COURT FILE NO.: CRIMJ(P) 1095/06

DATE: 20120109

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

HER MAJESTY THE QUEEN

A. A. Esson, for the Crown

• and -

ROBERT CUNSOLO

L. Adler, for the Defence

HEARD: September 23, 2011

JUDGMENT

HILL J.

INTRODUCTION

1After a trial, Robert Cunsolo was found guilty of defrauding the public of money exceeding $5,000.

2The facts of the crime were thoroughly reviewed in the court’s earlier reasons for judgment: 2011 ONSC 1349.

3It falls to be determined what a fit sentence is for the crime committed.

BACKGROUND

4Fouzan Beg, Aldo Munoz, the accused and others engaged in a mortgage fraud on a massive scale. The court concluded beyond a reasonable doubt that the offender, as particularized in the indictment, participated in the crime including in the planning and monitoring relating to the fraudulent scheme to obtain some or all of the proceeds of 23 residential mortgages.

5In the reasons for judgment, the court made these findings:

Turning first to Mr. Cunsolo’s physical connection to the OWF office. On the evidence of the prosecution witnesses Harricharan and Lall, they both met the accused at Val Chowbay’s office in Toronto. Both place Mr. Cunsolo at the OWF boiler room office during the set-up phase in 2003.

Rawl Harricharan recalled, in particular, setting up a fax machine with the accused and Raymond Ramnath (Eggie). John Lall testified that he delivered furniture to the Derry Road OWF office and wrote the accused’s name on his work order and met him at the office.

At trial, Mr. Cunsolo denied any attendance at OWF or involvement with its business operations. On the totality of the evidence, described more particularly below, it has been established that the accused was very much involved with Fouzan Beg’s operation. This evidence tends to confirm the testimony of Harricharan and Lall that Mr. Cunsolo played a part, albeit minor, in the set-up of the OWF boiler room.

Securing the laundered proceeds of the Jane St. fraudulent mortgage in US funds was an integral part of the fraud. In the wake of Beg’s arrest only hours before, and the consequential inability of “Junaid” to participate, there was a race against time to acquire the largest pay-out of funds yet from CCE. While the accused had not previously done a CCE cash pick-up, and there is evidence of his hesitation in entering the mall, on the whole of the evidence, the accused’s February 6, 2004 attendance at CCE was the conduct of an entirely knowledgeable party standing in for Beg bent on scooping the $268,000.00 US without delay.

On a number of documents shown to Mr. Cunsolo when he testified, both pages from his Daytimer and on papers seized from the trunk of his BMW, was written/printed the word “PAiD”.

In examination in-chief, and in particular in Ms. Esson’s cross-examination, the accused was questioned as to whether he had written this word on a number of key documents. Almost without exception, Mr. Cunsolo denied doing so. Resolution of this question is particularly important given that the placement of the word in certain documents (see, for example, paras. 188(5)(6)(9)(10), 201 above) raises the inference that the writer was intimately involved with the mortgage frauds.

I am satisfied that the word ‘paid’ was written/printed as “PAiD” by the accused on various pages in his Daytimer (Ex.#41, pp. 248, 249, 258, 261, 274, 394, 396) and on documents seized from the BMW trunk (Ex.#58, pp. 3-6, 3-7, 3-8, 3-10, 3-11, 3-13, 3-14, 3-15, 3-16, 3-19, 4-9, 4-11, 4-17, 4-18, 4-19).

The only reasonable inference based on the totality of the circumstantial evidence is that Robert Cunsolo was very much involved in the alleged fraud. The documents discovered at the OWF boiler room (paras. 66-82 above) bearing Mr. Cunsolo’s fingerprints or handwriting, and the presence of his Daytimer page at that location, were not as a result of some coincidental transference to the Derry Rd. office. The small notes in the accused’s man purse referring to Junaid Razui and Raf Valencia at Trillium (paras. 121-4 above) and various references in the accused’s Daytimer to properties and individuals relevant to the fraudulent scheme and in particular Ex.#41, pp. 125, 147, 286 (para. 206 above) further evidence the accused’s involvement. Mr. Cunsolo’s possession of the many documents seized from the BMW, some with his fingerprints and some with his handwriting and some with both, demonstrate the accused’s knowledge of the contents of the documents and that he recognized and acted upon them in terms of complicity in the fraud.

On the entirety of the evidence, and in particular having regard to the following documents found to have been in the accused’s knowing possession, the accused’s active involvement in the fraudulent scheme has been established. The accused did not handle the bank drafts described above at para. 193 in the manner he described. His fingerprints were on the bank drafts and his printing of “PAiD” on one because he was responsible for some of the processing and bookkeeping–like functions of the fraudsters. For similar reasons, the accused’s fingerprint came to be on the December 31, 2003 bank draft to CCE (para. 94 above) and the CIBC Credit Advice document relating to an OWF deposit (para. 194 above). As well, the documents entered as Ex. #58: 4-9, 4-10, 4-11, 4-15, 4-17, 4-18, 4-19, 4-22, 4-23, 10-16, 12-17 (see paras. 188(9)(10), 195, 201, 301-2 above) proved to be particularly telling of Mr. Cunsolo’s participation in the fraud.

The entirety of the evidence leaves no reasonable doubt but that Robert Cunsolo was a principal or a party to the alleged fraudulent mortgage scheme. He was not an innocent dupe. While I am unable to agree with the prosecution submission that the evidence safely goes so far as to establish that the accused “directed” or “supervised”, in the sense of overseeing the execution of tasks by others in furtherance of the scheme, the evidence cogently supports the accused’s participation in the fraudulent activity by performing not only a document storage function but also monitoring, undertaking relevant calculations, recording transactions and payments and shares relating to the fraudulent mortgage transactions and, on February 6, 2004, picking up laundered proceeds of one of the mortgages from CCE in furtherance of one of the fraudulent transactions.

