COURT FILE NO.: P427/09
DATE: 2012/06/14
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
HER MAJESTY THE QUEEN
– and –
ANDREI KHATCHATOUROV and NATALYA REZNIK
Accused
J. Sandy Tse, for the Crown
Anthony De Marco for Andrei Khatchatourov and
Brad Burgess for Natalya Reznik
HEARD: February 7, March 28 and May 24, 2012
REASONS FOR SENTENCE
A.J. O’MARRA J.: (delivered orally in Court)
[1] Andrei Khatchatourov and Natalya Reznik as co-accused were found guilty after trial by jury on 10 counts of committing mortgage-financing frauds and Mr. Khatchatourov was found guilty of an additional count, December 9, 2011. The frauds involved the purchase and sale of 11 residential properties and 27 mortgages arranged between April 2000 and July 2007. Mr. Khatchatourov is to be sentenced on 11 counts of fraud and Ms. Reznik on 10 counts of fraud.
[2] The frauds were committed by a variety of means, but they consisted largely of manipulating recent immigrants from Russia and the Ukraine to use their identities to obtain mortgage financing and to take title of a number of properties. The properties were sold subsequently at inflated values to other straw purchasers whose identities and false employment and income information was used to obtain mortgage financing. The mortgages were not paid and when they went into default, the financial institutions had to undertake power of sale proceedings. In each instance, they suffered losses when the properties sold at fair market value.
Circumstances of the Offences
[3] Identity theft, duping others into signing documents they did not understand and production of falsified documents to obtain mortgage financing and in providing directions on closing of transactions regarding disbursement of proceeds were common features in the commission of the offences, with some variation in each.
[4] Mr. Khatchatourov, who was from Russia, operated a company called Canada Suites, which was in the business of renting out condominium apartments for short-term accommodation. Ms Reznik, who was from Belarus, acted as a paralegal to assist others in the Russian community with immigration matters in the Toronto area. Ms. Reznik made use of her contacts with recent immigrants encourage a number of them to participate in Mr. Khatchatourov’s business of buying, renting and selling condominium apartments. Some were led to believe they were investing in condominium units, which Mr. Khatchatouov would rent out, pay expenses, including the mortgage and in return receive rental income, less a management fee, as well as the equitable interest on any resale. Others were told they could improve their credit rating and more quickly purchase property themselves by co-signing as guarantors to help someone else purchase property. Many, after signing documents, they either did not understand or had interpreted to them by the accused, ended up having both title to the property and mortgages taken unknowingly in their names. Some simply provided identification documents and later found to their surprise that title to properties and mortgages had been registered in their names when lenders began seeking past due mortgage payments.
[5] In the process of obtaining mortgage financing, the accused falsified employment letters, income statements, bank account statements and even citizenship documents in the names of the nominal purchasers to facilitate the frauds. They falsified powers of attorneys to execute documents in the names of the nominees and to give direction concerning the distribution of proceeds from the purchase and sale transactions.
Count 1: 410-10 Yonge Street
[6] Mr. Kostytyn Granik and his wife Yuliana immigrated to Canada from the Ukraine in December 1999. They were assisted by Natalya Reznik through her immigration consulting business. She assisted them by opening bank accounts in their names prior to their arrival to show that they had the appropriate funds to immigrate. She assisted them with in obtaining their first rental apartment and other documentation, such as health cards and social insurance numbers. In addition, a joint bank account was opened in the name of Kostytyn Granik and Natalya Reznik. Further, Mr. Granik provided a power of attorney to Ms. Reznik to permit her to deal with banking and other financial matters in his absence as he and his wife travelled periodically back to Ukraine. They returned to the Ukraine a number of times to facilitate their own permanent move to Canada and to assist Ms. Reznik with her immigration business.
[7] They knew Ms. Reznik well and considered her a friend. While trying to establish themselves in Canada they worked part-time for Ms. Reznik by couriering documents to and from the Ukraine to assist her. They met Mr. Khatchatourov through Ms. Reznik. He suggested that a good business opportunity would be for them to become involved in the purchase of condominiums that his company would rent and from the rents pay mortgage and other fees. The Graniks would receive the rest, less 20% management fee to Canada Suites. They agreed. The first property purchased was 410 – 10 Yonge Street on July 20, 2000 for $164,000.
[8] The arrangement worked well for approximately two years when Mr. Khatchatourov told Mr. Granik that because the condominium board had decided to end short-term rentals in the building, the property should be sold. He would find the buyer and make all the arrangements.
