Court of Appeal for Ontario

Date: 2019-03-14

Docket: C64068

Judges: Watt, Huscroft and Roberts JJ.A.

Parties

Between

Her Majesty the Queen Respondent

and

Tzvi Erez Appellant

Counsel

Gregory Lafontaine and Ricardo Golec, for the appellant

Jennifer A.Y Trehearne, for the respondent

Hearing

Heard: January 31, 2019

On appeal from: The judgment of Justice John B. McMahon of the Superior Court of Justice, dated May 23, 2017 and the sentence imposed on July 24, 2017.

Reasons for Decision

Introduction

[1] After an unsuccessful application to stay proceedings for unreasonable delay, the appellant, who was represented by counsel, pleaded guilty to 12 counts of fraud. The sentence imposed included:

i. imprisonment in a federal penitentiary for a period of eight years, less credit for time spent on restrictive terms of release;

ii. a free-standing restitution order in respect of each complainant amounting to a total of $6,261,632; and

iii. a fine of $6,261,632 in lieu of forfeiture, payable within ten years of his release from custody, with an additional period of imprisonment of seven years for non-payment.

[2] The appellant appeals both conviction and sentence.

[3] At the conclusion of argument, we dismissed both appeals. We promised that we would provide reasons for our decision. Those reasons follow.

THE APPEAL FROM CONVICTION

[4] On the appeal from conviction, the appellant advances two arguments. He says that:

i. the plea judge erred in failing to strike his plea of guilty; and

ii. the motion judge erred in failing to stay proceedings for a breach of s. 11(b) of the Charter.

Ground #1: Striking the Guilty Plea

[5] Some brief background is essential to an understanding of this ground of appeal and our disposition of it.

The Essential Background

[6] The appellant was originally charged in an information that contained 26 counts of fraud. He was ordered to stand trial after a brief preliminary inquiry.

The Section 11(b) Application

[7] At the outset of trial proceedings in the Superior Court of Justice, the appellant sought to have the proceedings stayed on account of a breach of s. 11(b) of the Charter. He was represented, as he had been throughout, by very experienced senior criminal counsel.

[8] After several days of submissions, the motion judge dismissed the motion and declined to stay the proceedings for unreasonable delay.

The Trial Proceedings

[9] On the day following dismissal of the s. 11(b) application, the appellant's trial began. That evening, the Crown provided some further disclosure to trial counsel. This consisted of copies of electronic communications from the appellant. Its effect was devastating to the single defence available to the appellant – that the complainants did not rely on his deceitful representations to part with their money.

[10] The appellant also provided additional material to his counsel. But this material was of no assistance because it tended to confirm that the evidence on which the appellant had planned to rely in his defence had in fact been altered from its original state to support that claim.

The Resolution Discussions

[11] After receipt of the additional disclosure, the appellant met with counsel to discuss its impact on the future course of trial proceedings. The thin reed of defence available to counsel had been dealt a fatal blow.

[12] The appellant instructed his counsel to open resolution discussions with the Crown. These instructions were memorialized in a written direction provided to counsel.

[13] Trial counsel and the Crown appeared before another judge of the Superior Court of Justice to discuss resolution and its terms. They reached an agreement about disposition.

The Guilty Pleas

[14] When arraigned on a fresh indictment containing the substance of the counts contained in the original indictment but reduced in number to 12, the appellant pleaded guilty to each count.

[15] The plea judge confirmed with trial counsel that he (trial counsel) had conducted "a full and extensive" plea inquiry of the appellant. The plea judge conducted a further inquiry before proceeding with the arraignment and the formal entry of the pleas of guilty.

[16] At the joint request of counsel, the plea judge adjourned sentencing proceedings for about five months to enable counsel to determine the amounts to be proposed in a free-standing restitution order.

The Death of Trial Counsel

[17] Prior to the conclusion of discussions about restitution, senior counsel who had represented the appellant throughout the proceedings passed away.

The Motion to Strike the Guilty Plea

[18] The appellant retained new counsel.

[19] About 18 months after the pleas of guilty had been entered and 12 months after the death of his former counsel, the appellant applied to the plea judge to set aside his guilty pleas on the ground that they were involuntary and uninformed due to the intolerable pressure applied and inadequate advice given by former counsel.

The Judge's Decision

[20] The plea judge dismissed the application.

[21] In his lengthy reasons, the plea judge said he was satisfied that the appellant's pleas of guilty were not uninformed or involuntary. No miscarriage of justice had occurred as a result of their entry.

[22] The reasons of the plea judge included several findings of fact based on the conflicting evidence given on the application. Among those findings of fact were lengthy reasons explaining why the judge rejected, as unworthy of belief, the testimony of the appellant. In the end, the plea judge was satisfied not only on a balance of probabilities, but also beyond a reasonable doubt that the appellant's pleas of guilty were at once voluntary and informed and that no miscarriage of justice had occurred.

