Court File and Parties

Court File No.: 2811 998 15 10572 00

Date: 2016-06-28

In the Ontario Court of Justice

Her Majesty the Queen

v.

Thomas Vaughn Garcia

Before: The Honourable Mr. Justice M.S. Felix

at Oshawa, this 28th day of June, 2016

Reasons for Judgment and Sentencing

Appearances:

• T. Boodoosingh, Counsel for the Crown
• K. Mitchell-Gill, Counsel for Mr. Garcia

Introduction

The defendant, Thomas Vaughn Garcia, pleaded guilty on March 29, 2016 to three indictable counts of Fraud Over $5,000 contrary to section 380(1)(a) of the Criminal Code of Canada. On June 7, 2016, the defendant pleaded guilty to two additional indictable counts of Fraud Over $5,000.

Circumstances of the Offences

Kendalwood Montessori School

The facts have been outlined and meticulously detailed by counsel in an agreed statement of facts numbering sixteen pages with thirty-eight typed paragraphs filed as Exhibit One in these proceedings. The agreed statement of facts was signed by the defendant. The facts were read into the record. As such, I will not detail or refer to the facts in extensive detail.

The defendant, his spouse and another couple—Kevin Kerr and Lisa Jobe—purchased the Kendalwood Montessori School in June 2012 after the previous owner experienced difficulties and requested assistance.

The school had a large tax debt to the Federal Government and the parties banded together to attempt to keep the school running for the benefit of their children and the other families who had children at the school. The object was to try to save the school.

While all four partnered in these efforts, the structure of ownership was such that Mr. Garcia was responsible for financial matters.

Each partner brought needed strengths to the management of the school. The defendant brought business experience and financial acumen to the running of the school.

The detailed agreed statement of facts documents that between December 2012 and May 2014, the defendant siphoned $575,583.64 from the school's bank account, and used the money for his own personal and business interests. During the same time frame the defendant re-deposited $208,481.00 into the bank account, leaving an unrecovered balance of $367,102.64.

Andrew and Regina Martenstyn, Elizabeth DeSousa

The details of these frauds are in the agreed statements of facts.

The defendant promised the Martensyns that he would invest $45,000.00. He did not invest this money as promised. He used the money for costs associated with his business interests. He returned $10,500 to these complainants, but sourced that money fraudulently and misappropriated it from the Kendalwood bank account.

Sasha Persaud, Ryan Ruckstuhl, and Michelle Michlowski

On June 7, 2016, the defendant pleaded guilty to additional counts of Fraud Over $5,000.

Sasha Persaud and Ryan Ruckstuhl are married. They knew the defendant because he had been their accountant for approximately 10 years. They trusted the defendant personally and with respect to business concerns. In April of 2015, the defendant offered a business opportunity to the couple. He explained that if they invested $15,000 with him, they would receive $30,000 by June 2015 when the investment matured. The investment concerned a holding company CPEC Holdings which the defendant explained was a holding company for Tru-Green Energy. He promised paperwork documenting the investment, but after investing the money, the couple did not receive any paperwork. In June of 2015, the defendant avoided contact with them, and did not provide them with their money. The Crown theory was that the defendant committed the offence because he promised an exorbitant return on the investment and he, in fact, needed the money for other business interests.

Defence counsel characterized this matter as a "close-call" and submitted clarifications to the facts. The defence position was that there was in fact a legitimate business interest. That the defendant invested the money in the investment he outlined to the complainants, but that the complainants were not given all of the relevant information about the investment and inherent risks.

The Court sought clarification from both counsel concerning the essential elements of the offence. While the element of deprivation had been satisfied, the Court enquired as to what constituted the dishonest act: R. v. Olan, [1978] S.C.J. No. 57.

As a result (after a lunch recess), the Crown Attorney clarified an essential fact—the defendant had no intention of investing the money received from the complainants. While there was indeed a legitimate business investment opportunity in Tru-Green Energy, the defendant had no intention of applying the funds received in that investment as promised to the complainants. He intended to use the money to assist his personal business circumstances. He never did in fact invest the money as promised.

Counsel for the defendant clarified that at the time the defendant solicited the investment, the company was "tanking". It was no longer a viable investment. Further, his intent was to use the money for other business opportunities given the venture was not going to succeed.

The Court was satisfied with the dishonest act with these modifications to the facts. "Other fraudulent means" can include non-disclosure of important facts and misappropriating entrusted funds for personal use: R. v. Theroux, [1993] 2 S.C.R. 5.

I should emphasize that given this chain of events, the Court carefully canvassed the acceptance of these facts with the defendant, and provided him with every opportunity to speak to his counsel again. The defendant confirmed the facts were correct twice.

Michelle Michlowski

This fraud involved a similar scheme to that employed with the complainants Persaud and Ruckstuhl.

