Agriculture, Food and Rural Affairs Appeal Tribunal 1 Stone Road West
Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales 1 Stone Road West
Guelph, (Ontario) N1G 4Y2 Tel: (519) 826-3433, Fax: (519) 826-4232 Email: AFRAAT@ontario.ca
Guelph (Ontario) N1G 4Y2 Tél.: (519) 826-3433, Téléc.: (519) 826-4232 Email: AFRAAT@ontario.ca
AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL
APPEAL:
Chromczak v Ontario Flue-Cured Tobacco Growers’ Marketing Board
Chromczak v OFCTGMB 1998 ONAFRAAT 10
STATUTE:
Ministry of Agriculture, Food and Rural Affairs Act
HEARING:
January 27, 1998
DATE OF DECISION:
February 10, 1998
1998-10
NEUTRAL CITATION:
1998 ONAFRAAT 10
Chromczak v Ontario Flue-Cured Tobacco Growers’ Marketing Board
IN THE MATTER OF THE FARM PRODUCTS MARKETING ACT AND SECTION 16 OF THE MINISTRY OF AGRICULTURE AND FOOD ACT.
AND IN THE MATTER OF:
An Appeal to the Farm Products Appeal Tribunal by Edward Chromczak, Caroline Chromczak and E. & C. Chromczak Holdings Inc., of Courtland, Ontario, from the decision of the Ontario Flue-Cured Tobacco Growers’ Marketing Board (the Board) dated June 2, 1997 wherein the Board found Edward and Caroline Chromczak and E. & C. Chromczak Holdings Inc., had sold tobacco other than through the Board’s auction exchange and as a result reduced the basic production quota of Edward and Caroline Chromczak by 77,300 pounds and E. & C. Chromczak Holdings Inc., by 40,625 pounds
Before:
Jim Rickard, Chair; Armand Bechard, Member; Moira Connell Member; Sarsfield O’Connor, Member.
Appearances:
Mr. Douglas G. Gunn, Counsel to the appellants, Edward and Caroline Chromczak and E. & C. Chromczak Holdings Inc.
Mr. Barry Bresner, Counsel to the respondent, the Ontario Flue Cured Tobacco Growers’ Marketing Board.
DECISION OF THE TRIBUNAL
This appeal was heard in Guelph, Ontario, on January 27, 1998. Edward Chromczak, Caroline Chromczak and E. & C. Chromczak Holdings Inc., (the appellants) appealed to the Farm Products Appeal Tribunal (the Tribunal) from the June 2, 1997 decision of the Ontario Flue-Cured Tobacco Growers’ Marketing Board (the Board) wherein the Board found the appellants had sold tobacco other than through the Board’s auction exchange and as a result reduced the basic production quota of Edward and Caroline Chromczak by 77,300 pounds and E. & C. Chromczak Holdings Inc., by 40,625 pounds.
The Background
The RCMP in Vancouver, British Columbia, began investigating the activities of Stephen Phillips in the summer of 1996. From the RCMP investigation, it became clear that Mr. Phillips had been acquiring raw leaf tobacco from Ontario and processing it into fine cut tobacco for sale in British Columbia. A search of Mr. Phillips' telephone records revealed that, between May and November 1996, 11 calls had been made by him to a telephone number registered to E. & C. Chromczak Holdings Inc. in Courtland, Ontario. On November 17, 1996, Mr. Phillips travelled to Toronto by air. He was picked up by his mother, Marion Phillips, in a rented van. They proceeded to the Chromczak farm in Courtland and the van entered one of the barns and after a time went to a mini-storage facility in Woodstock. Mr. Phillips and his mother made several more trips between the Chromczak farm and the mini-storage facility. The RCMP found 44 bales of tobacco in the mini-storage unit. Mr. Chromczak admits that he sold those 44 bales of tobacco to Mr. Phillips. A further 53 bales of tobacco were seized from the Chromczak farm. This total does not include any shipments made prior to November 1996.