THE LOSS AND RISK OF LOSS

6The Agreed Statement of Facts at trial established that the total monies advanced under the 22 mortgages involved in the fraudulent mortgage scheme where funds were advanced totalled about 5 ½ million dollars.

7According to the victim impact evidence (Ex. #4), with the financial lending institutions carrying insurance their loss was somewhat minimized. In many of the high ratio mortgages there was title insurance with Genworth or CMHC or TitlePlus (part of LawPro). After some recovery of the fraudulently obtained mortgage monies, the institutional losses may be summarized as follows:

LawPro (Title plus)

$1,700,000

BBCG Claim Services

$449,000

Stewart Title

$17,000

BMO

$152,000

CMHC

$64,000

Ing

$157,000

Gibraltar Mortgage

$170,000

AXA Pacific Insurance

$280,000

Xceed

$254,000

MCAP

$100,000

CIBC

$141,000

Resmor

$252,000

Laurentian

$180,000

$3,916,000

8The victim impact evidence establishes that in respect of 17 of the properties for which fraudulent mortgages were obtained:

...there were two types of victims (all were victims of Title Fraud). In five of the properties, the owners had resided in their homes for many years (in one case for 29 years). In these cases, the first time the owners of the homes were aware that something was amiss, was when the bank that had lent the money, called, asking why they haven’t made a payment.

The Homeowners would insist (rightfully so) that they had no mortgage on the property. The banks’ position at that time was that through the fraudulent mortgage (and given that the banks had acted in good faith) they maintained a legal claim on that property. The Homeowners had to hire lawyers to clear title and would spend thousands of dollars in fees to accomplish this. I had to notify the banks that the police were actively involved in an investigation to assist the homeowners in clearing title. This was a process that was ongoing 18 months after the fraud occurred.

A further complication in many of the 23 mortgage frauds, is that the fraud ring went to Canada Post and had the mail re-directed so that the innocent homeowners would not receive any information from the banks about the new fraudulent mortgages on the homes. This resulted in lost mail, late bills payments, and confusion about why no mail was coming to the home. Homeowners complained of stress issues, significant amounts of time spent, and financial burdens in dealing with the repercussions of the fraudulent mortgage placed on their properties (and the redirected mail).

In most of the remaining fraudulent cases the issues were more complicated. In many of the cases, the fraud ring, found buyers for the homes that should not have qualified for a mortgage because of inadequate monthly income levels. The fraud ring would inflate the income of the purchasers, produce false documents for the banks, and the purchasers would obtain a mortgage which they had every intention of paying.

Many of these purchasers were Spanish and were purchasing their first home (their income was not high enough to have purchased a home previously). Some barely spoke English (many knew Aldo Munoz). They had little understanding of the process and basically were told that the fraud ring could help them purchase a home and just did what they were told.

These mortgages were almost all high ratio so the mortgages were insured by Genworth or CMHC. The purchasers had to pay thousands of dollars for the insurance. The purchasers struggled to make the monthly payments due to their limited income. The fraud ring then placed fraudulent mortgages on these properties. The ring already had the knowledge and documentation regarding these properties because they had been involved in the initial purchase.

The purchasers now became victims of a Title Fraud. They had to hire lawyers to clear title. One of the victims advised me that they could scarcely afford the mortgage payments and could not afford to hire a lawyer to clear title. Some of the victims lost their homes...

THE CO-ACCUSED

9As stated in the Agreed Statement of Facts at trial, the day-to-day operation of OWF’s activities was left in the hands of Fouzan Beg and Aldo Munoz.

10Aldo Munoz fled to Argentina shortly after Fouzan Beg’s arrest on February 6, 2004.

11On February 23, 2005, about a year after his arrest, Beg pled guilty in the Ontario Court of Justice to a number of charges relating directly or indirectly to the mortgage fraud including a ‘fraud over’ charge, personation, two counts of unlawful possession of a counterfeit mark, and fraudulent possession of credit card information. As well, the accused pled guilty to failure to comply with an undertaking. The accused had no criminal record. He was 23 years of age when he committed the offences. The facts read into the record and agreed to by the defence in support of the pleas confirmed Beg’s role as a prime mover in the fraudulent mortgage scheme.

12At Beg’s sentencing hearing, the Crown sought to have a 6-year penitentiary sentence imposed while the defence submitted that the time served said to be equivalent to two to three years’ imprisonment would be a fit disposition. On February 14, 2006, Beg was sentenced on the fraud charge to 15 months’ incarceration beyond credit for 19 months’ pre-sentence custody and 2 months further credit on account of onerous bail conditions when on judicial interim release custody and 3 years’ probation and a restitution order in the amount of $5,223,500. On the remaining counts, the offender was sentenced to 15 months’ incarceration on each count concurrent to one another and consecutive to the fraud sentence. In effect, the global sentence was 3 years’ incarceration (19 + 2 + 15 = 36 months). The Crown did not appeal the sentence. Beg has made no restitution under the court order.

MR. CUNSOLO’S BACKGROUND

13The offender is currently 42 years of age (D.O.B. November 4, 1969). He completed high school and one year at Ryerson University. Married in 1992, the offender has been separated since August 2005. Mr. Cunsolo shares custody of his 12-year-old son. He is currently unemployed.

14Prior to his arrest, the offender had been employed as a real estate agent with ReMax 2000 for five years. After his arrest, Mr. Cunsolo was dismissed by ReMax. The Real Estate Council of Ontario suspended the offender’s realtor’s licence. He has not applied for reinstatement.

15Although Mr. Cunsolo has two younger adult brothers, at present only he provides care-giver assistance to his parents. The offender currently resides with his parents. His 71-year-old father has a number of health issues the most serious of which is ALS (Amyotrophic Lateral Sclerosis), a progressive and irreversible disease of the nervous system. With decreased muscular and respiratory function, the offender’s father uses a walker and is on home oxygen. There have been hospitalization sessions. As an out-patient, he has several treating doctors. Robert Cunsolo assists his father to eat, shower, shave, dress, take medication and get to appointments. He shops for his parents and drives them as necessary.

