ONTARIO COURT OF JUSTICE
DATE: 2021 09 03 COURT FILE No.: Sudbury 20-1738
BETWEEN:
HER MAJESTY THE QUEEN
— AND —
KAREN CADY
Before: Justice M. B. Carnegie
Heard on: April 14, June 22 and 30, July 16, 2021 Reasons for Judgment released on: September 3, 2021
Counsel: Carolyn Hackett, counsel for the Crown Denis Michel, counsel for the accused Karen Cady
Reasons for Sentence
1On April 14, 2021 Karen Cady pled guilty to two offences:
(1) Count 1: That she, between January 1st, 2015 and June 26th, 2019, defrauded Henninger’s Diesel Ltd. of a sum over $5000, contrary to s. 380(1)(a) of the Criminal Code; and
(2) Count 5: That she, on May 21st, 2020, had in her possession a forged document used in the commission of an indictable offence, contrary to s. 368(1)(d) of the Criminal Code.
2Prior to sentencing, a pre-sentence report was prepared, supporting medical documentation was filed, a victim impact statement was submitted and, as part of the sentencing hearing, a forfeiture hearing was conducted for which separate reasons will be released on this date.
3This is not Ms. Cady’s first fraud conviction. Indeed, she has a history of fraud, and in particular, fraud relating to an employer. Here, her fraudulent misconduct has caused a loss to her employer of just over one million dollars amounting to a significant impact upon that employer and their employees. This sentencing calls for an assessment of the appropriate quantum of imprisonment, be that 2-3 years or 4-4½ years, and the extent, if any, that restitution should be addressed. While Ms. Cady’s sentence may be small solace to her former employer and fellow employees, it must nevertheless act to deter and denounce like conduct so that the public hears loud and clear that large-scale fraud from an employer does not and will not ‘pay’.
Factual Background
Circumstances of the Offence
4As part of the evidentiary record, the Crown filed an Agreed Statement of Facts. While I do not propose to repeat it here I will summarize the salient features.
5Between January 1, 2015 and June 26, 2019, Ms. Cady defrauded Henninger’s Diesel Ltd. (“Henninger”) of $1,017,703.27. She was employed throughout that time as Henninger’s bookkeeper and found herself in a unique position to divert funds into established personal accounts for that purpose. Before her fraudulent behaviour was discovered, she left Henninger and, in so doing, trained her replacement in such a fashion that permitted this fraud to continue.
6Henninger is a small company from Sudbury, Ontario which, as of 2019, employed approximately 10 people. It’s primary focus was selling new and rebuilt engines used in underground mining operations. In the relevant timeframe, Henninger had approximately 30 to 40 regular vendors. It used both a standard and credit payment system to administer its accounts.
7In June of 2014 Ms. Cady was hired for temporary employment with Henninger. She was transferred over to payroll work given her skillset in January 2015 and in June of that year took over as the company’s sole bookkeeper – a position she maintained until June of 2019. Within Henninger, access to company financial accounts were restricted to her and the owner. Within a short period of time, Ms. Cady gained the trust and confidence of Henninger’s owner and she began abusing that trust almost immediately.
8The manner of Ms. Cady’s deceit bore a level of sophistication. Over 4 ½ years, she defrauded Henninger using three principal methods:
(1) altered cheques – From January 1, 2015 to June 30, 2015, Ms. Cady deposited five unauthorized cheques from Henninger into her personal bank account totaling $9,270.69. She concealed these efforts by creating altered cheque copies for Henninger’s records. As an example, on May 21, 2020, police found and seized from Ms. Cady’s residence an altered cheque from February 6, 2015 in the amount of $2,786.04. Comparing the bank copy with that found at her home, they discovered that it had been materially falsified by pasting over the front and back of the cheque to conceal that Ms. Cady had paid herself. This forged document, the subject of the second count pled to, was used to conceal one of her personal payments from Henninger. These transfers went beyond mere opportunity. They required repeated effort and deliberation to pull off;
(2) disguised Electronic Fund Transfers - In July 2015, she convinced Henninger’s owner to stop issuing paper cheques and, instead, use an Electronic Funds Transfer system which she was then able to manipulate to transfer $816,728.25, through 109 transactions using 17 fraudulent client codes, into an established personal account. In essence, she operated two vendor lists (one legitimate, one falsely paired to her own account) which allowed her to both pay vendors legitimately and also transfer funds to herself disguised as vendor payments. By matching legitimate vendor payments with subsequent personal transfers, she exploited Henninger’s accounting system in a way only she was in a position to notice. The accounting system did not show the specific account numbers where the money was being deposited. This process concealed her fraudulent withdrawals from external accountant reviews for over 4 years. When she left, she removed her account number from the vendor list to avoid detection. In addition, Ms. Cady also used Henninger’s credit system to disguise payments to herself – a process that ultimately caught up to her when two vendors sought to use credits they had earned a few months after she left Henninger. Prior to that, she had abused the Henninger credit system by using her vendor list linked to her personal account to transfer funds intended, instead, to be client credits. She would then represent these fraudulent transfers as credits used by the same vendors unbeknownst to them. Indeed, to further the deception, she went so far as to craft an email representing herself as a vendor employee requesting a credit payment, then making said payment to herself; and
(3) diverted client funds intended for Henninger – Ms. Cady also engaged in efforts to misdirect funds intended for Henninger into her own account, which, between November 5, 2015 to September 11, 2017, amounted to $191,704.33. She did so by communicating directly with a Henninger client advising that the company bank account number had changed and providing her own as the replacement. In an effort to later conceal this deception, on September 26, 2017 Ms. Cady advised the client to return to using the prior Henninger account.
