COURT OF APPEAL FOR ONTARIO
Hoy A.C.J.O., MacPherson and Blair JJ.A.
BETWEEN
Her Majesty the Queen
Respondent
and
Andrei Khatchatourov and Natalya Reznik
Appellants
Gordon S. Campbell, for the appellants
Melissa Adams, for the respondent
Heard: May 1, 2014
On appeal from the convictions entered on December 9, 2011 by Justice Alfred J. O’Marra of the Superior Court of Justice, sitting with a jury, and from the sentences imposed on May 25, 2012, with reasons reported at 2012 ONSC 3511.
A. INTRODUCTION
1Following a 37-day jury trial, the appellants Andrei Khatchatourov and Natalya Reznik were found guilty of multiple mortgage financing frauds. The frauds involved the purchase and sale of 11 residential properties and 27 mortgages arranged between April 2000 and July 2007. The frauds consisted largely of duping and manipulating recent immigrants from Russia and the Ukraine and using their identities to obtain mortgage financing and to take title to properties, usually in order to obtain mortgage advances that financial institutions would not otherwise have made.
2The trial judge imposed a sentence of four years' imprisonment on both accused, fines in lieu of forfeiture of $423,580.41 (Mr. Khatchatourov) and $71,954.63 (Ms. Reznik), and a $495,535.04 restitution order (jointly and severally).
3The appellants appeal the convictions and sentences.
B. FACTS
(1) The parties and events
4Mr. Khatchatourov, an immigrant from Russia, operated a company called Canada Suites that was in the business of renting out condominium apartments for short-term accommodation.
5Ms. Reznik, an immigrant from Belarus, acted as a paralegal to assist members of the Russian and Ukrainian communities with immigration matters in the Toronto area.
6Ms. Reznik made use of her contacts with recent immigrants to encourage a number of them to participate in Mr. Khatchatourov’s business of buying, renting and selling condominium apartments. Some were led to believe that they were investing in condominium units that Mr. Khatchatourov would rent out on their behalf. Others were told that they could improve their credit ratings and more quickly purchase property themselves by co-signing as guarantors to help someone else purchase property. Many, after signing documents they did not understand or had interpreted to them by the appellants, ended up having both title to the property and mortgages taken unknowingly in their names. Some simply provided identification documents and later found to their surprise that title to properties and mortgages had been registered in their names when institutional lenders began seeking past due mortgage payments.
7The frauds were committed by a variety of means. The core of the frauds was the appellants’ manipulation of recent Russian and Ukrainian immigrants. The appellants used the immigrants’ identities to obtain mortgage financing and to take title to properties. The properties were then sold at inflated values to other straw purchasers whose identities and false employment and income information was used to obtain mortgage financing. The mortgage proceeds were used, in part, to pay the “profits” from the artificial re-sale. The profits were disbursed to the appellants from the lawyers’ trust accounts upon completion of the fraudulent deals. The mortgages were not paid and when they went into default the financial institutions had to undertake power of sale proceedings. The financial institutions suffered losses when the properties sold at fair market value.
8In the process of obtaining mortgage financing, the appellants falsified employment letters, income statements, bank account statements, and even citizenship documents in the names of the nominal purchasers to facilitate the frauds. They also falsified powers of attorney to execute documents in the names of the nominees and to give directions concerning the distribution of proceeds from the purchase and sale transactions.
9While the appellants misused the personal information of several people who trusted them, they took particular advantage of the Graniks and the Vinniks. These couples were used directly or indirectly in five of the ten counts of fraud with which the appellants were jointly charged. Ms. Reznik gained their confidence and then introduced them to Mr. Khatchatourov.
10The identities of Kostytyn Granik and his wife Yuliana were used by the appellants in committing the frauds on three of the counts. The Graniks immigrated to Canada from the Ukraine in December 1999. Ms. Reznik assisted them by opening bank accounts in their names prior to their arrival to show that they had the appropriate funds to immigrate. She helped them rent their first apartment and obtain the necessary documentation, such as health cards and social insurance numbers. A joint bank account was opened in the name of Mr. Granik and Ms. Reznik. The Graniks came to know Ms. Reznik well and considered her a friend. Mr. Granik provided a legitimate power of attorney to Ms. Reznik to permit her to deal with banking and other financial matters in his absence as he and his wife travelled periodically back to Ukraine.
