Court File and Parties
Ontario Court of Justice
Between:
Her Majesty the Queen
— and —
David Bullen and Cadillac Financial Corporation
Before: Justice Robert Wadden
Reasons for Sentence
Counsel:
- Mr. R. Sonley, counsel for the PPSC
- Ms. J. Lagrande, counsel for the PPSC
- Ms. G. McInnes, counsel for the defendant
Reasons for Sentence
The Offences
1David Bullen is before me for sentencing after having pled guilty to:
i. s. 380(1)(a) Fraud against the Bank of Nova Scotia; ii. s. 347(1)(a) Charging a Criminal Interest Rate to A.B.; iii. s. 347(1)(a) Charging a Criminal Interest Rate to M.L.; iv. s. 354(1)(a) Possession of Property Obtained by Crime.
2His corporation, Cadillac Financial Corporation, is before me for sentencing on the two counts under s. 347(1)(a) of Charging a Criminal Interest Rate.
The Offences
3The facts are set out in detail in the Agreed Statement of Facts filed as Exhibit 1 of this sentencing proceeding.
4The facts underlying the frauds involve a mortgage that Mr. Bullen negotiated with the Bank of Nova Scotia in 2002, and renegotiated in 2003, 2004 and 2006. Mr. Bullen sold the property in 2010 and obtained a new mortgage for a different property. Other mortgages were negotiated with the Bank of Nova Scotia for a cottage property in 2005, and a land purchase in 2010. All of these mortgages were obtained with false employment and income documentation provided to the Bank. The total amount of the loans granted by the Bank on the various properties was $1.74 million. Each mortgage was properly secured against a property, all payments with interest were paid to the Bank on time and after the sale of each property the Bank fully recovered the funds it had loaned.
5The offences of charging a criminal interest rate involve loans Mr. Bullen and his company, Cadillac Financial, made to A.B. and M.L.. Ms. A.B. was the owner of a restaurant who could not secure bank financing, so she borrowed $59,000 at various times in 2010 and 2011 at interest rates of 49% and 118%. She made total payments to Mr. Bullen and Cadillac Financial of $148,188 as interest payments.
6Mr. M.L. was a realtor in the Perth area who needed money for a condominium investment and borrowed $135,000 from Bullen and Cadillac Financial in 2012 and 2013, at interest rates of 77.5% and 373%. Mr. M.L. made payments of $172,300 on interest only1.
7Mr. Bullen also pleaded guilty to Possession of Property Obtained by Crime for the money received in relation to the offences.
Positions of the Parties on Sentence
8The Crown seeks a sentence in the range of three to five years for the fraud, and one year consecutive for each count of charging a criminal interest rate, with concurrent time for the proceeds offence, for a total sentence of five to seven years. In addition, the Crown seeks fines in lieu of forfeiture of over $5.2 million.
9Counsel for the defence suggests an appropriate sentence would be six to eight months jail for the fraud on the bank and six months consecutive for the Criminal Interest Rate offences, for a total sentence in the 12-14 month range. In relation to the fines in lieu of forfeiture, counsel submits that for the Criminal Interest Rate offences the amount should relate solely to interest paid, less principal, and that no fines in lieu should be ordered for the fraud against the Bank of Nova Scotia, as all the mortgage funds were recovered by the Bank, with interest.
Background of Mr. Bullen
10Mr. Bullen is 49 years old and has been married since 2001. He and his wife have 12 year old twins, and he has a 25 year old son from a previous relationship.
11Mr. Bullen has a criminal record for drug trafficking in 1999 and was recently convicted in Superior Court of further drug trafficking offences for which he is awaiting sentence. As the recent convictions involve large-scale trafficking of cocaine he is likely to receive a significant penitentiary sentence.
12Mr. Bullen filed numerous letters of support from his family members and some close friends. They indicate he is well regarded by those close to him. A Pre-Sentence Report was filed and provided limited background information on him. There is no indication in any of the filed materials that Mr. Bullen has had any pro-social employment or legitimate source of income in the years since his release from prison on the 1999 conviction for drug trafficking. Indeed, on the evidence before me Mr. Bullen forged employment documents because he did not have any legitimate employment from 2002 to 2010. The PSR refers to self-employment at Cadillac Financial, which it turns out was used to commit criminal interest rate offences. In July of this year, Mr. Justice Labrosse found Mr. Bullen guilty of trafficking in cocaine between 2012 and 2013. In the PSR Mr. Bullen admitted that he committed those offences purely for financial gain.
