Court File and Parties

Ontario Court of Justice

Date: April 11, 2016

Court File No.: Central East - Newmarket 4911-998-15-05784-00

Between:

Her Majesty the Queen

— and —

Natalia Pouchkina

Before: Justice N.B. Dwyer

Reasons for Judgment released on: April 11, 2016

Counsel:

• B. McCallion, counsel for the Crown
• M. Simrod, counsel for the accused Natalia Pouchkina

DWYER J.:

Guilty Plea

[1] Natalia Pouchkina plead guilty to one count of fraud over $5,000.00 as follows:

Natalia Pouchkina between the 1st day of May in the year 2014 and the 2nd day of June in the year 2015 at the City of Vaughan in the Regional Municipality of York did, by deceit, falsehood or other fraudulent means, defraud Crane Canada Co. of money of a value exceeding five thousand dollars, contrary to Section 380, subsection (1), clause (a) of the Criminal Code.

[2] The details of the fraud were presented by way of an agreed statement of facts. Set out below are the facts relevant to the sentencing.

The Facts

[3] Natalia Pouchkina was employed as the Crane Payment Innovations ("CPI") from July 5, 2001 until June 2, 2015. When her employment ended on June 2, 2015, her position at the company was Commodity Manager for Electronics. As a Commodity Manager she was responsible for purchasing, on behalf of CPI, high quality electronic components at the best possible price from reliable suppliers. Prior to her abrupt departure from CPI on June 2, 2015, Ms. Pouchkina was a dedicated, loyal employee, and she was entrusted with significant responsibilities and sensitive, confidential information. She earned the confidence of her superior, Stephen Hnetinka, the Vice President and CFO of Crane Canada Co.

[4] CPI is in the business of providing unattended payment systems in the financial services, gaming, retail, transportation and vending industries. CPI manufactures and distributes various products including coin payment devices, bill validators and bill recyclers, cashless payment products and integration and management systems and services.

Fictitious Purchases

[5] Between March 18, 2014 and May 27, 2015, Ms. Pouchkina submitted 32 transactions for fictitious purchases ("fictitious transactions") of goods from a shell company called "Avnet Memmec". The 32 transactions caused CPI to issue cheques and pay $5,467,204.08 purportedly for electronic components. No parts were supplied to CPI in exchange for the monies paid. Rather, all of those moneys were deposited by Ms. Pouchkina into a TD Bank account. The account was opened by Ms. Pouchkina, and she was the sole signing authority for the account. The TD bank account was registered to the shell company, "Avnet Memmec". Ms. Pouchkina registered the business "Avnet Memmec" with the Government of Ontario on 11 March 2014, and she was the sole proprietor.

[6] The goods purportedly purchased were ostensibly shipped to a company in Hong Kong called "Parason". For each of the 32 fictitious purchases, cheques were issued by CPI at the behest of Ms. Pouchkina. Each purchase order was signed by Ms. Pouchkina. Each purchase order was approved by Mr. Hnetinka, because Ms. Pouchkina led Mr. Hnetinka to believe that each purchase order represented a legitimate purchase from a company, Avnet Memec, with whom CPI had an ongoing business relationship.

[7] Ms. Pouchkina exploited her position of trust and misappropriated company funds through the fictitious purchases. In doing so, Ms. Pouchkina circumvented CPI's internal controls such as the vendor approval process and three-way match system.

Vendor Approval

[8] It is CPI company policy that parts or materials are to be purchased from approved vendors only. It is not uncommon for new vendors to be added or for changes to be made to vendors' names or contact information. When a change to an existing vendor is requested, a Vendor Set Up/Maintenance Form must be completed and approved by Mr. Hnetinka.