9While some of this was ongoing, and unbeknownst to Henninger, Ms. Cady was convicted of committing fraud under $5000 respecting a previous employer in December 8, 2016. She had been employed by Paul Ayotte Insurance Brokers and was found to have defrauded them between January 1, 2013 and April 30, 2015 of an amount totalling $1,430. On December 8, 2016, she was sentenced to 18 months probation with a term that she “inform [her] current employer of this conviction within the next 30 days”. While she claims to have notified a fellow employee of Henninger, the owner (and her direct supervisor) was not informed. Of particular note, however, is the reality that while on this probation order she continued to defraud Henninger. Indeed, during her probationary period, she unlawfully diverted $465,531.50 to herself from Henninger. Prior to that period, she had defrauded Henninger of $326,339.50.
10In July 2019, Ms. Cady left Henninger to pursue other opportunities, namely ownership of a hair salon. She trained her replacement over the course of a month. Remarkably, as part of her electronic fund transfer training, her replacement became unwittily involved in transferring funds to Ms. Cady. As mentioned, the replacement bookkeeper ultimately received requests by vendors to use their accumulated credits after Ms. Cady’s departure. Henninger’s records reflected that these credits had already been spent – records crafted by Ms. Cady. When it was discovered that the electronic transfers associated to the payment of those credits did not match their clients’ accounts, but instead were all going to the same account (Ms. Cady’s), an audit of transfers to this account revealed hundreds of thousands of dollars in transfers to this then unknown account. The fraud now discovered, police were notified.
11While employed at Henninger, Ms. Cady lived a lifestyle reflective of her ill-gotten gains. She routinely vacationed abroad, bought trailers, snow machines, four wheeled sport vehicles, a Jeep, a truck, a boat and a home at 65 Hinds Road in Wahnapitae, Ontario. To colleagues she misrepresented her wealth as coming from a family inheritance. To family, she claimed to be receiving work bonuses. Regardless, Ms. Cady dispersed all these funds from the same bank account, used primarily for the fraud related activity. She was the sole account holder from July 29, 2015 until February 10, 2016 when her husband was then added to the account.
12Much of the proceeds of the fraud is unavailable for forfeiture – it has largely been spent, withdrawn in cash not located or transferred to other parties, her husband included.
13On May 21, 2020, police seized offence related proceeds of crime, including:
(1) 7 vehicles, including:
(a) a 2016 Jeep Cherokee (for which the $10,000 down payment and the subsequent 81 bi-weekly financing payments where paid from proceeds of crime for this $47,653.38 vehicle);
(b) a 2017 Splash+Superflex boat, 2017 Mercury motor and 2017 Shorelander trailer (purchased for $39,002.87 from proceeds of crime);
(c) a 2017 Kawasaki Jet Ski and 2017 Easy WCI boat trailer (purchased for $16,691.70 with proceeds of crime);
(d) a 2010 Ford Edge motor vehicle (purchased for $9,625.15 with proceeds of crime);
(e) a 2017 Cher 39K Recreational Travel Trailer (purchased for $5,924.48, after trade in, with proceeds of crime). The 2012 trade-in trailer, purchased for $14,338.22 after another trade-in, had also been with proceeds of crime. That 2008 trade-in trailer had been purchased by Ms. Cady’s husband in 2016 for $26,000, again from proceeds of crime;
(f) a 2019 Ram Durango motor vehicle (purchased for $76,502.33 with a trade-in and financed). The $10,000 deposit and subsequent financing payments were paid from proceeds of crime. The trade-in 2014 Ram 1500 motor vehicle had its lien of $26,324.96 paid for from proceeds of crime; and
(g) a backhoe (purchased for $8,000 with proceeds of crime);
(2) $1,140 in cash; and
(3) A restrained jointly owned property at 65 Hinds Road, Wahnapitae, Ontario, by order of the Superior Court of Justice, which was purchased for $148,000, of which the $18,222 down payment and various subsequent mortgage payments were paid from proceeds of crime.
Impact on the Victims
14Ms. Cady’s conduct adversely impacted not only Henninger but its employees, of which she was one. As outlined by its owner/operator’s Victim Impact Statement, deceived as to its true financial position, Ms. Cady’s conduct directly contributed to Henninger reducing or cancelling bonuses, freezing wages and reducing work hours to avoid more drastic layoffs. During the company’s fraud-based downturn, morale was low. Once the fraud was discovered, it did not improve. Employees, naturally, expressed anger and bitterness over Ms. Cady profiting off their misfortune. The company suffered a reputational loss once vendors and lenders were apprised of this fraud. Further, its present valuation and financial strength – important for its owner who has been intent upon maintaining this family legacy for her children – has been significantly corroded. Finally, the owner/operator expressed an understandable feeling of betrayal from a person she trusted and cared for – that trust having been used against her accentuating the vulnerability of this small business. But for the resilience of this small business and its employees, Ms. Cady’s actions could reasonably have closed Henninger down.