This complainant was referred to the defendant by the pastor at her church. Her family and the defendant's family knew each other back home on an island in the Caribbean. The defendant offered to help her with a house purchase by recommending an investment in his company Tru-Green. He indicated that if she invested $20,000, he would double her investment in a few months. The defendant did not return the investment money nor did he double her money. At the time, his intention was to obtain funds to support his "tanking" business opportunity rather than provide an investment opportunity.

Ultimately, on those clarified facts, I was satisfied that the defendant was guilty of all counts of Fraud Over $5,000 and I registered convictions.

Procedural History

This case has taken an unusual course and I am obligated to explain these circumstances.

After being pre-tried by another Judge, this matter was traversed before me for a guilty plea for the Kendalwood fraud, the Martenstyn fraud and the DeSousa fraud on March 29, 2016. The parties advised that they proposed to have the defendant enter a plea of guilt and then adjourn for sentencing.

The plea inquiry included cautioning the defendant that the Court would make the final decision concerning judicial interim release, notwithstanding the Court was alerted to a proposal by the parties.

Subsequent to the plea, counsel jointly proposed judicial interim release with very strict terms, including electronically monitored house arrest pending sentence. The express object of this proposal was to facilitate ongoing efforts being made by the defendant to acquire full restitution. The Court was advised on that day that the defendant was to engage in a partial sale of a company he co-owned so that full restitution could be provided to the complainants who suffered loss.

On March 29, 2016, prior to considering the proposed release, the Court inquired as to the length of time needed to give effect to the efforts regarding restitution. The Crown advised that 30 days would be the outside limit. The Court specifically inquired if the sale of the company was "teed up and ready to go?" This timeline was specifically confirmed by the defendant through counsel. This is why both counsel jointly proposed a "sunset clause" wherein the defendant would surrender himself into custody on or before the sentencing date of April 28, 2016. The Court agreed to release the defendant on a very strict house arrest judicial interim release plan, as proposed by the parties. Key in that decision was the proposed timeline. The case was adjourned to April 7, 2016 for the purpose of advising the Court of progress.

On April 7, 2016 the Court was advised that things were progressing well. A valuation of the business was in progress, due diligence was occurring, the sentencing date was confirmed.

On April 21, 2016, defence counsel alerted the Court that the timeline was in jeopardy as the parties had not anticipated the procedures inherent in such negotiations. The Court indicated that specific justifications for any request to extend the judicial interim release plan would be required.

On April 28, 2016 the defendant indicated that the sale proceeds were to be acquired in June 2016. The Court was advised that the defendant personally needed to address the negotiations. For the first time, the Court was advised of a second proposed transaction, regarding the geo-thermal retrofits of 65 appointment buildings valued at $250 million dollars. Further, the Court was advised that the parties involved in those negotiations were not aware of the defendant's current status; that is to say, that he had been convicted of several counts of Fraud over $5,000, and was awaiting sentence. Finally, the Court was advised that the original deal had changed through negotiations over the past few weeks. The Court expressed concerns about the original timeline of 30 days and the fact that the negotiating parties were not aware of the defendant's status. Nevertheless the Court granted a brief adjournment to June 2, 2016, and emphasized that sentencing would occur on that date.

The primary rationale for this approach was because of a concern for the public perception of the criminal justice system, where a person convicted of Fraud was out on judicial interim release, negotiating with other parties who were not aware of his status. The secondary concern was that not seven days prior, that is to say on April 21, 2016, there was no indication by way of advising the Court of a mutation from the original negotiated deal to a larger $250 million dollar deal. The Court did not contemplate such an evolution or a progression into larger business deals. The Court was not advised in a timely manner concerning this progression, and frankly, did not give permission for such larger scale negotiations to occur.

I have no doubt that counsel for the defendant was somewhat at the mercy of the multiple parties involved, other counsel, and the whims inherent in any negotiation. I am satisfied that defence counsel and the Crown could only advise what was reported to them.

On May 6, 2016, the Court was advised that due diligence would be completed by May 15. I was told that the defendant was doing everything in his power to close the transaction and the parties were optimistic about meeting the June 2 deadline.

On May 27, the defendant advised through counsel that it was anticipated that restitution funds would be in place by May 27 assuming no hold-ups at the bank. Full restitution would be available on the sentencing date.

On June 2, 2016, counsel for the defendant was unavoidably medically unavailable to attend court due to the aftermath of a serious medical procedure. An agent appeared for counsel. The court declined a request by agent for counsel to meet in chambers because of section 650 of the Criminal Code. Agent for counsel advised that they were awaiting a definitive agreement from the other negotiating parties. The Crown Attorney submitted that there had been no update with respect to restitution and submitted that the defendant should be returned back to custody as per the agreement regarding the judicial interim release.

The Court granted an adjournment of the sentencing and cancelled the judicial interim release of the defendant pursuant to section 523 of the Criminal Code.

While I note parenthetically that the Crown Attorney later re-attended the Court and suggested that a release should be considered after speaking to some parties outside of the court, I declined the request for reasons indicated on the record in a summary fashion that day. June 7, 2016 was firmly fixed for the sentencing.