Principles of Sentencing
13The principles of sentencing set out in ss. 718 and 718.2 of the Criminal Code include denunciation of unlawful conduct, general and specific deterrence and promoting a sense of responsibility in offenders. The Court should impose sentences similar to those imposed for similar offences committed in similar circumstances.
The Range of Sentence – Fraud
14Section 380(1) of the Code provides for a maximum term of imprisonment of 14 years for the offence of Fraud over $5,000. Section 380(1.1), which provides for a mandatory minimum sentence of two years for frauds over $1 million, was struck down in R. v. Plange [2018] O.J. No. 1502 (S.C.J.) and is therefore of no force or effect.
15In the absence of a mandatory minimum sentence, the range of available sentences for a significant fraud is wide. In R. v. Dobis, [2002] O.J. No. 646 (C.A.) the Court of Appeal stated that the appropriate sentence for a fraud in excess of $2 million, involving a serious breach of trust, was three to five years imprisonment. In R. v. Dwyer 2013 ONCA 34 , [2013] O.J. No. 277 (C.A.) the Court of Appeal determined that a fit sentence for the offender of a mortgage fraud over $600,000 was three and a half years where the offender was also in a position of trust. In R. v. Angelis 2016 ONCA 675, the Court of Appeal upheld a sentence in excess of four years for repeated frauds committed by an employee in a position of trust, resulting in total losses to the victims of just over $1 million.
16Lesser sentences were imposed in cases that did not involve a breach of trust, even for very significant frauds. In R. v. Gray [1995] O.J. No. 92 (C.A.) the Court of Appeal upheld sentences of 30 months and two years less a day on offenders in a $5.8 million fraud on the government. In R. v. Toozhy (appeal by Siddiqi) [2015] O.J. No. 2652 (C.A.) the Court of Appeal upheld Mr. Siddiqi's conditional sentence of two years less a day for a regulatory offence of making false statements on loan applications amounting to a $459,049 loss.
17In reported trial level decisions, the range is also wide. In R. v. Plange, Mr. Plange had attempted to defraud the CRA of over $41 million, although the actual loss was less than $16,000, all of which was repaid. He received a sentence of just over 13 months jail. In R. v. Chowbay [2011] O.J. No. 1334 (S.C.J.) the offenders were sentenced to terms of imprisonment of nine months and 12 months for a mortgage fraud against a bank in the amount of $363,750, all of which was recovered. At the other end of the range is the decision in R. v. Eid [2017] O.J. No. 614 (S.C.J.), in which Mr. Justice Ray imposed a sentence of seven years imprisonment for a fraud involving a breach of trust in which victims lost about $8 million.
18The facts in R. v. Chowbay, a mortgage fraud against a bank, have some similarities to those in the case before me. In that decision, Mr. Justice Boswell conducted a thorough review of the relevant sentencing case law and identified the relevant aggravating and mitigating factors to be considered in imposing sentence for a significant fraud. He noted that the range of sentence of three to five years suggested by the Court of Appeal in R. v. Dobis applied to instances in which there was a significant breach of trust2. R. v. Dwyer also involved a breach of trust, whereas the lesser sentences in R. v. Gray and R. v. Toozhy were in cases not involving a breach of trust.
19A number of aggravating factors are set out in s. 380.1 of the Code, most of which do not apply to Mr. Bullen's fraud. More useful for present purposes is Mr. Justice Boswell's enumeration of aggravating and mitigating factors, which I would agree is a summary of what the authorities have identified as relevant factors in sentencing on a large fraud. The aggravating factors are:
- Whether there was a breach of trust;
- The amount of the fraud and the amount of actual loss incurred;
- The number and vulnerability of victims;
- The sophistication and complexity of the fraud;
- The length of time over which the fraud was committed; and,
- The motivations of the accused, including personal benefit.
20Mitigating factors may include a guilty plea, personal circumstances of the accused and whether there has been any recovery of the monies involved.
21The case before me does not involve a breach of trust. Mr. Bullen was a client of the Bank – a fraudulent client, but always in an arm's-length position of client. He was not in a position of trust. The fraud was committed against a single financial institution. The fraud was significant, exceeding $1.7 million. However, at the end of the day although funds were at risk there was no financial loss incurred by the Bank. The Bank received all mortgage payments as they came due, with interest. The mortgages and lines of credit were secured against properly valued real estate. The Bank was able to recover the last of its funds upon the sale of the last property.
