Court File and Parties
Ontario Court of Justice
Between:
Her Majesty the Queen
— and —
Richard Glen Allison
Before: Justice David Rose
Heard on: March 29, 2018
Reasons for Sentence released on: March 29, 2018
Counsel:
- Mr. L. O'Neill — counsel for the Crown
- Mr. N. Stanford — counsel for the accused Richard Allison
Reasons for Sentence
Convictions
1On January 31, 2018 I convicted Mr. Allison of the following:
i. Defrauding No Panic Computing Over $5000 between 19 March 2014 and 16 September 2014;
ii. Knowing a Document to be forged, using it as if it were genuine between 19 March 2014 and 16 September 2014;
iii. Obtaining Merchandise from Larry Keating and No Panic Computing over $5000 by false pretence and with intent to defraud from 19 March 2014 and 16 September 2014;
iv. Make a false statement in writing for purposes of paying himself $91,875.00 between 19 March 2014 and 16 September 2014;
2The reasons for judgment are found at R. v. Allison, 2018 ONCJ 64. These are my reasons for sentence.
The Fraudulent Scheme
3Mr. Allison was found guilty of defrauding a company No Panic Computing (NPC) by means of a scheme which tricked NPC into believing that Mr. Allison had sold approximately $500,000 in computers to the energy company Encana. When NPC believed that it had made the sale and delivered the hardware to Encana, it paid Mr. Allison over $91,000.00. When the scheme was uncovered NPC was successful in getting the computers back and then re-selling them at a loss.
4The scheme was extremely sophisticated. The principals of NPC testified at trial. They had built up NPC 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. NPC's business model is to take commercially available computers and modify them so that they can run NPC proprietary software which makes the computer highly secure. In an age where data loss is seemingly endemic, this is an important industry.
Sophistication of the Scheme
5The sophistication of the scheme included developing and then exploiting fake email accounts to appear similar to the genuine Encana. Instead of using emails with "…encana.com", Mr. Allison held out to NPC that the client Encana was using "…encanahornriverproject.com". This required Mr. Allison to register and then operate fake email addresses. In addition to this he found actors who played the part of Encana employees in telephone calls with NPC. The actors were sufficiently well briefed that they managed to convince NPC that they knew about Encana and their computer needs. The scheme also required the use of a physical address in Calgary which would be the destination for the computer shipment. The computers were held there until they were recovered by NPC some weeks later. That address was also the creation by Mr. Allison as part of the scheme. Mr. Allison therefore went to considerable lengths to create a fake Encana, complete with email addresses, people and physical locations. There is no evidence that anyone other than Mr. Allison profited from the scheme, although I would infer that the actors were paid by Mr. Allison.
Breach of Trust
6Aside from the high degree of sophistication, it is also aggravating that Mr. Allison was not at arms-length to NPC. He was contractually bound to be their "Champion". He was to obtain genuine sales which would advance NPC's company interests. He was given an NPC computer and their support to pursue their interests. He negotiated very favourable compensation terms which included getting paid his commissions before NPC was paid from the client. It was this very term of the Champion Agreement which allowed Mr. Allison to receive over $90,000 from NPC before his fraudulent scheme was discovered. Mr. Allison was in a position of trust to NPC. Section 718.2(a)(iii) of the Criminal Code is therefore engaged.
Vulnerability of the Victim
7I would find that NPC was operated by sophisticated individuals. Larry Keating struck me as 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 NPC from a firm which had invested in NPC gave Mr. Allison the appearance of bona fides. Aside from the sophistication of NPC, it was nonetheless in a vulnerable position. NPC was a small company doing everything it could to take the business to the next level. Mr. Allison knew that. He exploited that weakness by telling them that the Vice-President of Encana, Mr. David Hill, was interested in helping small Canadian tech companies. Mr. Allison would have known that NPC would be particularly receptive to such a deal. And by choosing a large public company as the purported purchaser he knew that normal credit inquiries would be avoided. A prior deal Mr. Allison brought to NPC, a sale to an American firm Credera, foundered because Credera could not pass a credit check. Credera was not a large public company like Encana. Mr. Allison therefore used his knowledge of NPC's credit approval process to bring another one which would get approved. In this sense Mr. Allison was very much preying upon NPC, finding a weakness in its contract approval process to structure a fake deal which ensured that he got paid nearly $100,000 before anyone was the wiser.
Impact on the Victim
8When the scheme came to light and the computers came back to NPC from Calgary, they had to be re-sold at a loss. This was a significant setback to NPC. Employees had to be laid off. An investor lost interest in the company. Mr. Keating testified that NPC was a computer security company which had now been defrauded. This put it in a difficult position. It took years for the company to recover. This is yet another serious aggravating factor.
Financial Loss
9The forensic valuation report filed at sentencing quantifies the loss to NPC at $342,447.59. Of that, $91,875 is cash which went directly to Mr. Allison.
Motivation and Character
10The pre-sentence report discloses nothing which could explain Mr. Allison's conduct. He has no substance abuse problem, gambling problem or real reason for taking someone else's money. According to the Pre-Sentence report he is supporting himself from revenue from his holding company True Large Sales Creates Revenue Holdings. He told the PSR writer that he has operated a successful business for the last 8 years. I therefore find that that Mr. Allison was motivated by pure greed.
Restitution Capacity
11When the case appeared before me last week I was told that funds had been released to Mr. Allison and if I were to adjourn the sentencing then he would order transcripts and perfect a Charter Application under s.11(b) to stay the charges. I denied that request, in part, because Mr. Allison had not been diligent in prosecuting his 11(b) Application. I do take from that Court attendance that Mr. Allison has access to funds, and today I was told that the amount of money is $17,000.00. The PSR outlines that Mr. Allison can support himself from the revenue from his holding company. That said, there has been absolutely no restitution. I therefore find that Mr. Allison is uninterested in providing any restitution whatsoever even though he appears to have the ability.