There is some uncertainty as to the period of time over which Mr. and Mrs. Chromczak had been selling tobacco to Mr. Phillips. Mr. Chromczak asserted that he had not sold any tobacco to Mr. Phillips prior to June 1996. Mr. Chromczak estimated that he sold 42 bales of tobacco to Mr. Phillips between June and October 1996 and admits to the sale of an additional 44 bales to Mr. Phillips in November 1996. The Board accepted Mr. Chromczak's evidence that his sales of tobacco to Mr. Phillips only commenced in June.
On June 13, 1996, Mr. Robert Howes, inspector for the Board, inspected the Chromczak farm on behalf of the Board. At that time, Mr. Chromczak advised Mr. Howes that he had not grown a crop and had no carryover tobacco in the barn. Mr. Howes accepted Mr. Chromczak's representation and did not inspect the barn. Mr. Chromczak signed the Inspection Sheet confirming that he had no tobacco. Mr. and Mrs. Chromczak and E. & C. Chromczak Holdings Inc. had obtained an exemption from the Board permitting them to rent out all of their 1996 marketing quota. That exemption was granted on compassionate grounds as Mrs. Chromczak was seriously ill and, in the circumstances, Mr. Chromczak was unable to grow a crop.
Mr. Chromczak admitted that he had sold tobacco to Mr. Phillips earlier in June and that he had the tobacco in his barn that was subsequently sold to Mr. Phillips. The Board believed that Mr. Chromczak deliberately misled the Board's Inspector in order to pursue a calculated plan to continue selling tobacco to Mr. Phillips.
Each of Mr. Phillips, his mother Marion Philips, Edward Chromczak, Caroline Chromczak and E. & C. Chromczak Holdings Inc., were charged with the offence of unlawfully conspiring to sell manufactured tobacco in contravention of the Excise Act and Regulations. On January 21, 1997, Mr. Phillips pled guilty and received a fine of $10,000.00 plus a 15% surcharge. As part of that plea bargain, the charges against his mother were withdrawn. On April 15, 1997, the charges were withdrawn against Caroline Chromczak and E. & C. Chromczak Holdings Inc. as part of a plea bargain pursuant to which Edward Chromczak pled guilty to a lesser offence of having violated Section 225 of the Excise Act (unlawful possession of raw leaf tobacco). Mr. Chromczak was fined $10,000.00 or six months in jail and was given a period of one year in which to pay the fine.
The Board conducted a hearing into the matter and found that the Chromczaks sold at least 86 bales of tobacco to Mr. Phillips in a series of transactions over the six-month period from June to November 1996. The Board further found that Mr. Chromczak, while having admitted his knowing participation in the scheme to circumvent the Board’s General Regulations, was less than forthright with respect to the quality of the tobacco sold and that Mr. Chromczak deliberately mislead the Board's inspector in June. At the Board hearing, Mr. Chromczak sought leniency from the Board on compassionate grounds. He explained that he did not grow a crop in 1996 because of his wife's serious illness and the consequent need for him to devote considerable time to looking after his family. Mr. Chromczak claimed to be in financial difficulty, notwithstanding the $50,000.00 received on the rental of the tobacco marketing quota in 1996. Mr. Chromczak’s lawyer argued that the court fine should be taken into account when assessing the appropriateness of penalty to be imposed by the Board.
The Board decided that the court penalty does not address the need of the Board to protect and preserve the integrity of the marketing system. The Board also took into account the fact that in 1994, Mr. Chromczak refused to allow the Board's Inspector to inspect his tobacco and only agreed to do so after the Board cancelled his shipping instructions. The Board also considered the length of time over which the illegal sale of tobacco took place and the quantities involved. Taking all factors into consideration, including the serious health and financial problems described by Mr. Chromczak, the Board decided, on compassionate grounds, to only reduce the Chromczaks' basic production quota by 50%, or 117,925 pounds.
The appellants now appeal to the Tribunal the severity of the penalty. The facts of the case are not in dispute.
The Issue
Given the admission to selling tobacco contrary to the Board regulations, what is the appropriate penalty to apply against the appellants?
The Evidence and the Findings
Mr. Edward Chromczak told the Tribunal that he is married with three children. He and his wife Caroline are 50-50 partners in the tobacco farm. They operate a corporate farm which holds 81,250 pounds of basic production quota and a partnership farm that holds 154,600 pounds of basic production quota.
