Court File and Parties

Court File No.: Toronto 16-45001208 Date: 2017-11-16 Ontario Court of Justice

Between: Her Majesty the Queen — and — Anna Kovtanuka

Before: Justice Charles H. Vaillancourt

Heard on: April 10 and November 2, 2017

Reasons for Judgment released on: November 16, 2017

Counsel:

• Elizabeth Stokes, counsel for the Crown
• Aaron M. Spektor, counsel for the accused Anna Kovtanuka

Judgment

Vaillancourt, J.:

Charge and Plea

[1] Ms. Kovtanuka entered a plea of guilty to the charge that she between the 21st day of September in the year 2015 and the 16th day of November in the year 2015 at the City of Toronto in the Toronto Region did by deceit, falsehood or other fraudulent means did attempt to defraud Aviva Canada Insurance of monies of a value not exceeding five thousand dollars, contrary to Section 380, subsection (1), clause (b) of the Criminal Code of Canada.

Background

[2] Counsel prepared an agreed statement of facts outlining a scheme that was designed to defraud insurance companies of money through the processing of fraudulent claims.

[3] An individual by the name of R. L. owned a BMW that was insured by Aviva Canada. Mr. L. did not have collision insurance for his own vehicle, which meant that he would not be covered for repairs to his vehicle in the event of an accident.

[4] On August 8th, 2014, Mr. L. was a passenger in his car which was being driven by his friend, D.S. The driver lost control of the vehicle and hit a tree. Mr. S. was ultimately charged with careless driving. Neither Mr. S. nor Mr. L. sustained any injuries as a result of the accident.

[5] Mr. S. did not have the funds to pay for the repairs to the vehicle but he told Mr. L. that he knew of a rehabilitation centre where they could get money for the repairs. Mr. S. ultimately took Mr. L. to the Wellness Centres of Ontario, located at 3500 Dufferin Street, Unit 600, in the City of Toronto.

[6] Dr. Edward Hayes was a chiropractor at the aforementioned clinic and Mihaela "Michelle" Osacenco was the receptionist.

[7] The accused, Anna Kovtanuka, was a licenced paralegal who operated a legal office on the same floor as the clinic.

[8] Mr. L. attended at the clinic on August 14th, 2014. At the clinic, he dealt with a receptionist that he knew only as "Michelle", (Ms. Osacenco), who had him sign a number of forms. Mr. L. made it clear to Michelle that he had not been injured in the accident. Nevertheless, Michelle directed him to complain of certain injuries, including headaches, dizziness and nausea. Michelle told him he did not need to come back for any actual therapeutic appointments. Instead, she had him sign for a number of dated appointments on a sign-up sheet all at the same time.

[9] Mr. L. met with Dr. Edward Hayes, the chiropractor. He never told the doctor that he was injured. The chiropractor examined him, made notes and made arrangements for him to get a massage.

[10] Mr. L. was then directed by Ms. Osacenco to the lawyer's office down the hall, Profitti Law. Both Mr. L. and Mr. S. went to the lawyer's office and dealt with an unknown male there. Mr. L. made it clear to the lawyer that he was not injured. Mr. L. signed some documents and then the lawyer congratulated Mr. L. and Mr. S. He said that there would be a settlement in about a year in the amount of $10,000.00. The lawyer's office and clinic would keep $3,000.00 and $7,000.00 would go to Mr. L.

[11] Around August 25, 2014, Mr. L. had second thoughts about the situation and he contacted his insurance broker and advised him that he wanted to stop his insurance claim since he had not been hurt in the accident. As a result of this information, the insurance broker contacted Aviva Canada and advised them of Mr. L.'s revised information.

[12] It is to be noted that Ms. Kovtanuka did not have any involvement with Mr. L.

[13] The scenario as it relates to Mr. L. is crucial to explain how the insurance investigators became involved in the case at bar.

[14] Aviva hired two private investigators, Dominik Kolsnik and Izabella Michalowska, to verify Mr. L.'s story. They attended the clinic posing as uninjured accident victims trying to make some money.

[15] They attended at the Wellness Centre on separate occasions and secretly videotaped their interactions with Ms. Osacenco and Dr. Hayes. They were ultimately directed to a law office on the same floor and interacted with the accused before the court, Ms. Kovtanuka.