Circumstances of the Offender
15Ms. Cady is 48 years of age. She was born and raised in Sudbury to a loving, stable and supportive family. She is close to her two daughters, from her first marriage, and provides significant and ongoing support to and care for her grandchildren. She is currently unemployed, her recent hairstylist business succumbing to the pressures of Covid-19. Perhaps unsurprisingly, familial relations with her siblings have been strained since her arrest on these charges that have generated negative public exposure. They have been shocked by these offences characterizing them as out of character for her. They were deceived by Ms. Cady’s representations that her increased spending was the result of received bonuses from her employer. Her father expressed particular shock and disappointment. Reasonably, he thought that she would have learned from her first criminal matter in 2006. He is “devastated” that any lengthy custodial sentence may mean that she will not be around when he believes he’ll pass on. [1]
16In her Pre-Sentence Report, Ms. Cady expressed particular concern over the impact that this matter has had upon her family and other relationships in the community. Seeking insight into her offending conduct, Ms. Cady expressed regret for her choices and relayed the following:
[T]hey were bad decisions. I don’t know why I couldn’t stop, and I didn’t know how to stop. They only way I saw to stop was to quit that job. [2]
Clearly, there is no readily identifiable cause or reason for her offending conduct beyond obvious self-interest and/or greed. The Pre-Sentence Report author interpreted this behaviour from Ms. Cady’s responses as “compulsive and requiring a high level of deception only ending through her resignation from her position.” [3] She was apparently unaware that the total had reached over one million dollars inexplicably believing, instead, that a mere half of that was taken. I characterize this as inexplicable because the care and repetition put into this scheme is incongruous with a failure to track its profits.
17Ms. Cady has a related criminal history. As part of her Pre-Sentence Report interview, she declined to speak at any length respecting her prior offences. In 2006 she was found guilty of her first employment related fraud, under $5000, and was granted a conditional discharge with a period of 18 months probation. As already mentioned, in 2016 she was again found guilty of fraud under $5000, again respecting an employer, and was then convicted, given a suspended sentence with a period of 18 months of probation. It is noteworthy that this 2016 sentence was part of a joint submission by counsel. That is because Lebel J. “reluctantly” accepted this “very lenient” recommendation in the face of a breach of trust employment related fraud which usually merits a custodial sentence. [4] Further, it was noted as aggravating in that breach of trust matter where Ms. Cady misdirected funds from an insurance client to herself and not her employer, that she also forged a signature as part of an effort to cover up her malfeasance. In that matter, her counsel noted the significant consequence that a court mandated reporting of her fraud conviction to her present employer (Henninger) might have upon her continuing employment – as ultimately reflected on her probation order as opposed to a s. 380.2 order – as a significant mitigating feature. Indeed, the Crown’s related opposing comments justifying a non-custodial disposition, but with a prohibition term necessitating reporting to her present employer, are noteworthy and sadly ironic:
I ask you to impose such an order [per s. 380.2]. It may cost her her job, that’s true, but it is rather remarkable that after defrauding the prior employer, she has a new job in which she’s in a position to do much the same and has not told her employer, the current employer that she’s here in court facing these charges.
Nothing’s been told to us that would give us any idea why [Ms. Cady] would, would have permitted herself to engage in this sort of behaviour, which leaves us, I’d submit, with a concern that, that not only that the next person has to know you can’t do this, but that we don’t know what will stop her from being tempted to do it again the next time opportunity presents, which is again another reason why a 380.2 order is of significance in this case. [5]
Positions of the Parties
18The defence seeks consideration of a totality penitentiary sentence between 2 and 3 years. Citing R v Scholz, [6] it is submitted that the appropriate sentencing range is 3 to 5 years. It is accepted that this fraud has caused serious consequences but, fortuitously, Henninger has been able to carry on and has avoided the “devastating consequences” outlined as particularly aggravating in many cases. Frankly, Ms. Cady cannot make any more reparations than she already has through her plea of guilt and conceding the requested forfeiture orders (now joined by Mr. Cady). The complexity of this matter would have necessitated substantive prosecutorial and judicial resources, and in the process may have diminished further the value of the remaining proceeds of crime. She has acknowledged her guilt and presents having never been sentenced to a custodial period before.
19In addition, the defence asks me to consider Ms. Cady’s medical status. Her auto-immune system is compromised by her diagnosis of Lupus which, as a result, puts her at higher risk of infection for Covid-19 once incarcerated. Further, recent examinations have noted the risk of a cancer diagnosis which requires further medical follow-up and monitoring in the coming years.
20The Crown seeks a sentence between 4 and 4 ½ years incarceration. This, it is submitted, is in line with an established range of sentence for breach of trust major fraud cases and takes into account the defendant’s history and the mitigating and aggravating features present. The Crown notes the range of sentencing for “large-scale frauds” commences at three years with an upper limit as high as eight years.
21In addition, the Crown seeks a restitution order for the full amount of the loss pursuant to s. 738, a prohibition order for 10 years respecting the defendant’s future work or volunteer activities involving authority over real property, money or valuable security of another person pursuant to s. 380.2 and a non-communication order with two operators of Henninger pursuant to s. 743.21 of the Criminal Code.
22Finally, the Crown seeks a forfeiture order for the proceeds of crime available to be forfeited and a fine in lieu of the proceeds of crime unavailable to be forfeited, pursuant to ss. 462.37(1) and 462.37(3), which, as mentioned, will be dealt with in a separate ruling forthcoming.
Legal Framework
23In general, major fraud cases attract lengthy custodial sentences. This is because this offending behaviour has the capacity to considerably impact a number of victims and the public in general. These are considered serious offences and sentenced accordingly to deter like minded individuals from believing that such crime can ‘pay’.
Principles of Sentencing
24Section 718 of the Criminal Code highlights the fundamental sentencing principles for consideration of this and all sentencing matters:
(1) s. 718 highlights denunciation, deterrence (both specific and general), the separation of offenders from society when necessary, rehabilitation, reparation for harm done and the promotion of a sense of responsibility and acknowledgment of the harm done;
(2) s. 718.1 highlights that a sentence must be proportionate to the gravity of the offence and the degree of responsibility of the offender;
(3) s. 718.2(a) enumerates several relevant aggravating factors, including:
(a)(iii) evidence that the offender, in committing the offence, abused a position of trust or authority in relation to the victim;
(a)(iii.1) evidence that the offence had significant impact on the victim, considering their age and other personal circumstances, including their health and financial situation;
(4) s. 718.2(b) highlights the importance of parity in sentencing so that similar offenders for similar offences in similar circumstances receive similar sentences; and
(5) s. 718.2(c) highlights the importance of totality, here in particular when assessing the imposition of a restitution order.