12When Mr. Allison appeared before me for sentencing Mr. Stanford made submissions about the PSR and itemized three minor changes. On that basis the PSR was made an exhibit on sentence. During Mr. O'Neill's submissions Mr. Stanford said that in fact Mr. Allison was an undischarged bankrupt. There is no evidence filed to support this. Mr. Allison is supported by his holding company, and as late as last week was in possession of $17,000.00. Even if Mr. Allison is an undischarged bankrupt then his position is that his holding company and the $17,000.00 are beyond the reach of the trustee in bankruptcy. As unusual as that may sound, I will take it on its face. I therefore find that Mr. Allison is in a position to provide the restitution.
Duration and Intent to Continue
13It is somewhat aggravating that the fraudulent scheme took place over a period of some months. While the Encana deal was formed and completed in 3 months, there is evidence from Mr. Allison's emails that he wanted NPC to move past it and do more deals with Mr. Allison. Mr. Allison did not know at the time that Larry Keating was on to him and there was no possibility of that happening. Nonetheless Mr. Allison showed an intention to continue to defraud NPC if it were left to him. This is aggravating.
Personal Background and Record
14The pre-sentence report discusses Mr. Allison's challenges growing up. He did not have an easy childhood. I recognize this. That said, he completed a 3 year college degree in 1995 and has been a successful businessman since then. His business is "insourcing for leadership and sales management". Other than his involvement in criminal justice he appears to be a highly successful adult. He is in good physical shape with no debts and no dependants. He has been married twice but his ex-partners have positive comments about him.
15Mr. Allison has a criminal record for related offences, but those convictions are dated:
1994 Break and Enter — Suspended Sentence and 12 months of Probation
2004
- i. Attempt Fraud — Under 6 months conditional Sentence
- ii. Utter Forged Document X4
The record is related, but it is dated. I would find that the gap mutes some of the effect of the record even though Mr. Allison's criminal record is for related offences. That said, I do agree with the Crown that Mr. Allison's sentence in 2004 for similar offences did not deter him from committing another serious fraud.
Sentencing Range and Applicable Factors
16Cases involving sophisticated fraudulent schemes over a period of time which result in significant financial loss attract sentences of 1.5 years at the low end to 3 – 4 years. See: R. v. Goertzen & James, 2004 BCCA 639; R. v. Williams; R. v. Kothary, 2018 ONCJ 133; R. v. Schoer, 2016 ONSC 1127; R. v. Taylor, 2012 ONCA 809; R. v. Hadjor, [2000] O.J. No. 2978. In Williams (supra) Hill J. outlined at para. 30 a series of factors pertinent in sentencing fraud cases. In this case the Crown asks for a sentence of 2 – 3 years. The defence argues for a sentence of 18 months to 2 years. The two positions touch in the middle.
17Many of the aggravating factors outlined in s. 380.1 of the Criminal Code apply. I would find that ss. (a), (b), (c), (c.1) are relevant.
Custodial Sentence
18Mr. Allison has never served a custodial term of imprisonment. His last sentence was a conditional sentence. This offence puts him in the range of a jail term from upper reformatory to lower penitentiary. To the extent that his sentence could be a reformatory sentence it is eligible for a conditional sentence in law. I would, however, find that such a sentence would be entirely inadequate to fulfill the denunciatory and deterrent objectives which are front and centre. The aggravating factors outlined above lead me to this finding.
19Sentencing is not an exercise in precision. I have considered very carefully whether Mr. Allison should serve a penitentiary sentence. I would not do that for two principal reasons. The first is that he has never served a jail sentence at all. Imposition of a penitentiary sentence is too big a jump in the circumstances. The second reason is that this is the time for some restraint. It would be easy to give way to the outrage which flows from this case. Mr. Allison caused real harm to a company and the people who ran it for no reason other than greed. When given the role of making sales for a company whose interests he was to further, he instead took their money. That said, a sentence of two years less a day in jail will fulfill all the sentencing objectives.
Restitution and Probation
20In addition to the custodial sentence a stand-alone restitution order will be issued in the amount of $342,447.59. When Mr. Allison is released from jail he will be placed on probation for 3 years.
Probation Conditions:
He will report within 5 working days after his release from custody, and thereafter as required by the probation officer;
he will live at an address approved of by the probation officer;
he will maintain and operate only one email address, which shall be provided to the probation officer;
he will not operate any web sites or url addresses without the prior permission of the probation officer;
attend and actively participate for counselling for unresolved issues from childhood as recommended by the Probation officer;
he will sign necessary consents and permissions to enable the probation officer to conduct whatever inquiries the probation officer deems necessary to ensure compliance and completion with these conditions;
make restitution payments in the amount of not less than $3,000.00 per month;
no contact with Larry Keating, Bill Keating, Ken Heinrich, James Wooley or their family except through legal counsel;
he will seek and maintain suitable employment and/or attend school and show progress reports to the Probation Officer.
Stay of Count 4
21Mr. Allison asks that Count 4 be stayed under R. v. Kienapple (1974), 15 C.C.C. (2d) 524 (S.C.C). I agree. The transaction outlined in Count 4 is within the findings I made under Count.1. There is a legal and factual nexus between Counts #1 and #4. Count 4 is stayed.
Released: March 29, 2018
Signed: Justice David S. Rose