[16] The scenarios paralleled Mr. L.'s situation. Ms. Osacenco had them signing in using different colours of ink to make it appear that they had attended the clinic on different dates. She also counselled the two investigators on what symptoms and pains they were supposed to be experiencing in order to have their claims approved by the insurance company.

[17] Dr. Hayes gave both investigators a brief initial examination and then made notes and suggestions on the injuries that they should claim that they were experiencing. The chiropractor then billed the insurance company for multiple services on different dates even though the investigators only attended on the initial visit.

[18] Ms. Kovtanuka had taken over the office space formerly occupied by Proffiti Law in November 2014.

[19] The two insurance investigators were directed to Ms. Kovtanuka's office. Ms. Kovtanuka assisted the insurance investigators in preparing paperwork for the fraudulent claims. Ms. Kovtanuka also provided advice to the insurance investigators on how to maximize their claims and on how to change their stories to avoid an insurance investigation and on how to paper their claims with visits to doctors' offices.

Fraud Losses

[20] Insurance Investigator Dominik Kolsnik: Dr. Hayes submitted an invoice and statutory declaration seeking compensation for 21 treatment sessions for a total of $3,500.00 for the time period between April 2nd, 2015 and November 16th, 2015. Ms. Kovtanuka was compensated $220.00 for this claim. Aviva Canada paid out $2,400.00 on this claim.

[21] Insurance Investigator Izabella Michalowska: Dr. Hayes submitted an invoice and statutory declaration seeking compensation for 21 treatment sessions for a total of $3,500.00 for the time period between April 2nd, 2015 and November 16th, 2015. Ms. Kovtanuka did not receive any compensation for this matter and did not receive any follow-up correspondence from Aviva after the claim was submitted by the Wellness Centre. Aviva Canada paid out $2,400.00 on this claim.

[22] The investigators files were provided to the police at 32 Division on December 10th, 2015.

Position of Counsel on the Issue of Sentence

[23] Ms. Stokes submitted that the circumstances of this case requires a sentence that emphatically denounces the conduct disclosed in the agreed statement of facts. It is the position of the Crown that a conditional sentence of 90 days including house arrest for the first 45 days followed by 6 months of probation OR a sixty day sentence including house arrest for the entire period followed by 6 months of probation would be an appropriate sentence.

[24] Ms. Stokes also highlighted how difficult it was to detect the type of illegal conduct complained of herein.

[25] Mr. Spektor implored the court to grant Ms. Kovtanuka a conditional discharge based on the unique circumstances of his client.

Aggravating Factors

[26] Ms. Kovtanuka acted in her capacity as a licenced paralegal when she gave advice to the insurance company's investigators on how to craft their stories in furtherance of a scheme to defraud the insurance company of funds and instructed them how to "paper their claims". In return for her participation in the scheme, Ms. Kovtanuka would receive monetary compensation.

[27] Undoubtedly, Dr. Hayes was the prime mover in this rather clever scheme to defraud unsuspecting insurance companies. However, in order to make the plan work, it required the willing participation of others including Ms. Kovtanuka.

[28] Ms. Kovtanuka's conduct amounted to a public breach of trust. She was a legal professional, and as such, individuals dealing with her would have had or should have had an expectation of integrity and honesty. In the Victim Impact Statement of Aviva Insurance Company of Canada, it is noted that: "Ms. Kovtanuka is a member of the legal profession. She has a duty, and obligation, pursuant to Rule 6 of the Paralegals Rules of Conduct, to foster the administration of justice. Her actions in this matter have shown a flagrant disregard for her obligations and a dereliction of [her] duty." I agree with this sentiment.

[29] Ms. Kovtanuka was not merely going along with the scheme. She was independently participating in the illicit endeavor.