Mr. Chromczak said that they intended to grow a tobacco crop in 1996. He had started the tobacco plants in the greenhouse. He said that on April 4, 1996, Caroline gave birth to twins. On April 10, Caroline had surgery for a brain aneurysm and she is still recovering from that surgery. She suffers from digestive problems, memory loss and shows signs of anxiety and reacts to stressful situations. Mr. Chromczak said he was advised in April 1996, that avoidance of stress was a critical factor in his wife’s recovery so he decided not to grow a tobacco crop in 1996. He applied to the Board and was granted an exception to the Board’s policy on renting out marketing quota and was able to rent out all of his 1996 marketing quota.
Mr. Chromczak said that he spent all of 1996 attending to his family and travelling back and forth to the hospital in London. He had to hire people to care for the infant twins and his ten year old child. He told the Tribunal that, in April 1996, he had a carryover of 139 bales of tobacco, some as old as the 1993 crop. He sold 86 bales from this to Mr. Philips starting in early June 1996. He said that he sold the tobacco because he needed the money for personal living expenses so he could put food on the table for his family. He said he did not tell his wife about selling the tobacco as he did not want to worry her with their financial problems.
Mr. Chromczak said that, in his opinion, the tobacco was of poor quality and had already been offered for sale at the tobacco exchange without receiving an acceptable bid. He detailed for the Tribunal the financial arrangements he had made since the time of his wife’s illness and indicated the family was in financial difficulty and could not afford to lose the tobacco quota cancelled by the Board and still stay in tobacco production.
Mr. Chromczak told the Tribunal, that in 1997, he had reduced his acreage, rented the maximum marketing quota allowed by the Board policy in the spring and the fall and had an additional rent-in in late December which allowed him to market 84,210 pounds of tobacco in 1997; down from the approximately 107,000 pounds he would have been allotted if the quota had not been cancelled by the Board.
Mr. Chromczak then told the Tribunal that he apologizes to the Board for what he has done, and to his fellow growers for what he did to them as a result of his poor judgment. He said that, at the time, he had no idea of the consequences of his actions. At the time, he was not thinking about the consequences, his only concern was for his family and he would never do this again.
Mr. Frank Menich, tobacco producer and Chair of the Board, told the Tribunal that the Board feels selling tobacco outside of the regulations is a serious offense that strikes at the heart of the marketing system. In reaching its decision, the Board considered that Mr. Chromczak deliberately mislead the Board’s inspector in June when asked if he had any carryover tobacco. He said the Board feels that the quality of the tobacco marketed is higher than represented by Mr. Chromczak and that influenced the Board’s evaluation of the credibility of Mr. Chromczak’s testimony.
Mr. Menich said that the Board deliberated extensively on the penalty to apply. He said the penalty had to be severe enough to maintain the integrity of the system but should give Mr. Chromczak a chance to redeem himself. The Board set a difficult “row to hoe”, but feels Mr. Chromczak could continue to be a tobacco producer if he uses the options available to him such as share growing and renting in marketing quota. He said the Board felt the reduction in quota should not be minor but sufficient to emphasize the integrity of the system and address the issue of contraband and profitability of going outside the system.
In his summation, Mr. Gunn pointed out that there are no specific regulations or policy directives by the Board to provide guidance on the appropriate penalty to apply to this type of situation. He argued that the simplistic approach to penalty is a percentage basis. He said that the Sieon case in 1989 applied a penalty of cancellation of the basic quota necessary to obtain twice the marketing quota that would be needed to market the tobacco sold illegally - about 27% of the basic quota held by the producer. He suggested the Tribunal use this case as a guide.
Mr. Gunn argued that there is a difference between Caroline and Edward’s involvement in this case. He said there is no evidence that Caroline was involved and the penalty should not affect the holdings of Caroline. She is a 50-50 partner in the business and therefore any penalty applied should only attach to Edward’s 50% interest in the quota. He urged the Tribunal to use a percentage reduction in quota applied to the interest of Edward Chromczak only. He said the appropriate percentage to use was the 27% used in the Sioen case.