On June 7, 2016, the Court declined a request for a meeting in chambers per section 650 of the Criminal Code. Counsel to the defendant indicated an intention to present evidence relevant to a judicial interim release. The defendant requested another 30 day adjournment for sentencing and evidence was presented from his surety and business partner to establish that:

1. The defendant was a necessary part of ongoing negotiations.
2. The defendant alone possessed the business acumen to finalize the negotiations.
3. The agreement was at the drafting stage (a.k.a. the "legalise" stage).
4. There had been a delay in negotiations due to an illness.
5. There would be a delay in the future as a key person was getting married in late June 2016; and,
6. Finally (and significantly), that the other negotiating parties had still not been advised that the defendant had been convicted in these proceedings.

The Crown emphasized deterrence and denunciation and submitted that a four year penitentiary sentence was appropriate. The Crown further submitted that the Court should consider releasing the defendant again for the purposes of restitution.

Notwithstanding the evidence and the respectful submissions of the Crown Attorney and counsel for the defendant, the Court declined the request to grant judicial interim release for a second time for the purpose of facilitating restitution. The Court provided brief reasons on the record at the time. These reasons merely supplement the key issues outlined on the record that day. There are many reasons why the Court determined that the sentencing would proceed without further delay, including:

1. Section 720 of the Criminal Code mandates that the Court sentence a person as soon as possible.

2. The court had clearly set a firm sentencing date.

3. On March 29, 2016 given the emphasis on restitution efforts, and the urging of both the Crown and counsel to Mr. Garcia, it was reasonable to adjourn the sentencing for a short period of time, if there was, as I was advised, a reasonable prospect of restitution arrangements crystallizing. Frankly, the Crown and defence counsel were entitled to be optimistic given the information presented on March 29, 2016. They operated on the best information available and the firm commitment of the defendant to obtain restitution.

4. The Court had originally been assured that the time span would be 30 days or less. Despite this submission, the Court questioned this time line and was again assured that restitution would be obtained within 30 days.

5. The Court became aware through the evidence that the original business deal for $2 million dollars (which I call Deal 'A') had evolved into an additional deal for $250 million (which I call Deal 'B'). It became clear that the original deal had evolved into a larger more complicated business deal. Establishing a time estimate for the completion of the larger deal was not possible. The completion of both deals depended upon a number of factors including the negotiating steps, the schedule of the various parties, and the reviews inherent as pre-condition to finalizing the deal. These factors were not within the sole control of the defendant before the court or his business partner. The defendant could not control the pace of large firms with legal teams and several layers of approval. As such, there was no concrete time line to completion.

6. As I have explained, the Court was concerned about the public perception of the criminal justice system when it was revealed in evidence that the other negotiating parties were not aware of the criminal court sentencing of the defendant. Part of the detailed factual underpinnings of the case before the court included the defendant deceiving the complainant, and misrepresenting the current state of his business affairs. The Court could not countenance this conduct en route to restitution. It risked legal liability and potential stigmatization of the criminal sentencing process and the potential to bring the administration of justice into disrepute.

7. Notwithstanding the obvious importance and desire to facilitate restitution, restitution is not the core focus of a criminal sentencing court.

Sentencing Positions

The Crown seeks a sentence of four years incarceration, restitution, a DNA order, and a fine in lieu.

The defence submits that if the court determines that a penitentiary sentence is required, a two year penitentiary sentence on top of the pre-sentence custody would be appropriate. The defendant opposes the fine in lieu order.

Mitigating Factors

Guilty Pleas

The defendant pleaded guilty to a number of counts of Fraud Over $5,000. He is a 53 year old first offender.

The guilty plea to the Kendalwood fraud deserves some recognition. However, I also recognize that there was a strong case for the Crown.

The core of the fraud in relation to Kendalwood revolves around phantom payments to the C.R.A. The defendant told his partners that he had successfully negotiated a deal to pay back arrears to the C.R.A. in the amount of approximately $7,000 per month. Although he tried to obtain that agreement, there was no agreement. Instead, he misappropriated approximately the same amount and used it to service his personal and business interests. He withdrew cash at times, bank drafts were made out to his spouse, he paid his business office rent at Yorkdale, all sourced from the Kendalwood funds. He even used Kendalwood funds to partially repay the Martensyns and Ms. DeSousa.

There would have been evidence from the C.R.A. showing that the defendant was not paying $7,000 per month as part of the payment plan. There would have been evidence that the defendant opened a second bank account at the Bank of Montreal, and that account was used to siphon funds out of the main Kendalwood bank account. Further, there would have been evidence that the defendant told staff members at the school not to tell complainants Jobe and Kerr that he had opened up a second bank account.

The defendant's guilty pleas concerning complainants Martenstyn, DeSousa, Ruckstuhl, Persaud, and Michlowski is more deserving of recognition. These frauds were similar in design. There would have been obvious issues to litigate, including (as demonstrated on one of the guilty pleas) the issue of mental intent.

