Why Sales Agent Due Diligence is Necessary
April 19, 2018 – At Canadian Fraud News, we report on decisions issued by Canadian Courts related to fraud, that are not reported in the main stream media, and that contain legal issues the Canadian public and fraud recovery experts should be aware of. The following is one such story.
On March 29, 2018, the Ontario Provincial Court of Justice released its decision in the fraud that Richard Glen Allison perpetrated on an Ontario company. Prior to this article, Mr. Allison had no status on a Google search, despite his past criminal record for fraud.
Had Ontario’s criminal courts had their decisions indexed on a Google search, his employer, or companies hiring him as an independent sales agent, may have recognized the risk in hiring Mr. Allison. Hopefully this article will protect others from becoming Mr. Allison’s victim. The facts, as set out by the Court, are as follows:
The Hiring Process and the Sales Agent Agreement
ABC Computing was incorporated in 2008. ABC Computing builds secure computers. Mr. K, the President and CEO of ABC Computing, testified at trial.
One of the investors in ABC Computing was another computer firm XYZ Company. As a result, ABC Computing did business with XYZ Company. It was through ABC Computing’s relationship with XYZ Company that ABC Computing’s director of sales Mr. H came to know Mr. Allison. Mr. Allison had been working for XYZ Company as a sales manager, apparently for a short time.
Sometime in 2014, Mr. Allison stopped working for XYZ Company and approached Mr. H with a view to selling ABC Computing’s products into other areas. Mr. Allison was referred to Mr. K. Emails from Glenn Allison and Glenn Allison’s CV were identified in evidence by Mr K. at trial.
In Mr. Allison’s CV he represented himself as having extensive, impressive, and executive level sales experience. It held him out as being “Sr. Management, Global Client Relations” and “Strategic and Directional Thinker – Profitable Revenue Growth – Coach, and Highly accomplished Sr. Executive”. The work experience outlined suggests that Mr. Allison led sales teams in several firms over the last 20 years.
ABC Computing and Mr. Allison came to an agreement Mr. K. described as a “Champion Agreement” – “Champion” as Mr. Allison was supposed to ‘champion” the interests of ABC Computing. It made Mr. Allison an independent sales agent for ABC Computing products.
The compensation structure was notable insofar as it provided for some payment of sales as soon shipment was made . 50% of the commission fee was to be paid within 72 hours of confirmation of delivery of the product to the client and receipt by ABC Computing of Mr. Allison’s invoice. The balance was to be paid 45 days later.
Mr. Allison put TLSCR Holdings as the name on the Champion Agreement. Currently Mr. Allison has a LinkedIn address of https://www.linkedin.com/in/glenallison11/
The Oil Company Deal
As soon as the Champion Agreement was signed by ABC Computing Mr. Allison lined up a deal for ABC Computing product known as the Horn River Project for Oil Company. Horn River was held out by Mr. Allison as a remote project which required Oil Company to outfit its staff with ABC Computing product.
Mr. K. was told by Mr. Allison that he had a long relationship with an executive at the firm Mr. H., and it was Mr. H. who was in charge of the Horn River project. Mr. Allison told Mr. K. that he had vendor or record status with Oil Company, which is the formal purchase process for such a large firm.
Mr. K. described the Oil Company deal as a game changer for his company. ABC Computing was small at the time and it was looking for a breakthrough. Up to that point they had done business mostly on the basis of a few or several computers at a time. Oil Company was a different order of magnitude.
Mr. K. testified that the person on the phone held himself out as Mr. H. on the phone in that call, and appeared to be knowledgeable about Oil Company and asked good questions. He seemed to know about ABC Computing, and said he wanted to support Canadian tech companies.
When the call ended they proceeded with the order. The Oil Company deal required ABC Computing to buy $500,000 of computers up front. ABC Computing would get that money back in the price of the contract. The Oil Company contract stipulated payment 45 days from the date of ABC Computing’s first invoice.
This payment arrangement with Oil Company meant that ABC Computing owed Mr. Allison the first payment of his commission 15 days after shipment of the computers even if payment was due from Oil Company 30 days after that. In other words, ABC Computing had agreed to pay Mr. Allison his commission before it got paid from Oil Company.