[30] One must keep in mind that the fraud herein cannot be characterized as a victimless crime. Again, it is worth noting the Victim Impact Statement of Aviva Insurance Company of Canada which reads in part:

While one may think that the monetary amount that Ms. Kovtanuka has been convicted of defrauding Aviva is inconsequential to a large insurance company, in reality her actions have significant consequences for both Aviva and its many insured. Statutory no-fault accident benefits are mandatory insurance benefits that are included in all policies of auto insurance in Ontario. Their purpose is to ensure that people who are injured in car accidents, whether minor or catastrophic, have quick and guaranteed access to appropriate and well-defined insurance benefits to assist them in their time of need. In order to ensure that auto insurance, including these no fault benefits, is accessible to as many Ontarians as possible, both insurers and legislators have made efforts to keep premiums affordable. Unfortunately, insurance fraud has a negative impact on the ability of the public to access automobile insurance. Fraudulent claims, including those for no-fault accident benefits, can at times be abused by insured [persons] and also by individuals that operate within the medical, paramedical and legal communities. When this happens, insurance premiums go up for everyone, and honest members of the community who do not make fraudulent claims but must pay premiums for auto insurance are negatively impacted.

Similarly, insurance companies must incur considerable costs associated with adjudicating, investigating, and at times unknowingly paying these fraudulent claims. These costs are not inconsequential, even for large companies. A 2012 report submitted to the Ontario government by the Province's Auto Insurance Anti-Fraud Task Force included the outcome of research commissioned from the accounting firm KPMG and verified by Ernst & Young, which estimated that auto insurance fraud cost insurers in Ontario between $768 million and $1.56 billion in 2010 amounting to $116.00 to $236.00 per average premium. As no dedicated auto fraud investigation unit exits within law enforcement, auto insurers and the Insurance Bureau of Canada must also conduct and fund their own investigations and then take their discoveries to the police, which increases the costs associated with these fraudulent claims. In Ms. Kovtanuka's case, the total cost of the investigation was well over $100,000.00

[31] It must be remembered that this fraudulent activity would have gone undetected but for the twinge of conscience on the part of Mr. L. and his subsequent notification to his insurance adjustor.

Mitigating Factors

[32] Ms. Kovtanuka is thirty-two years of age. She was born in Latvia in 1985 and came to Canada with her parents and siblings in 2004.

[33] She has no prior criminal record.

[34] She has an eight and a half year old daughter. Ms. Kovtanuka is divorced and receives $200.00 per month from her ex-husband by way of child support.

[35] Ms. Kovtanuka has demonstrated that she is a hardworking and intelligent person. She has taken on employment opportunities in order to support herself while upgrading her education and raising her daughter.

[36] Ms. Kovtanuka graduated from York University with a Bachelor of Arts with honours in June of 2012. She received her diploma as a paralegal with honours from Herzing College in October of 2012. She became licenced to provide legal services by the Law Society of Upper Canada on April 3, 2013. Ms. Kovtanuka successfully completed the graduation requirements for the Online Immigration Practitioner Certificate Program on December 11, 2015 from the Canadian Society of Immigration Consultants.

[37] Ms. Kovtanuka is currently in the midst of completing a law program through University of London in the U.K. It is the accused's intention to apply her credits at a Canadian law school with the hope of gaining a law degree in Canada and becoming a lawyer.

[38] Commencing in October of 2014, Ms. Kovtanuka was employed as a substitute for a legal assistant in a law office that included the practices of Ian Shoub and Aaron Spektor. Mr. Shoub noted in a letter dated June 14, 2017 that throughout her employment in his firm, Ms. Kovtanuka conducted herself in an honest, diligent and responsible manner. At no time did he have any concerns with respect to Ms. Kovtanuka's work ethic or integrity. Her attitude and behaviour remained constant, regardless of the task at hand or the person she was dealing with. Mr. Shoub concluded that it is not unreasonable to suggest that the present offence is entirely out of character.

[39] Additional letters of support were filed by various professionals echoing the theme that the criminal conduct that Ms. Kovtanuka has pleaded guilty to is completely out of character.

[40] Ms. Kovtanuka is extremely remorseful with respect to her conduct. Obviously, her plea of guilty addresses the issue of remorse. In court, Ms. Kovtanuka tearfully expressed her remorse for her criminal conduct. Mr. Leon Levin, a paralegal, noted in his letter dated October 24, 2017 that the accused has told him on numerous occasions how remorseful and ashamed she feels.

[41] Ms. Kovtanuka has used her recent experience before the criminal courts to educate up and coming paralegals as to the crucial importance of honesty in dealing with the public trust aspect of their profession. Steven Parker of the Ontario Paralegal Association noted that Ms. Kovtanuka spoke at a monthly meeting of his association providing a cautionary tale to the members. He noted that the presentation was well received. Likewise, Ms. Kovtanuka attended two classes at the Canadian Business College and addressed the paralegal classes for three hours on each occasion regarding her experience and answered questions posed by the students. These presentations were considered thorough and insightful and they were very much appreciated by the students.