11The Graniks met Mr. Khatchatourov through Ms. Reznik. Mr. Khatchatourov suggested that it would be a good business opportunity for them to become involved in the purchase of condominiums that his company would rent and from the rents pay mortgage and other fees. The Graniks would receive the rest, less 20% management fee to Canada Suites. They agreed, and purchased 410 - 10 Yonge Street in 2000.
12The arrangement was in place for approximately two years. Then Mr. Khatchatourov told Mr. Granik that because the condominium board had decided to end short-term rentals in the building, the property should be sold. He would find the buyer and make all the arrangements. However, as described in more detail by the trial judge in his reasons for sentence, the appellants resold the property twice without Mr. Granik’s knowledge, returned his deposit, and kept the profits. In selling the property, the appellants misused a power of attorney that Mr. Granik had given to Ms. Reznick for another purpose. They used the identities of other Russian immigrants as the ostensible participants in these fraudulent transactions, and defaulted on the mortgage so that the property had to be sold under power of sale at a loss.
13The Graniks invested in a second property through Mr. Khatchatourov. The appellants submitted false mortgage documentation for the purchase of 1009 – 55 Bloor Street East, alleging that Mr. Granik was an employee of Ms. Reznik’s. The property was subsequently resold in 2004, again using false documents without the knowledge of Mr. Granik. The appellants tried to sell it once more, using one of Mr. Khatchatourov’s clients as the buyer, but the mortgage application was rightly suspected to be fraudulent and was not approved. TD Canada Trust ultimately sold the property at a loss under power of sale.
14The Graniks’ name was used entirely without their knowledge in a third set of transactions. The appellants purchased 338 Harvie in Yuliana Granik’s name, then sold it again to another recent immigrant to whom Ms. Reznik had promised help, Mr. Ermakov. The appellants used Mr. Ermakov’s personal information to obtain mortgage financing and purchase the property in his name, using a false power of attorney in favour of Mr, Khatchatourov. It was sold for a third time using false documentation in a transaction in which Mr. Khatchatourov was both vendor and purchaser and, on closing, a cheque was issued to him for $58,205.42 “in trust”.
15The Vinniks were also brought into the fraudulent scheme through Ms. Reznik, and two counts relate to them. Ivan Vinnik and his wife ran a coffee house in Toronto. They met Ms. Reznik because she had helped Mr. Vinnik’s parents as a paralegal. The Vinniks approached Ms. Reznik when they had financial difficulties and asked her to help them. She persuaded them to sell their home to her “temporarily”. She told them that the proceeds from the sale could be invested in downtown condominiums managed by Canada Suites and then sold at a higher price, allowing the profits to be put back into their coffee shop business. She said she would later sell the house back to them, but she never did and they lost their home.
16The appellants then used the Vinniks’ identities in two further fraudulent transactions. They paid the profits out to themselves and the lenders had to sell the two properties at a loss when the mortgages went into default.
17The appellants’ profits from their fraudulent schemes, as evidenced by cheques they received flowing from various transactions, were $423,580.41 (Khatchatourov) and $71,954.63 (Reznik). The financial institutions involved in the transactions lost $1,167,869.95, which amount was ultimately reimbursed by the Canada Mortgage and Housing Corporation (“CMHC”).
(2) The trial
18The appellants were charged jointly on 10 counts of fraud and Mr. Khatchatourov was charged alone on an 11th count. The jury found the appellants guilty on all counts.
(3) The sentence
19The trial judge delivered comprehensive reasons for sentence (139 paragraphs). He observed (at para. 103) that “[d]efence counsel did not seek to differentiate between the offenders as to the length of incarceration that would be appropriate and I see no basis to do so either in this case”.
