Breaking Fraud Cases from Canadian Courts
On May 4, 2017, the Provincial Court in Nova Scotia sentenced Mr. Sponagle, the operating mind of Jabex Financial Services Inc., of Windsor, Nova Scotia, to time served, probation, and payment of a $1.1M restitution order in relation to a $2.2M Ponzi scheme.
The Court also imposed a $1.1M jail-in-lieu-of-forfeiture order, requiring Mr. Sponagle to pay the $1.1M to his victims within five years, or risk going to jail for five years. The time served was in the infamous La Joya Penitentiary in Panama.
Mr. Sonagle’s Ponzi Scheme
Leading up to 2006, based on a too-good-to-be-true scheme, by a silver tongued con-artist, approximately 200 Canadian investors transferred approximately $4.2M to an account controlled by Mr. Sponagle in the name of Jabex Financial Services Inc. (JFSI) located at the First Curacao International Bank (FCIB) in Curacao, Netherland Antilles.
As karma (or bad luck) would have it, the bank license of FCIB was revoked by the Central Bank of the Netherland Antilles. Although this revocation was unrelated to the actions of Mr. Sponagle or JFSI, it effectively froze JFSI’s bank account, which lead payments not being made and the discovery of the scheme. There was about $2M in the JFSI account when it was frozen.
Of the unaccounted for $2.2M, a Canadian receiver reported to the Canadian Courts that $1.1M was used to fund Mr. Sponagle’s lavish lifestyle and was lost. The remaining $1.1M was used to pay early investors to keep the scheme operating. It was not reported how much of the $2M frozen in the Netherland Antilles went to the victims, but it can be presumed the receiver’s costs reduced this amount considerably.
On April 17, 2013, Mr. Sponagle was arrested in Panama. He had been living in Panama and Canada while perpetrating his fraud. Canadian authorities made the request for extradition, which Panamanian authorities eventually acted on. Mr. Sponage resisted extradition to Canada, but on November 29, 2014, he was transferred to Canada.
La Joya Penitentiary
Much of the Canadian Court’s sentencing decision focused on what credit, if any, Mr. Sponagle should receive for serving time a Panama jail. The Crown acknowledged:
La Joya Penitentiary is infamous for its deplorable and harsh conditions. It has been repeatedly denounced, including by the United Nations, for violating the basic human rights of prisoners. It bears the unenviable reputation as being “one of the worst jails in the world.”
The Crown submitted, however, that the usual allowance of 2-for-1 time for pre-conviction time served should not be afforded to Mr. Sponagle as he had refused to consent to his extradition. In other words, he caused his own time to be spent in the infamous “Joya” jail.
The defence submitted the conditions were so deplorable that the Court should grant an allowance of 4-for-1 time for pre-conviction time served.
The Court cut down the middle and ruled that normally no allowance should be given to anyone resisting extradition, but considering how bad this jail was, the allowance of 2-for-1 time for pre-conviction time served was appropriate in the circumstances.
The Canadian Jail Sentence
The Canadian Court further held that Canadian jail sentences for $1.1M frauds, where there was a breach of trust and no restitution paid, are often in the range of three to six years. The Court held that given the 2-for-1 time served basis, Mr. Sponagle had served 3 years, 4 months, and six days. On this basis our Canadian Court held that Mr. Sponagle should receive a sentence on the light end of the scale, not receive any further jail sentence, and should simply be placed on probation, and be ordered to pay restitution to his victims of $1.1M.
The Jail-in-Lieu of Forfeiture Order
While not sending Mr. Sponagle back to jail, the Canadian Court did impose what the Canadian Criminal Code refers to as a “fine-in-lieu” of forfeiture. The Court held that Mr. Sponagle has five years to pay $1.1M, and any payments made would be a set-off against the restitution he was required to pay. In other words, payment of restitution is given priority over payments of fine to the government.
Norman Groot, a lawyer at the fraud recovery firm Investigation Counsel PC, is of the view that the reality is that what the Criminal Code refers to as “fines”, are really threats of “jail” – hence the term “jail-in-lieu of forfeiture” is more appropriate. Mr. Groot advises that the threat of jail may not be a significant one as the victims may hope, as after the five years, the Crown has to bring an application to have the jail sentence imposed if the payment is not made.
To date we are not aware of any cases where applications to enforce jail-in-lieu of forfeiture have been reported. Whether Mr. Sponagle pays his victims, or finally serves time in Canada for his failure to do so, is a story that we at Canadian Fraud News Inc. intend to report on in the future.
For further information on this case, or any other fraud recovery inquiry, contact Canadian Fraud News Inc.
For the full Reasons for Sentence related to this story, see: R v. Sponagle, 2017 NSPC 23 – Decisions of Courts