[42] I find that addressing the new wave of paralegals took courage and that such presentations would certainly drive home the importance of the concept of public trust and the breaching of said public trust and the ensuing consequences.

[43] Ms. Kovtanuka has already performed 100 hours of volunteer work with the Jewish Russian Community Centre of Ontario. She is prepared to undertake another 200 - 300 hours of community service as part of her sentence.

[44] The court recognizes that Ms. Kovtanuka had only begun her career when she unfortunately made a very bad business and professional decision, namely, becoming involved in facilitating an insurance rip-off. The accused had taken over space near the office of Dr. Hayes and therefore was conveniently located to further the interests of Dr. Hayes. Inexperience and a lapse of good judgment put Ms. Kovtanuka in the crosshairs of disaster.

[45] Ms. Kovtanuka has paid an extremely high price for her criminal conduct. She was arrested at her office in the presence of her then six and one-half-year-old daughter. Unlike most accused, Ms. Kovtanuka, also discovered herself in the eye of her fifteen minutes of fame or more accurately infamy. The insurance scam made the news in a major way and Ms. Kovtanuka was front and centre on T.V., on radio, and on-line. Her fledging practice vanished in a flash. Family, friends, colleagues and clients deserted her in droves. She became the object of scorn and shame. This isolation remains to this day.

[46] Counsel pointed out that his client had had a very positive and jovial outlook on life prior to her arrest. Subsequently, she began to suffer from anxiety attacks and sought out medical assistance. Dr. Arbitman's report dated September 8, 2017 indicates that Ms. Kovtanuka is suffering from an Adjustment Disorder with anxiety and depression and panic attacks. She is currently on prescribed medications to address her health issues.

[47] The court must recognize that Ms. Kovtanuka's involvement in the criminal scheme was short-lived and resulted in a nominal financial gain. I accept that Aviva Canada Insurance expended significant resources to unravel the business model that Dr. Hayes created. However, I would apportion very little of this cost to Ms. Kovtanuka.

[48] As a result of Ms. Kovtanuka's part in the fraud, she also must deal with the financial implications in pending civil litigation.

[49] Ms. Kovtanuka has a date with the Law Society to determine whether she will be disbarred for her criminal conduct. Mr. Spektor rather dramatically suggested that if I were to register a conviction in this matter that it would be tantamount to the final nail in the coffin as it relates to the accused's disbarment proceedings. I am confident that the Law Society will apply the proper principles when they deal with the issue of disbarment. Obviously, a conviction is less helpful than a conditional discharge might be but I doubt that a conviction can be equated to the final nail. In any event, the ultimate decision maker regarding the issue of disbarment is the Law Society of Upper Canada.

[50] Ms. Kovtanuka's plea of guilt is a significant mitigating factor. By pleading guilty, she has saved four days of trial time.

Disposition of Other Accused Persons

[51] Two other individuals have pleaded guilty and have been sentenced.

[52] Dr. Hayes was convicted for his role and Justice P. Reinhardt sentenced him to a conditional sentence of 6 months plus 12 months of probation. I have been advised that this was a joint submission. It would appear that Dr. Hayes was the man behind this entire adventure and was the primary beneficiary of the funds fraudulently obtained.

[53] I found Ms. Osacenco guilty for the role she played in the scheme and I gave her a conditional discharge and placed her on probation for 12 months. In addition, she was the subject matter of a free standing restitution order in the amount of $1,500.00. Ms. Osacenco was a receptionist for Dr. Hayes. She actively participated in preparing false documentation for Dr. Hayes' operation. In arriving at my determination, I took into account that her role was on the low end of the chain of command; that she acted out of fear of losing her job; that she pleaded guilty; that she was remorseful; that she lost her employment when the house of cards came tumbling down; that she had limited education that would hamper future employment; that she was caught up in the media exposure and thus suffered additional humiliation and notoriety; and she was fifty-seven-years of age making her future employment prospects rather dim especially if a criminal record was added to her woes.

Sentencing Principles in Play

[54] Ms. Stokes and Mr. Spektor are in agreement that the breach of public trust evidenced in this case is a very serious matter.

