Court File and Parties

Court File No.: Central East - Newmarket - 13-9000479 Date: 2013-08-13 Ontario Court of Justice

Between: Her Majesty the Queen — and — Abraham Herbert Grossman

Before: Justice Peter N. Bourque

Reasons for Sentence August 13, 2013

Counsel: Cameron Watson for the Crown Richard Shekter for the accused Abraham Herbert Grossman

Bourque J.

Overview

[1] The defendant has pled guilty to three offences under section 122 of The Securities Act. He traded in securities without being registered and did so in the face of two cease trading orders from the Ontario Securities Commission. The principle issues raised in this sentencing hearing is whether I should impose a sentence concurrent to two other sentences that the defendant is presently serving for two other securities' offences, and whether I can, or should, use the principle of "totality" in fashioning an appropriate disposition.

The Facts

[2] The defendant committed the offences as per the agreed statement of facts which was filed as Exhibit 1. The important facts are as follows:

(a) The defendant was not a registrant of any securities commission, and held no licence to trade in securities;

(b) The defendant was the sole proprietor of an entity called Strategic Gifting Group;

(c) This entity solicited donations for client charities and remitted 10 per cent of the amount received to the charity and kept the rest;

(d) This entity then delivered shares from Dixon Perot & Champion Inc. to the donors and provided information to the donors that they could then donate these securities to one of the charities and get a tax receipt some 4 to 12 times the value of their cash donation. Strategic gifting group received $332,620.00 and tax receipts in the amount of $2.2 million were issued. Some of these receipts have been revoked and receipts have been issued for the true amount received by the charities (10 per cent of the donation);

(e) The shares from Dixon Perot & Champion may have no market but Strategic Gifting Group stated to the donors that the shares were trading for a value between .40 to 1.27 EURO;

(f) During the time of these activities of the defendant he was subject to two OSC temporary orders preventing him from trading in securities (Jan 24, 2006, and January 16, 2008).

[3] It is important in my considerations that the defendant has not pled guilty to any form of fraudulent activity. While he made a lot of money from this breach of the securities laws, the Crown does not allege a fraud upon unsuspecting members of the public. This does contrast with the sentencings (referred to below) where frauds of several hundred thousand dollars were committed. The Crown asserts that his actions in setting up this scheme are similar to the previous two schemes. The Defendant argues several important differences including that in the present case, he did not conceal his identity or his connection to Strategic Gifting Group. The defence reminds me that these are strict liability offences and while the defence cannot show due diligence, these offences show a much less degree of culpability when there is no fraud.

The Defendant

[4] The defendant is 56 years old and is married and has several children. His wife has been employed, but I am left with the impression that the defendant was the principal support for his family. The defendant has a brother and a sister who have both pursued successful professional careers. As a result of his previous convictions under the Securities Act, the defendant has lost his income and lost his home. The defendant has clearly, over the past 10 years, been involved in the sale of securities (sometimes illegally). He has, however, been previously involved in the real estate and construction business. As a result of being in jail for the past two years, the defendant has missed out on several family milestones. While in jail, he has completed his high school education.

Criminal Record

[5] The defendant has been sentenced twice for securities infractions.

[6] On May 4, 2011, the defendant was sentenced to 21 months on 10 counts after a trial. As stated by the sentencing Justice, the defendant was convicted of being part of a "boiler room scheme" between October 15, 2004 and November 30, 2005, whereby they would sell large volumes of shares in a company with a prospectus through high pressure sales tactics and was not registered with the Commission to sell securities. The high pressure tactics included several misrepresentations. The shares of the company for which they sold shares, was at the time of sentencing without value.

[7] On June 15, 2011 the defendant was sentenced to 3 years consecutive to all other sentences for 11 counts, again after a trial. The counts included a finding of fraud. The facts included a finding that the defendant sold shares in a worthless shell company (Shallow Oil), by the use of false representations, and contrary to cease trading orders. In the short period of time that sales were being made, the defendant generated sales of $205,300.00. I note in that sentencing, the court rejected a concurrent sentence to the one imposed the month before. The Court accepted that some measure of totality should be considered for this second sentence, but "not to the extent submitted by counsel".

[8] The defendant has also been subject to regulatory fines and orders by the Ontario, Alberta, and New Brunswick Securities Commissions. It was accepted that the defendant has paid the fines to the Alberta Securities Commission but fines over $250,000.00 remain unpaid to the Ontario Securities Commission and amounts are still outstanding to the New Brunswick Securities Commission.

