Court File and Parties

Court File No.: Brampton 11-10489 Date: May 3, 2013 Ontario Court of Justice Central West Region

Between: Her Majesty the Queen — and — Imad Kutum

Before: Justice Richard H.K. Schwarzl

Heard on: November 27 and December 21, 2012; February 21 and March 20, 2013

Reasons released on: May 3, 2013

Counsel:

• Ms. Sabrina Montefiore, for the Crown
• Mr. Murray Shore, C.S., for the Accused

SCHWARZL, J.:

1.0: INTRODUCTION

[1] Imad Kutum entered a plea of guilty before me to one count of Fraud Over $5000 contrary to section 380(1)(a) of the Criminal Code of Canada regarding a million dollar tax evasion scheme in which the offender played a significant role over a six year period. The plea was taken by me in November 2012 and a lengthy sentencing hearing took place over three days between December, 2012 and March, 2013. The defence seeks a conditional sentence of two years less a day. The prosecution seeks a penitentiary sentence of between three and five years. The Crown submits that if a reformatory sentence is imposed it should nevertheless be served in jail and not in the community.

2.0 CIRCUMSTANCES OF THE OFFENCE

[2] Mr. Kutum was a chartered accountant working from his own office in Mississauga between 1995 and 2012. For the six tax years of 2003 to 2008 inclusive, Mr. Kutum knowingly prepared 487 false personal income returns for a large number of clients. He also provided many of his clients with fake charitable donation receipts. The bulk of the criminal activity took place in the five years before the 2008 tax year. For the 2008 tax year he prepared and filed only one false return. Over the entire period, Mr. Kutum made false deduction claims on behalf of his clients in the amount of $3,674,000. These false claims cost the people of Canada $1,045,111.21 in unpaid taxes.

[3] Mr. Kutum acted in concert with others in committing this crime. In 2003 Mr. Kutum was approached by men who presented him with a tax fraud scheme together with a list of willing clients. Mr. Kutum was convinced by his accomplices that he could quickly expand his accounting business and his earnings by helping create false receipts and false tax returns for the listed people. After the crime commenced with those persons supplied by his confederates, Mr. Kutum enlisted some of his own clients into the scheme, all of whom appeared to become willing fraudsters too. Mr. Kutum was paid either a flat fee or a percentage of the false charitable claims to participate in the crime. Mr. Kutum was motivated by greed to participate in, and continue, this crime for many years. By his own reckoning, Mr. Kutum received about $94,000 as compensation for his role.

[4] By 2007 Mr. Kutum told his accomplices that he wanted out of the scheme because the money it brought in was now making up only a small portion of his practice. At the time he chose to withdraw from the scheme, no charges were pending but he appears to have become concerned about the CRA possibly becoming suspicious. In any case, Mr. Kutum stopped on his own volition. In 2009 he was approached by one of the masterminds of the scheme to re-enter it, but he refused. Although he personally stopped making false claims, he remained silent about not only his involvement, but also that of his accomplices which included some of his own staff who continued to create and file false claims under his watch until the last fake return was made for 2008.

[5] After being charged, Mr. Kutum provided a voluntary statement under oath to CRA investigators setting out specific details of not only his involvement but also that of his accomplices, employees, and clients. His statement also contains some information about other schemes for which he was not charged. Mr. Kutum has expressed a willingness to provide any further assistance asked of him by the CRA and is willing to testify against others in the scheme. Mr. Kutum provided both cooperation and assistance to investigators, doing so after receiving legal advice and without any offer of leniency by either CRA investigators or the prosecution. The Crown contends Mr. Kutum's statement was not supported by documents, he chose to not answer when asked about other schemes, and he did not provide as many details as desired to be of true assistance. I am satisfied that Mr. Kutum's statement to the police garners him significant mitigation in his sentence.

[6] Since January 2012 Mr. Kutum placed this matter on a single track towards resolution. He has saved and set aside $100,000 - representing a "gross up" of his self-assessed profit - as potential restitution or a fine.