Mr. K. testified that ABC Computing worked more or less non-stop for two weeks to get the Oil Company order filled in time. In order to do that ABC Computing bought computers worth a total of $534,000 for the purpose of modifying and then selling them to Oil Company. The order was, at least initially, the cause of enthusiasm at ABC Computing and the firm worked hard to complete its side of the deal.
Mr. Allison was paid $32,812.50 as a first installment of his commission on July 10, 2014. A second commission installment of $52,062.50 was wired to Mr. Allison on July 17, 2014.
In the days and weeks that followed shipment of the computers to Oil Company, only one of the shipped computers was turned on. ABC Computing knew this because they were not merely selling computers but also a support system which was tracked from ABC Computing. That network told them that only one of the computers of the 350 was in use.
No payment was ever received. Glen Allison had told Mr. H. that all of ABC Computing’s invoices to Oil Company should go through him as opposed to ABC Computing directly sending an invoice to Oil Company. Within weeks Mr. Allison had told Mr. K. that there was an internal re-organization at Oil Company and that the Horn River project which required the computers would be sold. He told Mr. K. that, as a result he was not sure that Oil Company would need the computers, or whether ABC Computing would be paid.
Discovery of the Scam
By early August Mr. K. had concerns about the bona fides of the Oil Company deal and contacted Oil Company directly. By August 8, 2014 Mr. K. had knowledge that Oil Company knew nothing of the computers shipped to them and had never signed the contract with ABC Computing.
Mr. K. testified that there was real concern that several hundred thousand dollars in ABC Computing product was sitting in a warehouse in Calgary. If it wasn’t recovered, Mr. K. had real concerns about the viability of ABC Computing as a company. He continued to engage with Mr. Allison without telling him what he knew so that the computers could be recovered.
Mr. Allison’s position to Mr. K. was that the contract with Oil Company was bona fide but the sale of the Horn River project put the deal in limbo. Mr. K. testified that he knew otherwise but if getting his computers back meant playing along with this narrative he would do it. Ultimately all of the computers were returned to ABC Computing.
Once Mr. K. determined that there never was a deal with Oil Company, and the entire contract was a fiction, there was no basis for any commission to be paid to Glen Allison. Once confronted with this issue, Mr. Allison told Mr. K. that he was not going to return the commissions that ABC Computing paid him.
Mr. Allison’s Admissions at Trial
At trial Mr. Allison did not contest the commission amount paid to him, and that the Oil Company deal was a fake one. Mr. Allison did not contest the credibility of the Crown witnesses.
Findings of the Court
The Court made the following findings of fact. The Oil Company deal was signed by a fictitious Mr. H. using a fictitious email address with a delivery address which had nothing to do with Oil Company.
Individuals following up with ABC Computing who held themselves out as Oil Company employees turned out to be unknown to Oil Company.
The falsity of the deal included the fact that the email addresses provided by Mr. Allison to ABC Computing were close to the real Oil Company addresses but not exactly the same. Mr. Allison provided a URL of OilCompanyhornriverproject.com. This was a fake. The real Oil Company email addresses were in fact OilCompany.com.
The falsity of the deal included a shipping destination in Calgary which was where Oil Company was located but a municipal address which was unknown to Oil Company.
The Court held that the concept of selling product to Oil Company was brought to ABC Computing by Mr. Allison alone. This is not a case where Mr. Allison followed up on someone else’s lead.
The Court held that Mr. Allison continued to tell Mr. K. in late August that the deal was not dead. The Court held that the Crown has proven beyond a reasonable doubt that there was never a real deal. It was a complete fake.
Mr. Allison argued that he was as much a victim as ABC Computing. The Court held that there was no evidence whatsoever of that. Mr. Allison held out to ABC Computing that he was an established client of Oil Company and therefore there was no need to do background checks. That was entirely false.
The Court held that Mr. Allison passed on to ABC Computing a contract for the sale of computers signed by a senior executive of Oil Company Mr. H. Mr. H.’s signature on it and therefore Oil Company’s approval of the contract was entirely false. Mr. Allison sent the document to ABC Computing expecting it to act on it.
Mr. Allison was convicted on Count #1: Defrauding ABC Computing Over $5,000. The Court held that there was no other possible explanation available on the evidence before it.