[9] On March 20, 2002, 410 – 10 Yonge Street was sold to Yevgeniy Yukhymenko by Kostytyn Granik through a power of attorney granted to Natalya Reznik for $249,600. Granik’s signature had been forged on the agreement of purchase and sale and he had not given a power of attorney to Natalya Reznik with respect to the transaction. The only power of attorney he had granted to her was with respect to banking matters while he was in the Ukraine in 2000.
[10] Mr. Yukhymenko had immigrated to Canada from Russia in 1999 and sometime in 2002, he received a call from Natalya Reznik who said she had received his phone number from someone she knew in his English classes. She said that she wanted to talk to him about her company in assisting new Canadians and about purchasing real estate. He later met with her and she showed him documentation relating to the purchase of an apartment and said that if he participated it could help his credit history. He went to a lawyer’s office with Natalya and met Andrei there. He also went to the bank with Ms. Reznik to sign other documentation.
[11] All of the documentation submitted in support of the mortgage application was false. A CIBC bank account statement was altered to indicate that Mr. Yukhymenko had over $27,000. in his account. He had no such account. There was a letter of employment stating that he was a manager earning over $85,000 a year.
[12] With respect to the sale proceeds, Granik received only the amount of his deposit whereas the remainder, $79,308.87 went to Natalya Reznik and Andrei Khatchatourov.
[13] On December 22, 2003, the property was sold by Mr. Yukhymanko through a power of attorney granted to Andrei Khatchatourov to a person named Robert Levine for $297,500. Mr. Yukhymanko had not given a power of attorney to Mr. Khatchatourov. The named purchaser, Robert Levine, obtained mortgage financing through a false citizenship card, letter of employment and a non-existent bank account. Mr. Khatchatourov received $14,166.31. The mortgage went into default and the mortgagee, Royal Bank of Canada, sold the property under power of sale on October 21, 2004 for $171,300.
Count 2: 730 Lansdowne Avenue
[14] Yaroslaw Derkach immigrated to Canada from the Ukraine in 1998. He made contact with Natalya Reznik through a newspaper advertisement looking for someone to assist him with his immigration documentation. When he met with her, he provided documentation such as driver’s license, passport from the Ukraine and birth certificate. She asked him if he could help a friend of hers by acting as a “second person” in getting a mortgage to buy a house. He was told that it would help him establish a credit history and it would help him if he wanted to buy a house himself later on. He was told that he would not be responsible for the mortgage.
[15] On March 28, 2003, the property at 730 Lansdowne Avenue was purchased in his name, unbeknownst to him, for $269,000. Mr. Derkach had no knowledge that he had taken title to the property nor did he participate in the application for mortgage financing.
[16] The property was sold on May 2, 2003 through a power of attorney in his name granted to Andrei Khatchatourov to Eugini Krisanov and Oleg Ilyashenko for $346,800. Mr. Derkach had not granted a power of attorney to Andrei Khatchatourov.
[17] Mr. Ilyashenko who came to Canada from Russia in 1998 became acquainted with Natalya Reznik who asked him if he would act as a co-signor to the purchase of a property. She told him that the person who was buying the property did not have a sufficient credit history to get a mortgage and that he could help by providing a letter from the factory where he worked as well as some personal information. He did not know Andrei Khatchatourov and had never provided him with a power of attorney. Yet, Mr. Khatchatourov signed and provided instructions to solicitors on behalf of Mr. Ilyashenko on the purchase and then subsequently on the sale November 25, 2003 for $424,900.
[18] On the purchase, the cheque on instructions by Andrei Khatchatourov was issued to him in the amount of $9,287.42. In addition, he directed that a person named Oxana Mirochnitchenko receive $40,000.
[19] The mortgage on this property went into default and the mortgagee, Royal Bank of Canada, sold it under power of sale for $220,000.
Count 3: 409 – 2285 Lakeshore Blvd. West
[20] This count involved Mr. Ivan Vinik and his wife, a couple who ran a coffee house in Toronto. They had met Natalya Reznik, as a result of her assisting Ms. Vinik’s parents as a paralegal. The Viniks ran into financial difficulties and approached Ms. Reznik to help them. She suggested that they sell their home to her temporarily. The proceeds from the sale could be invested in downtown condominiums managed by Canada Suites and then sold at a higher price allowing the profits to be put back into their coffee shop business. Then she would later sell the house back to them.
[21] The Viniks signed a document entitled “Release of Liability” wherein they unconditionally waived any interested in the property and transferred all interest to Natalya Reznik and one of her businesses, Dela Property Management.
[22] The first property purchased, after signing over their house to Ms. Reznik was 409 – 2285 Lakeshore Blvd. West. It was registered in the name of Ekaterina Melnikova, the girlfriend of Andrei Khatchatourov at the time. On June 13, 2002, the property was sold by Melnikova through her power of attorney held by Andrei Khatchatourov to Ivan Vinik for $272,300.