16Mr. Cunsolo was in custody for three (3) days following his arrest. He was released on a recognizance on February 9, 2004 which included a restrictive house-arrest like condition.

17On August 26, 2005 Mr. Cunsolo was arrested and charged with drug-related offences and breach of bail. His prior recognizance was revoked and he remained in custody until October 3, 2005 (a total of 38 days) when he was again admitted to judicial interim release on conditions. Those conditions included house arrest, although they were gradually eased starting in July of 2006. By January 15, 2008, Mr. Cunsolo was acquitted of all charges.

POSITIONS OF THE PARTIES

The Crown

18On behalf of the Crown, Ms. Esson submitted that Beg, Munoz and the offender were all equals in terms of degree of participation in the fraud. It cannot be said that there was a hierarchy within this group or that Mr. Cunsolo was subordinate to Beg.

19The Crown submitted that general deterrence is the paramount sentencing principle in a large-scale fraud warranting a penitentiary sentence for Mr. Cunsolo of 3 to 5 years’ incarceration. With such a sentence, it was argued, there is no disparity with the disposition for Beg who entered a very early guilty plea.

20In outlining the gravity of the offences, Crown counsel noted the degree of planning and complexity and sophistication of the fraudulent scheme, the large-scale nature of the crime with over $5,000,000 advanced over many months with nearly four million dollars of quantifiable loss with very limited recovery, an apparent motivation of greed, and a collapse of the scam only with the occurrence of arrests.

21Ms. Esson submitted that the offender benefitted from his participation in the fraudulent scheme. The Crown is unable to identify the total of the proceeds which made their way to Mr. Cunsolo from the funds laundered through OWF, the James and Associates and Wayne DeLandro accounts, and through the Continental Currency Exchange.

22The Crown acknowledged various mitigating circumstances including Mr. Cunsolo’s first offender status, his loss of employment, the existence of a supportive family, the care-giver status, and the efficient approach of the defence at trial in admitting the details of the fraud. Ms. Esson maintained that with the offender having two brothers and with his mother not being infirm, it cannot be said that the offender is in the position of an exclusive care-giver.

23It was further submitted that there is an absence of certain factors in this case capable of ameliorating the sentence to be imposed including no offer of restitution, and no remorse or acceptance of responsibility.

24Ms. Esson argued in favour of a restitution order in the amount of $3,466,000 submitting that those who committed the fraud ought to be jointly and severally accountable for the loss. The offender’s ability to pay is not a relevant consideration.

25The Crown submitted that the offender ought not to be credited for the 38 days of pre-sentence custody in 2005 as that custody is not properly referable to the fraud charge for which the offender was found guilty.

The Defence

26While accepting that general deterrence and denunciation are paramount considerations in large-scale frauds, Mr. Adler submitted that a fit sentence in this case would be a conditional sentence of imprisonment. If the court was not persuaded by such a submission it was alternatively argued that a mid-range reformatory sentence would be appropriate.

27Counsel submitted that while Mr. Cunsolo was not a dupe, he had been “sucked in” by Beg in terms of participation in the fraudulent scheme. Beg and Munoz were “the brains” behind the scheme – the offender was not an overseer, supervisor, director or principal. In particular, paragraph 49 of the court’s earlier reasons, the Agreed Statement of Facts at trial, and the facts supporting Beg’s guilty pleas, evidence Beg’s significantly deeper involvement in the scam.

28Mr. Adler further submitted that Mr. Cunsolo never received any personal benefit or proceeds from the fraud. Counsel submitted that the offender “wasn’t benefitting”, that he “never had any proceeds”, and that there existed no direct evidence that even “one cent came to him”. Counsel observed that in the many years since the fraud the Crown has failed to bring any of the fraudulent proceeds to the feet of the offender.

29While acknowledging the offender’s conviction for participation in a large-scale fraud with loss of about four million dollars, the defence emphasized several mitigating factors including the offender’s lack of a prior criminal record, the loss of his livelihood, the severity of judicial interim release conditions early on, the existence of a supportive family, a trial conducted only on legitimate justiciable issues without victims having to testify, and the offender’s role as primary care-giver for his ill father.

30Also noted was the absence of a factor frequently encountered in fraud cases - a breach of trust.

31Mr. Adler argued that with Beg being sentenced to an effective sentence of 3 years’ incarceration, given Beg’s status as a mastermind of the scheme, the sentence upon Mr. Cunsolo should be significantly lower considering the offender’s limited participation, lack of benefit, and shorter duration involvement. Although Beg pleaded guilty, it was not an early plea and the fraud was committed while Beg was on bail.

32The defence opposed an order for restitution on the basis of a lack of proceeds received by the offender and his inability to pay.

33Mr. Adler advocated that, beyond the brief pre-sentence custody in 2004, the offender should receive 2:1 credit for the pre-sentence custody served in 2005 as his bail on the fraud charge served to make the 2005 bail hearing a reverse onus proceeding on all charges and because the custody served was referable to the s. 524 Code order vacating his bail on the fraud charge.

THE FIT SENTENCE

Relevant Principles

34At the time of the commission of the offence in the present case, the offender’s crime was punishable by only a 10-year maximum term of imprisonment. Section 380.1 of the Code (sentencing – Aggravating Circumstances) had not been enacted.

35“Fraud over $5,000 is a serious offence, attracting a maximum sanction of 10 years in jail”: R. v. Bogart (2002), 2002 CanLII 41073 (ON CA), 167 C.C.C. (3d) 390 (Ont. C.A.), at p. 396 (leave to appeal refused [2002] S.C.C.A. No. 398).