The defendant is sincerely remorseful in my view, and spared all of the complainants from going through a trial by his plea of guilt. He instructed his counsel from the very beginning to resolve the matter rather than litigate these issues.

Factors Neither Mitigating nor Aggravating

I have struggled to properly characterize some of the conduct in this case. As such, some of the circumstances present mixed consideration that defy neat characterization as solely aggravating or solely mitigating.

Structure of the Fraudulent Activity

In many large-scale frauds, there is no legitimate business concern (e.g. a Ponzi scheme.) The Kendalwood fraud is different. It was born out of an attempt to save the school from financial ruin. Funds were used to invest in the defendant's geo-thermal business opportunities. This business actually existed and the defendant was working hard with his business partner to get the business off the ground. The defendant and his business had invested large sums of money and untold amounts of sweat equity.

It is my view that the characterization submitted by counsel to Mr. Garcia is apt. The defendant moved funds as needed to support his business efforts. He used the Kendalwood account like a line of credit. He also deposited money back into the Kendalwood account. According to the Crown and police investigation, the money he re-deposited was legitimate money. It was not money stolen from other sources.

While it is not a mitigating factor, the fact that the business opportunity and the corresponding investment opportunity were both legitimate is a factor that I consider with respect to the structure of the Kendalwood fraud.

With respect to the fraud counts involving Martenstyn, DeSousa, Ruckstuhl, Persaud and Michlowski, the defendant pitched a legitimate business opportunity and solicited their investment. The complainants trusted the defendant and invested. With respect, contrary to the submission of the Crown, it is not a criminal offence to promise a fantastic return on an investment. As demonstrated during the plea on the Ruckstuhl, Persaud fraud, the facts relied on by the Crown did not make out a criminal offence until time was provided to present amended facts in support of the plea.

On the amended facts I understood that given the financial strain associated with the defendant's efforts to complete his business opportunity, the defendant did not intend to re-pay these complainants, and never invested the money in accordance with their wishes.

This analysis serves to recognize that the structure of these frauds was not terribly complex, and the fraud although it did occur, was ancillary to a real object, a legitimate business opportunity.

Return of Money

The defendant took as I have outlined $575,583.64 from the Kendalwood account between December 2012 and May 2014.

Over the same time, he re-deposited approximately $208,481.00.

I have mixed views about this circumstance. First of all, I must recognize that replacing $208,481.00 deserves some recognition. In most large scale frauds, there is no return of large amounts of money.

According to the Crown and police investigation, as I have outlined, the return of funds was periodic and from legitimate sources. The Crown points out, however, that there were times where the defendant had to put money back into the Kendalwood account or else staff and supplies would go unpaid. One may reasonably infer that the defendant wished to avoid this circumstance. As such the purity of his aims in returning a large sum of money is somewhat clouded by this reality.

Nevertheless I find that when I think about the Kendalwood fraud, it is a different animal from a fraud ab initio. I am satisfied that the defendant did not involve himself in the Kendalwood school for the purpose of fraud. The community banded together to save the school and he sought to assist. It is reasonable to infer that at the outset, this was done for altruistic reasons. It is in that context that I recognize that over a two year period, the defendant siphoned off money that was to support other business endeavours, and also periodically returned money.

The defence submits that ultimately the defendant intended on paying all of the money back when the first business project ended, but the government froze his bank account in the day or days before that deal was to close. But for that action, perhaps the fraud would not have been detected at all. I think it is reasonable to infer that if the Kendalwood line of credit so to speak received $280,000 it was reasonably, probably the intention of the defendant to pay the balance back as well. The proceeds from his business project would have covered the deficiency.

However, with respect to the other complainants, the inference that the return of some funds to them was designed to avoid detection of fraud, is easier to draw. It is also significant that the return of funds was sourced from other stolen money from the Kendalwood account.

Restitution Efforts

Replacing money you stole is not "restitution" as defined by the Criminal Code.

Taking money from one complainant to give to another complainant is also not restitution.

The defendant did not succeed in making full restitution in this case. This factor is therefore unavailable as a mitigating factor.

Although I recognize that there were actions on the part of the defendant such that a significant amount of money $208,000 was returned.

I have considered all that I have heard in this case, and I accept that the defendant made sincere efforts to obtain restitution while on judicial interim release pending sentence.

His counsel has indicated that it is his clear stated intention to provide restitution as soon as he is able. I credit him for those efforts and for that attitude, but I must also recognize that these efforts would have benefited him personally. The Crown Attorney in this case made it crystal clear that he felt a lot of pressure on the restitution issue, and the Crown took the position that it would have a substantial impact on the sentencing position taken by the Crown.

Restitution would have afforded the defendant a much more generous position from the Crown. Restitution would have benefited the defendant because I would have had to consider the issue when addressing the appropriate sentence in this matter. Restitution would have also directly benefited the defendant financially. When these were less complex, and the focus was on Deal 'A' as described by his business partner, I am advised that the proceeds would have been $2 million for the company. Restitution would have required a quarter of that windfall.