[23] The purchase was financed through ING. All of the documentation submitted to ING on the mortgage application in the name of Ivan Vinik was false. It included a Canada Customs and Revenue Agency notice of assessment indicating that Mr. Vinik’s income in 1999 was $145,832 and in 2000, $147,765. In addition, there was banking documentation and accounts submitted one of which bore the account number for a business known as Khannan Associates, the registered owner of which was Natalya Reznik. Based on the false documentation mortgage financing was obtained.
[24] Soon after closing, the mortgage went into default and ING sold the property for $177,500 under power of sale.
Count 4: One Palace Pier Way – Suite 307
[25] The other property that involved the Viniks was One Palace Pier Way, Suite 307, another property Ms. Reznik suggested they invest in as an income producing property.
[26] In this instance, the property was taken in the name of Ms. Vinik on May 3, 2002. The purchase price was $274,700. Again, the documentation submitted in support of the mortgage financing application was false. It included a false letter of employment indicating that Ms. Vinik earned $84,000 a year and that she worked for the Canadian Association of Travelers’ Services. Further, there was a void cheque on an account stated to be hers although registered to Khannan Associates with Natalya Reznik as the listed owner.
[27] On the sale, funds were dispersed to Andrei Khatchatourov in the amount of $21,000 and Natalya Reznik $25,903.21.
[28] The mortgage on the property went into default and ING sold the property by power of attorney July 28, 2003 for $190,000.
[29] The Viniks received nothing from the condominium property investment, they lost the home that had been transferred to Natalya Reznik’s interest, they were investigated by the R.C.M.P. as part of the fraud investigation and they ended up declaring bankruptcy.
Count 5: 1601 – 889 Bay Street
[30] Mr. Alex Gigger came to Canada from Russia in 1985. He became acquainted with Ms. Reznik because she helped him with the documentation required for his fiancée’s immigration to Canada. He came to know Mr. Khatchatourov through Ms. Reznik. He was asked if he would do them a favour by acting as a guarantor on the purchase of two properties. He provided documentation to Mr. Khatchatourov and he attended a lawyer’s office with them. There the documentation was explained to him in Russian by Mr. Khatchatourov. He was unaware that he had signed documents wherein he took title to 1601 – 889 Bay Street for $188,000 on March 25, 2002.
[31] Similarly, he did not participate or have any knowledge of the sale on March 1, 2005 when the property was transferred from him through a power of attorney exercised by Natalya Reznik for $248,000.
Count 6: 1009 – 55 Bloor Street East
[32] This was another property that Granik and his wife invested in through Andrei Khatchatourov and managed by Canada Suites. The documentation submitted for mortgage financing had been falsified by the accused. In part, it indicated that Granik was employed as an IT manager for Reznik, Robertson and King, Immigration Consultants, earning $87,900 annually.
[33] The property was sold November 25, 2004 to Armin Safarian for $324,600. Mr. Granik played no role and signed no documents in the transaction. Again, all of the documentation provided to TD Canada Trust with respect to Mr. Safarian was false.
[34] An attempt was made to sell the property in the name of Safarian to Gian Marrone. In February 2006 Stephen Frazee, a real estate broker received a copy of an agreement of purchase and sale from Mr. Khatchatourov selling the property from Armin Safarian to Gian Marrone. Frazee was asked by Mr. Khatchatourov’s to prepare an MLS listing for the property based on the purchase price.
[35] Mr. Khatchatourov had been a customer of Mr. Marrone who owned an automobile detailing company. Later, Mr. Khatchatourov became a financial advisor to him. He encouraged Marrone to invest in the purchase of 1009-55 Bloor Street suggesting it would help Marrone’s credit rating. Mr. Khatchatourov told him he would help to set him up with a mortgage broker in order to get mortgage approval from a lender to purchase the property. He agreed and on Mr. Khatchatourov’s request provided him information about his bank account, SIN card, and driver’s license. It was Natalya Reznik, who asked the mortgage broker, Gavin Dac-Bang to prepare the mortgage application for Mr. Marrone. The mortgage amount sought was $327,750. All of the documentation submitted in the name of Marrone was false.
[36] Fraud was suspected and in this instance, there was no approval.
[37] When the Safarian mortgage on the property went into default, TD Canada Trust sold it under power of sale for $233,000.