20The trial judge imposed a custodial sentence of four years’ imprisonment on both accused. He imposed fines in lieu of forfeiture pursuant to s. 462.37 of the Criminal Code of $423,580.41 for Mr. Khatchatourov and $71,954.63 for Ms. Reznik. According to the trial judge, these were “the amounts received by each, as reflected by the cheques issued in their interest in the various transactions”.
21The trial judge also made a restitution order pursuant to s. 738 of the Criminal Code against both accused jointly and severally in favour of the CMHC, which had insured the financial institutions, in the amount of $495,534.04. The trial judge found (at para. 131) that this was “the total amount disbursed to them, as reflected by the cheques issued in the property transactions”.
C. ISSUES
22The appellants advance six grounds of appeal, three relating to conviction and three relating to sentence. I would frame the grounds of appeal as six questions:
(1) Did the trial judge err by charging the jury on co-conspirators in the absence of allegations or evidence of conspiracy and did he err in the contents of this portion of his charge?
(2) Did the trial judge err in his jury charge by itemizing certain evidence as if it were proven fact rather than evidence to be weighed?
(3) Did the trial judge err by not providing sufficient mid-trial or final instructions to the jury in response to Crown counsel’s comments disparaging the defence?
(4) Did the trial judge impose custodial sentences that were harsh and excessive and outside the range for similar offences?
(5) Did the trial judge err by imposing fines in lieu of forfeiture?
(6) Did the trial judge err in his treatment of the appellants’ ability to pay in the context of the fine and restitution orders he made?1
D. ANALYSIS
(1) Jury charge on co-conspirators
23In this case, the only charges against the appellants were offences of fraud; there were no separate conspiracy charges. The appellants contend that the trial judge err in instructing the jury on co-conspirators in the absence of conspiracy charges being laid against them.
24I do not accept this argument. In my view, the trial judge’s decision to charge the jury on the issue of co-conspirators was consistent with the leading authorities at the time, especially R. v. Carter, 1982 35 (SCC), [1982] 1 S.C.R. 938, and R. v. Bogiatzis, 2010 ONCA 902. It must be remembered that the purpose of a Carter charge is to instruct the jury on how to analyze evidence it has already heard. Indeed, where the Crown is alleging a joint plan to commit a crime, whether as parties or co-conspirators, the trial judge is required to give this charge in order to make sure that the jury properly applies the evidence against each accused: see R. v. Puddicombe, 2013 ONCA 506, at para. 57.
25The appellants also submit, in paragraph 16 of their factum, that the trial judge “erred in explaining to the jury how evidence on one charge could be applied to other charges before the court, thereby prejudicing the Appellants’ defence to a degree capable of affecting the jury’s verdict”. Neither in the factum nor in oral argument did the appellants narrow this submission to a specific portion of the jury instruction. In any event, as I read the trial judge’s charge on this issue, it faithfully tracks the structure and language of Carter, Bogiatzis and Puddicombe.
(2) Jury charge – proven facts versus allegations
26The appellants submit that the trial judge misdirected the jury by treating certain aspects of the evidence as if it were proven fact as opposed to allegations.
27I am not persuaded by this argument. Several times throughout the charge, the trial judge instructed the jury that they were the sole arbiter of the facts. The Crown called 28 witnesses and tendered more than 250 exhibits. The defence called no evidence and its case rested primarily on points made in cross-examination. The two defence closing addresses, anchored in considerable detail in the points made in cross-examination, took a day a half to deliver and were followed, an hour later, by the jury charge.
28The trial judge’s summary of the Crown and defence cases was fair and even-handed. He properly said that he would “review the evidence relied on by the Crown”. However, he also provided a detailed overview of the defence positions, including the summaries prepared by defence counsel. Moreover, he prefaced his formal charge on the parties’ positions with this instruction:
I do not intend to repeat what counsel have said to you but simply to provide the summary of their respective positions, and it is done to try to assist you. You must, of course, take their positions from what they told you in their addresses to you, not from the summary that I am now providing to you.
29In summary, in the context of a long trial with many Crown witnesses, no evidence from the defence, and a defence case resting on cross-examinations and closing addresses, the trial judge’s jury charge, including his treatment of the evidence led by the Crown, was balanced. He left the job of finding the facts to the jury.