[9] On or about March 6, 2014, Ms. Pouchkina presented Mr. Hnetinka with such a form seeking his approval. The form purported to add a vendor associated with an existing vendor – Avnet Memec. Avnet Memec ("real Avnet Memec") is a public company listed on the New York Stock exchange and was a major supplier of parts for CPI products. Mr. Hnetinka believed Ms. Pouchkina sought his approval for adding another vendor within the real Avnet Memec group. Mr. Hnetinka approved the vendor change. In reality, and unbeknownst to Mr. Hnetinka, the form added a fictitious vendor by the name of "Avnet Memmec". The only difference between the new vendor (which was the shell company created by Ms. Pouchkina) and the real Avnet Memec was an additional "m" in the name. The real Avnet Memec issued legitimate invoices for US $1,423,760.17 to CPI during the period of 1 March 2014 to 1 June 2015. Furthermore the 32 fictitious transactions were issued using the same logo and trade name as the invoices used to support the legitimate transactions of US $1,423,760.17. This enabled Ms. Pouchkina to submit fictitious purchase orders, under the guise of legitimate purchases to an approved vendor.

Purchasing Process

[10] CPI uses internal controls when processing invoices received from vendors, including a system called the "three-way" match system.

[11] First, a purchase order is created by CPI's Purchasing Dept. Two signatures are required for a purchase under $25,000; two signatures and the approval of Mr. Hnetinka are required for purchases over $25,000. The purchase order is then sent to the vendor for the order to be filled.

[12] Second, when the vendor fills the order, they include a packing slip with the order that notes the items and quantities included in the shipment. The warehouse receives the shipment, and they compare the packing slip to the actual goods received and to the purchase order. This creates a report ("receipt"). The receipt generates the ordered items being entered into inventory. The receipt is then taken to the Accounting Department to be matched to the invoice.

[13] Third, the invoice is sent by the vendor to CPI's Accounts Payable Department. The Accounts Payable clerk then checks that the details of the invoice are consistent with the details on the purchase order and the receipt. Once the three-way match is complete, the invoice is then entered into the accounting records and processed for payment. A cheque payable to the vendor is issued for payment.

Drop Ship System

[14] It is common for CPI to use what is called a "drop ship" system. This means that purchases for various component parts for CPI's products are ordered from a vendor, which is then shipped directly to CPI's foreign contract manufacturers for assembly. When goods are drop shipped, they do not physically appear in CPI's Concord, Ontario warehouse. Nevertheless, the warehouse Department in Concord, in the ordinary course of business, obtains confirmation from the foreign contract manufacturer that goods have been received, in accordance with the packing slip and receipt process described above.

[15] Parason Industries Ltd is a Chinese manufacturer with offices in Hong Kong. Parason assembles products for CPI under contract. Parason assembles a large volume of products for CPI. Ms. Pouchkina's scheme involved this drop ship arrangement involving electronic parts purportedly being shipped to Parason.

Ms. Pouchkina Circumvents Standard Procedures to Obtain Cheques

[16] Ms. Pouchkina was able to circumvent the internal controls process in part by presenting packing slips to an employee in the warehouse department, stating to the employee that she received the packing slip by Parason, which had the effect of confirming receipt of the goods. In fact no such emails or signatures by Parason officials were ever produced to substantiate receipt of goods for the fictitious transactions. This was not standard company procedure. However, warehouse department employees relied on Ms. Pouchkina's stature and assurances when approving the packing slips or receipts that had the effect of creating the appearance of confirming that goods were received by Parason in Hong Kong.

[17] In the normal course of business, packing slips and purchase orders are dropped in a blue bin in the accounting office by a Purchasing or Warehouse employee for Ms. Carol Jackson, Accounts Payable clerk. Ms. Jackson normally would match packing slips and purchase orders to invoices, which she receives by mail or email. Cheques would be issued, placed in envelopes, stamped and mailed or picked up by the vendor.

[18] For the "Avnet Memmec" shell company purchases, Ms. Pouchkina would attend in person to give Ms. Jackson the packing slips, purchase orders and invoices. Ms. Pouchkina would ask Ms. Jackson to issue cheques the same day by 3:00 to 4:00 pm. The cheques for the shell company "Avnet Memmec" would be given to Ms. Pouchkina. She would advise Ms. Jackson that the vendor was picking up the cheques. This procedure was unique to the shell company "Avnet Memmec" purchases, and it started in March 2014.