Whether the ambitious pursuit of Deal 'B' worth $250 million complicated matters or lengthened the negotiations or had some untold impact on the negotiations, I will never know. Perhaps in the benefit of hindsight, the defendant should have limited himself to Deal 'A' and kept it simple.

But for all of these reasons, I am satisfied that the defendant made sincere efforts. As I have outlined, this recognition is weakened to a limited degree by some of the things I heard about during the delay in sentencing. As I outlined, the defendant engaged in negotiations with other negotiating parties and did not disclose the current circumstances. That there might be pragmatic reasons for that decision does not detract from the fact that such conduct tends to mirror the deceit exhibited by the defendant during the commission of the offences before the court. He misled complainants, misrepresented the truth, and engaged in material non-disclosure in pursuit of the overarching object of a "deal." That is a predominant feature of his criminal acts before this Court. It also appears that it was a feature in the current negotiations as well.

This conduct was particularly concerning when I heard evidence that the defendant had not disclosed his status to one of the involved negotiating business partners who he viewed as a mentor to him.

I am guided by the criminal law. As such, I do not and cannot characterize this behaviour as aggravating. I do not have sufficient details or the particulars of the negotiations, and I have not heard the defendant's perspective directly on these issues.

Suffice it to say these revelations presented an obvious concern for the public perception of the criminal justice system. As outlined above, this is why I cancelled the defendant's judicial interim release and moved to sentence him immediately.

Civil Proceedings

I am satisfied based on the submissions of defence counsel, that the defendant was sued civilly by some of the complainants. He did not contest the action or defend it, and he agreed to a civil judgment.

Circumstances of the Offender

The defendant has no prior criminal record. He is 53 years old.

This criminal offence caused or contributed to the demise of his relationship with his spouse.

He has three young children ages 10, 8 and 4 that he supports and assists.

He has two elderly parents that he supports and assists.

He was a Chartered Accountant with experience managing and running businesses.

He received his education at the University of Miami, in Florida, and the University of Toronto. He has volunteered in his community, contributed to his religious institution, and set up a mentorship program for students of University of Ontario Institute and Technology in Oshawa. He has provided instruction and guidance to young entrepreneurs. He has coached sporting teams and sat on a local board for a prominent art gallery.

Of course, these criminal acts do not totally define Mr. Garcia, but I am satisfied that Mr. Garcia used his status or reputation in the community, his good character, and his apparent business acumen and financial skills to commit the offences. There is no doubt that these factors were involved in these offences. As such, by operation of the Criminal Code, section 380.1(2) the background of the defendant is not characterized as a mitigating factor on sentence.

Aggravating Factors

There are many aggravating factors in this case, including:

1. The quantum of the frauds.
2. The time span of the Kendalwood fraud.
3. Breach of trust.
4. The number of complainants and the impact on the complainants particularly as revealed in several victim impact statements filed with the court.
5. Statutory considerations.

The first two factors are glaringly clear on the facts in this case, and not controversial as between the Crown and defence.

The third, fourth and fifth factors, require some elaboration.

Breach of Trust

The defendant was a professional chartered accountant trusted by the complainants. This trust was placed in the defendant because of his good character, his involvement in the community, his professional qualifications, his professional accomplishments, and the existence of personal friendships.

This is particularly egregious when considering the close-knit community involved in the Kendalwood school. His partners, complainants Jobe and Kerr, had a right to expect trust and honourable dealings. Not only because of their friendship, but because they had fused together as a unit to save the school in a time of crisis. Their purpose was to save the school from ruin.

The Kendalwood community at large were also owed trust from the defendant. Not simply the families and the children who relied on the school, they of course are entitled to trust Mr. Garcia. But the staff at the school were entitled to trust as well. There were real people working, with families and obligations. He owed a duty to his partners and the school to be honest, and do his part to help salvage the school.

I am not troubled by any effort to properly characterize the breach of trust as dependent on a position of authority in this case: See R. v. Garrick, 2014 ONCA 757 at para. 24. Having regard to the quantum, the length of time, the extent of the deceit, I am comfortable characterizing the Kendalwood fraud as a large-scale fraud. See Garrick para. 25.

The frauds involving the remaining complainants are smaller in quantum, but no less significant given the extent of the relationship between the defendant and those complainants.

A core component of Mr. Garcia's criminal, moral blameworthiness, involves the fact that he exploited the personal relationships he had with those who viewed him with respect and trust because of his personal attributes and qualifications.

Impact on the Complainants

It would do an injustice to the complainants in this case to try to articulate what the defendant's actions has caused.

The victim impact statements in this case are marked as exhibits. Some of the detail was read out in court as per the wishes of certain complainants. I have taken the time to read these victim impact statements carefully, and I am struck by the magnitude by the depths of the trust placed in the defendant.