Mr. Allison was convicted on Count #2: Knowing a Document to be forged, using it as if it were genuine. The Court found that the Mr. H. signature on the Oil Company contract was a fake as was Oil Company’s purported agreement to purchase the computers. The Oil Company contract was therefore a forged document and Mr. Allison’s transmission of it to ABC Computing for which he sought and obtained over $91,000 in commissions from ABC Computing was a forgery.
Mr. Allison was convicted on Count #3: Obtaining Merchandise from ABC Computing over $5,000 by false pretenses and with intent to defraud. The invoice Mr. Allison sent to ABC Computing for his commission of $91,875 on the Oil Company deal was a false statement. The evidence was overwhelming that Mr. Allison knew that there was no real contract with Oil Company. Mr. Allison knew that he was not entitled to the commission, obtained it, and kept it anyway.
Mr. Allison was convicted on Count #4: Making a false statement in writing for purposes of paying himself $91,875.00. Mr. Allison’s invoice for the commission was a false statement.
The Effect of Fraud on its Victims
The principals of ABC Computing testified that they had built up ABC Computing into a small if thriving company selling computer hardware in a niche market, namely customers who required secure devices which were not available off the shelf. ABC Computing’s business model was to take commercially available computers and modify them so that they could run ABC Computing proprietary software which made the computer highly secure. In an age where data loss is seemingly endemic, this is an important industry
Mr. Allison breached his relationship of trust with ABC Computing. He was not at arms-length to ABC Computing. He was contractually bound to be their “Champion”. He was to obtain genuine sales which would advance ABC Computing’s company interests. He negotiated very favourable compensation terms which included getting paid his commissions before ABC Computing was paid from the client. As Mr. Allison was in a position of trust to ABC Computing, section 718.2(a)(iii) of the Criminal Code was engaged.
ABC Computing was operated by sophisticated individuals. The Court held that Mr. K. was a business man who made reasonable decisions to advance this company’s interest. He did not know that he was being played. That Mr. Allison came to ABC Computing from a firm which had invested in ABC Computing gave Mr. Allison the appearance of bona fides. Aside from the sophistication of ABC Computing, it was nonetheless in a vulnerable position as it did not know who the true Mr. Allison was.
Who is this Fraudster Richard Glen Allison?
The pre-sentence report disclosed nothing which could explain Mr. Allison’s conduct. He had no substance abuse problem, gambling problem or real reason for taking someone else’s money.
According to the Pre-Sentence report Mr. Allison was supporting himself from revenue from his holding company True Large Sales Creates Revenue Holdings, which had operated a successful business for the last 8 years.
The Court held that there had been absolutely no restitution paid prior to sentencing. The Court held that Mr. Allison was uninterested in providing any restitution whatsoever even though he appears to have the ability.
Mr. Allison advised the Court that he was an undischarged bankrupt. That said, his company True Large Sales Creates Revenue Holdings was not. The Court held that Mr. Allison was in a position to provide the restitution to ABC Computing but chose not to.
Mr. Allison had a prior criminal record for related offences:
|1.||1994||Break and Enter||Suspended Sentence|
|2.||2004||i. Attempt Fraud Under||6 months conditional Sentence|
|ii. Utter Forged Document X4|
ABC Computing was not aware of this record prior to hiring Mr. Allison.
The forensic valuation report filed at sentencing quantified the loss to ABC Computing at $342,447.59. Of that, $91,875 is cash which went directly to Mr. Allison.
The Court held that sentencing is not an exercise in precision. After weighing the competing factors, the Court imposed a sentence of two years less a day in jail.
In addition to the custodial sentence the Court ordered a stand-alone restitution order in the amount of $342,447.59.
The Court also ordered that Mr. Allison be placed on probation for 3 years after being released from jail, with terms that:
- he maintain and operate only one email address, which shall be provided to the probation officer;
- he not operate any web sites or URL addresses without the prior permission of the probation officer; and
- he make restitution payments in the amount of not less than $3,000.00 per month
The Reported Decision
This Court’s trial decision on Mr. Allison is reported as R. v. Allison, 2018 ONCJ 64. The Court’s sentencing decision regarding Mr. Allison is reported as R. v. Allison, 2018 ONCJ 209. These decisions are publically available on-line at:
At Canadian Fraud News Inc., we welcome information from the pubic on Mr. Richard Glenn Allison who is the subject of this case.
For further information on this case, or any other fraud recovery inquiry, contact Canadian Fraud News Inc. at firstname.lastname@example.org.