IN THE MATTER OF THE RACING COMMISSION ACT, S.O. 2000, c. 20;

AND IN THE MATTER OF ONTARIO RACING COMMISSION LICENSEE

BRUNO SCHICKEDANZ

On December 22, 2000, the Director of the Ontario Racing Commission, by Order, proposed to revoke the thoroughbred owner’s licence of Bruno Schickedanz in accordance with section 21 of the Racing Commission Act, S.O. 2000, c. 20 (the Act).

On January 3, 2001, Bruno Schickedanz requested a hearing before a panel of the Ontario Racing Commission with respect to the proposed Order in accordance with sections 22(2) and 22(3) of the Act.

On March 22, May 14-16, and June 21, 2001, ORC Chair Stanley Sadinsky, Q.C. convened to consider the matter, along with Vice Chair Herbert Bryant and Commissioner Patricia Bullock.

Counsel Dan McMahon and David Tanovich appeared for Bruno Schickedanz and Counsel Joanne Mitchell and Don Bourgeois appeared for the ORC Administration.

On hearing the witnesses for Bruno Schickedanz and the Administration, on hearing the submissions of the parties, and on reading the exhibits filed, the ORC panel concluded Mr. Schickedanz’s thoroughbred owner’s licence should not be revoked as the Director proposed in his Order. The Director’s proposed Order to revoke the owner’s licence of Bruno Schickedanz is hereby set aside.

Pursuant to section 22(6) of the Act, the ORC panel directs that the Director replace Bruno Schickedanz’s current owner’s licence with a probationary licence and to renew that licence annually until the end of year 2003 if there are no further violations by Mr. Schickedanz of any of the applicable statutory provisions or the Rules of Racing.

As a condition of issuing a probationary licence, the ORC panel requires that Bruno Schickedanz donate the sum of $100,000.00 to the Avelino Gomez Memorial Foundation forthwith.

The Commission’s Reasons for Decision are appended to this Ruling.

DATED this 10^th^ day of July, 2001.

BY ORDER OF THE COMMISSION_________________________

Jean Major

Executive Director

REASONS FOR DECISION

On December 22, 2000, the Director of the Ontario Racing Commission (ORC), Jean Major (Major), by Order proposed to revoke the ORC thoroughbred owner’s licence of Bruno Schickedanz (Schickedanz) in accordance with Section 21 of the Racing Commission Act, S.O. 2000, c. 20 (the Act).

On January 3, 2001, Schickedanz requested a hearing before a panel of the Commission with respect to the proposed Order in accordance with Sections 22(2) and 22(3) of the Act. That hearing commenced before us on March 22, 2001, and continued on May 14, 15, 16 and June 21. At the hearing, Joanne Mitchell and Don Bourgeois appeared for the Administration of the ORC and Dan McMahon and David Tanovich appeared for Schickedanz.

The Administration called three witnesses, O.P.P. Detective Constable Laura Easterbrook (Easterbrook), R.C.M.P. Sergeant Jan Chorney (Chorney), and Jean Major. Mr. McMahon called a total of 21 witnesses, lawyer, Eric Lewis (Lewis), thoroughbred trainers Barbara Pirie (Pirie), Abraham Katryan (Katryan) and Layne Giliforte (Giliforte), O.R.C. Director of Thoroughbred Racing Ed Hall (Hall), thoroughbred owners James Ogilvie (Ogilvie) and Jim Clark (Clark), Secretary/Manager of the Jockey’s Benefit Association of Canada, Irwin Driedger (Driedger), Jockey’s Agent, Tom Patton Jr. (Patton), Jockey, Patrick Husbands (Husbands), racing fans, Compton Ferreira (Ferreira), Katherine Dalton (Dalton) and Larry Campbell, member of St. Paul’s Lutheran Church, Muriel Meitz (Meitz), Standardbred Owners Betty Strong (Strong) and Karen English (English), Veterinarian, Dr. Ted Crocker (Crocker), St. Paul’s Lutheran Church Pastor Patricia Giannela (Giannela), Reverend Guenther Dahle of the Eastern Synod of the Evangelist Lutheran Church and Race Secretary at Fort Erie Racetrack, Philip Brown (Brown).

It is undisputed that Schickedanz, his companies and others were charged with defrauding the Canada Housing and Mortgage Corporation (CMHC) and other financial institutions of a sum of money exceeding $5,000 between January 1, 1991 and December 31, 1996, contrary to section 380(1)(a) of the Criminal Code of Canada. On October 20, 2000, the charges against Schickedanz personally were withdrawn and the same charge was laid against B.G. Schickedanz Investments Limited (the Corporation) and a guilty plea was entered by Schickedanz on behalf of that Corporation. (see Exhibits 1, Tab 2 and Exhibit 4) The Corporation was ordered to pay restitution in the sum of $450,000.00 to CMHC and $50,000.00 to charity. The funds were ultimately paid by another company owned by Schickedanz.