36When sentencing for fraud involving substantial dishonesty, the principles of general deterrence and denunciation merit paramount consideration. In R. v. Drabinsky and Gottlieb, 2011 ONCA 582, at paras. 160, 173 (appl’n for leave to appeal filed by Drabinsky, [2011] S.C.C.A. No. 491), the court observed:

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.

We agree that cases properly characterized as “scams” will normally call for significantly longer sentences than frauds committed in the course of the operation of a legitimate business.

See also R. v. Coffin (2006), 2006 QCCA 471, 210 C.C.C. (3d) 227 (Que. C.A.), at paras. 49, 70,

37“[A] sentence of six years is within the correct range of sentences for major frauds” and sentences in the 3 to 5-year range are common: R. v. Dobis (2002), 2002 CanLII 32815 (ON CA), 163 C.C.C. (3d) 259 (Ont. C.A.), at p. 271; R. v. Drakes, 2009 ONCA 560, at paras. 24-6 (leave to appeal refused, [2009] S.C.C.A. No. 381); R. v. Bertram, [1990] O.J. No. 2013 (C.A.) (QL), at p. 3; R. v. Wilson, 2003 CanLII 48181 (ON CA), [2003] O.J. No. 1047 (C.A.) (QL), at para. 5. Penitentiary sentences in the six-year range have been imposed in cases involving millions of dollars. The Dobis decision, at p. 273, includes at the lower end of “large-scale frauds”, the McEachern case ((1978), 1978 CanLII 2506 (ON CA), 42 C.C.C. (2d) 189 (Ont. C.A.)) involving $87,000 and the fraud in Pierce ((1997), 1997 CanLII 3020 (ON CA), 114 C.C.C. (3d) 23 (Ont. C.A.) (leave to appeal refused, [1997] S.C.C.A. No. 225) in the amount of $270,000, while a $200,000 defalcation was described by Juriansz J. (as he then was) as a large-scale fraud in R. v. Robinson, [2003] O.J. No. 4722 (S.C.J.) (QL), at paras. 4, 11. By way of jurisdictional comparison, in England, on a guilty plea to theft or fraud of sums between GBP100,000 and GBP200,000 the appropriate sentence is in the range of 2 to 3 years’ imprisonment: R. v. Clark, [1997] EWCA Crim 3081, at pp. 4-5.

38General deterrence tends to have greater impact in the case of embezzlement-type crimes, whether fraud or theft – criminal conduct where persons “usually plan and deliberate about it to some extent”: Dobis, at pp. 272-3; R. v. Wismayer (1997), 1997 CanLII 3294 (ON CA), 115 C.C.C. (3d) 18 (Ont. C.A.), at p. 38; R. v. Gray (1995), 1995 CanLII 18 (ON CA), 76 O.A.C. 387 (C.A.), at pp. 398-9 (leave to appeal refused, [1995] S.C.C.A. No. 116); R. v. McKinnon 2005 ABCA 8, [2005] A.J. No. 12 (C.A.) (QL), at para. 60; R. v. Hoy, 1998 CanLII 6024 (BC CA), [1998] B.C.J. No. 1649 (C.A.) (QL), at para. 6; R. v. Reid, 2004 YKCA 4, [2004] Y.J. No. 3 (C.A.) (QL), at para. 13. Put differently, “law-abiding persons, with good employment records and families...are the ones most likely to be deterred by the threat of severe penalties”: R. v. Proulx (2000), 2000 SCC 5, 140 C.C.C. (3d) 449 (S.C.C.), at 503; see also Drabinsky, at para. 160.

39In addition to the usual factors mitigating sentence, such as first offender status, a plea of guilt, cooperation and assistance with the authorities, and the significant impact of incarceration on a third party as in R. v. Bunn (2000), 2000 SCC 9, 140 C.C.C. (3d) 505 (S.C.C.), other circumstances that can serve to ameliorate the harshness of the disposition to be imposed:

(a) “substantial recovery” of the proceeds of the dishonest conduct: Wilson, at para. 9; R. v. Nichols, 2001 CanLII 5680 (ON CA), [2001] O.J. No. 3220 (C.A.) (QL), at paras. 47, 49 (leave to appeal refused [2001] S.C.C.A. No. 508)

(b) the pre-sentence making of restitution is a mitigating factor: Drabinsky, at para. 166; R. v. Pavich, 2000 CanLII 16971 (ON CA), [2000] O.J. No. 4209 (C.A.) (QL), at para. 2; Bogart, at p. 400; McKinnon, at paras. 22, 88-92; R. v. Francis, [2000] O.J. No. 5043 (C.A.) (QL), at para. 2; Clark, at p. 5

(c) where the dishonesty resulted in personal benefit to the accused, was there a motive mitigating the offender’s conduct, whether a medical condition, or addiction, or other motivating cause existing other than greed or financial gain: R. v. Poutney, [2006] O.J. No. 2964 (C.A.) (QL), at paras. 1, 3; R. v. Davies (2005), 2005 CanLII 63757 (ON CA), 199 C.C.C. (3d) 389 (Ont. C.A.), at pp. 399-401; Bogart, at p. 400; McKinnon, at para. 47; R. v. McIvor (1996), 1996 ABCA 154, 106 C.C.C. (3d) 285 (Alta. C.A.), at pp. 286-7; R. v. Harding (2007), 2006 SKCA 118, 213 C.C.C. (3d) 543 (Sask. C.A.), at pp. 548-9; R. v. Gulam et al., [2006] EWCA Crim 2320, at para. 8; R. v. Barrick (1985), 81 Cr. App. R. 78 (C.A.), at p. 82; Clark, at p. 4.