25Several offence specific statutory aggravating features, pursuant to s. 380.1(1), are relevant to this sentencing, including:
(a) the magnitude, complexity, duration or degree of planning of the fraud committed was significant;
(c) the offence involved a large number of victims;
(c.1) the offence had a significant impact on the victims given their personal circumstances including their age, health and financial situation; and
(f) the offender concealed or destroyed records related to the fraud or to the disbursement of the proceeds of the fraud.
26And, s. 380.1(1.1) expressly makes aggravating any fraud for which the value or loss exceeds $1 million.
27Finally, according to s. 380.1(2), I must not consider as mitigating an offender’s employment, employment skills or status or reputation in the community if those circumstances were relevant to, contributed to, or were used in the commission of the offence.
28While all applicable sentencing principles must and are considered, in fraud cases, and in particular large-scale fraud matters, the principles of denunciation and deterrence are emphasized as the paramount considerations and are best reflected by the length of the custodial disposition. [7]
Precedents respecting the range of sentence
29As highlighted by the Supreme Court in R v Friesen, [8] when assessing an appropriate range for sentence I must be mindful of Parliament’s intent, which was re-addressed in 2004 through the increase in the maximum sentence for fraud and the enumeration of additional aggravating factors, [9] as well as in 2011 with the creation of a mandatory minimum sentence of two years imprisonment for frauds over $1 million. [10] By raising the maximum penalty, and by later adding a mandatory minimum in the penitentiary range, Parliament has signaled that it expects these offences to be punished more harshly, that the proportionality goal posts have been pushed further down the field.
30I have been provided with a number of sentencing authorities dealing with breach of trust employment frauds, all of which are large-scale to various degrees. [11] I have reviewed and considered all of them. The following authorities offer assistance in the application of relevant sentencing principles, in particular parity, and the determination of the appropriate range of sentence for this offence and offender. I am mindful, of course, that sentencing ranges are not meant to be straightjackets.
31Our Court of Appeal recently noted the range of 3 – 5 years for major, or large-scale frauds, in R v Scholz. There, a first-time offender “of good character” who committed a breach of trust fraud amounting to close to, but not exceeding, $1 million received a conditional sentence. The Court of Appeal allowed the Crown’s sentencing appeal and imposed a 3 year sentence. In so doing, the Court commented:
With respect to the first error, this court has an established range of three to five years as the sentence for major frauds: R. v. Bogart (2002), 61 O.R. (3d) 75 (C.A.), at para. 36, leave to appeal refused, [2002] S.C.C.A. No. 398; R. v. Davatgar-Jafarpour, 2019 ONCA 353, 146 O.R. (3d) 206, at para. 34. It is a range of sentence that has been set for many years. [3] The trial judge acknowledged that a penitentiary term of imprisonment was the norm, although he stated the range as being two to six years. Regardless of which of those two ranges is accepted, the trial judge still departed from the range without explaining the reasons why he felt justified in doing so. On that point, I would reiterate the admonition in Davatgar-Jafarpour, at para. 32, where Roberts J.A. said"[S]entencing ranges cannot be arbitrarily ignored otherwise they become meaningless." [12] [emphasis added]
However, the court was careful to note, citing its reasoning in R v Reeve, 2020 ONCA 400, [13] that formally understood general sentencing ranges (there it was considering the “Drabinsky” 5–8 years range for premediated large-scale frauds involving public companies) should now be approached with caution given Parliament’s 2004 increase in the maximum penalty for fraud over $5000 and the Supreme Court’s reasoning in Friesen. I take from that reference that while acknowledging a historical range of sentence, the Court of Appeal was not affirming it modern application. For major case frauds, 3 – 5 years is, at best, a conservative yard post for my consideration.
32Regardless, the Scholz court reminded lower courts that departing from an established range of sentence requires explanation. Factors that have historically justified departures in major fraud cases have included a guilty plea, the repayment of monies taken, that the offender played a minor role, was at an advanced age, or had serious health issues. [14]
33In R v Ghandi, 2018 ONSC 735, [15] the offender worked as a bookkeeper at a small business and forged cheques to herself. Upon discovery, she was terminated and moved on to a second business where she did the same. The total combined fraud amounted to $792,293.71. Greed was her obvious motive. She pled guilty, had one prior conviction for theft over $5000 and was sentenced to 3 ½ years imprisonment along with full restitution.
34In R v Inshanalli, 2017 ONSC 1729, [16] the offender worked as a bookkeeper at a golf club and wrote 134 unauthorized cheques to herself over two years amounting to $463,824.42. She had a gambling addiction which provided context for her actions. She was plainly motivated by greed. She had two prior convictions for fraud and received conditional sentences and had been on a s. 380.2 prohibition order. She made $54,000 in restitution. She was sentenced to 3 ½ years imprisonment and a restitution order for the remaining loss.
35In R v Atwal, 2016 ONSC 3668, [17] the offender was a bookkeeper/accountant for a large corporation. She issued cheques and forged signatures over the course of 8 weeks accounting for an actual loss of $645,301.16 and a risk of loss of over $1 million. The offender was motivated by greed. She was 54 years of age without criminal history. No restitution was made. She was sentenced to 3 years imprisonment.
