Court File and Parties

Court File No.: Newmarket 11-00427 Date: 2013-06-11 Ontario Court of Justice

Between: Her Majesty the Queen — and — Gregory Rao

Sentencing – Ruling on Restitution

Counsel: Mr. Paul Tait for the Crown Mr. Scott Fenton for the accused

Decision

KENKEL J.:

Guilty Plea and Offence

1. Mr. Rao pleaded guilty to one count of Fraud Over $5,000 contrary to s. 380(1)(a) of the Criminal Code.

2. Mr. Rao used his position within a bank as an investment advisor to steal almost $9 million from the bank's clients. He was sentenced to a 4-year term of imprisonment. Defence submissions regarding restitution had focused on their submission for a conditional sentence so the issue of restitution was adjourned for further written submissions given the accused's incarceration. Both counsel provided further submissions and responded to court requests for further information.

Legal Principles on Restitution

3. The Crown agrees that Mr. Fenton's initial submission fairly summarizes the relevant cases submitted by both parties on this issue. From these cases the following principles emerge:

• A s. 738 restitution order is part of an overall sentence and general sentencing principles apply. R. v. Castro, 2010 ONCA 718, para. 35

• A restitution order is not automatic and in some cases may not be imposed where the sentence is otherwise fit and ordering restitution would amount to excessive punishment. Castro, para. 23

• Ability to pay is not a statutory pre-condition for a restitution order. R. v. Topp, 2011 SCC 43, para. 27

• The means of the offender and the impact of such an order on rehabilitation must be considered. R. v. Siemens, [1999] M.J. No. 285

• Where the offence involves a breach of trust, the effect on the victim is the primary consideration and rehabilitation plays a lesser role. Castro, para. 35

• Consideration of the ability to pay includes ability to make payment from the monies taken as a source of restitution. Castro, para. 35

• In the context of a restitution order, past receipt of ill-gotten gains places a burden on the offender to explain where the money has gone. Topp, para. 38; Castro, para. 34

• A restitution order need not be for the full amount of the loss. Siemens, para. 8

Crown's Position

4. The Crown seeks a restitution order in the amount of $5,255,850. Mr. Tait's written submission indicates that figure represents the outstanding amount less funds recovered from the civil suit with "Aces Capital" and funds received from the disposition of Mr. Rao's assets. That figure which was provided by the bank also includes "some of their costs of recovery".

Defence Position

5. The defence submits that given the 4-year custodial sentence imposed, the court must take into account Mr. Rao's very limited ability to pay upon release. His personal assets were seized and sold by the bank and they have a $2.2 million civil judgment outstanding against him. The bank also recovered $1.9 million from Aces Capital where the bulk of the stolen funds were sent by Mr. Rao. A restitution order would be impossible for Mr. Rao to repay and would crush his prospects for rehabilitation. If there is to be a restitution order, the amount should be net of costs and reduced to reflect funds already recovered or subject to civil order resulting at most in a final amount of $4,695,871.39.

Court's Analysis of Ability to Pay

6. Prior to his incarceration Mr. Rao started a new construction business. Although he'd obtained work and paid others he'd never got to the point where he drew a salary. I agree with the defence that his ability to pay restitution from employment in the period immediately following his release from prison will be very limited and even in the long term will be limited considering the millions of dollars taken.

Tracing the Stolen Funds

7. Mr. Fenton's written submission dated January 25th, 2013 summarizes the evidentiary record in this case regarding what became of the monies as set out in the Agreed Statement of Fact marked as Exhibit 1, and the transcript of the proceedings June 28, 2012 before Justice P. Wright marked as Exhibit 7. Of the $8.9 million taken, $8.1 million was sent to Aces Capital Inc. The record does not reveal the purpose of that transfer other than a reference to repayment of high interest loans to Mr. Rao. Mr. Rao made a statement to the bank that the loans related to a failed condominium investment but no particulars were provided.

8. Other than the $1.9 million recovered from Aces Capital there is no other evidence as to what became of the rest of the $8.1 million. No financial records were submitted to the court by either party. It's logical to infer that Mr. Rao received value back from Aces Capital for the millions of dollars he sent there. If Mr. Rao managed to lose millions of dollars in a failed condominium or other investment that would have been extensively documented. It would have been in his interest to show investigators and the court that the funds really were lost. On the issue of restitution he bears a burden to provide proof of such a claim.

9. I find I can place no weight on Mr. Rao's statement to his former employer that all the money was lost where that claim is unsupported by any evidence or documentation in circumstances where such documentation would be available and required by law for financial transfers and investments in those amounts. The fact that millions of dollars remain unaccounted for is a circumstance that I find favours the making of a restitution order in the full amount of the monies outstanding.

Court's Reasoning on Restitution

10. The circumstances of this offence also require that a restitution order be made. Mr. Rao used his position of trust to steal millions of dollars from his clients over a 6-year period. Restitution of the monies taken is important to ensure that the offender does not benefit financially from the offence, that the loss and harm to the victim is acknowledged and addressed, and to ensure that others in similar positions of trust are deterred from such conduct. Although Mr. Rao has been sentenced to a term of incarceration in the penitentiary, I find that a restitution order is a necessary component of sentence in this case.

Calculation of Restitution Amount

11. I agree with the defence that the restitution order should be net of costs and reduced to reflect sums already recovered and the unpaid amount covered by the civil judgment. In further written correspondence dated May 22, 2013 the Crown concurred with Mr. Fenton's calculation of a net figure of $4,695,871.39.

Restitution Order

12. The bank has repaid their clients for the monies taken by Mr. Rao. Mr. Rao is therefore ordered to repay $4,695,871.39 in favour of the bank.

Conclusion

13. I thank both counsel for their very thorough submissions and their patience in responding to the court's inquiries relating to this aspect of sentencing.

Released: June 11, 2013

Justice Joseph F. Kenkel