Remorse

[9] The defendant has pled guilty to these offences. It is a sign of remorse. I contrast the defendant's position today with the position taken and noted by the Court in his sentencing on May 4, 2011. He has also spared the necessity of what may have been a trial of considerable length. His family have spoken of his remorse.

[10] The defendant has filed a brief of several letters (mainly from family members). It sets out clearly that to his family, he was a good father and a good husband. It stands in stark contrast to his activities in breaching the Securities Laws of this Province. This is however not always unusual when dealing with persons convicted of "white collar" crime. The obtaining of wealth by illegal means is often motivated by the wish to provide for one's family, and outwardly be well regarded in one's circle of friends. I accept that I am not sentencing a "bad man" who is beyond feelings of remorse and rehabilitation.

[11] Through his counsel, the defendant has offered to make restitution of any monies that he received in this operation, in the total amount of $155,000.00. $100,000.00 of this is in his lawyer's trust account and counsel has provided his undertaking to pay it out to whomever the OSC directs. He has raised this amount from others as he is financially destitute. He is also agreeable to a period of probation with a term that he pay (as the OSC directs) further recompense in the amount of $27,500.00 per year. I accept this unconditional offer as a further sign of remorse.

[12] I must however always be mindful, that he is a man who, for a period of many years, consistently broke the securities laws with a view to achieving his own gain.

Crown Position

[13] The Crown seeks concurrent sentences for the trading in the face of the cease and desist orders, but one year consecutive for the offence of trading in securities without a registration.

Defence Position

[14] The defence states that pursuant to the existing sentences for which he is incarcerated, the defendant will be eligible for parole in December of 2014 (I note that he was paroled previously and was in a half-way house for one month before breaching some terms and conditions of his parole and it was revoked. It was not revoked as a result of these charges).

[15] The defence submits that the sentences for these offences should all be concurrent and be no longer than the projected release date.

The Law

[16] Sec 122 of the Securities Act provides penalties for breaches of the act by fines up to $5,000,000 and imprisonment for up to 5 years. The Court my impose jail and fines. I can also impose a probationary term pursuant to the Provincial Offences Act.

[17] It is appropriate to consider all of the factors which are in section 718 of the Criminal Code, including, deterrence, rehabilitation and other principles.

[18] Counsel have cited many cases dealing with specific issues of sentencing in Securities Act matters. It may be best to summarize Justice Kenkel's words in the sentencing of this defendant on June 15, 2011, when he said:

...the offences strike directly at the integrity of capital markets in this province. In R. v. VonAnhalt, [2007] O.J. No. 2745 the court said:

The potential for abuse in the investment industry is very high, and those involved, either as clients or advisors, and even the public at large, have to know and be assured that those who are found in breach of the law will be dealt with severely.

[19] It is my view from a reading of the cases that specific and general deterrence and indeed denunciation (R. v. Serfaty, [2006] O.J. No. 2281 ONCA) are the paramount considerations. I note that many of the mitigating and aggravating factors of the defendant today, were also present when he was sentenced by Justice Kenkel on June 15, 2011. The important aggravating factors in my mind are the nature of the operation was so similar to his previous matters and the fact that the defendant was under two cease trade orders, and the obvious fact that the sole motivation for these offences was financial gain. He has been subject to administrative fines and suspensions all over the country and there remains over $250,000.00 of administrative penalties still unpaid in this Province.

Parole

[20] The defence has advised that the defendant's present parole date is sometime in December 2014 and that will be extended if I sentence him to a further period of incarceration. Traditionally, absent some special circumstances, is that post sentencing release practices generally ought not to be considered in determining a fit and just sentence. I accept that if I should impose a further custodial sentence upon the defendant, that his period of parole will be further pushed back. I can accept generally that this will impose a further hardship upon him and his family, but I cannot use it to deviate from what is in law the appropriate sentence in this matter.

Concurrent Sentences

[21] I have considered whether it would be appropriate to impose a sentence concurrent to the two matters noted above. I have reviewed the decision of McWatt, J. in R. v. DaSilva, where a concurrent sentence was overturned on appeal and the justice cited several factors, many of which are present here namely:

(a) these offences are separate from the other matter;

(b) this was a different scheme and involves trades in different securities;

(c) the dates of the offences do not seem to overlap

[22] The court also stated that "the fact that the respondent breached three separate prohibition orders...is reason enough to find the concurrent sentence unfit" (par 13). In our case the defendant has breached two such orders.