THE ISSUES

There are two central issues before us for determination:

i) Are there reasonable grounds to believe that while Schickedanz carries out activities as an owner of thoroughbred horses, he will not act in accordance with law, or with integrity, honesty, or in the public interest, having regard to his past conduct? (see Section 19(a) of the Act)

ii) If we are satisfied that there are such reasonable grounds, what is the appropriate sanction to apply?

THE BURDEN OF PROOF

Counsel for Schickedanz submitted that in order to succeed in revoking Schickedanz’s licence, the Administration of the ORC must satisfy the following burden of proof:

Nothing short of clear and convincing proof based upon cogent evidence will justify an administrative tribunal in revoking a licence … to gain a livelihood in business.

This quote comes from the case of Coates v. Ontario (Register of Motor Vehicle Dealers and Salesman), 1988 CanLII 4555 (ON HCJ), 65 O.R. (2d) 526 at 536-537 (O.H.C.J (D.C.)). The Coates case bears many similarities to the case before us. There, a company controlled by Coates, pleaded guilty to two counts of fraud and 13 counts of tampering with motor vehicle odometer readings.

Following a plea bargain, charges laid against Coates personally were withdrawn and the company pleaded guilty to the charge against it. Subsequently, the Registrar of motor vehicles proposed to revoke Coates’ registration as a motor vehicle salesman pursuant to legislation that bears some resemblance to the relevant provisions of the Racing Commission Act. Section 5(1) of the Motor Vehicles Dealers Act provides, in part, as follows:

5(1) An applicant is entitled to registration or renewal of registration by the Registrar except where…

(b) the past conduct of the applicant affords reasonable grounds for belief that he will not carry on business in accordance with law and with integrity and honesty; …

In the Motor Vehicles Dealers Act, there is no reference to “the public interest” as there is in the Racing Commission Act, which reads as follows:

19(1) The Director shall refuse to issue a licence to an applicant or to renew the licence of an applicant if,

(a) there are reasonable grounds to believe that, while the applicant carries out activities for which the licence is required, the applicant will not act in accordance with law, or with integrity, honesty, or in the public interest, having regard to the past conduct of the applicant.

In Coates, the Ontario Divisional Court set aside the proposed order of the Registrar on the basis that a company could be convicted of an offence although its officers knew nothing of its wrongdoing. The Court held that the Registrar erred when he presumed that Coates had knowledge of what the company was doing simply because he was its sole shareholder and president. The Court concluded that there was no evidence implicating Coates personally. Mr. Tanovich relied on the following passage at page 536 of the Coates decision as the ratio decidendi of the case:

Nothing short of clear and convincing proof based upon cogent evidence will justify an administrative tribunal in revoking a licence to practice medicine or to gain a livelihood in business. (emphasis added)

The reference in this passage to the practice of medicine is readily understood because some of the earlier case law dealt with physicians and their right to practice their profession. In addition, the high standard set out in Coates is certainly justified when a person’s entire livelihood is at risk, as it appears to have been in that case. However, Coates can be distinguished from this case as here, we are not dealing with physicians or some other traditional profession nor does Schickedanz appear to be earning his livelihood from horse racing. Notwithstanding that his racing operation is very substantial, Schickedanz is clearly heavily involved in the home building and development business as well. (see Exhibit 2, Tab 138)

It is arguable that a lesser standard of proof should apply here for the above reasons. However, we are satisfied that even if the higher standard applies, the Administration of the ORC has met that standard having regard to all of the evidence. In reaching this conclusion, we are not bound by or limited to the evidence that was before the Director. It is clear from the Act, that we are entitled to consider all of the evidence before us and we are entitled to substitute our opinion for that of the Director. (see Section 22(7) of the Act)

THE EVIDENCE

The key issue of fact before us is to determine whether Schickedanz had knowledge of or participated in the elaborate fraudulent scheme that gave rise to his Corporation’s guilty plea. Putting it another way, our task is to determine whether there is clear and convincing evidence linking Schickedanz to the fraud.