(3) Crown closing remark
30In the course of Crown counsel’s closing address to the jury, he said:
Now, I anticipate, ladies and gentlemen, that the defence will be suggesting to you that there are a host of other persons that committed fraud, that are, to use the phrase, that are the real fraudsters.
I respectfully suggest to you, ladies and gentlemen, that this defence is really a sleight of hand. And by sleight of hand, we’re talking about what magicians do when they want to draw attention here so that it takes your focus away from here. It’s a sleight of hand, ladies and gentlemen, because it draws attention away from the real question. It matters not if others are guilty, because the question you are sworn to answer is whether or not the accused are guilty beyond a reasonable doubt.
31Both defence counsel objected to this submission. One of them described it as “inflammatory… derogatory, and … a disservice to the administration of justice”.
32Crown counsel responded:
With respect to the colourful language I used, Your Honour, I certainly in no way meant to disparage defence counsel but meant to illustrate my exact point, which was to keep their focus on the issue at hand, as opposed to being deflected by evidence which wouldn’t help them answer the question that they’re sworn to do.
I just want to apologize if it could be taken that way.
33The trial judge agreed with defence counsels’ position. Defence counsel suggested that the trial judge comment on this issue before they made their closing addresses. The trial judge agreed and, when the jury came into the courtroom, he told them:
Before defence counsel addresses you this morning, there is just one matter I wish to bring to your attention.
At the close of the Crown’s address to you yesterday, he made a reference to anticipated defence comments and used an unfortunate analogy of sleight of hand, that the defence were endeavouring to use sleight of hand. That may have unintentionally conveyed to you that defence counsel have been endeavouring to use trickery to distract you from your task with respect to determining whether the accused were involved in these mortgage financing frauds.
Both defence counsel, as all the counsel who appear before the Court, are officers of the Court. These counsel have been defending their clients completely within the ethical bounds of the profession, and you should not take the analogy as disparaging their conduct as defence counsel on behalf of their clients, ladies and gentlemen.
34Neither defence counsel objected to the contents of this comment by the trial judge. Neither applied for a mistrial.
35On appeal, the appellants raise this issue again, contending that the trial judge did not sufficiently address it with the jury.
36I reject this submission, for two reasons. First, the trial judge’s comment to the jury was almost word-for-word what defence counsel requested. Second, the alleged impropriety in the Crown’s closing is not apparent to me; the impugned language strikes me as reasonable adversarial rhetoric.
(4) Sentence – the imprisonment component
37The appellants contend that the trial judge erred by concluding (at para. 93) that “the appropriate range of sentence for the type of frauds committed by these offenders is 3 to 5 years”. In support of this conclusion, the trial judge cited several cases, including two from this court, R. v. Dobis (2002), 2002 32815 (ON CA), 163 C.C.C. (3rd) 259, and R. v. Bogart (2002), 2002 41073 (ON CA), 167 C.C.C. (3rd) 390.
38The appellant submits that sentences in this range are restricted to cases involving all three of these factors – (1) a large scale fraud, (2) committed by a person in a position of trust, (3) with devastating consequences for the victims: see Dobis, at para. 42. The appellant asserts that factors (2) and (3) are missing in this case: the appellants were not in a position of trust with the principal victims, the financial institutions and, especially, CMHC; and it would be a huge exaggeration to label the consequences for these victims as “devastating”.
39I do not agree with this submission. In my view, the trial judge was alive to the relevant case law, and his description of the nature of the fraud committed by the appellants and its impact on the various victims, personal and institutional, led him to fix a range supported by the case law: see G.R. Clewley, P.G. McDermott, and R.E. Young, Sentencing: The Practitioner’s Guide, looseleaf (Toronto: Canada Law Book, 2013), at para. 10.30. The four-year custodial sentences imposed are within the appropriate range for this large-scale, sophisticated fraud, even though the appellants were not in a position of trust with the financial institutions or, in a legal sense, with all of the personal victims, and the consequences for the primary victim – the public purse – were not “devastating”.