CPI Learns of the Scheme

[19] In early 2015 CPI implemented a new procedure. It involved verifying that vendors received and cashed cheques over $50,000. Ms. Jackson attempted to verify one of the purchases to the shell company. She called the number of "Avent Memmec" Ms. Pouchkina provided to her. No one answered the call, and Ms. Jackson left a voice mail. The next morning Ms. Jackson retrieved an after-hours return voice mail from "Rachel" stating the cheque was received and cashed. This after-hours verification with respect to a payment to "Avnet Memmec" occurred on May 8 and 28, 2015 for cheques in the amounts of $195,071 and $153,499.20 respectively.

[20] On June 1, 2015, Ms. Jackson emailed Ms. Pouchkina. Ms. Jackson requested that Ms. Pouchkina confirm that Parason received the goods paid for by CPI pursuant to cheque #329020 in the amount of $153,499.20, issued on May 27, 2015. Ms. Pouchkina replied on June 2, 2015 by stating, "Carol, Parason will respond to our request latest tomorrow. Regards," Ms. Pouchkina did not attend at work the following day, Wednesday, June 3, 2015. Ms. Pouchkina flew to Frankfurt, Germany on June 4, 2015 and never returned to work. Ms. Pouchkina's CPI-issued computer has been missing since that date.

[21] On the morning of June 4, 2015, Mr. Hnetinka arrived at his Concord, Ontario office. An employee, Orlin Saratchinov, advised Mr. Hnetinka that he was unable to obtain proof of a delivery of goods for a shipment paid for by cheque #329020. The transaction involved a purchase of goods made by Ms. Pouchkina. The purchase in question involved CPI issuing a cheque payable to the shell company "Avnet Memmec".

[22] An employee of CPI, Julie Huang, attempted to verify with the shell company Avnet Memec that it had received the payment for one of the fictitious transactions. Ms. Huang made that inquiry by calling a phone number that was provided by Ms. Pouchkina. The contact name associated with the phone number provided by Ms. Pouchkina was "Julie". Ms. Huang noticed the phone number was a cell phone number rather than a landline. On previous occasions, CPI was able to confirm payment received by "Avnet Memmec" based on phone numbers provided by Ms. Pouchkina.

[23] Ms. Huang and Mr. Saratchinov determined that the company, Parason, who purportedly would have received the goods in exchange for the payment issued by Ms. Pouchkina, did not receive any goods. Furthermore, on June 4, 2015, a company representative from the real Avnet Memec advised that the invoice relating to the cheque #329020 was invalid. As a result, Mr. Hnetinka obtained CPI's accounts payable files relating to purchases recorded for "Avnet Memmec" for 2014-15. A forensic accounting firm and law firm were retained and Ms. Pouchkina's fraud of $5,467,204.08 involving 32 fictitious purchases was uncovered.

McCarthy Tetrault/KPMG Investigation

[24] CPI retained law firm McCarthy Tetrault and Forensic Accounting Firm.

[25] In March 2014, Ms. Pouchkina registered a sole proprietorship with the Government of Ontario. The name of the sole proprietorship was "Avnet Memmec". Avnet Memmec had a bank account with TD Bank in Vaughn. Ms. Pouchkina was the account holder and signing authority for the TD Bank account. The TD Bank account was opened on the same date in March 2014 as the shell company "Avnet Memmec" was registered with the Government of Ontario. The monies deposited into the TD Bank account were transferred overseas.

[26] On July 2, 2015, Stephen Porter, a partner at McCarthy's, obtained two orders in the Superior Court of Justice, Toronto, by Justice Richetti. Mareva and Norwich orders were issued by the Justice freezing and disclosing the accounts controlled by Ms. Pouchkina. The Accounting Firms' investigation revealed that very little of the proceeds of the monies obtained through the fictitious transactions remained. The fake TD bank account records, connected to the shell Avnet account, were obtained by the KPMG investigation. All 32 of the cheques payable in the fictitious transaction scheme were deposited into TD Bank account #5245594-003. The records show $5,467,203.58 deposited into the account. However, $5,391,669.45 (98% of the total deposited) were disbursed. Of the amount disbursed $3,498,215.50 was wired. The TD Bank records did not contain sufficient information to determine where these funds were wired.