The Arguments on Appeal

[23] In this court, the appellant acknowledges that the plea judge correctly set out the essential elements of a valid guilty plea as well as the test applicable when an accused seeks to set aside that plea. The appellant also accepts that a reviewing court affords significant deference to findings of fact made on controverted evidence in courts of first instance.

[24] In this case, the appellant says we should not afford deference to the plea judge's findings of fact. This is so, he contends, because the judge misapprehended the evidence of a crucial defence witness and failed to appreciate its destructive effect on the evidence of another lawyer in trial counsel's office upon which the trial judge relied in ultimately finding the appellant's guilty plea voluntary.

[25] To fortify this claim of error, the appellant seeks leave to introduce as fresh evidence an affidavit of the appellant's sister to which her cellphone records were attached. This evidence is proffered ultimately to support the argument that the appellant's guilty pleas were involuntary because of the unbearable pressure exerted upon him by trial counsel to plead guilty. The route it follows to this ultimate destination is that the proposed evidence confirms the appellant's account of two meetings that fateful day rather than one as described by the lawyer in the office of trial counsel who participated in the discussions and gave evidence on the application.

[26] The respondent resists the claim that the plea judge misapprehended the evidence adduced on the application to set aside the pleas of guilty and thus erred in the ultimate conclusion he reached. The plea judge was very much alive to different recollections about the meeting. He made specific findings that counsel's recollection about the timing or sequence of meetings may have been erroneous. But the judge also found that this inconsistency did not afford any reason to reject the core of associate counsel's evidence which was that no pressure was applied to induce the appellant's plea.

[27] The respondent also opposes the application to introduce the proposed fresh evidence on the grounds that it fails to meet the cogency requirement and also cannot survive the due diligence test. The evidence does not bear upon a decisive or potentially decisive issue. Further, it is not reasonably capable of belief since it does not confirm that the calls to which the deponent refers were actually incoming calls from the appellant's phone as he claimed. In the end, the proposed evidence founders as a result of its dependency on the veracity of the appellant's assertions for its cogency. The plea judge provided persuasive reasons for rejecting the appellant's testimony, none of which is compromised by the fresh evidence.

Analysis

[28] We are not persuaded that there is any basis upon which the appellant's pleas of guilty should or even could be set aside.

[29] The plea judge confirmed with very senior criminal counsel who had represented the appellant throughout that he (counsel) had conducted a plea inquiry with the appellant. Counsel described that inquiry as "a full and extensive review", a characterization confirmed by the lengthy direction given and signed by the appellant the day before the plea was entered. The plea judge then conducted his own plea inquiry which included the following:

THE COURT: All right. Also, what is very important, sir, is that a person plead guilty voluntarily. You cannot plead guilty because you are being pressured by your family, your friends, your lawyer, the police, the Crown Attorney, or the court. Is anyone pressuring you to plead guilty to these charges?

THE ACCUSED: No, sir.

THE COURT: All right. Are you doing so voluntarily?

THE ACCUSED: Yes.

[30] A review of the extensive reasons of the plea judge for refusing to set aside the guilty pleas as involuntary makes it clear that his core finding that the appellant's plea was voluntary was not contaminated by any misapprehension of evidence. The judge was well aware of the disparity in recollection about the sequence of the meetings between the appellant and associate counsel. But whether the appellant's pleas were voluntary was not determined by whether there was one seamless meeting as described by associate counsel or two meetings separated by an inter regnum as described by the appellant. The long and the short of it was, and is, that the plea judge, for clearly articulated and sound reasons, did not believe the appellant's claim that he was pressured into pleading guilty. Even if the fresh evidence were admissible, a conclusion we would not reach, this finding is unassailable.

Ground #2: The Section 11(b) Issue

[31] The appellant accepts that if he is unsuccessful in setting aside the guilty pleas, he is foreclosed from advancing this ground of appeal on the basis of the prior decisions of this court in R. v. Fegan (1993), 80 C.C.C. (3d) 356 (Ont. C.A.), at p. 360; R. v. Faulkner, 2018 ONCA 174, at para. 99. This concession is at once proper and puts paid to his claim of error on this ground.

[32] In the result, the appeal from conviction was dismissed.

THE APPEAL FROM SENTENCE

[33] With respect to the plea judge's decision on the Gardiner hearing, the appellant submits that the trial judge misapprehended the totality of the evidence and committed palpable and overriding errors in giving little weight to the reports of the defence expert, Mr. Ken Froese, concerning the losses suffered by the victims of the appellant's fraud.

[34] We do not accept these submissions.