40The trial judge said this on the breach of trust issue (at paras. 84 and 86-87):
Counsel contends that the aggravating factors of breach of trust and devastating consequences to victims in relation to large scale frauds noted in Bogart, Dobis and Drakes, relied on by the Crown are absent in this matter.
The accused were not in a position of trust with respect to the financial institutions they deceived. However, in the conduct of their scheme they violated the trust of those who agreed to either assist them or invest with them. Some had their identities stolen and became entangled in the subsequent default proceedings and investigations. The Vinniks believed that Ms. Reznik would help them through their difficult financial circumstances. The Graniks and Vinniks, had an expectation the accused, Mr. Khatchatourov would legitimately manage their investments, through Canada Suites. Further, the accused misused and fabricated numerous powers of attorney to effect their fraudulent scheme.
Defence counsel argued that the only victims were the named financial institutions in the indictment, and others such as the Vinniks and Graniks or persons whose identities were misused, the nominees should not be considered victims by the court in the assessment of an appropriate sentence. The breadth of the financial devastation may not have been as great as in cases such as Drakes, but the financial consequences were significant nonetheless. There was financial loss to the Vinniks and the Graniks. The Vinniks lost their home and they went bankrupt. They may have been ancillary victims or collateral damage in the greater scheme to defraud financial institutions, but they were still victimized by the offenders’ predatory exploitation of them as a means to commit the frauds.
41With respect, this is a nuanced and attractive analysis of the breach of trust issue. Three of the counts involved the Graniks, who were in a traditional or classic relationship of trust with the appellants by virtue of the power of attorney Mr. Granik had given to Ms. Reznik. The appellants’ conduct with respect to the Vinniks was also very serious.
42Moreover, in assessing the nature of the fraud, the trial judge was entitled to consider that all of the personal victims were new immigrants to the country. They were trying to establish their careers, finances and homes, and they counted on – trusted, in the non-legal sense of the word – the appellants to help them with those affairs. Instead, what the appellants did was place them in a giant mess of criminal and civil proceedings. As the trial judge said, “[t]he accused ensnared many others in their scheme, some falling under suspicion and investigation by the police”.
43The misuse of the identities of the individuals drawn into these offences was not limited to subsequent blemishes on their credit ratings and the inconvenience of testifying in court proceedings. The trial judge found that the Graniks and Vinniks suffered financial loss as a result of the offences. The Vinniks received nothing from their condominium property investment with the appellants, they lost the home that they had transferred to Ms. Reznik’s interest, they were investigated by the RCMP as part of the fraud investigation, and they ultimately declared bankruptcy.
44Finally, the fact that the principal victim of the appellants’ fraud was CMHC, a government agency, does not diminish the seriousness of the crime. A fraud on government is not a “victimless crime”; it takes money from the public purse and, therefore, from all those who rely on it: see Bogart, at para. 23.
45For these reasons, I conclude that the trial judge did not err by finding that the range for fraud offences like the ones committed by the appellants was three to five years. The appellants’ activities were a sophisticated, long term, large scale fraud; the victims included several recent immigrants who trusted, in various ways, the appellants; the principal victim, CMHC, lost more than $1,000,000; two immigrant families were hurt financially; and many personal victims were hurt by becoming ensnared in the appellants’ criminal scheme. It follows that the actual sentence imposed on the appellants – four years’ imprisonment – was a fit sentence.
(5) Sentence – the fine in lieu of forfeiture component
46Pursuant to s. 462.37(3) of the Criminal Code, the trial judge imposed fines in lieu of forfeiture on Mr. Khatchatourov and Ms. Reznik in the amounts of $423,580.41 and $71,954.63 respectively. The appellants contend that the trial judge erred in three respects in imposing these fines.
47First, the appellants assert that the trial judge erred by imposing fines in lieu of forfeiture in the absence of evidence that the property (i.e. money) that might be subject to a forfeiture order could not be located with reasonable diligence.
48I disagree. s. 462.37(3) of the Criminal Code authorizes a court to impose a fine in lieu of forfeiture in any of five circumstances, including “if the property”
(a) cannot, on the exercise of due diligence, be located… or
(e) has been commingled with other property that cannot be divided without difficulty.