In no particular order, I look at the statement of Elizabeth DeSousa and she talks about the fact that Mr. Garcia was her friend for over 20 years, she trusted him, and loved him as a brother, and a friend. He was a member of her church and has further reinforced her trust in him. She understood Mr. Garcia to be an upstanding member of the church and a person with integrity. She talks about the fact that she was a single mother, he knew that. She had a daughter, he knew that. She had been through a lot, no doubt Mr. Garcia knew that over their 20 years friendship. She talks about the fact that she had to work very hard to get financial security or some semblance of that. And she is particularly concerned about how someone she trusted so much was able to fool her. She talks about the fact that she is a Christian, a registered nurse, and a mother, and notwithstanding what he has done to her, she forgives him.

Andrew Martenstyn talks about the fact that he met Mr. Garcia 15 to 17 years ago through the church. He was a respected member of the church and was involved in finances. This is the gentleman who details the stress and the impact of how he borrowed money from his line of credit to invest. He also invested money that was saved for his eldest son and money saved for his youngest son. The impact statement had to be written by the spouse of Andrew Martenstyn because Mr. Martenstyn through the strain and stress of this matter and no doubt life in general, had a stroke in June 2014 and had second stroke in November 2014. He is subject to paralysis, he is hospitalized, and he is now overseas trying to recover. His spouse who is left here to deal with the issue says, "In closing I would like to mention that every statement and action taken by Thomas Garcia was made in deceit without any care for the mental, physical and financial trauma he caused. He has destroyed the peace of our home."

Kevin Kerr is one of the partners who stepped into the breach to save the Kendalwood school. He has a very detailed statement, as does his spouse, wherein they document the fact that they have had to deal with the staff and families at Kendalwood as a result in the aftermath of this offence. They, of course, detail the trust that was violated, the efforts that they have had to make with respect to the C.R.A., and the impact on their ability to trust individuals. They had good staff members. The relationship has impacted with those good staff members because Mr. Garcia asked staff members to hide information from them. A very detailed and lengthy victim impact statement outlines the impact on complainant Kerr and complainant Jobe.

Sasha Persaud and Ryan Ruckstuhl. Again, they have known Mr. Garcia for a number of years. Mr. Ruckstuhl knew him for 10 years, she for six years. Mr. Garcia knew that they couldn't afford to lose the money they invested. They were about to purchase a home. She was on maternity leave, pregnant with a second child. Finances were extremely tight, and as a result of not receiving their money back, they almost lost their house, and they had to use their credit cards and all sorts of other means to try to complete their transaction. Once again, I am not doing a service to the sentiment and impact provided by the complainants in this case, but they filed their statements and I have considered the impact very carefully.

I am satisfied that there was a profound impact on the complainants and that impact is felt even to this day.

I am satisfied that the defendant's conduct has had significant consequences.

Section 380.1(1) of the Criminal Code

Parliament amended the Criminal Code in 2004 to codify certain aggravating circumstances that I am obligated to consider. I find that pursuant to that section:

1. The magnitude and the duration of the Kendalwood fraud was significant.
2. The offences involved several victims and had a significant impact based on their personal circumstances.
3. The defendant took advantage of his position in the community.
4. The defendant did not comply with professional standards expected of chartered accountants.

Relevant Sentencing Principles

Statutory Considerations

The purpose and principles of sentencing are set out in section 718 of the Criminal Code:

Purpose

718. 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.

Fundamental Principle

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

Other Sentencing Principles

Section 718.2 of the Criminal Code also has other statutory considerations that I must consider:

718.2 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 find that (iii) under that section:

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

applies, and (iii.1);

"(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, . . . shall be deemed to be aggravating circumstances."

Those are statutory aggravating circumstances. Other considerations I must keep in mind is:

"(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,"

I must consider:

"(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."

Fraud Over $5,000 is a serious criminal offence. In 2004 Parliament increased the maximum sentence from 10 years to 14 years. Parliament also amended the Criminal Code such that a conditional sentence of prison is not available in this case. Finally, as I have outlined, Parliament codified factors that I must find to be aggravating.

Sections 718 and 718.2 set out relevant statutory considerations. I must fashion a proportionate sentence that achieves the primary sentencing goals of denunciation and deterrence. I find that incarceration is the primary means by which to achieve such goals. While I have determined that incarceration must be part of this sentence, I must keep in mind the sentencing principle of restraint. Further, as I have outlined, given I am sentencing the defendant on multiple crimes, I should keep the principle of totality in the forefront of my mind.

The sentences in this case should be the minimum necessary to achieve the various goals I have outlined. The sentence should not over-emphasize denunciation and deterrence. I must keep in mind that I am sentencing a 53 year old man of previous good character and a productive member of the community.

Caselaw

In R. v. Drabinsky, 2011 ONCA 582 at para. 159-162, the Ontario Court of Appeal said:

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, (1995), 76 O.A.C. 387 (Ont. C.A.), at 398-99, leave to appeal to SCC refused, [1995] S.C.C.A. No. 116 (S.C.C.).

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.