[55] Likewise, both the Defence and the Crown acknowledge that if the court is considering the appropriateness of granting Ms. Kovtanuka a conditional discharge in the particular circumstances of this case it must be ever mindful of the factor that Ms. Kovtanuka was a member of the legal community at the time of her participation in the fraud. Mr. Spektor quaintly refers to Ms. Kovtanuka's paralegal status as the elephant in the room.

Case Law

[56] Mr. Spektor referred me to a number of decisions to support his position that a conditional discharge for Ms. Kovtanuka would be appropriate in the case at bar. I do not intend to reference every authority provided but it is worthwhile to consider two of the cases in assessing the appropriateness of a conditional discharge for Ms. Kovtanuka.

[57] In R. v. Snyder, [2011] O.J. No. 4904, Justice M. Greene of the Ontario Court of Justice granted the accused a conditional discharge. Mr. Snyder pleaded guilty to nine counts of fraud against his employer totalling $9,300.00. The offences occurred over a three-year time period and included some level of sophistication and planning. The motivation for the criminal conduct had been rooted in greed. The accused had no prior criminal record; had sold his house to make restitution; entered a plea of guilty; was remorseful and had been under stress at the time of the offences.

[58] Justice Greene summarizes the general objectives of sentencing and the particular principles of sentencing regarding breach of trust at paragraphs 18-20 of her reasons and neatly pulls together the law as it relates to conditional discharges at paragraphs 21-22.

[18] In determining the appropriate sentence, I must consider all the objectives of sentencing. They include deterrence, denunciation, rehabilitation, instilling responsibility in offenders, separation from society where necessary, and reparation to the community where possible. How much weight I place on any one of these objectives will depend on the facts of each case, as sentencing is, by and large, an individual process.

[19] In this case, given it is a breach of trust fraud, the appellate courts have made it clear that deterrence is a paramount consideration, as is denunciation. Frauds are one of those few cases where there is clearly a cost benefit analysis by offenders; that is, they have time to assess. This was not an impulsive act but one where there was time to consider the consequences of his actions, and in my view deterrence and denunciation are primary factors. Having said that, I cannot ignore the rehabilitative component of a sentence given his prior good conduct and his personal circumstances.

[20] In recent years the appellate courts have taken a strong stance against large breach of trust fraud, and incarceration has been the norm not the exception. In this case, however, because of the extensive mitigating factors, both the Crown and the defence agree jail is not necessary to meet the objectives of sentencing. The sole issue is whether the imposition of a criminal record is necessary given the gravity of the offence.

[21] Conditional sentences can only be granted where it is in the best interest of the accused and not contrary to the public interest. It is clearly in the accused's interest to receive a discharge for his work and travel because of his status in Canada. The question here is whether, because of the time of the offence; that is, being three years, and the breach of trust and the amount of money involved, would it be contrary to the public interest.

[22] A discharge is not confined to any offence or class of offences other than those that are statutorily excluded. The offences involved here are not statutorily excluded. Having said that, the nature of the offence may still require the imposition of a criminal record. The public interest component of a discharge takes into account the public interest in deterring others from committing similar offences; R. v. Fallofield, 13 C.C.C. (2d) 450 (BCCA). But it is important to note that general deterrence is only one factor to consider; R. v. Sears, 39 C.C.C. (2d) 199 (OCA). In R. v. Cheung and Chow, (1976) 19 Crim. L.Q. 281, (Ont. C.A.), the court held the suspended sentence is not necessarily a greater deterrent than a conditional discharge. Speedy apprehension, arrest and public disgrace can be sufficient deterrents. Discharges have also been deemed appropriate where the finding of the guilt provided sufficient humiliation to act as a deterrent; R. v. Blahey, 7 W.C.B. 214. Discharges have also been deemed appropriate where the offence is completely out of character of the accused and where the accused was in the midst of some kind of emotional or mental turmoil or some other unusual disturbance in his life at the time of the offence; R. v. Taylor, (1975), 24 C.C.C. (2d) 551 (Ont. C.A.).

[59] Justice Greene, at paragraph 24, also highlights the need to not only focus on the mitigating factors but to be mindful of the aggravating factors as well.