40A sentencing court may take into account in the exercise of its sentencing discretion, not as an aggravating feature of sentencing, but as the absence of a factor entitling sentence reduction, and as relevant to whether restorative objectives can be satisfied in a particular case, an offender’s lack of remorse and acceptance of responsibility for his or her crime: Proulx, at para. 113; R. v. Valle-Quintero (2002), 2002 CanLII 45123 (ON CA), 169 C.C.C. (3d) 140 (Ont. C.A.), at p. 164; R. v. A.(K.) (1999), 1999 CanLII 3756 (ON CA), 137 C.C.C. (3d) 554 (Ont. C.A.), at p. 570; R. v. Valentini (1999), 1999 CanLII 1885 (ON CA), 132 C.C.C. (3d) 262 (Ont. C.A.), at paras. 81-3.

41By way of overview, and without attempting to be exhaustive, various circumstances relevant to Mr. Cunsolo’s offence which have been recognized as aggravating factors in fraud sentencing cases, include:

(1) the magnitude of the crime – was it a large-scale commercial fraud?

(2) a significant degree of sophistication, planning and deception: Dobis, at p. 272; Wilson, at para 8; R. v. D’Andrea, Ont. C.A., June 4, 2004 (File No. C38809), at para. 12; R. v. Steeves and Connors (2005), 2005 NBCA 85, 200 C.C.C. (3d) 282 (N.B.C.A.), at pp. 285, 287

(3) the number of dishonest transactions undertaken in the commission of the crime: R. v. Smith, 2004 CanLII 33793 (ON CA), [2004] O.J. No. 4179 (C.A.) (QL), at paras. 5-6; Wilson, at para. 9; Harding, at p. 548; Coffin, at para. 47

(4) a lengthy period of dishonesty: Drabinsky, at para. 181; Dobis, at p. 270; Reid, at para. 15; Coffin, at para. 47; R. v. Leaf, [2007] EWCA Crim 802, at paras. 14-5

(5) the nature and extent of the actual loss: Drabinsky, at paras. 179-180, 186; R. v. Savard (1996), 1996 CanLII 5703 (QC CA), 109 C.C.C. (3d) 471 (Que. C.A.), at p. 474

(6) whether the offender benefitted personally

(7) where the crime was carried out by a number of parties and the extent of the accused’s specific participation in the offence

(8) whether the sole motivation was greed: Drabinsky, at paras. 171, 173; Savard, at p. 474; Clark, at p. 5

(9) whether the termination of the offence was by arrest as opposed to voluntary cessation: McKinnon, at para. 47; Steeves and Connors, at p. 287; Gulam et al., at para. 9.

42Turning to the subject of restitution, in R. v. Devgan (1999), 1999 CanLII 2412 (ON CA), 136 C.C.C. (3d) 238 (Ont. C.A.), at para. 26 (leave to appeal refused [1999] S.C.C.A. No. 518), the court stated:

In Zelensky, ([(1978), 1978 CanLII 8 (SCC), 41 C.C.C. (2d) 97 (S.C.C.)], Laskin C.J. identified certain objectives and factors that relate to the application of s. 725(1). These considerations have been expanded upon in subsequent cases. Below, I have consolidated these objectives and factors, all of which are relevant to the issue of what constitutes a proper exercise of discretion for the purpose of s. 725(1).

1. An order for compensation should be made with restraint and caution;

2. The concept of compensation is essential to the sentencing process:

(i) it emphasizes the sanction imposed upon the offender;

(ii) it makes the accused responsible for making restitution to the victim;

(iii) it prevents the accused from profiting from crime; and

(iv) it provides a convenient, rapid and inexpensive means of recovery

for the victim;

3. A sentencing judge should consider:

(i) the purpose of the aggrieved person in invoking s. 725(1);

(ii) whether civil proceedings have been initiated and are being pursued;

and

(iii) the means of the offender.

4. A compensation order should not be used as a substitute for civil proceedings. Parliament did not intend that compensation orders would displace the civil remedies necessary to ensure full compensation to victims.

5. A compensation order is not the appropriate mechanism to unravel involved commercial transactions;

6. A compensation order should not be granted when it would require the criminal court to interpret written documents to determine the amount of money sought through the order. The loss should be capable of ready calculation.

7. A compensation order should not be granted if the effect of provincial legislation would have to be considered in order to determine what order should be made;

8. Any serious contest on legal or factual issues should signal a denial of recourse to an order;

9. Double recovery can be prevented by the accounting of all sums recovered; and

10. A compensation order may be appropriate where a related civil judgment has been rendered unenforceable as a result of bankruptcy.

43The jurisprudence relating to restitution as an element of sentencing advances a number of other relevant guidelines including the following:

(1) a restitution order pursuant to s. 738(1)(a) of the Criminal Code forms part of the sentence imposed upon an offender and therefore whether such an order is an appropriate punishment requires a global view of the imprisonment to be imposed along with any restitution order: R. v. Eizenga, 2011 ONCA 113, at para. 91; R. v. Castro (2010), 2010 ONCA 718, 261 C.C.C. (3d) 304 (Ont. C.A.), at paras. 22-3, 35, 43; R. v. Chamczuk, 2010 ABCA 380, at para. 14

(2) the sentencing court has a discretion whether or not to order restitution: R. v. Popert, 2010 ONCA 89, at paras. 37, 40; R. v. Kim, 2008 ONCA 458, at para. 4; Castro, at paras. 21, 46

(3) because “[a] restitution order should not be made as a mechanical afterthought to a sentence of imprisonment” (Castro, at para. 23), there is a necessity for reasons founded on an evidential base explaining the basis for ordering restitution: Eizenga, at paras. 93-4; R. v. Gallagher, 2008 ONCA 252, at para. 15; R. v. Nero, 2008 ONCA 622, at para. 14

(4) the exercise of caution and restraint with regard to making a restitution order is not meant “as a free-standing brake” on the making of such an order but rather a recognition that the criminal court should avoid ordering restitution simply to enforce a civil obligation particularly where the amount taken is unclear: Castro, at para. 43

(5) a restitution order is not intended to undermine the prospects for rehabilitation of the offender: Castro, at paras. 26, 35; Popert, at paras. 41,43