22The fraud could be described as moderately sophisticated, using documents that were forged well enough to deceive a major bank. The length of time over which the fraud was committed was lengthy, from 2002 to 2010, involving renegotiations and renewals that repeated the fraudulent activity. The motivation of Mr. Bullen appears to have been financial gain. The fact that Mr. Bullen could make all payments on the mortgages, despite a lack of legitimate income, leads to the inference that he was using illicit funds to pay the Bank.
23Mr. Bullen's guilty plea is a mitigating factor. Also mitigating is the fact he has a young family and a supportive network of family and friends in the community. However, as these personal circumstances were present during the years he was involved in his criminal lifestyle it is questionable whether they would keep him from recidivism.
24In my view, the appropriate sentence for Mr. Bullen is below the three to five years sought by the Crown. The facts of this case are not similar to those in R. v. Dobis in terms of breach of trust, financial loss incurred and devastating impact on the defrauded party. The facts are closer to those in R. v. Chowbay, although in Mr. Bullen's case they are more serious because of the greater sum involved and the greater length of time over which the fraud took place. The proper sentence for Mr. Bullen falls between the three years in Dobis and the one year range in Chowbay.
25The sentence for Mr. Bullen on the s. 380 offence will be two years incarceration.
The Range of Sentence – Criminal Interest Rate
26Section 347 of the Code creates the offence of Charging a Criminal Interest Rate – a rate in excess of 60% – and provides for a maximum term of imprisonment of five years upon conviction.
27The leading authorities for this offence appear to be the decisions in R. v. Saikaley 2013 ONSC 2699 , [2013] O.J. No. 2331 (S.C.J.) and R. v. Chan [2014] O.J. No. 5635 (S.C.J.). In both cases, the offence of Charging a Criminal Interest Rate was closely tied to extortion and threats committed by the offenders – classic "loan sharking". These aggravating factors are not present in Mr. Bullen's case. The victims of the Criminal Interest Rate offences, Ms. A.B. and Mr. M.L., indicated that Mr. Bullen treated them well, did not put undue pressure on them and did not threaten or intimidate them.
28The decision in R. v. Saikaley is of limited assistance, as the overall sentence for drug trafficking and other offences was 19 years, and it is hard to parse out the reasons of the trial judge in imposing the one year sentence for the s. 347 offences. However, the decision in R. v. Chan, in which Madam Justice Kelly conducted a thorough review of the sentencing authorities, is of more use in providing a benchmark. In that case, the offenders were conducting a large-scale loan-sharking operation, with a debt list of approximately 74 clients, charging interest of up to 520% and taking in income of over $10,000 per week. The offenders' actions included threats and extortion and the offences had devastating psychological and financial consequences on the victims. Madam Justice Kelly imposed conditional sentences on the offenders, determining that six month conditional sentences were appropriate for the s. 347 offences.
29The facts surrounding Mr. Bullen's and Cadillac Financial's actions in relation to the s. 347 offences are less serious than those found in R. v. Chan, although still significant. The total amount of revenue, based on the facts before me, was nearly $700,000. The annual interest rates ranged from just over 60% to 373%. There is no indication that the loans caused financial ruin to any of the individuals, but the amounts the individuals paid to Mr. Bullen and Cadillac Financial were substantial. Neither Ms. A.B. nor Mr. M.L. seemed to realize they were paying such high annual rates, indicating financial naivety on their part.
30These offences were committed for purely financial motive. The harm done is to the victims of the offences and to society as a whole, in that it is a disruptive factor in a properly functioning market economy. It is conduct that must be denounced. General deterrence is paramount.
31In determining a fit sentence for Mr. Bullen on these charges I consider the sentencing principles in ss. 718 and 718.2 of the Code, including the need to impose similar sentences for similar crimes. I have considered the personal circumstances of Mr. Bullen, the pleas of guilty and the lack of aggravating factors such as violence or threats. Finally, I have taken into account the principle of totality in relation to the offences before me, considering that there will be a significant sentence imposed for the fraud offence. The overall sentence must serve as a deterrent but must not be crippling. Therefore, the appropriate sentence for the s. 347 offences is three months each, consecutive and consecutive, for a total of six months consecutive to the sentence on the fraud offence.