We have concluded that there is ample and cogent evidence of this link as follows:

i) Brian Fernandes (Fernandes), an employee of the Corporation, pleaded guilty to fraud by supplying CMHC with false documents. The guilty plea proceeding was held before Mr. Justice L. Thibideau of the Ontario Court of Justice at Brantford, Ontario, on November 20, 2000. (see Transcript – Exhibit 6) During that proceeding, the Crown read on the record an Agreed Statement of Facts wherein it was stated that Fernandes participated in a scheme of falsifying documents and providing them to CMHC. The Agreed Statement of Facts also provided that sales persons were directed by sales and marketing managers to advise prospective purchasers that they needed a minimal down payment or no down payment at all and that the builder would cover the rest of the down payment and closing costs. CMHC was then led to believe that the purchasers were making substantial down payments. The sales and marketing managers reported directly to Schickedanz. (see Exhibit 6, Page 9) The entire scheme was approved by Schickedanz. (see Exhibit 6, Page 18)

ii) Fernandes became employed by the Corporation in July 1992, and participated in the fraudulent scheme since July 1994. The scheme had already been in place and operating since January 1991. (see Exhibit 6, Pages 4 and 17) During the first few months of his employment, Fernandes was suspicious about the legality of the scheme but when he questioned Schickedanz, he was assured on more than one occasion that the scheme was legal. (see Exhibit 6, Page 18)

iii) The scheme included the use of Voucher Addenda and False Gift Letters both of which were used to deceive CMHC. On occasion, false Gift Letters were prepared to show that relatives of purchasers were lending money for the purposes of the down payments. On one occasion, the Corporation issued a cheque with the funds ultimately being transferred to a purchaser to make it appear to a lending institution that the purchaser had made a legitimate down payment. The cheque was signed by Schickedanz. (see Exhibit 6, Page 13)

iv) The Agreements of Purchase and Sale of the homes in question falsely showed that a down payment had been made by the purchasers when, in fact, only a minimal sum was ever paid. These Agreements were signed by Schickedanz on behalf of the Corporation. (see Exhibit 6, Page 10 and Exhibit 4, Page 14)

v) On one occasion, a false letter of employment and T-4 slips were prepared on behalf of the Cambridge Flea Market, a business owned by Schickedanz, indicating that a prospective purchaser of a home was so employed. This letter was used to satisfy lending institutions of the credit worthiness of the purchaser. (see Exhibit 4, Page 19)

vi) The Corporation pleaded guilty to fraud involving a sum in excess of $5,000 by supplying CMHC with false documentation. The guilty plea proceeding was held before Mr. Justice K.G. Lenz on October 20, 2000, at Brantford Ontario. (see Transcript – Exhibit 4) An Agreed Statement of Facts was read on the record by Crown Counsel and was filed as Exhibit 1 in that proceeding (Exhibit 5 in this Hearing). It is clear from the record that Schickedanz was the sole shareholder and a directing mind of the Corporation. (see Exhibit 4, Page 10) The Agreed Statement also provides that -

“The Corporation, its servants and others prepared documents based on false information and, on occasion, forged documents, which were then provided by them, directly or indirectly, to various lending institutions and CMHC, knowing that the false information and forged documents would be relied upon by the lending institutions and CMHC in advancing mortgage funds to persons who would not otherwise qualify for such mortgage because of poor credit rating, poor employment history or, most importantly, because they had not made the requisite down payment on the purchased property.” (emphasis added )(see Exhibit 4, Page 10)

vii) In response to a question from his counsel, Eric Lewis in the guilty plea proceeding as to whether Schickedanz was familiar with the affairs of the Corporation, Schickedanz responded “yes”. (see Exhibit 4, Page 43)

viii) In her evidence in this case, Chorney testified that during her investigation of this matter, she was advised by Ray Keshen (Keshen), one of the sales and marketing managers of the Corporation, that he was instructed by Schickedanz as to the sales methods that the salesmen were to employ in order to encourage purchasers to purchase homes. These methods included the use of false letters of employment, false gift letters, false T-4 slips, the transfer of funds to the purchaser who would then re-transfer the funds as part of his or her down payments, false voucher addenda and fraudulent Agreements of Purchase and Sale. (see Transcript of these proceedings – May 14, 2001, Pages 15-18) As this is hearsay evidence and while we are entitled to consider it, we have given it limited weight.