[27] The KPMG investigation found that Ms. Pouchkina purchased condominiums in Montreal, Berlin, and three properties in Spain, as well as two Mercedes Benz vehicles. The estimated value of the four European properties was $2,364,520 Canadian.

[28] A search of CPI's server email boxes was conducted on Ms. Pouchkina's email account. Emails were identified relating to Ms. Pouchkina's purchase of properties in Spain and Germany and other assets.

Mareva and Norwich Orders

[29] The law firm of McCarthy Tetrault in Toronto was retained by CPI. The law firm applied for, and was granted, a "Mareva" injunction and "Norwich" order from Justice Richetti of the Superior Court of Justice on June 16, 2015.

Arrest of Ms. Pouchkina

[30] York Regional Police learned that Ms. Pouchkina flew to Frankfurt, Germany on June 4, 2015. It was further learned that Ms. Pouchkina had travelled through Latvia and Germany, and was likely in Spain at or near an address of one of the purchased properties. A Canada Wide Warrant for the arrest of Ms. Pouchkina was authorized by the Crown Attorney. A request for an "Interpol Red Notice" was issued thereby directing Interpol to arrest Ms. Pouchkina should she be located in Spain.

[31] On September 15, 2015, Ms. Pouchkina was arrested in Marbella, Spain by Spanish police. On October 15, 2015, YRP received information that Ms. Pouchkina waived her right to an extradition proceeding in Spain.

[32] On October 19, 2015, Det. Fred Kerr and Det. Hyland of YRP flew to Madrid, Spain. They liaised with Spanish police on October 23, 2015. Ms. Pouchkina was arrested on the strength of the Canada Wide Warrant. Detectives Kerr and Hyland took custody of Ms. Pouchkina. The Detectives returned to Toronto with custody of Ms. Pouchkina on October 23, 2015.

Search of Ms. Pouchkina's Luggage

[33] Det. Kerr searched Ms. Pouchkina's travel bag when he arrested her in Spain. Ms. Pouchkina had in her possession detailed notes. The notes refer to financial transactions. The notes in particular refer to a bank account located in Cyprus. Ms. Pouchkina made considerable efforts to control money and property after she was arrested by Spanish police.

Overview

[34] The facts disclose a sophisticated scheme developed by Ms. Pouchkina which required careful thought and vigilance to execute. Ms. Pouchkina had to continually monitor the scheme and provide cover for what she was doing. The explanation for what occurred from Ms. Pouchkina was that she started the scheme out of a need for money, intending to pay the money back, but succumbed to an addiction to the money and the process in continuing the scheme. The 32 cheques involved were in the range of $140,000 to $214,000 with a frequency of about 2 per month over 14 months. The actions of Ms. Pouchkina constitute a breach of trust, were sophisticated, were persistent and only ended when it was clear to Ms. Pouchkina that she was going to be caught. She then fled the country, was arrested in Spain and was extradited. She did not resist the extradition.

Background of Ms. Pouchkina

[35] Ms. Pouchkina is 55-years old, a Canadian citizen, has no criminal record and has an 18 year old daughter. Prior to her arrest Ms. Pouchkina resided with her daughter and her elderly mother whom she cared for. As explained above she had a responsible job. By the end of her employment she was earning $106,000.00 per year. Through her hard work she had gained a position of responsibility and trust at her job. Ms. Pouchkina does not have a substance abuse problem or gambling problem. The father of her child does not participate in Ms. Pouchkina's life or the life of her daughter. Ms. Pouchkina was ordered not to have any contact with her daughter after she was charged. This has caused her anguish. Other than greed there is no explanation for what occurred. Ms. Pouchkina's prospects for employment in the future will be limited in the areas of her past employment. She is remorseful and is clearly devastated by what she has done. It will be difficult for Ms. Pouchkina to resume stability in her life upon release.

[36] Ms. Pouchkina's actions had a devastating effect on her employer, affecting the trust and morale at the company. This was clearly set out in a letter by the president of Crane Payment Innovations which was in the nature of a victim impact statement. The company was affected financially and the culture of the company was irreparably harmed causing a decrease in the camaraderie and trust that had been enjoyed by the employees and principals of the company. To this point none of the money appropriated by Ms. Pouchkina has been recovered.