[24] However, the analysis cannot just focus on the mitigating factors. The analysis must also look at the aggravating factors and the gravity of the offence: that is, the nature of the fraud itself, the amount of money involved, the breach of trust. …

[60] In R. v. Truelove, [2003] O.J. No. 1295, Justice L. Feldman refused to grant a conditional discharge to the accused chiropractor who had made about 800 fraudulent claims against the Ontario Health Insurance Plan in the amount of $8,086.00 over six years. The accused had pleaded guilty and had made full restitution. The court found that the fraud was planned, pervasive and long-term in effect and that despite significant mitigating and sympathetic factors, a conviction was necessary for general deterrence and to signal the seriousness of the offence.

Balancing the General Principles of Sentencing with the Particular Factors of the Accused

[61] A breach of the public trust by a member of the legal community immediately triggers the principle of general deterrence and denunciation. Barristers and solicitors and paralegals are expected to discharge their duties to their clients and the public at large in the most ethical manner possible. Needless to say, participating in a fraudulent scheme that causes insurance companies to pay out illegitimate claims strikes at the very heart of integrity and honesty, the touchstones of our legal system.

[62] The Crown's position for the registration of a conviction and the imposition of a conditional sentence struck me as very reasonable at first blush.

[63] Members of the legal community who involve themselves in circumstances such as Ms. Kovtanuka finds herself should not expect courts to be embracing the conditional discharge provisions of the Criminal Code save in the most exceptional cases. The question remains whether Ms. Kovtanuka's circumstances are such that this court can consider that a conditional discharge is in her best interest and NOT CONTRARY TO THE PUBLIC INTEREST.

[64] I confess that when Mr. Spektor commenced his submissions for a conditional discharge I was rather skeptical that he would be able to compile sufficient material to cause me to embrace a finding of guilt and grant Ms. Kovtanuka a conditional discharge.

[65] At the end of Mr. Spektor's presentation, I had been presented with a very impressive list of mitigating factors.

[66] Ms. Kovtanuka certainly has what I would consider the minimum factors to support a finding of guilt and the registration of a conditional discharge, namely: a plea of guilty; a sincere expression of remorse; no prior criminal antecedents; actions that are out of character.

[67] Ms. Kovtanuka has already performed 100 hours of community service and has actively and meaningfully participated in addressing paralegal students as to the perils and results of conduct that amounts to breach of the public trust.

[68] Ms. Kovtanuka also has personal factors that should be weighed in the sentencing process. She is a young mother attempting to raise her young daughter with limited outside resources. She had only commenced her practice when she ill-advisedly became associated with Dr. Hayes' enterprise. Fortunately, this scheme was collapsed almost at the same time as she had become engaged in it.

[69] Regardless of the findings of this court, Ms. Kovtanuka also faces civil consequences for her actions as well as potential professional ramifications. She has worked very hard to educate herself while raising her daughter and is now in danger of losing everything for her serious lapse in judgment.

[70] Ms. Kovtanuka has paid a medical price for her criminality and is under a doctor's care to address those issues.

[71] Some of Ms. Kovtanuka's mitigating circumstances also directly address the issues of denunciation and deterrence. Her very public arrest and the ensuing media attention certainly has brought home to her and the public-at-large the seriousness of the crime. This notoriety not only had professional ramifications but personal ones as well. She was ostracized by family members, friends and associates. Her crime has not gone unnoticed and she has felt society's condemnation in a way many accused persons do not.

[72] Ms. Kovtanuka finds herself in a most precarious position. The registration of a conviction in this matter might be viewed as the straw that broke the camel's back.

Conclusion and Sentence

[73] I find that the unique and cumulative mitigating circumstances of Ms. Kovtanuka are such that it is in her best interest and not contrary to the public interest to grant her a conditional discharge and place her on probation for a period of one year on the following terms:

1. Be of good behaviour and keep the peace.

2. Report to a probation officer today and thereafter as required.

3. Perform 100 hours of community service at the direction of the probation officer or his/her designate. The work is to be commenced within 60 days of today's date at a minimum rate of 10 hours per month. Once the work has been completed, written proof of same will be provided to your probation officer.

[74] Ms. Kovtanuka is subject to a free standing restitution order in the amount of $1,000.00.

[75] There is a victim fine surcharge in the amount of $100.00.

Released: November 16, 2017

Signed: Justice Charles H. Vaillancourt