Chorney testified before us that in her opinion, there was sufficient evidence to successfully convict Schickedanz of fraud. She did not agree to drop the charges against him in return for a guilty plea by the Corporation but that decision was that of the Crown Attorney, Erika Chozik (Chozik). Chozik was also the Crown Attorney on the Fernandes guilty plea proceeding and counsel for Schickedanz relied heavily on a statement that she made to the Court during that hearing. That statement is as follows:

…The sentence with respect to the Corporation (in the proceeding where the Corporation plead guilty to fraud) was, in my respectful submission, not of that much assistance to this court. The Corporation can only be fined. What can be said, with respect to that sentence is that Mr. Schickedanz, through the Corporation, was the only one who essentially restored the victim in this case to its original position by paying the restitution up front, $450,000.00, and making donations to this community in the amount of $50,000.00. Ultimately, that plea was entered into on the basis that the Crown did not have direct evidence to pin knowledge of the fraudulent scheme on the president of the Corporation …(emphasis added) (see Exhibit 6, pages 38-39)

Lewis also testified that after reviewing all of the evidence in the criminal proceedings in his opinion there was insufficient evidence to convict Schickedanz personally. He testified that the Agreed Statement of Facts that was ultimately submitted to the Court on the guilty plea of the Corporation was amended to delete any suggestion that Schickedanz knew of or participated in the fraudulent scheme.

On considering all of the evidence before us, we are satisfied that there is ample direct evidence which is both clear and convincing that Schickedanz knew of and participated in the fraud in question. We derive little assistance from the opinions of Chorney, Chozik and Lewis as to whether there was sufficient evidence to prove a criminal case against Schickedanz where the onus of proof is ‘proof beyond a reasonable doubt’. That is clearly not the standard of proof that applies in the proceedings before us. For the purpose of determining the issues before us as previously described, we are entirely satisfied that a link has been established connecting Schickedanz to the fraud.

Justice Lenz had considerable involvement with the criminal proceedings and we accept the following observations that he made during the sentencing of the Corporation:

During our discussions I heard a great deal about Mr. Schickedanz. Mr. Schickedanz, nor his Corporations have any other criminal record. In the circumstances, they have never before, and I am sure will not hereafter be involved in a scheme such as this. Mr. Schickedanz, who is the sole shareholder in these Corporations and, obviously, the power behind the legal figment is a person who does a great deal for his community and has been rewarded for such. This particular scheme is certainly a slippage in his good character, but he is entitled, in my opinion, to draw on his bank of good character and the Corporation’s prior good record, as it relates to sentencing and, in addition, thereto, it means that the issue of specific deterrence is not really an important one in the sentencing. (see Exhibit 4, Pages 51-52) (emphasis added)

Counsel for the Administration of the ORC asked us to draw a negative inference from the fact that Schickedanz failed to testify before us. The principle relied on is that a court or tribunal is entitled to draw an unfavourable inference when a party to a proceeding does not testify. Such failure amounts to an implied admission that the evidence of the party would be contrary to that party’s case or at least would not support it. (see Sopinka, Lederman and Bryant, The Law of Evidence in Canada, 2^nd^ Ed. Butterworths, Toronto)

Counsel for Schickedanz argued that no such inference should be drawn in this case as the Administration had not presented a case for Schickedanz to meet and accordingly, there was no need to call his client as a witness.

We disagree with the position of counsel for Schickedanz on this issue. As indicated above, there was an abundance of evidence adduced by the Administration for Schickedanz to meet. Also, having regard to the fact this is a licensing matter where Schickedanz is in the best position to address the issue as to whether he knew of and participated in the fraudulent scheme in question and he failed to do so. We do draw a negative inference in that respect. Counsel for Schickedanz referred us to the case of Amourgis v. Law Society of Upper Canada, [1984] O.J. No. 1415 (H.C.J(D.C.)) where in contempt of court proceedings, the Court refused to draw a negative inference from the failure of the lawyer in question to give evidence. The Court noted that the onus on the Law Society in the proceeding was to prove its case beyond a reasonable doubt and as the Law Society had not met its onus, there was no obligation on Amourgis to testify. That case is distinguishable from the case before us on the basis that here, the Administration had met the onus on it.

Finally and significantly, Schickedanz has diminished the reputation of the horse racing industry by his activities in his building business and by permitting his name, Bruno G. Schickedanz, which is used to identify his stable to be associated with a Corporation that bears the same name viz, B. G. Schickedanz Investments Limited. It was clear to us that many witnesses that we heard were unable to separate these two legal entities and some of the publicity that this case received was unable to do so as well. (see Exhibit 7) This continued association remains a blight on the industry and Schickedanz must bear the responsibility for arranging his business and racing affairs in that manner.

Accordingly, we have answered the question posed in the first issue above in the affirmative.

PENALTY

For us, the most difficult aspect of this case is to determine the appropriate sanction to apply having regard to all of the circumstances.

The evidence on penalty overwhelmingly establishes that Schickedanz has an excellent reputation in the horse racing industry, in his church and in his community. The oral evidence adduced on his behalf clearly establishes this conclusion. While it is true that virtually all of the witnesses called on his behalf to speak to his reputation did not know a great deal about the details of the criminal charges that were brought about against him and against the Corporation, they indicated that they thought no less of him as a result.