Crown Position

1. 7 year sentence
2. $5,467,204.08 restitution
3. $5,467,204.08 forfeiture
4. $5,467,204.08 fine in lieu of forfeiture with 6 years to pay
5. 6 years in default for non-payment of fine
6. $526 Euro restitution in favour of Federal Insurance the money seized from Ms. Pouchkina upon her arrest
7. DNA order

[37] The Crown points to the obvious aggravating factors present:

1. Breach of trust;
2. Amount of the fraud; and
3. Sophistication of the fraud.

[38] The Crown also noted that none of the money has been recovered. The location of approximately $2.3 million of the money has been traced to property and bank accounts in Canada, Spain, and Germany. Steps are being taken to recover those funds.

Defence Position

1. 5 years

[39] The defence does not contest the restitution, forfeiture and fine in lieu of forfeiture position of the Crown. The defence points to the lack of a criminal record, the plea and a stated willingness of Ms. Pouchkina to cooperate as factors to consider.

Penalty for Fraud Over $5,000

[40] There is a maximum penalty of 14 years and a minimum penalty of 2 years where the total value of the subject matter of the offence exceeds one million dollars.

Section 380(1) of the Criminal Code provides:

Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security or any service,

(a) is guilty of an indictable offence and liable to a term of imprisonment not exceeding fourteen years, where the subject-matter of the offence is a testamentary instrument or the value of the subject-matter of the offence exceeds five thousand dollars; or

(b) is guilty

(i) of an indictable offence and is liable to imprisonment for a term not exceeding two years, or

(ii) of an offence punishable on summary conviction,

where the value of the subject-matter of the offence does not exceed five thousand dollars.

(1.1) When a person is prosecuted on indictment and convicted of one or more offences referred to in subsection (1), the court that imposes the sentence shall impose a minimum punishment of imprisonment for a term of two years if the total value of the subject-matter of the offences exceeds one million dollars.

[41] There are specific aggravating factors to be taken into account when imposing a sentence for fraud over and certain factors that cannot be considered as mitigating.

Section 380.1(1) of the Criminal Code provides:

Without limiting the generality of section 718.2, where a court imposes a sentence for an offence referred to in section 380, 382, 382.1 or 400, it shall consider the following as aggravating circumstances:

(a) the magnitude, complexity, duration or degree of planning of the fraud committed was significant;

(b) the offence adversely affected, or had the potential to adversely affect, the stability of the Canadian economy or financial system or any financial market in Canada or investor confidence in such a financial market;

(c) the offence involved a large number of victims;

(c.1) the offence had a significant impact on the victims given their personal circumstances including their age, health and financial situation;

(d) in committing the offence, the offender took advantage of the high regard in which the offender was held in the community;

(e) the offender did not comply with a licensing requirement, or professional standard, that is normally applicable to the activity or conduct that forms the subject-matter of the offence; and

(f) the offender concealed or destroyed records related to the fraud or to the disbursement of the proceeds of the fraud.

(1.1) Without limiting the generality of section 718.2, when a court imposes a sentence for an offence referred to in section 382, 382.1 or 400, it shall also consider as an aggravating circumstance the fact that the value of the fraud committed exceeded one million dollars.

(2) When a court imposes a sentence for an offence referred to in section 380, 382, 382.1 or 400, it shall not consider as mitigating circumstances the offender's employment, employment skills or status or reputation in the community if those circumstances were relevant to, contributed to, or were used in the commission of the offence.

(3) The court shall cause to be stated in the record the aggravating and mitigating circumstances it took into account when determining the sentence.

[42] In determining the appropriate sentence to be imposed I have taken into account the principles of sentencing in sections 718, 718.1 and 718.2 of the Criminal Code.