36In R v Clarke, 2017 ONSC 1996, [18] the offender was employed as a payroll administrator and over a period of five months defrauded her company of $321,945.78. This was a well thought out scheme involving 58 fraudulent transactions and avoided employer scrutiny until the bank noted irregularities. She had a prior breach of trust fraud conviction in relation to $1,500 taken from an employer. She was sentenced to 3 years imprisonment. A s. 380.2 order was made for life and, having paid none, she was ordered to pay restitution for only the amounts the court found she directly received which was reversed on appeal imposing a full restitution order.
37Beyond these authorities provided by counsel, I have reviewed other noteworthy precedents. In R v Palmer, 2019 BCSC 372, [19] the offender was a bookkeeper and office administrator who stole over $2.2 million from her employer, a small manufacturing company, over the course of 12 years. She pled guilty and was sentenced to 4 ½ years and ordered to pay full restitution. No attempt at restitution was made and no reasonable explanation for where the monies went was offered.
38In R v Dunkers, 2018 BCCA 3272, [20] the offender was a bookkeeper of a non-profit organization. Over two years, she used her position of trust to issue cheques to herself amounting to $204,197.80. As a result, the organization was forced to cease operations. The British Columbia Court of Appeal upheld her sentence of 5 years and the full restitution order made.
39Having considered these authorities and the cases cited therein, it is apparent that the range of sentence for breach of trust for large-scale frauds is broad, generally starting from 3 to 8 years, [21] and in extreme cases as high as 12 years incarceration. And, the range may indeed be in flux. In the context of the nature and quantum of the fraud before me, it is apparent that, absent an individualized assessment of mitigating and aggravating factors, at 3 – 5 year range is the starting point for my consideration.
Covid-19 Considerations
40The defence asks that I consider Ms. Cady’s Lupus diagnosis in 2017 which adversely impacts her immune system, amongst other things. This resulting auto-immune disease has necessitated hospitalizations since its diagnosis and, it is argued, places her at enhanced risk for Covid-19 infection within a custodial setting. The Crown has filed Exhibit 5, a Correctional Service Canada online account detailing that as of June 14, 2021 there were no active Covid-19 cases at Grand Valley Institution for Women (a probable institutional location for Ms. Cady) and that “rigorous” safety protocols are in place inclusive of a vaccination program which, as of June 11, 2021, reported at least a 75% first dose vaccination rate for inmates and staff with second doses being administered.
41According to our Court of Appeal in R v Morgan, 2020 ONCA 279, [22] it has been established that the Covid-19 pandemic falls under the category of “collateral consequences” for sentencing consideration. [23] As a result, I must determine “whether the effect of the [collateral] consequences means that a particular sentence would have a more significant impact on the offender because of his or her circumstances.” This ‘effect’ analysis necessitates consideration of the specific infection-related risks posed to the offender while in custody while appreciating that, invariably, harsher conditions of imprisonment due to preventative lockdown measures are likely – particularly in light of the present Delta variant spread, or fourth wave environment which enhances the risk of contagion and makes ‘breakthrough’ infections more likely. [24] In R v Lariviere, 2020 ONCA 324, [25] our Court of Appeal emphasized that this pandemic does not justify reducing an otherwise fit sentence, absent evidence that the offender is uniquely vulnerable to the virus. Exhibit 5 offers some comfort here, but Ms. Cady’s compromised immune system obviously puts her at higher risk.
42Both parties seek the realistic consideration of a penitentiary sentence. Unlike cases where merely crossing the custodial threshold is the principal consideration, I am faced with assessing the enhanced risk posed to Ms. Cady in the context of a certain incarceration for a substantive period that, even at its lower end, may outlive the pandemic’s active risk. I do not have a crystal ball nor the capacity to project the risk for Ms. Cady a year or more down the road. I find that it would be speculative for me to conclude that the imposition of the Crown’s range of sentence would place her, realistically, at greater risk than that offered by the defence. And, I am not prepared, on the basis of this limited evidentiary record, to reduce an otherwise fit sentence. However, I am alive to the inevitable harsher custodial environment she will be facing for at least the short term, and will consider that as a collateral consequence when assessing the proper range of possible fit sentences.
Mitigating and Aggravating Factors
43There a few compelling mitigating factors to assist with my determination of a fit sentence for Ms. Cady. The most significant factor, for which I grant full credit, is her plea of guilt. Regardless of the strength of the Crown’s case, fraud prosecutions are by their nature complex and involved. The defendant has accepted responsibility for her actions through her plea which is no small concession. This plea has saved the administration of justice, in a time when the pandemic has adversely impacted its capacity, from what would have invariably been a multi-week trial delayed well into the future. It also brings some closure to these proceedings for Henninger and its owner/operator and employees who, I am sure, are best focused upon their collective financial recovery.
44Ms. Cady’s health status is a relevant consideration on sentencing. As demonstrated by Exhibits 7 and 8, gallbladder polyps and a spot on her chest x-ray have been recently detected which require follow up examination within a year. Her doctor does not believe that they are cancerous, but they may be a precursor necessitating ongoing surveillance. However, a potential adverse medical condition is not sufficient to ground any mitigating benefit. And, I have no evidence suggesting that follow up medical surveillance of these issues will be encumbered by the imposition of a penitentiary term that the defence, itself, at a minimum endorses.
