Court of Appeal for Ontario

Citation: R. v. McCarthy, 2010 ONCA 893

Date: 2010-12-22

Docket: C49893 and C48533

Between:

Her Majesty The Queen (Respondent)

and

Brian McCarthy (Appellant)

Before: Winkler C.J.O., Laskin and Rosenberg JJ.A.

Counsel:

Ian R. Smith, for the appellant

Robert Hubbard, for the respondent

Heard: December 10, 2010

On appeal from conviction entered by Justice Julie A. Thorburn of the Superior Court of Justice, dated October 1, 2008.

ENDORSEMENT

[1] At the conclusion of oral argument, the court indicated that the appeal by the appellant Brian McCarthy from his conviction for fraud on the public was dismissed and that the Crown appeal from the appellant’s acquittal on two charges of fraud on a company, Southbridge Capital, was dismissed as abandoned. The court indicated that we would shortly release reasons for that disposition.

[2] The three charges that are the subject of the appeals concern the 2003 and 2004 financial statements of a small public company, Betacom, of which the appellant was president and CEO. There was no dispute at trial that the financial statements were false and misleading in material respects in overstating sales, revenue and cost of sales and failing to record that Betacom had taken on a $300,000 loan (the Lakefield loan). While the appellant had not prepared the financial statements, the Crown alleged that he was aware that the statements were false and misleading. The trial judge found that sometime after February 2003, the appellant knew that the sales, revenues and costs of sales had been falsified. This was the basis for the conviction for fraud on the public.

[3] The appellant submits that the trial judge’s reasons were inadequate in failing to deal with substantial inconsistencies between the two principal Crown witnesses, Phil Spensieri, Betacom’s Chief Operating Officer, and Douglas McIntyre, the Chief Financial Officer, and contradictions between the evidence of these two witnesses and other more reliable Crown witnesses. The Appellant also submits that the trial judge erred in failing to instruct herself as to the danger of acting on the unconfirmed evidence of these two highly suspect witnesses. Finally, the appellant submits that the verdicts are inconsistent.

[4] The first two grounds of appeal can be dealt with together. The reasons reveal that the trial judge was aware of the inconsistencies in the evidence of Spensieri and McIntyre. It was not necessary for her to specifically refer to all the inconsistencies. But, more importantly the conviction turned on the independent evidence of the appellant’s friend, Mr. Gorney, not the evidence of Spensieri and McIntyre. That evidence, on its own, established beyond a reasonable doubt that the appellant was aware that the financial statements were false in relation to revenue. The trial judge dealt with that evidence at length and explained why she did not accept the appellant’s version of those events. The trial judge only relied upon Spensieri’s evidence when it favoured the appellant to find that the appellant did not have the requisite intent to defraud when the Southbridge loans were made. She did not rely upon the evidence of McIntyre and Spensieri when making findings against the appellant on the only real issue in the case, whether the appellant had the intent to defraud.

[5] Mr. Smith argues on behalf of the appellant that a finding of intent could not rest solely on the evidence of Mr. Gorney and that the trial judge must have relied upon the highly suspect evidence of McIntyre and Spensieri. In our view, once the trial judge accepted Mr. Gorney’s evidence and rejected the appellant’s evidence, a finding of intent was inevitable and did not depend upon the disputed evidence of McIntyre and Spensieri. Mr. Gorney’s evidence established that the appellant asked him to sign a false audit confirmation letter, confirming sales to Mr. Gorney’s company. While the appellant may have relied upon McIntyre and Spensieri to prepare the financial statements, his area of expertise was sales. He could have had only one reason for asking Mr. Gorney to sign the false confirmation letter, namely, to inflate the revenue figures in the audited statements, which would be relied upon by the public. This finding did not depend upon any of the evidence of McIntyre and Spensieri.

[6] Accordingly, we would not give effect to the first two grounds of appeal.

[7] The test for inconsistent verdicts is whether on any realistic view of the evidence, the verdicts cannot be reconciled on any rational or logical basis. In our view, the verdicts are explicable. The trial judge found that the appellant did not have the requisite fraudulent intent until many months after Southbridge made the loans to Betacom. Hence the acquittals on the two counts that named Southbridge as the victim. However, the trial judge found, based on Mr. Gorney’s evidence, that the appellant had an intent to defraud, at least after May 2003 when the false audit confirmation letter was submitted. Thereafter, members of the public relied upon the false financial statements, which included the inflated revenue figures, when investing in the company. This finding explains the conviction for fraud on the public. The verdicts are not inconsistent.

[8] Accordingly, the appeal from conviction is dismissed. Crown counsel indicated that the Crown had no interest in pursuing its appeal from the two acquittals if the conviction was upheld. Accordingly, the Crown appeal is dismissed as abandoned.

Signed: “Winkler CJO”

“John Laskin J.A.”

“M. Rosenberg J.A.”