Mr. Bresner, in his summation, argued that the charges against Caroline were dropped as part of a plea bargain and therefore the extent of her involvement is unclear. He said the suggestion that the penalty apply only to Edward’s interest in the quota had not been made before and not considered by the Board. He argued that the sale of tobacco outside the marketing system is a capital offense in supply marketing terms. There is little that a producer can do that is worse than that. It undermines the integrity of the system. At the end of the day, the value of the quota will be diminished as quota only has value as long as there is integrity in the system. He said Mr. Chromczak’s conduct detrimentally affects every producer of tobacco. If not deterred such conduct jeopardizes the entire system.
He argued that this is a serious situation:
a course of conduct over several months that contravenes the Board’s rules.
misleading of the Board inspector.
the board felt 100% cancellation is warranted.
He argued that the Board tempered its decision by the fact that:
this is the first offense by Mr. Chromczak,
the financial difficulties experienced by the Chromczak family,
Caroline’s illness.
He said, the Board gave Mr. Chromczak a second chance on compassionate grounds and the Board decision should be confirmed by the Tribunal.
The Tribunal considered the evidence and arguments presented and was impressed by the sincerity of the apology offered by Mr. Chromczak to the Board and his fellow producers for having breached the regulations and brought discredit to the members of the industry.
In the opinion of the Tribunal, Caroline had to know what was going on relative to the sale of tobacco to Mr. Phillips. It appears to the Tribunal that, in 1996, the appellants applied for an exemption of the Board’s policy on compassionate grounds and got a full exemption not just an exemption from growing Caroline’s portion of the quota. Both Edward and Caroline benefited from the Board’s policy. In the opinion of the Tribunal, it is inappropriate to say in 1997 that the quota is split equally between Edward and Caroline and should be treated as separate holdings. If the quota was one in 1996, it is still one in 1997.
The Tribunal reviewed the evidence and decided that the circumstances of this case warrant the application of compassion in determining the penalty. Mr. Chromczak was under a great deal of stress at home with the arrival of twins and the serious illness of his wife occurring at virtually the same time. In the opinion of the Tribunal, this stress lead Mr. Chromczak to make a bad decision to sell some tobacco in breach of the Board’s regulations. The Tribunal accepts Mr. Chromczak’s statement that he did this in order to provide the basic necessities for his family. Nonetheless, the Tribunal views this breach of the regulations as a serious offense that warrants a significant penalty that acts as a deterrent to others that may find themselves in comparable circumstances. The Tribunal agrees with the Board that Mr. Chromczak ought to be allowed the opportunity to continue as a tobacco producer and be given the opportunity to prove to his fellow producers that he can operate his farm within the rules and regulations of the Board. The Tribunal is of the opinion that a 50% reduction in basic quota is too severe a burden to place on this farm operation if the intention is to provide an opportunity for Mr. Chromczak to continue as a tobacco producer.
Decision and Reasons
After careful consideration of the evidence presented and the submissions made, the Tribunal decided to partially grant the appeal and vary the decision of the Board. Having considered the circumstances, the Tribunal decided to set the penalty for this case at a cancellation of 40% of the basic quota owned by Edward and Caroline Chromczak and E. & C. Chromczak Holdings Inc.
The Tribunal directs the Board to cancel 61,840 pounds of basic quota allotted to Edward and Caroline Chromczak and 32,500 pounds of basic production quota allotted to E. & C. Chromczak Holdings Inc. effective for the beginning of the 1998 crop year.
The reasons for this decision are:
(1) in the opinion of the Tribunal, while a serious offense occurred that warrants a significant deterrent level penalty, this is a case where compassion ought to be applied.
(2) The Tribunal agrees with the Board that Mr. Chromczak should be given the opportunity to prove to his fellow tobacco producers that he can operate his farm within the Board’s rules and regulations and regain his former position in the industry and the Tribunal feels a 40% quota reduction gives him a greater opportunity to remain viable.
Dated at Guelph, Ontario, this 10th, day of February, 1998.