32The corporation, Cadillac Financial, will be sentenced to fines of $150,000 for the offence against Ms. A.B. and $175,000 for the offence against Mr. M.L..
Fines in Lieu of Forfeiture
33The last issue to consider is the imposition of fines in lieu of forfeiture. The relevant Criminal Code provision is s. 462.37 and the leading authority is the decision of R. v. Lavigne 2006 SCC 10. The first stage for the sentencing judge, in accordance with s. 462.37(1), is to determine whether it has been proven that property is proceeds of crime. Having done so, that property shall be ordered forfeited. In this case both parties agree that, as Mr. Bullen is impecunious, forfeiture of money or property would not be possible and a fine in lieu of forfeiture, pursuant to s. 462.37(3), would be appropriate.
Determining Proceeds of Crime for the Fraud
34In R. v. Dwyer, the Court of Appeal considered the application of these provisions in the context of a mortgage fraud. As in the case before me, in that case Ms. Dwyer had obtained a mortgage from the bank by using forged documents. In dealing with the issue of a fine in lieu of forfeiture, Mr. Justice Rosenberg stated, at para 21: "A pre-requisite to making a forfeiture order is that the court is satisfied on a balance of probabilities that 'any property is proceeds of crime and that the designated offence was committed in relation to that property'". He stated, at para 24, that "… an order for a fine in lieu of forfeiture can be made under s. 462.37(3) only where an offender has possession or control of the property in question or at least had possession of the property at some point." In determining the amount of proceeds of crime on the mortgage fraud before him, Mr. Justice Rosenberg deducted the amount that had been recovered by the bank. He found, at para 26, that "At its highest the evidence shows that the appellant had control of $10,700 more than the bank recovered. I would therefore allow the Crown appeal only to the extent of ordering that the appellant pay a fine of $10,700."
35Mr. Sonley, for the Crown, urges an interpretation of s. 462.37(1) whereby the value of each mortgage or advance by the Bank is added up, and furthermore the value of each property that was bought or sold is added up, regardless of amounts repaid to the Bank. He urges a total finding of proceeds of crime for the mortgage fraud of $4.9 million even though the total amount of the fraud was only $1.74 million. This would be disproportionate to the offences and relies, in my view, on an overly literal interpretation of the definition of proceeds of crime.
36I am instead persuaded by, and bound to follow, the approach taken by Mr. Justice Rosenberg, that the proceeds of the crime of mortgage fraud should not include the amounts recovered by the Bank. It is my view, consistent with the approach in Dwyer, that in the case of a mortgage fraud the money that has been recovered by the bank has already been surrendered, or taken from the offender, and although he once had possession of it, as of the time of the application it is identifiable and locatable and it is not in the control of the offender. Accordingly, for the purposes of this application it does not constitute proceeds of crime. Money or property that has been surrendered back to the person from whom it was taken cannot be held to be the offender's profit from the crime.
37In an application under s. 462.37(1) the onus is on the Crown to establish that any property is proceeds of crime. The first stage in the analysis is to identify the property in question as of the time of the application. In the case before me, I consider firstly the money advanced by the Bank, totalling over $1.7 million. I must first ask: does that property currently exist, and if so where is it? I find there is a clear paper trail tracing those funds and that those funds are in the possession of the Bank. I find that is identifiable property that is not in the possession of the offender. It is therefore not proceeds of crime for the purposes of this application. Furthermore, the evidence indicates that each real estate property was sold in a bona fide transaction and is not in the possession or control of the offender, nor does he retain a residual benefit in any of them. The real estate itself is therefore not proceeds of crime on this application. The third aspect to consider, though, is whether there is profit from the sale of the properties that the offender gained as a result of his fraudulent ownership of them.
38In relation to the property at 326 Wagon Drive, Dunrobin, the evidence indicates it was purchased in 2002 for $315,000, and over the years the Bank provided a mortgage and further advances totalling $402,605. The facts indicate the property was sold in 2010 but there is no evidence before me of the sale price. The proceeds were folded into a subsequent mortgage with the Bank and it appears the Bank recovered all the money it had forwarded. It has not been proven that Mr. Bullen made a profit on that property. I therefore find there are no proceeds of crime eligible for forfeiture in relation to that property.