Section 718 of the Criminal Code provides:

The fundamental purpose of sentencing is to protect society and to contribute, along with crime prevention initiatives, to respect for the law and the maintenance of a just, peaceful and safe society by imposing just sanctions that have one or more of the following objectives:

(a) to denounce unlawful conduct and the harm done to victims or to the community that is caused by unlawful conduct;

(b) to deter the offender and other persons from committing offences;

(c) to separate offenders from society, where necessary;

(d) to assist in rehabilitating offenders;

(e) to provide reparations for harm done to victims or to the community; and

(f) to promote a sense of responsibility in offenders, and acknowledgment of the harm done to victims or to the community.

Section 718.1 of the Criminal Code provides:

A sentence must be proportionate to the gravity of the offence and the degree of responsibility of the offender.

Section 718.2 of the Criminal Code provides:

A court that imposes a sentence shall also take into consideration the following principles:

(a) a sentence should be increased or reduced to account for any relevant aggravating or mitigating circumstances relating to the offence or the offender, and, without limiting the generality of the foregoing,

(i) evidence that the offence was motivated by bias, prejudice or hate based on race, national or ethnic origin, language, colour, religion, sex, age, mental or physical disability, sexual orientation, or any other similar factor,

(ii) evidence that the offender, in committing the offence, abused the offender's spouse or common-law partner,

(ii.1) evidence that the offender, in committing the offence, abused a person under the age of eighteen years,

(iii) evidence that the offender, in committing the offence, abused a position of trust or authority in relation to the victim,

(iii.1) evidence that the offence had a significant impact on the victim, considering their age and other personal circumstances, including their health and financial situation,

(iv) evidence that the offence was committed for the benefit of, at the direction of or in association with a criminal organization,

(v) evidence that the offence was a terrorism offence, or

(vi) evidence that the offence was committed while the offender was subject to a conditional sentence order made under section 742.1 or released on parole, statutory release or unescorted temporary absence under the Corrections and Conditional Release Act

shall be deemed to be aggravating circumstances;

(b) a sentence should be similar to sentences imposed on similar offenders for similar offences committed in similar circumstances;

(c) where consecutive sentences are imposed, the combined sentence should not be unduly long or harsh;

(d) an offender should not be deprived of liberty, if less restrictive sanctions may be appropriate in the circumstances; and

(e) all available sanctions, other than imprisonment, that are reasonable in the circumstances and consistent with the harm done to victims or to the community should be considered for all offenders, with particular attention to the circumstances of Aboriginal offenders.

Sentencing Analysis

[43] The facts of this case disclose a large scale commercial fraud. For large scale commercial frauds denunciation and general deterrence are the dominant sentencing principles, see R. v. Drabinsky and Gotlieb, 2011 ONCA 582, paras. 159 and 160:

159 The deterrent value of any sentence is a matter of controversy and speculation. However, it would seem that if the prospect of a long jail sentence will deter anyone from planning and committing a crime, it would deter people like the appellants who are intelligent individuals, well aware of potential consequences, and accustomed to weighing potential future risks against potential benefits before taking action: R. v. Gray (L.V.) et al. (1995), 76 O.A.C. 387, at 398-99 (C.A.), leave to appeal to SCC refused, [1995] S.C.C.A. No. 116.

160 In any event, this court and all other provincial appellate courts have repeatedly held 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.

[44] The appropriate sentence for this category of offences is a significant penitentiary sentence in the range of 3 to 8 years, see:

• R. v. Drabinsky and Gotlieb, 2011 ONCA 582, at para. 164; significant penitentiary sentence beyond 2 years.
• R. v. Waxman, [2011] O.J. No. 4654 (S.C.J.), at para. 53; 8 year sentence, $15 million fine, 6 years in event of default. $17 million restitution order.
• R. v. Williams, [2007] O.J. No. 1604 (S.C.J.), at para. 29; 6 year range.
• R. v. Dhanaswar, [2014] O.J. No. 6388 (S.C.J.) at para. 23; 6 and 7 year sentences; $2,372,702 fine, 5 years in event of default
• R. v. Adams, [2015] O.J. No. 1460 (O.C.J.), five and one-half year sentence, fine of $1.6 million, six years in event of default

[45] In this case the only mitigating factors are an early plea, and lack of a criminal record. The aggravating factors are: the breach of trust, the size of the fraud (over 5 million), the persistence and duration of the fraud (over one year), the detailed planning involved, the serious impact on the company, the advantage taken by Ms. Pouchkina of her status with the company, the manner in which she concealed her tracks by manipulating the records of the company, and the fraud being over 1 million dollars.

