk Plate, a one-time manager of Atlas Copco’s construction and mining division at its Canadian base in Sudbury, Ont., received a five-year jail sentence in late 2016 after his conviction for benefits fraud along with two fellow employees and a Montreal insurance broker.

Plate, who pleaded not guilty and still denies any involvement, fought to avoid civil liability for the fraud after the sentencing judge in his criminal case ruled he was “not as central” to the kickbacks and overbilling plot as other players.

On the limited facts before him, Ontario Superior Court Justice Sean Dunphy ruled in a summary judgment earlier in March that Atlas Copco had failed to prove either civil fraud or civil conspiracy by Plate. However, Dunphy found Plate had breached his fiduciary duty to the company on the strength of the sentencing decision, which said he knew about the kickback scheme and allowed it to continue.

“A fiduciary does not have the option of remaining mute in the presence of an identified, known scheme that is actively harming his employer. Still less is he entitled to accept benefits and payments that I have inferred were in whole or in part made in return for his silence,” Dunphy wrote, ordering Plate to pay $20 million, net of any future recovery from the other defendants.

According to the sentencing decision in the criminal case, the fraud at Atlas Copco took root in the 1990s, when benefits broker Paul Caron began inflating bills to the company and submitting fake invoices. The sentencing judge found a number of insiders at the company facilitated the overbilling and received kickbacks in return for keeping it going.

The amount involved escalated in the years before the discovery of the fraud, with a forensic report submitted at the criminal trial showing $22 million in overbilling in the years between 2004 and 2007.

Plate, a Dutch national who had worked for Atlas Copco in his home country since the 1970s, moved to Canada in the 1990s and was manager of the construction and mining division for much of the period when the fraud was active. However, the sentencing judge found Plate only became involved in 2001 as a result of his dissatisfaction with his pension arrangement, which required him to keep his existing Dutch pension when his entitlement under the Canadian plan would have been much greater.

The fraud continued after Plate left his position, but Caron’s insurance company purchased 15 annuities worth $1.4 million for Plate between 2003 and 2006, according to the decision.

Two senior employees at Atlas Copco pleaded guilty to their involvement in the scheme and implicated Caron and Plate, both of whom pleaded not guilty at their trial in 2016. However, a jury found both of them guilty and sentenced each of them to five years in jail.

Caron was ordered to pay $10 million in restitution, but both he and his company had previously filed for bankruptcy. Plate, meanwhile, was ordered to return the annuities and additional payments received from Caron worth $77,000.

An earlier decision in the civil case from 2011 noted Plate was one of the few defendants yet to declare bankruptcy and revealed that, at the time, he was still receiving his Dutch pension, which was worth about $96,000 per year. In 2007, following his suspension by the company, he had transferred three properties jointly owned with his wife into her name only, before she was later added as a defendant in the civil case.

Norman Groot, a fraud recovery lawyer not involved in the case, says criminal conviction is rarely the end of the story for companies seeking restitution for losses. Still, he notes this case was unusual.

“I’ve never seen a case where civil fraud was not found after a criminal court — where the burden of proof is much higher — has found someone liable,” he says.

“However, the company got the finding for breach of fiduciary duty, so they ended up in essence with the result they wanted, even if they got there in an unusual way,” adds Groot.

Plate’s lawyer didn’t respond to a request for comment, while Atlas Copco’s counsel said he had “no comment at this time.”