45In her Pre-Sentence report, the author interpreted her comments about the offending conduct – “they were bad decisions. I don’t know why I couldn’t stop, and I didn’t know how to stop. The only way I saw to stop was to quit that job” [26] – as demonstrating “some insight into her behaviour … She categorized it as compulsive.” [27] This, despite confirmation that no formal diagnoses of any mental health or addiction issue is relevant. Frankly, having considered the offending narrative in its totality and her history of breach of trust fraud I am unable to adopt the notion that “compulsion” played any role sufficient to equate to a mitigating factor as seen in the case law respecting addiction related issues. While I do not have a sufficient evidentiary record to infer that her resignation from Henninger can only be explained by the likelihood of her scheme’s imminent discovery, particularly given the lengths she went to conceal its detection, neither can I reasonable accept her commentary that she left as a means of stopping the fraud. The duration of this conduct, the relative sophistication of the scheme, the repetition of its mechanism, and the ill-gotten profits it yielded and were represented to family as earned bonuses all speak to an individual in control and motivated by greed.
46That Ms. Cady maintains familial support and is active and supportive of her daughters and grandchildren is not mitigating on this sentencing. That is equally the case with respect to her father and the sad reality that he may pass on in the coming years. So often an offender’s own family members are burdened by the consequences imposed by offending conduct. That Ms. Cady is burdened by the impact these proceedings and their consequence has, and will have, upon her family is yet a further consequence she alone has created. These regrettable third party impacts are not mitigating features to be considered on sentencing.
47Mr. Justice Hill in R v Williams, set out a non-exhaustive list of aggravating factors developed over time in “white colour” breach trust cases, which themselves mesh well with the noted statutory principles. This list includes several relevant features:
(1) the nature and extent of the loss;
(2) the degree of sophistication of the dishonesty and the degree of planning, skill and deception;
(3) whether the offender’s sole motivation was greed;
(4) the length of the period of dishonesty;
(5) the number of dishonest transactions undertaken in the commission of the offence;
(6) where there exists little hope of restitution;
(7) where the offender was caught as opposed to voluntary termination of the criminality;
(8) when the offender runs the risk that others will fall under suspicion;
(9) the impact on the victims including the employer and fellow employees; and
(10) the “quality and degree of trust reposed in the offender” by the victim(s). [28]
48Informed by these suggestions, I have considered the following aggravating factors as part of a fit sentence determination:
(1) Ms. Cady was in a position of trust vis-à-vis Henninger and breached that trust by taking advantage of her exclusive position as this small business’ bookkeeper and delegated authority over vendor payment interactions to exploit a supervisory vulnerability and advance her fraudulent scheme;
(2) the relative magnitude of this fraud, over $1 million was lost, for this small business and its employees is considerable. This quantum of loss for a small engine business employing ten people must be assessed contextually as against other frauds against larger corporations. That bonuses were stopped, wages frozen and hours cut to prevent layoffs and keep operations going is unsurprising and indicative of a substantial negative impact. That the business survived and avoided the “devastating consequences” seen in other cases where victim business fail only marginally dims the glare of this factor;
(3) the complexity of the fraud and the degree of concealment incorporated into it is significant. The methodologies used to effect this scheme went so far as to include the creation of fraudulent communications from vendors seeking credits to justify the transfer of funds to the defendant, and were such that even accounting reviews did not reveal the misappropriations given the limited information inputted into the accounting records themselves;
(4) the duration of the fraud was protracted. The activity commenced virtually from the start of her employment and proceeded for over four years, including when she was training her replacement on the eve of her departure;
(5) the degree of planning involved and its repetition over four years is concerning. Far from a momentary lack of judgment of isolated opportunity, this activity was carefully orchestrated by a variety of methods with well over 100 separate fraudulent events conducted over the entire course of her employment history with Henninger, inclusive of training her replacement and, again, profiting from that replacement’s use of her established scheme. That she edited the electronic transfer vendor list she had created to remove evidence that she had been paying herself demonstrates some of her concealment efforts upon departure from Henninger;
(6) Ms. Cady continued her fraudulent behaviour, even after being convicted of fraud respecting her prior employer. While serving an 18 month probation order, she defrauded Henninger of $465,531.50, substantially more than the $326,339.50 she had previously defrauded from Henninger prior to the commencement of that sentence. Therefore, she was busily enhancing her fraudulent conduct while serving a sentence for defrauding her prior employer;
(7) the entire evidentiary record speaks to a primary motivation – Ms. Cady acted out of greed and profited to enhance her and her family’s lifestyle at the expense of her employer and fellow employees; and
(8) Ms. Cady has a related employment fraud history having received a conditional discharge in 2006 upon a finding of guilt for fraud under $5000 and a suspended sentence and probation order in 2016 for a fraud under $5000 conviction. As suggested by her father, she has not learned from her past.
Analysis
49Without question, a fit and proper sentence must include a penitentiary term of imprisonment. That much has been conceded. The quantum of that sentence should not depart from an established range unless it can be justified through an analysis of the circumstances of the offence and the offender. Here, I find that there are insufficient mitigating features to justify a sentence below the minimum range of 3 – 5 years, a range I acknowledge may be artificially low given the imposition of enhanced statutory maximum and minimum sentences. That the Crown is seeking a sentence within this range, in any event, is instructive.
50In determining where Ms. Cady falls within the appropriate range, I have also considered beyond the outlined mitigating and aggravating features areas that present an absence of a mitigating factor. Unlike in some cases, but for the real and personal property seized for forfeiture consideration, no efforts have been made to compensate the victims’ loss. It has been represented that Ms. Cady has done all that can be expected of her by pleading guilty and conceding forfeiture of the remaining offence related proceeds seized. The rest of the loss has been consumed. There is nothing left available to take or use as compensation. That some of the property is available for forfeiture as proceeds of crime is not a mitigating circumstance – that would be like rewarding her for spending the victims’ money in a partially recoverable fashion although she could not realize when or if her scheme would fail. When or if she would be arrested. If the remaining proceeds are relevant to anything, it could be relevant to the quantum of restitution that may be ordered which will later be discussed.