39The property at Lombardy, Ontario had a mortgage and line of credit of $1.2 million, which was discharged upon the sale of the property in 2014. The money that the Bank had been defrauded of was returned to it at that time. There appears to have been a residual amount from that sale, but I cannot determine, on the facts filed before me, if that was profit from the ownership of the Lombardy property. It has therefore not been proven, in this proceeding, that the residual from the sale of that property was proceeds of crime.
40A third property involved in the Bank fraud was the cottage property at 361 Ash Island, Leeds and the Thousand Islands, purchased for $300,000 in 2005. As a result of the fraud, the Bank loaned $225,000, which was repaid when the property was sold for $490,000 in 2010. The $225,000 does not constitute proceeds of crime eligible for forfeiture on this application, as it, like the other repayments, was restored to the aggrieved Bank. However, the facts filed before me indicate that Mr. Bullen made a profit of $190,000 on the sale of that property. I find this profit directly arose from his ownership of the property, and that ownership had only been possible due to the fraud committed on the Bank. I therefore find that the $190,000 profit is proceeds of crime from the fraud, eligible for forfeiture. As it is agreed that the money cannot be otherwise located, a fine in lieu of forfeiture is warranted.
41There will be a fine in lieu of forfeiture in relation to the fraud conviction of $190,000, in favour of the Receiver General of Canada.
Proceeds on the Criminal Interest Rate Offences
42The calculation of the fine in lieu of forfeiture for the Criminal Interest Rate offences is more straightforward. On the evidence filed in this proceeding, Mr. Bullen (either directly or as principal of Cadillac Financial) received $148,188 in interest payments from Ms. A.B. and $172,300 in interest payments from Mr. M.L.. I would not accept the suggestion of Mr. Bullen's counsel that the loan principal should be deducted from those amounts in calculating proceeds of crime. It is clear from the facts filed before me that the amounts consist solely of interest payments, and the interest was charged at a criminal interest rate. Therefore, the amounts in their entirety are proceeds of crime, eligible for forfeiture and a fine in lieu.
43It is acknowledged that the fine in lieu of forfeiture for the Criminal Interest Rate offences is to be paid to the Government of Ontario. Therefore, there will be a fine in lieu of forfeiture of $320,488 payable to the Treasurer of Ontario.
44The total fine in lieu of forfeiture will be $510,488. The time to pay will be 10 years after completion of the custodial portion of this sentence. The term of imprisonment in default of payment, in accordance with s. 462.37(4)(vi), will be three years, to be served consecutively to any other term of imprisonment.
Conclusion
45The sentence to be imposed on Mr. Bullen will be 30 months jail, consecutive to any term he is currently serving, as follows:
i. On the s. 380 Fraud Over, two years jail; ii. On the s. 347 Criminal Interest Charge against Ms. A.B., three months consecutive; iii. On the s. 347 Criminal Interest charge against Mr. M.L., three months consecutive; and iv. On the s. 354 Proceeds of Crime Charge, one year concurrent.
46There will be an Order for a fine in lieu of forfeiture in the amount of $510,488, with a term of imprisonment in default of payment of three years, to be served consecutively to any other term of imprisonment.
47The sentence for Cadillac Financial will be a fine of $150,000 (re Ms. A.B.) and $175,000 (re Mr. M.L.) for a total of $325,000.
48There will be an order, pursuant to s. 743.21 of the Code, that Mr. Bullen not have any communication with Ms. A.B., Mr. M.L. or any person named in Exhibit 1 in relation to the Criminal Interest Rate offences while he is serving this sentence.
Released: October 24th, 2018
Signed: Justice Robert Wadden
Footnotes
- The Agreed Statement of Facts indicates that other amounts loaned at criminal interest rates were $40,000 to Jason Lorraine at 61.6% and 77.5%, for which payments of $31,700 were made; $35,000 to Walter Lubiano at 4-4.9% monthly, for payments of $217,060; $25,000 to George Pettit at 4.9% monthly, for payments of $29,225; $43,530 to Andre Schad at 4% per month, for payments of $67,550 and $52,000 to Paul Thomas at rates ranging from 3.1% to 4.9% per month, for payments of $29,215.
- It is notable that in R. v. Dobis the offender was "a senior and trusted employee of a mid-size family company." His offences had a devastating effect, putting the survival of the company and the jobs of its 250 employees in jeopardy.