161 The amendments to the fraud provisions made in September 2004, while inapplicable to this case, both raise the maximum sentence and specifically identify certain factors found in sophisticated frauds as aggravating factors. Those are the same factors that have caused appellate courts to stress general deterrence and denunciation in the sentencing of those who engage in large scale premeditated frauds on the public marketplace: see An Act to Amend the Criminal Code (Capital Markets Fraud and Evidence-Gathering), S.C. 2004, c. 3, ss. 2 and 3. The statutory amendments follow the sentencing path cut by the appellate courts.

162 The appellants' argument that longer sentences do not enhance general deterrence ignores that the proper sentence quantification in cases like this is also driven by the need to publicly denounce the appellants' criminal conduct. The length of the sentence imposed is reflective of the appropriate level of denunciation.

In R. v. Bogart, [2002] O.J. No. 3039 at para. 30 the Ontario Court of Appeal held:

30. This court has affirmed that in cases of large-scale fraud committed by a person in a position of trust, the most important sentencing principle is general deterrence. Mitigating factors and even rehabilitation become secondary. In R. v. Bertram (1990), 40 O.A.C. 317, this court observed that most major frauds are committed - as this one was - by well-educated persons of previous good character. Thus the court held at p. 319,

The sentences in such cases are not really concerned with rehabilitation. Instead, they are concerned with general deterrence and with warning such persons that substantial penitentiary sentences will follow this type of crime, to say nothing of the serious disgrace to them and everyone connected with them and their probable financial ruin. [Emphasis added.]

There is a real need to emphasize denunciation and general deterrence in the realm of large-scale frauds with devastating consequences for their victims so that individuals involved in such crimes and those seeking to develop new offences understand the significant penalty: R. v. Drakes, 2009 ONCA 560.

The focus must be on general deterrence and warning the defendant that a substantial penitentiary sentences will flow from this type of crime: R. v. Bertram (1990), 40 O.A.C. 317.

There are few crimes where the aspect of deterrence is more significant: R. v. Gray (1995), 76 O.A.C 387.

Sentencing is a unique process. Every defendant receives a sentence crafted to fit their particular circumstances.

With respect to the quantum of sentence, it is my respectful view, that the ranges of sentence for these offences has been impacted by Parliament's approach. Bluntly, prior to the amendments, the proportionate and just sentence in this case might well have been a conditional sentence, if the circumstances permitted it. This is no longer available because of the action of Parliament. As such, the numerous cases that I have reviewed involving conditional sentences are less helpful.

Parliament has raised the maximum sentence and codified the aggravating factors. It is a clear sign that the sentences should increase for this type of offence.

I have reviewed countless sentencing decisions including those provided by the Crown and defence. None of those cases dictate the result in this case. All are distinguishable.

Sentence

The defendant has accumulated 191 days of pre-sentence custody. I am prepared to credit him 1.5 to one for each day pursuant to the principles outlined in R. v. Summers, 2014 SCC 26. As such, I will credit the defendant with 287 days in custody already served.

I am prepared to grant only minimal credit for restrictive bail conditions per: idem Downs. This is because of the procedural history outlined earlier in this judgment, and the fact that the plan was proposed by the defendant to facilitate his efforts to obtain restitution. The stipulated terms were appropriate to address primary ground and secondary ground considerations. A modest recognition of 13 days credit for 66 days of judicial interim release in these circumstances will suffice in my view.

In total, I therefore credit the defendant with 300 days in custody or approximately 10 months.

With respect to the frauds involving complaints Martenstyn, DeSousa, Ruckstuhl, Persaud and Michlowski, I sentence Mr. Garcia to 150 days in custody. This will be sourced from the pre-custody credit of 300 days that I just outlined.

With respect to the Kendalwood fraud, I sentence Mr. Garcia to 900 days in prison or approximately 30 months in prison. I will credit him with the remaining five months pre-sentence custody which is approximately 150 days. The sentence to serve remaining is 25 months incarceration or 750 days.

This sentence is consecutive to the sentence in relation to the other counts.

I will order DNA on secondary grounds.

There will be an order of non-communication pursuant to section 743.21 in relation to all of the complainants in this case, and any member of their immediate family, with one exception—he may communicate indirectly for the purpose of facilitating restitution.

I approve of the restitution scheduled prepared by the Crown and marked as Exhibit 6 on Sentencing. I order the defendant to pay restitution in the amount of $450,602.64 in total. It is documented in Exhibit Six and that schedule will form part of the restitution order.

I have considered the submissions of both counsel, and I am satisfied that a fine in lieu of forfeiture pursuant to section 462.37(3) of the Criminal Code is appropriate. The defendant took property in the form of money from the complainants in this case. I am satisfied that this property can no longer be located because the defendant used it for his own personal business purposes. It has also been spent or substantially diminished and/or it has been co-mingled with other property. A forensic audit of Tru-Green and other related or prior companies would be required to ascertain the location of any money if it still exists.