51But for her guilty plea, I find that parity places Ms. Cady well within the Crown’s 4 ½ year sentencing recommendation. Denunciation and specific deterrence demands a substantial term of imprisonment. General deterrence is the paramount consideration in any employment related large-scale breach of trust fraud. Rehabilitation, while not ignored, is of little significance to my assessment, particularly considering her recidivist background and this offending conduct extending over the period of her last probationary term. What remains is a consideration of totality and the impact a restitution order and other collateral consequences may have upon a fit and just quantum.
Ancillary Orders
Section 380.2 Prohibition
52The Crown seeks a s. 380.2 prohibition that would prevent Ms. Cady from obtaining any employment or becoming a volunteer in any capacity that involves having authority over the real property, money or valuable security of another person for a period of 10 years. While the defence does not contest this order being granted, it does note the implications of such an order on Ms. Cady’s capacity to obtain future employment in the field(s) she has experience in and its resulting impact upon her capacity for the payment of reparations.
53I have considered the following factors which I find support the imposition of this prohibition:
(1) this is Ms. Cady’s third employer related breach of trust fraud;
(2) on December 8, 2016, the court declined to make a s. 380.2 order but, in its stead, ordered that Ms. Cady report to her then present employer (Henninger) the conviction to mitigate any potential risk;
(3) Ms. Cady continued and enhanced her fraudulent conduct while being supervised on probation; and
(4) Ms. Cady’s lack of insight into why she couldn’t stop, or how to stop her fraud other than “quit[ting] the job” [29] (which, as I have noted, I reject as inconsistent with the reality and nature of the scheme she implemented and continued to profit from).
54As a result, inclusive of the time for which she is imprisoned, Ms. Cady will be prohibited from seeking, obtaining or continuing any employment, or becoming or being a volunteer in any capacity, that involves having authority over the real property, money or valuable security of another person for the requested period of ten years – a period I find minimally necessary to protect the public.
Non-Communication Order
55The Crown seeks a communication prohibition with the owner and operators of Henninger while Ms. Cady is serving her custodial sentence pursuant to s. 743.21 of the Criminal Code. This is not contested and, informed by the Victim Impact Statement, I find it entirely reasonable. The only exception will be for indirect communication through counsel in the event of any related civil litigation.
Restitution
56The imposition of a s. 738 restitution order is discretionary. To avoid breaching the totality principle, it must be considered as part of an overall sentencing disposition so that it does not become a mere “mechanical afterthought” [30] and must always be made with “restraint and caution”. [31]
57Again, in Williams, Hill J. noted that a fundamental principle of sentencing is reparation of harm done. Restitution, a discretionary order, forms a part of this consideration when the amount of loss, as here, is clearly calculable. While not determinative, a sentencing court is entitled to consider “an assessment of the means of the offender to meet the obligations of court-ordered restitution”. [32] In R v Taylor, a case where the offender committed a $4 million fraud against his employer over 13 years to feed his gambling addiction, had substantively rehabilitated himself, there was little to no chance of re-offending, was teetering on the edge of bankruptcy, and was sentenced to two years, our Court of Appeal set aside the imposed full restitution order noting that “[i]t should only be made with restraint and caution and not only in order to avoid putting the victim through the extra legal expense of going to the civil courts or as a substitute for civil procedure.” [33] Further, the court outlined the factors to be considered in making such an order:
The relevant factors and objectives to the imposition of a restitution order have been discussed by this court in R. v. Devgan (1999) and R. v. Biegus (1999). An order for restitution must also bear some reality to the circumstances of the appellant and must be directly associated with the sentence imposed as the public reprobation of the offence. In the circumstances of this case, the overriding factor is the means of the appellant. There is no ability, as noted by the trial judge, to pay even the most minute part of this staggering amount, with no expiry date. It would kill all hope for the appellant for the future and it would likely impair his chances of rehabilitation. The order is clearly excessive and futile and the trial judge erred in that regard. [34]
58The debate over the significance to be placed upon an offender’s inability to pay [35] has been substantively muted by the 2015 amendment to the Criminal Code, s. 739.1, instructing that “the offender’s financial means or ability to pay does not prevent the court from making an order under section 738 or 739.” [36] Post this amendment, our Court of Appeal noted in R v Wagar, 2018 ONCA 960 that in cases where a breach of trust fraud has occurred, as here, the “paramount consideration is the claims of the victim” and “the ability to pay should not be a predominate factor … restitution orders can be made even where there does not appear to be a likelihood that the appellant will pay.” [37]
59In deciding to make a restitution order, I have considered the following factors:
(1) this is a breach of trust fraud, and not Ms. Cady’s first;
(2) the sum lost over the course of planned, deliberate and repetitive conduct spanning over four years exceeds $1 million;
(3) that sum represents a substantive loss Henninger, a small business, and its employees who over the course of this offending timeframe suffered wage freezes, cutbacks in hours worked and lost bonuses to keep the business afloat;
(4) available seized proceeds of crime pale in comparison to the outstanding losses;
(5) Ms. Cady consumed the proceeds upon herself and family on luxuries with no apparent regard to any reparation;
(6) Ms. Cady is presently unemployed, although her acquisition of a private hairstyle business (which failed due to pandemic restrictions and associated pressures) after her departure from Henninger demonstrates her capacity to obtain substantive employment. While the quantum of the loss is substantial, any present inability to make financial reparations does not speak to her future capacity to make payments as demonstrated by her comments to her Pre-Sentence report author: “I could try [to repay restitution] but it would take me the rest of my life to pay the whole amount.” [38];
(7) Ms. Cady will be prohibited from working or volunteering in a financial management capacity over real property, money or valuable security of another person for a period of 10 years. As mentioned, this has not stopped her from gainful employment; and
(8) Ms. Cady will serve a substantive period of incarceration, appreciating that its proper quantum has been adjusted so as not to make punitive the imposition of this order.