3.0 CIRCUMSTANCES OF THE OFFENDER

[7] Mr. Kutum was born in 1961. At the time of sentencing he was 51 years old and has no criminal record. Mr. Kutum is married and has four adult children in their twenties, all of whom live at home with him and his wife. The entire family has felt the shame of Mr. Kutum's crime.

[8] He has pled guilty and always intended to, which plea was entered at a reasonable time. On his own behalf, he expressed extreme and sincere remorse. The shame he has suffered within his family has extended to his professional and community lives. In March 2012 Mr. Kutum voluntarily surrendered his designation as a Chartered Accountant.

[9] The offender was born into a professional family and has achieved impressive academic and professional accomplishments himself. He has worked in his profession in Europe, America, and Canada since 1985. He is a highly educated man, receiving a Ph.D. in accounting from the University of Stirling in Scotland in 2011. In 2012 he received a designation as a Charter Global Management Accountant. Mr. Kutum has a paper ready for publication in the International Journal of Auditing.

[10] Despite his professional, public, and personal disgrace caused by his crime, Mr. Kutum has concrete plans to rehabilitate his reputation and to pursue lawful employment by teaching and writing in the field of accounting. He has had to turn down at least two teaching positions at the university level while awaiting the outcome of his case.

[11] Over the years before and during this crime, Mr. Kutum was an active and contributing member of his community, having provided placements and volunteer positions for students in his office over the years. He has helped new Canadians in their transition to life in this country. He has helped Arab-Canadian businesses in the Greater Toronto Area.

4.0: MITIGATING FACTORS

[12] There are a number of mitigating factors surrounding this offence and this offender, all of which I take into account in passing sentence. They include:

(i.) A mature first offender;

(ii.) A plea of guilty at a reasonable opportunity;

(iii.) A genuinely contrite and remorseful offender;

(iv.) An offender with substantial prospects for personal and professional rehabilitation;

(v.) An offender who is unlikely to reoffend and is not a danger to the community;

(vi.) An offender willing and able to forfeit his unlawful profit;

(vii.) An offender who voluntarily stopped committing the offence before being caught;

(viii.) An offender who was not the originator of the scheme;

(ix.) An offender who provided both cooperation and information to the police following his apprehension;

(x.) An offender who maintains a willingness to assist investigators and prosecutors against others; and

(xi.) Significant collateral effects including shame, loss of professional status, and loss of economic opportunity pending the outcome of the case.

5.0: AGGRAVATING FACTORS

[13] There are a number of aggravating factors surrounding this offence and this offender all of which I take into account in passing sentence. They include:

(i.) A large fraud, resulting in a loss to the public of $1,045,111.21;

(ii.) The nature of the offence was pernicious because it abused the laudable goal of encouraging charity in our society;

(iii.) The offence occurred over a period of six years;

(iv.) An offender who willingly became involved;

(v.) An offender whose role was central to the scheme;

(vi.) An offender who recruited his own clients into the scheme;

(vii.) An offender who engaged his staff in assisting him to commit the crime;

(viii.) An offender who committed a serious breach of public trust;

(ix.) An offender who committed a serious breach of his duties towards his clients and his profession;

(x.) An offender who was motivated by greed;

(xi.) An offender who only withdrew from the crime when it no longer was financially significant to him;

(xii.) An offender who profited financially from the crime;

(xiii.) An offender who engaged in a criminal enterprise in concert with others; and

(xiv.) An offender whose professional status and skills and his status within the community at large, facilitated and contributed to the commission of the offence.

6.0: POSITIONS OF THE PARTIES

6.1: The Defence

[14] In R. v. Leo-Mensah, 2010 ONCA 139, [2010] O.J. No. 712 the Ontario Court of Appeal stated that in situations that include a fraud exceeding one million dollars, a significant breach of trust, a blatant abuse of charitable tax donation laws, and a pivotal role in the scheme, a substantial custodial sentence is usual. In R. v. Bogart (2002), 61 O.R. (3d) 75, the Ontario Court of appeal stated that a penitentiary sentence should be the norm, not the exception, where there are no extraordinary mitigating circumstances.