[35] As with any witness, it was open to the plea judge to accept some, all or none of any expert's evidence. While he found both Ms. Patricia Harris and Mr. Froese to be professional and credible, the plea judge discounted Mr. Froese's opinion that the losses only amount to a few hundred thousand dollars because its validity depended on unreliable photocopied source documents provided by the appellant. The plea judge reasonably gave little weight to these unsourced documents based on the history of the appellant's use of sophisticated fraudulent photocopies. The plea judge preferred the opinion of the Crown's expert, Ms. Harris, which was based on reliable bank statements and the receivership report. As the plea judge explained:

Mr. Froese, on the other hand, relies to a great extent on unsourced, unproven photocopies of bank records and purported e-mails. There are no books to examine. Mr. Erez kept no books, or at least there were none provided. The banking records produced by the bank are helpful as source information. It is for these reasons it is important to see how these source documents fit or do not fit with the rest of the evidence.

[36] In careful and thorough reasons, the plea judge found that the unsourced documents provided by the appellant were also inconsistent with a debt chart that the appellant had earlier created, the conclusions of Mr. Froese based on bank statements and other reliable documents, FINTRAC reports, and the evidence of the victims defrauded by the appellant.

[37] We see no error in the plea judge's findings that are amply supported by the evidence and entitled to deference.

[38] The appellant submits that the plea judge erred in failing to reduce the total losses by the amount of brokerage fees paid by the appellant to secure the loans from the victims, and by the loans carrying criminal interest rates.

[39] We agree with the plea judge's conclusion that the appellant is responsible for all the losses caused by his fraudulent scheme. That he may not have benefitted from all the monies advanced under the loans because he chose to pay out brokerage fees does not affect his liability to his victims for the total amounts of the loans that he fraudulently induced them to make. Similarly, the fact that some of the loans contained criminal interest rates does not affect the appellant's responsibility for the principal amount of those loans.

[40] The appellant similarly argues that the plea judge erred in imposing a fine in lieu of forfeiture because he was not in possession of a large portion of the fraudulently obtained monies that were paid out in brokerage fees or because others contributed to the losses of over $6 million. The appellant also complains of the fine's potential injustice to him because any income he makes would be taken by the Receiver to pay back lenders before it could be used to pay any restitution order or fine.

[41] We do not accept these submissions.

[42] First, as we earlier stated, the appellant is responsible for all the losses that his fraud engendered. That he was, but is no longer, in control of the monies does not preclude a fine in lieu of forfeiture, as provided for in s. 462.37(3) of the Code.

[43] Second, there is no injustice to the appellant. Under s. 741(1) of the Code, an unpaid restitution order is enforced as a civil judgment. Sections 69.3(1), 69.3(1.1) and 69.4 of the Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3, provide that the consent of the Bankruptcy Court is required before the execution of a restitution order can proceed. Moreover, the plea judge ordered that the restitution order take priority over the fine in lieu of forfeiture so that any monies paid towards the restitution order will be equally credited to reduce the fine.

[44] Finally, the appellant submits that the sentence imposed was unduly harsh because the plea judge placed an undue emphasis on the appellant's lack of remorse because of his unsuccessful application to strike his guilty plea, the appellant was the alleged dupe of unscrupulous brokers and loan-sharking lenders, and the sentence was not in parity with other decisions.

[45] We disagree.

[46] As the plea judge found, there were few mitigating but significant aggravating factors. For considerable personal monetary gain, over several years, the appellant masterminded and carried out through a corporation created for the fraud a large-scale, sophisticated Ponzi-like scheme involving numerous victims. He perpetuated and concealed the fraud by paying monies from one lender to another. He used several millions of the fraudulently-procured monies to pay gambling debts. The losses of over $6 million constituted an aggravating factor under s. 380.1(1.1) of the Code. The impact on the fraud was devastating. Most aggravating, (which distinguished this case from others cited to by the appellant, like R. v. Drabinsky, 2011 ONCA 582), is that the appellant had a prior criminal record for fraud-related offences committed in relation to his gambling debts; and he committed the bulk of the present fraudulent transactions when he was either serving a conditional sentence for the previous forgeries or on probation for them. The plea judge did not consider the appellant's lack of remorse and application to strike his guilty plea as aggravating factors. Rather, the plea judge properly determined that the appellant's lack of remorse attenuated the full mitigating effect of his guilty plea.

[47] As a result, there was no error in the plea judge's determination that the appropriate sentence in the circumstances of this case was at the top of the sentencing range.

[48] For these reasons, the appeal from sentence was dismissed.

"David Watt J.A."

"Grant Huscroft J.A."

"L.B. Roberts J.A."

Footnote

[1] This judge, who was to preside over the trial of the appellant, declared a mistrial at the request of counsel after counsel had attended before another judge (the plea judge) to pursue resolution discussions.