60The stark juxtaposition between Ms. Cady’s ill-gotten profits and her employer and fellow employees’ loses demands a compensatory aspect to her sentencing disposition. The community and Ms. Cady must understand that crime cannot be made to ‘pay’ by default, for whatever period of time it was enjoyed. And, once caught, having spent most of the proceeds of crime and having few present prospects for repayment will not absolve an offender of the court’s consideration of “reparations for [the] harm done to victims or to the community” and, if ordered, their resulting compensatory duty. As Parliament has directed, an offender’s inability to pay does not prevent this court from making a restitution order.
61I have considered whether the quantum of a restitution order should be reduced by the value of seized property subject to forfeiture. However, s. 462.49(2) of the Criminal Code satisfies me that any property forfeited pursuant to the proceeds of crime regime will be applied first to the satisfaction or operation of any restitution order made under s. 738. So satisfied, there is no risk that the complainant will be unjustly enriched by imposition of a restitution order for the full loss suffered.
62Therefore, I am satisfied that it is appropriate to make a standalone order under s. 738 that Ms. Cady pay restitution in the amount of $1,017,703.27.
Conclusion
63Having considered the issue of restitution and the burden that it will impose upon Ms. Cady, in addition to the credit I grant her for pleading guilty and the invariably harsher institutional environment she will be facing as Covid-19 mitigation efforts continue, I have determined that a 4 year term of imprisonment represents a fit and proportionate sentence for this offence of fraud over $5000, contrary to s. 380(1) of the Criminal Code. It reflects both the gravity of the offence and the degree of responsibility of this offender – both exceedingly high. It gives me no pleasure to impose such a disposition but I believe that only a sentence of this duration can contribute to respect for the law and maintain a just, peaceful and safe society.
64With respect to the offence of possession of a forged document used in the commission of an indictable offence, contrary to s. 368(1)(d) of the Criminal Code, I sentence Ms. Cady to a term of one year in custody, concurrent to the fraud disposition.
65Therefore, Ms. Cady will serve a total of 4 years imprisonment.
66As outlined, I grant the Crown’s application for a s. 380.2 order for 10 years, a s. 743.21(1) order, and a s. 738(1) restitution order for $1,017,703.27.
67I thank counsel for their helpful submissions and the materials provided.
Released: September 3, 2021 Signed: Justice M. B. Carnegie
[1] Exhibit 6, Pre-Sentence Report dated June 21, 2021, at pp 6-7 [2] Supra, at p 6 [3] Supra, p 9 [4] Exhibit 3, Transcript of sentencing proceedings before Lebel J, December 8, 2016 at p 16 [5] Supra, at pp 13 - 14 [6] R v Scholz, 2021 ONCA 582 [7] R v Gray at para 32, also cited in R v Dobis at para 45 – both emphasizing ‘deterrence’; R v Holden; R v Drabinsky, 2011 ONCA 582 at para 160 [8] R v Friesen, 2020 SCC 9 at paras 96-97 [9] R.S.C. 2004, c. 3, s. 2 [10] R.S.C. 2011, c. 6, s. 2 [11] It is noteworthy that the quantum of loss in most of these precedents is significantly less than that before this court. [12] Scholz, supra, at para 18 [13] R v Reeve, 2020 ONCA 400 at para 39 [14] Ibid, at para 23 [15] R v Ghandi, 2018 ONSC 735 [16] R v Inshanalli, 2017 ONSC 1729 [17] R v Atwal, 2016 ONSC 3668 [18] R v Clarke, 2017 ONSC 1996; and 2018 ONCA 905 [19] R v Palmer, 2019 BCSC 372 [20] R v Dunkers, 2018 BCCA 3272 [21] See R v Plange, 2019 ONCA 646, 2019 OJ No 4097 (CA) at para 40 where the Court of Appeal noted various ranges for differing large-scale frauds as between 3 and 8 years. [22] R v Morgan, 2020 ONCA 279 at para 9 [23] Ibid, at para 8 [24] R v Fairbarn, 2020 ONCA 784 at para 7, our Court of Appeal acknowledged that “the pandemic certainly renders incarceration more difficult and potentially more dangerous than it was before March 2020” [25] R v Lariviere, 2020 ONCA 324 at paras 16-17 [26] Exhibit 6, PSR, p 6 [27] Ibid, p 9 [28] R v Williams, 2007 OJ No 1604 (SCJ) at para 30 [29] Exhibit 6, PSR, supra, p 6 [30] R v Castro, 2010 ONCA 718 at para 23 [31] R v Robertson, 2020 ONCA 367 at para 7 [32] Williams, supra, at para 33; See also: R v Chambers, 2007 ONCA 300 at para 2 [33] R v Taylor at para 5; see also the factors outlined in R v Zelensky, 1978 SCJ No 48 as cited in Castro, supra, at para 24 [34] Ibid, at para 9 [35] See: R v Biegus at para 22; R v Gallagher, 2008 ONCA 252, 2008 OJ No 1271 (CA) at para 15; R v Castro, 2010 ONCA 718; R v Cunsolo, 2014 ONCA 220 [36] R.S.O. 2015, c. 13, s. 30 [37] R v Wagar, 2018 ONCA 960 at para 19 [38] Exhibit 6, PSR, supra, p 6