[15] The defence pointed to a number of cases from all levels of courts in Ontario, both before and after Leo-Mensah, in which offenders received reformatory and/or conditional sentences for large tax frauds. They correctly submit that a conditional sentence is legally available in Mr. Kutum's case because he committed the offence before Parliament made such a sentence unavailable.

[16] The defence submits that there are extraordinary mitigating circumstances in this case to justify a conditional sentence of two years less a day. They submit these extraordinary circumstances include:

(i.) The unsolicited and thorough post-offence cooperation of the offender with the police together with an ongoing offer of assistance to CRA investigators;

(ii.) The offender's role in the scheme was secondary and not primary. That is to say, he merely executed it but did not devise or manage it;

(iii.) The offender's true contrition and pre-sentence efforts at rehabilitation;

(iv.) The offender's voluntary withdrawal from the scheme and his refusal to recommence it when asked; and

(v.) The offender is in a position to forfeit his profit.

6.2: The Prosecution

[17] The prosecution acknowledged the strength of many of the mitigating factors identified in this case. Having done so, however, they submit that even after giving credit for these factors, the aggravating circumstances and the sentencing principles applicable to large-scale frauds inexorably results in a substantial penitentiary sentence. The prosecution submits that the circumstances of this case are virtually on all fours with those cited in Leo-Mensah, supra.

[18] The Crown submitted that all of the cases presented by both sides proves the prevalence of tax fraud that abuses the charitable donation tax laws. As such, the Crown submits that general deterrence demands a lengthy sentence involving an actual deprivation of liberty. The prosecution submits that it is disingenuous to characterize Mr. Kutum's role as secondary. They submit that without his skill, knowledge, and good reputation, the scheme devised by others could not have been executed. Furthermore, the Crown argues that Mr. Kutum exacerbated the offence by recruiting some of his own clients who, like him, were willing to expand the illegal scheme.

[19] The Crown submits that an appropriate range of sentence is three to five years, taking it outside the scope of eligibility for a conditional sentence.

[20] Lastly, the Crown submits that even if the mitigating circumstances are extraordinary enough to make a reformatory sentence available, a conditional sentence is manifestly unfit to address the overarching sentencing principles in large-scale tax frauds.

7.0: ANALYSIS AND SENTENCE

[21] In addition to all of the mitigating and aggravating factors set out above, I take into account the statutorily aggravating factors present as set out in sections 380.1 (that the value of the of the fraud exceeded $1,000,000) and 718.2(a)(iii) of the Criminal Code (that Mr. Kutum abused his position of trust).

[22] I find that while Mr. Kutum was not "Mr. Big" insofar as he did not concoct the scheme to abuse the charitable contribution donation provisions of the Income Tax Act to defraud the public, his role was pivotal to its success. He had the skills, the means, and the reputation to pull it off. In other words, the crime could not be committed without him, making him "Mr. Indispensible." After voluntarily embroiling himself into the scheme, he then lured his own clients into it. Although he did not dupe or deceive any of these clients, his willingness to draw others into the affair is highly revealing about Mr. Kutum's intentions and attitudes about this offence. Mr. Kutum's degree of moral and legal responsibility in this crime is very high indeed. The fact that he stopped participating in the crime of his own accord does not in any way dilute his culpability.

[23] As stated by the Court of Appeal in Leo-Mensah, it will be the exceptional case where the offender does not go to the penitentiary. There is no doubt that there are many compelling mitigating circumstances that point towards mercy and leniency. Perhaps the most compelling of these is his cooperation with the police. It is clear that such cooperation is a major mitigating circumstance: R. v. Doe, [1999] O.J. No. 5089 (S.C.J.); R. v. C.N.H., [2002] O.J. No. 4918 (C.A.); R. v. A.B., [2004] O.J. No. 5220 (S.C.J.); and R. v. Tulloch, [2002] O.J. No. 5446 (S.C.J.).