[46] Taking into account all of the aggravating and mitigating circumstances the appropriate sentence is 6 years. Credit will be given for pretrial custody from September 15, 2015 to April 11, 2016, a total of 210 days on a 1.5 to 1 basis for a total of 315 days. The remaining portion is 5 years and 50 days.

Restitution

[47] The court also orders restitution of $5,476,204.08 pursuant to section 738(1) of the Criminal Code:

738 (1) Where an offender is convicted or discharged under section 730 of an offence, the court imposing sentence on or discharging the offender may, on application of the Attorney General or on its own motion, in addition to any other measure imposed on the offender, order that the offender make restitution to another person as follows:

(a) in the case of damage to, or the loss or destruction of, the property of any person as a result of the commission of the offence or the arrest or attempted arrest of the offender, by paying to the person an amount not exceeding the replacement value of the property as of the date the order is imposed, less the value of any part of the property that is returned to that person as of the date it is returned, where the amount is readily ascertainable;

(b) in the case of bodily or psychological harm to any person as a result of the commission of the offence or the arrest or attempted arrest of the offender, by paying to the person an amount not exceeding all pecuniary damages incurred as a result of the harm, including loss of income or support, if the amount is readily ascertainable;

(c) in the case of bodily harm or threat of bodily harm to the offender's spouse or common-law partner or child, or any other person, as a result of the commission of the offence or the arrest or attempted arrest of the offender, where the spouse or common-law partner, child or other person was a member of the offender's household at the relevant time, by paying to the person in question, independently of any amount ordered to be paid under paragraphs (a) and (b), an amount not exceeding actual and reasonable expenses incurred by that person, as a result of moving out of the offender's household, for temporary housing, food, child care and transportation, where the amount is readily ascertainable;

(d) in the case of an offence under section 402.2 or 403, by paying to a person who, as a result of the offence, incurs expenses to re-establish their identity, including expenses to replace their identity documents and to correct their credit history and credit rating, an amount that is not more than the amount of those expenses, to the extent that they are reasonable, if the amount is readily ascertainable; and

(e) in the case of an offence under subsection 162.1(1), by paying to a person who, as a result of the offence, incurs expenses to remove the intimate image from the Internet or other digital network, an amount that is not more than the amount of those expenses, to the extent that they are reasonable, if the amount is readily ascertainable.

Forfeiture and Fine in Lieu of Forfeiture

[48] Clearly the offence resulted in a loss of property by CPI. The Crown brings an application for forfeiture or a fine in lieu of forfeiture. The relevant sections of the Criminal Code are as follows:

Section 462.37(1) of the Criminal Code provides:

Subject to this section and sections 462.39 to 462.41, where an offender is convicted, or discharged under section 730, of a designated offence and the court imposing sentence on the offender, on application of the Attorney General, is satisfied, on a balance of probabilities, that any property is proceeds of crime and that the designated offence was committed in relation to that property, the court shall order that the property be forfeited to Her Majesty to be disposed of as the Attorney General directs or otherwise dealt with in accordance with the law.

Section 462.3(1) of the Criminal Code provides:

proceeds of crime means any property, benefit or advantage, within or outside Canada, obtained or derived directly or indirectly as a result of

(a) the commission in Canada of a designated offence, or

(b) an act or omission anywhere that, if it had occurred in Canada, would have constituted a designated offence.

The word "property" is defined in section 2 of the Criminal Code:

property includes

(a) real and personal property of every description and deeds and instruments relating to or evidencing the title or right to property, or giving a right to recover or receive money or goods,

(b) property originally in the possession or under the control of any person, and any property into or for which it has been converted or exchanged and anything acquired at any time by the conversion or exchange

Section 462.37(3) of the Criminal Code provides:

If a court is satisfied that an order of forfeiture under subsection (1) or (2.01) should be made in respect of any property of an offender but that the property or any part of or interest in the property cannot be made subject to an order, the court may, instead of ordering the property or any part of or interest in the property to be forfeited, order the offender to pay a fine in an amount equal to the value of the property or the part of or interest in the property. In particular, a court may order the offender to pay a fine if the property or any part of or interest in the property

(a) cannot, on the exercise of due diligence, be located;

(b) has been transferred to a third party;

(c) is located outside Canada;

(d) has been substantially diminished in value or rendered worthless; or

(e) has been commingled with other property that cannot be divided without difficulty.