(6) while no single factor or consideration is determinative of whether a restitution order should be made, as the circumstances of each crime and offender are assessed, the nature of the offence, including its impact on the victim(s), and, where money has been taken what happened to the money are significant: Castro, at para. 27

(7) where more than one person was involved in the crime, it is important to ensure that “imposition of a restitution order on a given offender does not “work an unfairness as between the perpetrators”” (Popert, at para. 42 quoting Devgan, at paras. 42-4) including ordered restitution having a proper sense of “proportionality” to an offender’s “involvement in the fraudulent scheme”: Eizenga, at paras. 95-6, 101

(8) where it is established that the offender received “some of the defrauded money” but “actual tracing of...funds is not possible due to the manner in which [the offender] dealt with those funds...a restitution order may be made in an amount that generally reflects the culpability of the accused without slavishly relying on tracing or a strict calculation of the accused’s enrichment”: Eizenga, at para. 108

(9) the offender’s ability to repay the loss occasioned by his criminal conduct is a factor to be considered: Eizenga, at para. 99; R. v. Shi, 2011 ONCA 515, at para. 15; Popert, at paras. 40-41; R. v. Sabaratnam and Prathapan, 2009 ONCA 93, at para. 10; Castro, at paras. 27, 35; Gallagher, at para. 15; R. v. Hameed, 2008 ONCA 51, at para. 3; Chamczuk, at para. 14

(10) the offender’s ability to pay is not, however, a determinative factor: Eizenga, at para. 103; Castro, at paras. 27-8, 35

(11) in considering the individual circumstances of an offender and the total effective sentence imposed, “[t]he fact that there was evidence that the fraud was considerably higher was no bar to a restitution order in [a] lower amount”: R. v. Johnson-Bryan, 2010 ONCA 160, at para. 1

(12) in an instance of restitution orders made against co-offenders whose liability is joint and several, the orders should make clear that the victims “cannot collect more in total than what they are owed under the orders”: R. v. Ratnasingham and Rajkumar, 2009 ONCA 47, at para. 6.

44A further observation about the relevance of an offender’s ability to pay – “[d]epriving the offender of the fruits of his crime is one of the overarching goals of making a restitution order”: Castro, at para. 34. The notion of ability to pay includes present capacity as well as future ability to earn: Eizenga, at para. 110; R. v. Enofe, 2011 ONCA 653, at para. 2; Castro, at paras. 33 (and fn 6), 39, 46; Popert, at para. 41. Ability to pay engages not only consideration of current assets and earning status but also consideration of the availability of the very proceeds of the offender’s criminality: Popert, at para. 42 (“the appellant received no money for his role in the offence”); R. v. Sabaratnam and Prathapan, at para. 9 (“restitution order...unsupportable on the evidence, especially given the absence of any evidence that she benefited from the illegal conduct”). In R. v. Topp, 2011 SCC 43, an appeal primarily about the interpretation of s. 734(2) of the Code authorizing the court to impose a fine only if “satisfied that the offender is able to pay the fine”, at paras. 27, 33-8, 42, the court made important observations relating to the existence of proceeds of the offender’s crime as an available source to pay a monetary penalty on sentencing:

In the absence of a reasonable explanation to the contrary, past receipt of illegally obtained funds will often – but not always – support an inference that the offender still possesses sufficient funds to pay a fine at the time of sentencing.

First, in my view, the weight reasonably attributable to the past receipt of funds will vary with at least two factors: the length of time that has passed between the acquisition of the funds and the imposition of sentence, and the amount of funds acquired. The more time that has passed since the acquisition of the funds, the less likely it is that the offender still possesses the full amount. And the lower the amount of funds acquired, the less likely it is that the offender still possesses much or all of the funds. A small sum is more likely than a large sum to be gone in its entirety.

Sentencing courts must retain their accepted measure of discretion in determining how much weight they should assign to proof of past possession, bearing in mind the variables I have mentioned and other factors they find relevant in the particular circumstances of the case. For example, where much time has passed and little money was stolen, past possession alone may not satisfy the court – even in the absence of an explanation by the offender – that the offender can still pay the fine. On the other hand, recent possession of a large sum will generally suffice, in the absence of a credible explanation, to satisfy the court that the offender still controls a significant chunk of the stash. In both cases, the past acquisition of fraudulently obtained funds will have the same probative effect as past possession of legally acquired assets.

The Crown submits that the offender bears an onus to explain what happened to the funds because the offender is in a better position to obtain and adduce relevant evidence than the Crown. It is often impossible for the Crown to trace the proceeds of crime. In the present case, for example, the Crown lost track of the fraudulently obtained funds after tracing them to a bank account in Antigua.

This submission is attractive at first glance but loses its appeal on closer scrutiny.

First, the Crown is not required to identify or locate the specific assets that the offender can use to pay the fine, though direct evidence of this sort, when available to the Crown, is by its nature particularly persuasive. In its absence, the Crown may instead rely on various types of indirect evidence to satisfy the trial judge of the offender’s ability to pay – including evidence that the offender had possession of impugned funds in the relatively recent past, evidence of an ongoing lavish lifestyle, and evidence of the offender’s earning potential.

Second, the Crown’s argument disregards the text of s. 734(2). It may be desirable from a truth-seeking perspective to place an evidentiary onus on the party that is best positioned to produce evidence. Parliament well understood that the offender is better positioned to produce evidence of his finances than the Crown. But Parliament has nonetheless explicitly chosen to require an affirmative finding that the offender is able to pay a fine, instead of requiring the offender who opposes a fine to satisfy the court that he or she is unable to pay.

The Crown also argues that the interpretation of s. 734(2) should be influenced by case law relating to restitution and the common law rules regarding the imposition of fines. With respect, the cases cited by the Crown are readily distinguishable.