49The trial judge applied (e); it was, therefore, not necessary for him to consider (a). In any event, as the trial judge noted in his sentencing reasons, Mr. Khatchatourov’s trial counsel conceded that “the criteria for a fine in lieu of forfeiture are met in this instance.”
50Second, the appellants submit that the trial judge erred by imposing fines in lieu of forfeiture in the absence of proof that they received the funds that served as the basis for the fine amounts, $423,580.41 for Mr. Khatchatourov and $71,954.63 for Ms. Reznik. They argue that there was insufficient evidence that the appellants had possession or control over the funds, and therefore that the Crown had not proved the funds were “property” as defined in s. 2, and for the purpose of s. 462.37(3), of the Criminal Code.
51I do not accept this submission. Mr. Khatchatourov’s counsel said this at the sentence hearing:
[C]ertainly it is open to Your Honour to say: “Well, look, these cheques were made payable to him. Who knows what happened from there but it’s a reasonable inference that he got that money or had control of that money”….
52This common sense concession is consistent with the evidence, which was that Mr. Khatchatourov and Ms. Reznik received cheques, made out in their names, from the fraudulent transactions totalling the precise amounts of the two fines. Absent some evidence (for example, testimony from the appellants at their sentence hearing) that the appellants did not cash the cheques and receive the funds, I see no reason to impose a duty on the Crown to take additional steps (for example, a tracing exercise) to try to obtain further proof that the appellants actually received the money generated by their frauds. Their receipt of the cheques is enough. Even in the increasingly complicated world of Canadian criminal law, some things are obvious.
53Third, the appellants assert that the trial judge erred in his analysis of the relationship between a fine in lieu of forfeiture and a concurrent restitution order. The trial judge held that if the appellants served terms of imprisonment in default of paying their fines (three years for Mr. Khatchatourov and 18 months for Ms. Reznik), the restitution order would survive. He said (at para. 122):
The Crown suggested that in order to alleviate any concern the restitution order could contain provision that the amount with respect to the fine could be subtracted from the restitution order should the offenders be imprisoned for default in payment of the fines in lieu of forfeiture. In my view, such a reduction would be contrary to the objectives of the proceeds of crime provisions that require punishment for non-payment in order to impress on the offender and others that crime does not pay, and the objective of a restitution order to compensate victims for loss. On making the restitution order there is nothing to prevent the victim from proceeding to filing the order to obtain judgment in the full amount ordered as permitted by s. 741 of the Criminal Code.
However, it would be appropriate to ensure payment of the fine in lieu of forfeiture is credited to the amount of restitution ordered that there is a term to that effect in the proceeds of crime order.
54The appellants submit that the effect of these two paragraphs is this: if the appellants pay their fines, every cent of the restitution order will disappear; however, if the appellants serve their additional terms of imprisonment in lieu of paying their fines, every cent of the restitution order will survive and be enforceable. This juxtaposition, says the appellants, is unfair.
55I do not accept this submission. In my view, the real question is why, if payment of the fine reduces the amount owed on the restitution order, imprisonment in default should not. The answer lies in the reason for the imprisonment in default. It is not an addition to the sentence. The objective of forfeiture is not punishment, but to deprive the offender of the proceeds of crime and to deter him or her from committing crimes in the future.
56If the offender does not pay the fine in lieu of forfeiture without reasonable excuse, the offender serves a mandated period of imprisonment. This is a substitute for the fine: R. v. Lavigne, 2006 SCC 10, [2006] 1 S.C.R. 392, at paras. 16 and 26. As this court noted some years ago, “a subsequent imprisonment imposed for a default in payment of a fine imposed under s. 734.7 [a warrant of committal for non-payment of a fine] is not a punishment; rather it is an enforcement mechanism designed ‘to give serious encouragement to offenders with the means to pay a fine to make payment’”: R. v. Bourque (2005), 2005 3580 (ON CA), 193 C.C.C. (3d) 485 (Ont. C.A.), at para. 20.