The defendant's ability to pay is not a factor I have considered in imposing this fine in lieu. Given the sentence proposed, I will consider the defendant's ability to pay in determining the amount of time I will allow for payment. See: R. v. Lavigne, 2006 SCC 10. I will allow six years to pay this fine in lieu of forfeiture. The defendant will be subject to the operation of section 462.37(a)(ii) in default of payment of that fine. I further order that the fine in lieu of forfeiture Order shall require the Attorney General of Ontario to transfer all payments received to the satisfaction of the restitution listing the complainants on Exhibit six.

Any payments received in satisfaction of either the restitution order or the fine in lieu shall be distributed on a pro rata basis amongst all complainants.

Finally, it is a matter of public concern, and a criminal court should not abdicate responsibility for protection of the public given the risk presented by the defendant. As such, I have considered the operation of section 380.2(1) of the Criminal Code and I will order a prohibition pursuant to that section subject to certain exemptions and conditions designed to mitigate the broad impact of such an order: See R. v. Hooyer, 2016 ONCA 44.

I will not detail, Mr. Garcia, the prohibition order to you because your counsel has read it to you. Actually, I will. This prohibition applies anywhere in Canada for 10 years. If you are physically located outside of Canada, you will not engage in any transactions with any person, persons or business entities situated within the territorial jurisdiction of Canada. You will not provide financial advice nor hold yourself out to be a financial advisor, financial planner or business advisor concerning the purchase or sale of investments. You will not provide business-related investment advice. You may prepare and file tax returns for the general public. You may complete any current business negotiations concerning Tru-Green subject to two conditions:

(1) you will obtain legal advice concerning the issue of material non-disclosure to other negotiating parties; and,

(2) you will be in the physical presence of your business partner, Mr. Lesley Thomas.

You may sign any documents required to complete the negotiations concerning Tru-Green. You may practice as a certified public accountant in Ontario if:

(a) you have provided a copy of this judgment and your criminal record to C.P.A. Ontario.

(b) you have otherwise complied with any other requirements or obligations placed upon you by C.P.A. Ontario including registering your practice with C.P.A. Ontario if you are providing accounting services to the public as defined by By-law 1.1.31 or practicing public accounting as defined by the Public Accounting Act, 2004.

If you plan to move to another province within Canada and you wish to practice as a C.P.A., you may apply before me for a variance with three days notice to the Attorney General Ontario.

On or about June 28, 2021 you may then provide financial advice to the general public provided you are governed by the Financial Planning Standards Council and certified as a Certified Financial Planner C.F.P. or an F.P.S.C. Level One certificate holder, and you comply with any other mandatory provincial government and/or federal government requirements.

Frankly, there are two cases in Canada addressing this section. I've done my best to balance the protection of the public, with a graduated approach to this gentleman's return to the business world. I understand as I have heard from counsel that that order is on consent.

Mr. Garcia, it's been a very difficult sentencing. I know that it has been challenging, but I sincerely hope that you will go forward and take your positive attributes and assist the community once again.

That is the sentence of this Court.

Court Clerk Clarification

Court Clerk: Your Honour, if I can just clarify something. The order of fine in lieu of forfeiture...

The Court: Will be in the amount of $450,602.64.

Court Clerk: Yes. The length of incarceration if the amount is not paid?

The Court: By operation of the Criminal Code.

Court Clerk: Thank you.

The Court: In this case it's four years.

Defendant's Statement

Mr. Mitchell-Gill: Thank you very much, Your Honour. I have advised Mr. Garcia he would have an opportunity to say sorry to the Court.

The Court: Yes.

Mr. Mitchell-Gill: I know it's not going to make any difference in sentence, and we're certainly not requesting that, Mr. Garcia would still wish to.

(At this time, Mr. Garcia put some comments on the record.)

The Court: Thank you, Mr. Garcia.

Mr. Garcia: Thank you so much.

The Court: Thank you for your patience today and on other days. Thank you for the things that you have said, it only makes me even more satisfied as to the remorse that I have heard, all right? That is the sentence.

Mr. Boodoosingh: Your Honour, I should ask that any additional counts against Mr. Garcia, if they can be marked withdrawn, please, sir?

The Court: Withdrawn at the request of the Crown.

Certificate of Transcript

Evidence Act, Subsection 5(2)

I, Jodi J. Hewett, certify that this document is a true and accurate transcript of the duplicate recordings of Her Majesty the Queen v. Thomas Vaughn Garcia, in the Ontario Court of Justice, Oshawa, Ontario taken from Recordings No. 2811_402_20160628_090437_10_FELIXM.dcr made by Linda Van Es, Court Reporter, on the 28th day of June, 2016 which has been certified in Form 1.

Date: ___________________________

Jodi J. Hewett Certified Verbatim Reporter

Legend: (sic) - Indicates preceding word has been reproduced verbatim and is not a transcription error (ph) - Indicates preceding word has been spelled phonetically.

This transcript is a true certified copy bearing the original signature in blue ink. If additional copies are required, please contact the above-noted reporter.

Transcript Ordered: June 28, 2016

Transcript Completed: July 27, 2016

Transcript Released: July 30, 2016