Section 462.37(4) of the Criminal Code provides:

Where a court orders an offender to pay a fine pursuant to subsection (3), the court shall

(a) impose, in default of payment of that fine, a term of imprisonment

(i) not exceeding six months, where the amount of the fine does not exceed ten thousand dollars,

(ii) of not less than six months and not exceeding twelve months, where the amount of the fine exceeds ten thousand dollars but does not exceed twenty thousand dollars,

(iii) of not less than twelve months and not exceeding eighteen months, where the amount of the fine exceeds twenty thousand dollars but does not exceed fifty thousand dollars,

(iv) of not less than eighteen months and not exceeding two years, where the amount of the fine exceeds fifty thousand dollars but does not exceed one hundred thousand dollars,

(v) of not less than two years and not exceeding three years, where the amount of the fine exceeds one hundred thousand dollars but does not exceed two hundred and fifty thousand dollars,

(vi) of not less than three years and not exceeding five years, where the amount of the fine exceeds two hundred and fifty thousand dollars but does not exceed one million dollars, or

(vii) of not less than five years and not exceeding ten years, where the amount of the fine exceeds one million dollars; and

(b) direct that the term of imprisonment imposed pursuant to paragraph (a) be served consecutively to any other term of imprisonment imposed on the offender or that the offender is then serving.

[49] R. v. Lavigne, 2006 SCC 10, [2006] 1 S.C.R. 392 is the leading case on section 462.37. The case makes it clear that the intent of this section is to make certain one does not benefit from their offence (para. 10):

10 The sentence imposed for an offence under Part XII.2 on proceeds of crime consists of two elements: the penalty for committing a designated offence (s. 462.3(1)), and forfeiture of the proceeds of crime (s. 462.37(1)). The new provisions are in addition to existing methods. The intention of Parliament is clear. Not only must the act itself be punished, but it must not benefit the offender. Parliament's purpose in doing this is to ensure that crime does not pay. Although the appeal concerns the discretion of a court that imposes a fine instead of forfeiture, the objective of the primary provision must be correctly established for it to be possible to identify the objective of the provision authorizing this sentence.

[50] Where the prerequisites of a fine are proven the sentencing judge has limited discretion to determine whether a fine in lieu of forfeiture is to be imposed. While the court may decide not to impose a fine in certain circumstances (including for example if the offender did not profit from the crime and if it was an isolated crime committed by an offender acting alone), once a decision is made to impose a fine, the amount of the fine is required to "equal to" the value of the property over which the offender had possession or control.

[51] I am satisfied on a balance of probabilities that the $5,476,204.08 appropriated is proceeds of crime and that the fraud was committed in relation to that money. Ms. Pouchkina controlled the money taken. An order for forfeiture should be made in this case however, with the exception of the money found on Ms. Pouchkina (526 Euros) when she was arrested, the proceeds cannot be made the subject of an order at this point. It is not contested that diligent steps have been taken to retrieve the money taken; the proceeds are in part outside of Canada and will be difficult to fully trace. Ms. Pouchkina benefitted from the fraud to the dollar amount taken. In the circumstances a fine order is made for $5,476,204.08. I give Ms. Pouchkina 6 years to pay the fine after her release from custody. In default of payment I order that Ms. Pouchkina serve 5 years in jail. I make a forfeiture order in relation to the 526 Euros found on Ms. Pouchkina, which must be deducted from the fine order once it is recovered.

[52] I also make a DNA order in the circumstances of this case, noting the seriousness of offence and the minimal invasion of privacy involved.

Released: April 11, 2016

Signed: "Justice N.B. Dwyer"