[23] The Crown in its submissions stresses that the defendant is something of an incorrigible, in that while he was being disciplined and prosecuted for other offences, he began this scheme which has led to these convictions today. The Crown also stresses that the defendant was also subject to regulatory orders from securities commissions in four Provinces.

[24] Based on all of these factors, I do not feel that it is appropriate to simply impose a concurrent sentence, for all of these offences before me.

[25] I therefore believe that I should fashion a sentence today which is consecutive to the sentences that the defendant is already serving.

Totality Principle

[26] The defendant argues that as these offences have some similarity with the previous matters for which he was convicted, that I should take into account the total sentence on all matters and thus treat the defendant in a similar fashion that I would have if I had been the sentencing justice in all of these matters at the same time. As stated by Ruby in Sentencing: "It requires a sentencing judge who orders an offender to serve consecutive sentences for multiple offences to ensure that the cumulative sentence rendered does not exceed the overall culpability of the offender...and...The sentence must not be crushing to a particular accused given his age, circumstances and prospects" (page 48).

[27] I am prepared to consider this principle and apply it in a general fashion notwithstanding that this sentencing is separated in time from the other two sentencings, and notwithstanding, they comprise separate offences from the ones he has already been sentenced for. I have already stated that I do not think that it is appropriate to fashion a sentence which is concurrent to the ones for which he has already been sentenced, however, I will, as stated above, apply the principle of totality, in a modified form as I do not have all of his many offences before me.

[28] The defendant argues that this scheme of the defendant was similar to other schemes which have not run afoul of securities regulation (R. v. Lipson), and therefore his breach was not as serious, in that he may have not realized that he was breaching the terms of the securities act (and the non-trade orders) at the time. The defence agrees that he could not put forward a defence of due diligence and has not done so. I am not sure whether this is a great consideration for me other than to negate some of the Crown's suggestion that the defendant is something of an incorrigible.

[29] The defendant does however state that if the totality principal is applicable, then I should look at all of the offences, and by the case law (cited by the Crown) a total sentence of 57 months (which has already been imposed), is in excess of any other similar circumstance. He specifically refers to the sentencing in the "Livent" case (R. v. Drabinsky et al) and states that if I accede to the Crown's submissions, I would have effectively sentenced the defendant to a longer period of custody than Drabinsky. With all due respect, that analogy can only go so far. These are very different cases, and it is not just the total amount of money involved in a fraud which determines the final sentence.

[30] It is my opinion that to do that sort of analysis, then I would, in effect, be second guessing the other two justices who have already sentenced the defendant. I am not here to pass judgement on whether those sentences were too great or too small. I must assume that they were the appropriate sentence for those offences. I am only dealing with this one, although in arriving at a disposition I can and I will consider the weight of sentence that he is already under.

Conclusion

[31] The defendant is presently serving a total of 57 months for his previous offences. There is no fraud conviction in the matters before me today and that lessens the severity of these offences in relation to the matters that he has already been sentenced to. His offer of recompense is significant and I will consider it in an amelioration of what would be the appropriate sentence.

[32] The Crown seeks a further year (12 months) on top of what he is already serving. One year for the offences today standing in isolation is a reasonable sentence for these offences, based simply upon his history of securities act violations.

[33] However, applying a principle of totality, and if I was sentencing this defendant to all of the offences he has now been found guilty of, I believe that I would reduce the sentence for these offences now before me in order to give some effect to that principle. I repeat, I cannot reconsider the sentences that he has already received but can only consider in a general way what would be fit in all of these circumstances. In other words I will not go outside what I feel is an appropriate range of sentence but I believe I should sentence him to the lower end of the scale, taking all of these factors into account.

[34] I therefore sentence the defendant as follows:

1. 6 months concurrent upon all offences before the court today but consecutive to any offences for which he has previously been sentenced;

2. Two years probation under the Provincial Offences Act;

3. Probation for a period of 24 months;

4. To keep the peace and be of good behaviour. Report to probation forthwith and thereafter as required;

5. In each year, pay to the Ontario Securities Commission (or to whom they shall direct) the sum of $27,500.00 (for a total of $55,000.00 over the full term of the probation); and,

6. The defendant shall not be involved in any fashion (either as a principal, agent or through a corporation partnership or trust) in the trading of securities as defined in the Ontario Securities Act.

Released: August 13, 2013 Bourque J.