Aside from the oral evidence adduced, two extensive volumes of documents were filed dealing with Schickedanz’s good character. (see Exhibit 2) These testimonials included personal letters of support (16), letters from racing officials (12), letters from licensed owners (20), licensed trainers (11), licensed jockeys and jockey’s agents (12), a licensed trade person; veterinarians (5), Ontario Jockey Club Staff (5), racing fans (165) and even letters from persons in the home building industry (6). This constitutes a most impressive level of overall support.

An additional factor for consideration is the fact that the fraud in question took place between 1991 and 1996 although it was not discovered until 1998-1999. The successful prosecution of the Corporation took place in October, 2000. In all that time, there is no evidence that Schickedanz participated in any fraudulent activity whatsoever in the racing industry. The fraud was isolated to one segment of his life, viz. the home building business, and was not a part of his horse racing, church or community activities. Accordingly, it was submitted by counsel for Schickedanz that there was no reason to interfere with Schickedanz’s thoroughbred owner’s licence. It was also submitted that to suspend this licence would negatively impact on the horse racing industry as a whole and on many persons who are employed by him and who are wholly innocent of any related wrongdoing.

There is abundant evidence to support the nature, size, extent and value of Schickedanz’s contribution to horse racing. Over the past years, he has employed over 100 people in his racing operations and their economic impact in both 1999 and 2000 exceeded $6 million. (see Exhibit 2, Tabs 138, 139, 140, 141) To suspend or cancel Schickedanz’s owners licence would be highly detrimental to his employees and others and to the industry in Ontario. Schickedanz is one of the top thoroughbred owners in Ontario and in North America and is currently the leading owner at Fort Erie Racetrack.

Ordinarily in a case such as this, revocation of a licence for a fixed period of time would be the appropriate penalty. However, in this case, it serves no useful purpose except to demonstrate the importance of making it abundantly clear that all those who participate in horse racing are expected to be persons of honesty, integrity and good character. This is a fundamental principle which we strongly endorse but we have concluded that a different sanction is required and appropriate in the circumstances of this case.

Many cases have been cited to us in support of the principle that persons should be excluded from participating in horse racing as licensees who could reasonably be expected to seek improper gain or to stray from the highest standard of honesty and integrity and thereby bring the industry into disrepute. We accept the principle that the fundamental tenet of horse racing is integrity. (see for example Re Martino, [2000] O.R.D.C. No. 20, Re Frank Pugliese, January 26, 2000, O.R.C, Re Flamboro Downs Holdings and the Belmont Hotel, July 7, 1995, O.R.C.Re Tot, [1994] O.C.R.A.T.D. No. 113, (Ontario Commercial Registration Appeal Tribunal), Re Hart, [1994] O.C.R.A.T.D. No. 153 (Ontario Commercial Registration Appeal Tribunal), Re Gautreau, [1977] O.C.R.A.T.D. No. 135 (Ontario Commercial Registration Appeal Tribunal and Re Ontario Historical Society, [1996] O.C.R.A.T.D. No.2 (Ontario Commercial Registration Appeal Tribunal). Many of these cases speak to the ‘public interest’ which our Act charges us to protect. In the case before us, in applying the correct sanction we have the difficult task of balancing the risk of diminishing the integrity of the industry with doing justice to Schickedanz and to the industry as a whole having regard to the unique circumstance that exists here.

In sum, we have concluded that we should not revoke Schickedanz’s thoroughbred owner’s licence as the Director had done in his proposed Order and we hereby set it aside. Pursuant to Section 22(6) of the Act, we direct the Director to replace Schickedanz’s current owner’s licence with a probationary licence and to renew that probationary licence annually until the end of the year 2003 if there are no further violations by Schickedanz of any of the applicable statutory provisions or the Rules of Racing.

In addition, as a condition of issuing a probationary licence, we require that Schickedanz donate the sum of $100,000.00 to the Avelino Gomez Memorial Foundation forthwith. The objective of this Foundation is to provide aid to people involved in racing who, through circumstances beyond their control , may require financial assistance to help them through difficult times. In particular, the Foundation provides assistance to ‘backstretchers’ that provide so much devoted care and attention to the equine animal. The Foundation was established in the memory of the late jockey Avelino Gomez who contributed so much to thoroughbred racing in Ontario and whose commitment to his fellow riders and the people in horse racing generally is legendary. By imposing this condition on Schickedanz, we are requiring him to repay something to the industry that has been diminished by his wrongful conduct.

DATED this 10^th^ day of July, 200l

Stanley Sadinsky Q.C.

Chair