In Johnson and Castro, the Alberta and Ontario Courts of Appeal respectively held that, in the context of a restitution order, past receipt of ill-gotten gains places a burden on the offender to explain where they have gone. Restitution, however, differs from a fine in two important respects. First, and perhaps most important, restitution orders are not subject to s. 734(2). Second, an offender who defaults on a restitution order – unlike an offender who defaults on a fine – is not subject to imprisonment as a consequence.

On the evidence and information before her, the judge was not bound to infer, on the balance of probabilities, that Mr. Topp was able to pay the fine sought by the Crown. Seven years had passed between Mr. Topp’s acquisition of the fraudulently obtained funds and the hearing on sentence. Mr. Topp was by then 64 years old, had lost his licence to work as a customs broker, was unlikely to find future employment, and had “few tangible assets”

(emphasis of original)

45These observations are quite consistent with the holding in the Castro case at paras. 34, 40, 46:

Ability to pay must taken into consideration what disclosure has been made respecting where the money is or has gone. Depriving the offender of the fruits of his crime is one of the overarching goals of making a restitution order: see Working Paper 5 of the Law Reform Commission of Canada, October 1974, cited with approval by Laskin C.J. in Zelensky at pp. 592-593. In cases of theft, robbery, fraud, breach of trust or the like, I see no reason why the court should accept an offender’s bald assertion that he or she has no ability to make restitution because the money “is gone” when no evidence is proffered in support of this assertion. When the victims can clearly establish that “the replacement value of the property” under s. 738(1)(a) is the amount of money taken, surely it is the offender asserting that he or she has no ability to make restitution who is in the best position to provide transparency concerning what has happened to that money. A bald assertion that the money is gone should be given no weight. Similarly, when the location of the money illegally obtained by the offender is unknown, the sentencing judge is entitled to take that fact into account with respect to ability to pay in making a restitution order: see e.g. R. v. Williams (2007), 2007 CanLII 13949 (Ont. S.C.), per Hill J. at para. 41.

...there was no evidence proferred as to what the appellant did with the money once he withdrew it from his trust account. The trial judge rightly rejected counsel’s bald submission that the money had been used to buy drugs for his brother’s cocaine habit. The lack of evidence as to what happened to the money obtained by the appellant’s conduct was a fact open to the trial judge to consider regarding ability to pay.

The imposition of the restitution order was a proper exercise of the trial judge’s discretion and he gave effect to the requisite factors. The appellant...has some future prospects, and the disposition of the money obtained by his conduct is unknown.

See also Eizenga, at para. 110.

46Similar dicta appears in R. v. Johnson, 2010 ABCA 392, at paras. 23, 24, 28-9:

If a perpetrator of a fraud wishes to argue on sentencing, after the Crown has proven the magnitude of the fraud and the loss to the victims, that he or she is without assets, the burden to establish that there is no money (and necessarily where it went) falls to the offender, not the Crown. This is consistent with the requirement on sentencing that the party who wishes to rely on a relevant fact has the burden of proving it: s. 724(3)(b) of the Code.

It is this simple, Johnson’s failure to explain the use of the funds obtained through fraud and give reasons for failure to repay it are relevant considerations in sentencing.

At sentencing, approximately $1.7 million of the monies obtained by fraud remained unaccounted for. This is highly relevant to whether the restitution order should have been granted and on what terms.

More important, an offender’s means have limited import in cases of fraud: R. v. Cadieux 2004 ABCA 98, 346 A.R. 56 at para. 9. Depriving an offender of the fruits of his or her crime continues to be one of the overarching goals of a restitution order. Thus, ability to pay must taken into consideration what disclosure an offender has made – or not made – concerning disposition of the proceeds of the crime.

47In appropriate circumstances, a sentencing court may credit an offender for days of custody occasioned by a change in bail status as a result of subsequently laid unrelated criminal charges, for example where refusal of bail on the later charges was based on the accused already being on bail, where the offender’s bail status led to a reverse onus bail hearing for the subsequent charges, etc.: R. v. Reid, 2005 CanLII 14964 (ON CA), [2005] O.J. No. 1790 (C.A.) (QL), at para. 1; R. v. Tsai (2005), 2005 CanLII 22191 (ON CA), 198 C.C.C. (3d) 533 (Ont. C.A.), at paras. 19-22; R. v. Wilson (2008), 2008 ONCA 510, 236 C.C.C. (3d) 285 (Ont. C.A.), at paras. 46-50; R. v. D.N. (2010), 2010 ONCA 168, 253 C.C.C. (3d) 455 (Ont. C.A.), at paras. 3-6.

Application of Principles

48In its earlier reasons for judgment, the court determined as a fact that it had not been established that Robert Cunsolo was a party in the fraudulent scheme at the same level of participation as Fouzan Beg and Aldo Munoz. He may have been. It was not proven that he was. That said, the offender was far from a bit player on the periphery of the dishonest scheme. As reviewed in paragraph 5 above, Mr. Cunsolo’s involvement extended beyond records storage and the February 6, 2004 CCE US cash pick-up to writing on various documents (i.e. “PAiD”) as well as tracking expenses and proceeds distribution from the fraudulently obtained monies including to himself (“Rob”).

49In this prosecution, regrettably, but typical of large fraud investigations in this jurisdiction, no effort was made to trace the flow of proceeds of the fraud to the offender – no forensic accounting audit, no net worth evaluation, and no bank account or investment or safety deposit box evidence (6 safety deposit box keys seized from offender’s vehicle on arrest), etc. Asked about this in the context of her submissions relating to Mr. Cunsolo’s role and his receipt of proceeds of the fraud, Ms. Esson stated that it was “a matter of resources”. Be that as it may, the absence of such evidence, whether or not characterized as an investigative omission, places practical restraints on Crown submissions relating to level of participation and receipt of benefit.