[24] Notwithstanding all of the formidable and valid mitigating circumstances, I find that they are outweighed by the aggravating ones and by other important applicable sentencing principles. Large frauds perpetrated by professional criminals are a grave scourge on society. A very substantial sentence of real jail is essential in deterring professionals like Mr. Kutum. The comments of Doherty, J.A. in R. v. Rosenfeld, 2009 ONCA 307, [2009] O.J. No. 1478 (C.A.) are apt even though the offender in that case was a lawyer and not a chartered accountant like Mr. Kutum. His Honour stated:

Money was the appellant's only motive. While the value to both individual and general deterrence of longer jail sentences can be questioned in many contexts, I think it has value for offenders like the appellant. If any offender engages in a "risk/benefit" analysis before engaging in criminal activity, it is an offender like the appellant. The appellant had choices. He did not stumble into this criminal activity. Nor did circumstances push him into this criminal activity. The only reasonable inference is that the appellant chose criminal activity over legitimate ways of pursuing a living because the criminal activity offered the possibility of quicker, easier and larger profits. Persons like the appellant who measure success by the size of their monetary gain, must understand that the potential for quick, large gains through criminal conduct comes at the risk of detection and the imposition of a long jail term.

[25] In R. v. Drabinsky, 2011 ONCA 582, [2011] O.J. No. 4022 (C.A.) at ¶ 160, the Ontario Court of Appeal affirmed that "denunciation and general deterrence must dominate sentencing for large scale commercial frauds. Denunciation and general deterrence most often find expression in the length of the jail term imposed." This principle must perforce be applicable to large-scale tax frauds because they, like large commercial frauds, victimize all citizens and erode public trust and confidence in essential societal activities such as effective governance and honest commerce.

[26] Mr. Kutum was not caught in a moment of weakness when he decided to involve himself in this crime. He was not himself duped nor was he wilfully blind when he undertook to commit a crime for easy money. He was anxious and willing to grow his business and make profits through crime and did so quite happily for years. He only stopped the criminal activity when it became a small portion of his overall practice. In other words, he did not stop because it was wrong, but because it was convenient to do so.

[27] In my view, the appropriate range of sentence in a case like this is between three and four years. However, a proper application of the mitigating factors can, in some cases, result in a fit sentence that is outside of the applicable range: R. v. Nasogaluak, 2010 SCC 6, [2010] 1 S.C.R. 206, at para. 44. Here I find that the significant mitigating circumstances discussed above reduces the sentence below the range sought by the Crown. However, I find that these positive factors are cumulatively not so extraordinary as to take the sentence out of the penitentiary range.

[28] Since I have found that the appropriate sentence is one in the penitentiary, the offender is not eligible for a conditional sentence. Had I found that he was eligible, and upon applying the principles set out by the Supreme Court in R. v. Proulx, 2000 SCC 5, [2000] 1 S.C.R. 61, I would not have granted one. Even though Mr. Kutum is clearly not a danger to community safety, his role in the scheme, the nature of that scheme being one in which charitable tax laws were plundered, his expansion of the scheme, its duration, the serious breaches of public and professional trust, and the overwhelming need for denunciation and general deterrence render a conditional sentence wholly inconsistent with the fundamental purposes and principles of sentencing in a case like this.

[29] I have considered the able submissions of counsel, all of the authorities to which I was referred, and the statement of remorse made by Mr. Kutum on his own behalf. After carefully balancing all relevant factors present in this case and upon applying the relevant legal common-law and statutory sentencing principles, I find that the fit sentence for Mr. Kutum is two years in the penitentiary together with a $100,000 fine representing his illegal profit. Mr. Kutum shall be given six months to pay the fine.

ORIGINAL SIGNED BY JUSTICE RICHARD H.K. SCHWARZL

Richard H.K. Schwarzl, Justice of the Ontario Court of Justice