57Sections 734.8(2) and (3) of the Criminal Code provide that as the fine is paid off, the potential period of imprisonment in default is reduced commensurately. This scheme operates entirely independently from the restitution order. It does not follow that just because the payment of fine reduces the restitution order amount, the imprisonment served in default should reduce the restitution amount.
58The reason the amount owing on the restitution order is reduced as the fine in lieu of forfeiture is paid off is not because these orders are imposed for the same reason, but that legislation prioritizes the reimbursement of the victims over collecting on fines destined for general revenues: s. 462.92(2) of the Criminal Code, and s. 14.6 of the Crown Attorneys Act, R.S.O. 1990, c. C.-49.
59Further, these considerations are premature. Both appellants were given a very generous amount of time to pay: four years after release from incarceration. It is not a foregone conclusion that either of them will be unable to pay in the future. They are relatively young and can work for the money or may receive a windfall: R. v. Wu, 2003 SCC 73, at para. 33.
60Even if they have not paid their fines by the end of four years after their respective releases from custody, the appellants would have a hearing before another court before serving time in default. That court would only issue a warrant of committal if the appellants had refused to pay or discharge the fine without reasonable excuse: s. 734.7(1)(b)(ii), R. v. Wu, at paras. 60-66. The defaulting appellant would have the opportunity to show that he or she was unable to pay the fine. If the court determined that the appellants were unable to pay, this would constitute a “reasonable excuse” and a warrant of committal would not issue: Bourque, at para. 16. The courts at that stage would have better information than this court has now about their willingness and ability to pay.
61I do not see any reversible error on the part of the sentencing judge in refusing (despite the fact that the Crown suggested it at the sentencing hearing) to reduce the restitution order by an amount that reflects any time that may be served in default of payment. If such time is ever served, it will be served after all of the financial circumstances and willingness to comply of the appellants are taken into consideration, and it will be served for a different purpose than the time served on the fraud sentence.
(6) Sentence – the restitution component
62Pursuant to s. 738 of the Criminal Code, the trial judge made a restitution order of $495,535.04 in favour of CMHC. This order was made against both appellants jointly and severally. He said (at para. 125):
In this instance, the offenders were involved in a joint and common enterprise to defraud the financial lending institutions. While the financial institutions were the direct victims, they were compensated through insurance CMHC. It is not a victimless crime as some might suggest. The frauds caused loss to the public purse and the public should be compensated.
63The appellants contend that the trial judge erred in two respects in making the restitution orders.
64First, the appellants submit that the trial judge made no inquiry into the appellants’ ability to pay a very large restitution order.
65I do not accept this submission. Both defence counsel did make submissions on their clients’ ability to pay a restitution order in their sentencing submissions. The trial judge acknowledged their respective positions about their clients’ financial circumstances, but did not accept that there was an inability to pay. He noted that the appellants were still relatively young, with time to work for the money to pay the order, and that Mr. Khatchatourov’s business was doing well. He also took into account, appropriately, that the appellants had offered no explanation of what happened to the money that had been illegally obtained.
66Second, the appellants contend that the restitution order should not have been joint and several; rather each appellant should have been responsible for only his or her share of the calculation that led up to the total amount of the order, i.e. $423,580.41 for Mr. Khatchatourov and $71,954.63 for Ms. Reznik.
67I disagree. The trial judge found that the appellants were “equal participants in a joint and common enterprise and as such, they are equally responsible for the loss they created”. It is true that Ms. Reznik’s profit from the illegal scheme was about one-sixth of Mr. Khatchatourov’s; however, Ms. Reznik’s active role in the frauds enabled Mr. Khatchatourov to reap his substantial financial gain. Accordingly, it is not unfair to make both appellants liable for the full amount of the restitution orders.
E. Disposition
68The conviction appeals are dismissed. Leave to appeal the sentences is granted, but the sentence appeals are dismissed.
Released: June 16, 2014 (“A.H.”)
“J.C. MacPherson J.A.”
“I agree Alexandra Hoy A.C.J.O.”
“I agree R.A. Blair J.A.”
1 In oral argument, the court did not call on the Crown to respond to the three issues relating to conviction.