50While the degree of monetary benefit derived by Mr. Cunsolo cannot be determined, it cannot seriously be accepted that the offender’s activities did not result in the receipt of any personal benefit. Apart from the reasonable circumstantial inference arising from various writings that the offender was actively acquiring a share of the fraudulent proceeds of the relevant mortgage advances, it defies common sense that with his extensive involvement the offender was not compensated from the proceeds of crime. Mr. Cunsolo’s activities were neither unpaid volunteer work or a hobby.

51The aggravating features of the offence committed are manifestly apparent and include the following:

(1) the offender was integrally involved in a large-scale commercial fraud

(2) over five million dollars of mortgage funding were advanced in the fraudulent scheme with actual loss of $3,916,000

(3) apart from the institutional victims, a number of ordinary homeowners were victimized by the dishonesty of the fraudsters

(4) by any account, the fraud perpetrated was the epitome of a dishonest scam

(5) the offender’s participation was over months and involved many fraudulent transactions

(6) while not proven to have occupied a participation position in the hierarchy of the fraudulent scheme equivalent to Beg and Munoz, Mr. Cunsolo was actively and extensively engaged in the fraud

(7) the fraud was sophisticated, complex, planned and deliberate, and included a variety of dishonest measures in the practice of deception

(8) the offender’s motive for participation was greed – not some altruistic purpose or special need

(9) the offender benefitted personally from his criminal activity

(10) the offender’s criminal conduct ended with his arrest not his voluntary withdrawal from the fraud.

52In the balance, in mitigation, a number of factors fall to be considered including:

(1) Mr. Cunsolo has no prior criminal record

(2) He was under restrictive bail conditions for some time

(3) In the over 7 ½ years since his arrest, the offender has remained trouble free

(4) the offender’s realtor hence was suspended and his ability to borrow significantly curtailed as a result of the fraud charge

(5) with an extensive Agreed Statement of Facts and various admissions at trial, the defence conducted a focused trial

(6) the offender has a supportive family

(7) Mr. Cunsolo is a primary care-giver for his sickly father.

53Absent as mitigating features, but not aggravating factors, are the absence of restitution and the lack of remorse or acceptance of responsibility for the fraudulent conduct.

54On the evidentiary record in this trial, Fouzan Beg was the prime mover in the fraudulent scheme and was on bail when arrested for the fraud. That said, Beg too was a first offender. He waived his preliminary inquiry and pleaded guilty only 2 years after his arrest. Beg’s global punishment was a total of 3 years’ incarceration and a $5,223,500 restitution order. As said, the Crown did not appeal that disposition. Accordingly, in terms of the principles of parity in sentencing, Beg’s moral culpability, and most certainly his benefit from the fraud, exceeds that of the offender. On the other hand, Beg’s sentence was deservedly discounted on the basis of his guilty plea, acceptance of criminal responsibility, and remorse as well as the avoidance of a lengthy and expensive criminal trial.

55As said, the fraud in this case involved a variety of dishonest measures including forgery, personation, a boiler room, false documents, redirected mail, identity theft, etc. with the fraudulent proceeds systemically laundered through the conspirators’ structured setup. The dishonesty, like so many large frauds which are notoriously difficult and expensive to investigate, was practiced with a clear intent to evade detection.

56The offender operated one of the organization’s two known mobile offices, had custody of the OWF Master Business Licence and self-inking stamp and a significant number of critical documents, and tracked transactions including expenses and profit-sharing distribution from the fraudulent proceeds (including being the “Rob” referred to in such documents as Exhibit #58: 4-9, 4-10, 4-15, 4-17 and 4-19). Mr. Cunsolo’s moral blameworthiness is proportionate to his significant role in recording and tracking information including profit and expense calculations and maintaining custody of documents essential to the successful operation of the fraud.

57A fit and just sentence for the offender’s conduct is 18 months’ imprisonment. Having regard in particular to the gravity of the fraud, and to the offender’s moral culpability, the necessary degree of denunciation and general deterrence cannot be effected except through the imposition of actual incarceration.

58In the present case, with the fraud and the offender’s arrest preceding the February 2010 enactment of the Truth in Sentencing Act, there is no reason to depart from the prevailing 2:1 credit guideline respecting pre-sentence custody. This is an appropriate case for the court to credit Mr. Cunsolo for the days spent in custody in 2004 and in 2005 (3 + 38 = 41 x 2 = 82 days). The offender stands to be credited with 1 ½ months of pre-sentence custody.

59On the subject of restitution, the court is respectfully unable to accept the respective positions of the parties. A restitution order is appropriate but not in the full amount sought by the prosecution. The offender personally benefitted from his active participation in the large-scale commercial fraud. Quantifiable loss was identified as occasioned by the dishonest scam. As to ability to pay, beyond his representation that he received not a cent of the proceeds of the crime, a submission rejected by the court, the offender baldly pleads that he has no ability to pay restitution. Assuming ability to pay to be a relevant consideration in the circumstances here, despite the offender’s current unemployment he is clearly employable and, in light of the unexplained destiny of the proceeds of crime received by the offender, it cannot be said that no capacity to make restitution exists. In exercising its discretion to order restitution, with its restorative and punitive character, the offender’s prospects for potential will not be undermined.

60For a number of reasons, the offender should not be jointly and severally liable for the restitution in the amount ordered to be made by Beg. The proven loss in this sentencing hearing is $3,916,000. On the evidence, the offender was less involved in the scam than Beg, it can be inferred received a smaller share of the proceeds, and given the passage of time is less likely to still have the full amount of what he received. In these circumstances, and considering the term of incarceration imposed, the offender is ordered to pay restitution in the amount of $250,000.00.

CONCLUSION

61With credit for 1½ months of pre-sentence custody, the offender is sentenced to a further 16½ months’ incarceration. Mr. Cunsolo is further ordered to pay restitution in the amount of $250,000 on a pro-rated basis to the victims of the fraud identified in paragraph 7 of these reasons.