Count 7: 151 Old Surrey Lane
[38] This property involved Sasha Alexander and Igor Kagan as co-purchasers. Mr. Alexander, a real estate agent at the time was charged with respect to his participation in this transaction and pleaded guilty to having defrauded the ING bank by fraudulently obtaining mortgage financing. In this instance, Mr. Alexander knowingly participated with the accused in providing false information to obtain mortgage financing. When the mortgage on the property went into default, the bank lost almost $125,000, which was covered by the CMHC. Mr. Alexander received an 18-month conditional sentence with 200 hours of community service. (See R. v. Alexander, unreported, June 9, 2010 (SCJ)).
Count 8: 902 – 889 Bay Street
[39] The offence committed with respect to this property involved only Andrei Khatchatourov. In this instance, Sasha Alexander introduced Ouran Tchoukanov to Andrei Khatchatourov. Mr. Tchoukanov was interested in moving his business from Montreal to Toronto and the purchase of real estate. Mr. Khatchatourov interested Mr. Tchoukanov in investing in the purchase of condominiums for his Canada Suites rental business. On this property, Mr. Khatchatourov falsified the information concerning Mr. Tchoukanov’s financial circumstances in order to obtain mortgage financing. On the initial purchase for $311,800, Mr. Khatchatourov received payment of $47,215.07. In July 14, 2006, it sold for $225,000 under power of sale.
Count 9: 802 – 889 Bay Street
[40] Mr. Oleg Ilyashenko’s personal information was used in addition other documentation falsified by the accused to obtain mortgage financing with respect to the purchase of this property on May 7, 2002 in the amount of $258,600. On closing, Ms. Reznik received a cheque in the amount of $11,797.02. When the property re-sold October 17, 2003, for $315,800 a false power of attorney in Oleg Ilyashenko’s name was used by Andrei Khatchatourov, to direct $32,351.44 to himself. When the mortgage went into default, it was sold under power of sale for $192,935.75.
Count 10: 338 Harvie Avenue
[41] On March 12, 2002, this property was purchased for $172,000 and title was registered in the name of Yuliana Granik. Ms. Granik had never heard of 338 Harvie Avenue before the police interviewed her and her husband with respect to the fraudulent mortgage application used to finance its purchase.
[42] In this instance, the accused arranged the original transaction and then re-sold on September 18, 2002 to Alexandre Ermakov for $229,000.
[43] Mr. Ermakov had immigrated to Canada in 1999 and had come to know Natalya Reznik. She encouraged him, as she had others to become involved in the purchase of a house suggesting it would improve his credit history. In the course of dealing with her, he provided personal information later used by Ms. Reznik and Mr. Khatchatourov to obtain mortgage financing and purchase the property in his name. This is another instance where Mr. Khatchatourov executed documentation by power of attorney purportedly granted by the vendor. Mr. Ermakov did not know Mr. Khatchatourov and never granted him a power of attorney.
[44] On July 15, 2003, the property was sold by Mr. Ermakov to Oleg Chinah for $298,600. Mr. Ermakov had no knowledge or involvement in the transaction. The lawyer who acted on the matter took all her instructions from Mr. Khatchatourov based on the power of attorney. He also directed on closing that a cheque in the amount of $58,205.42 be made payable to Andre Khatchatourov “in trust”.
[45] The lawyer acting for the purchaser Oleg Chinah, met a person identified as Oleg Chinah in advance of the closing with Andrei Khatchatourov, who acted as an interpreter during the interview. Further, it was Mr. Khatchatourov, who gave direction with respect to disbursal of funds using another false power of attorney. In effect, Mr. Khatchatourov, acting through false power of attorneys was both the vendor and purchaser.
[46] Ms. Reznik provided the mortgage application information to the mortgage broker concerning Oleg Chinah, which included a false letter of employment, a falsified Canada Revenue Agency notice of assessment and HSBC account statement.
[47] When the property went into default it was later sold under power of sale for $110,000.
Count 11: 603 Royal York Road
[48] Andrei Khatchatourov bought 603 Royal York Road on May 2, 2003 for $162,000. On May 30, 2003, he sold it to Nadya Ladyzhenko for $329,500. Natalya Reznik, posing as Ladyzhenko, provided false employment and income information to the mortgage broker to obtain mortgage financing. Andrei Khatchatourov provided direction through his lawyer to the purchaser’s lawyer to make payable to him $172,061.92 on closing. Subsequent to the mortgage going into default, the property sold under power of sale for $169,001.
Background of the Offenders
Andrei Khatchatourov
[49] Andrei Khatchatourov was born December 27, 1976 in Moscow, Russia to Svetlana Khatchatourova and Vladimir Entin. His mother was a former adult learning educator and his father a lawyer in Moscow, currently the director of the Non-Profit Foundation Centre for the Legal Protection of Intellectual Property.
[50] His father, in a letter of support submitted to the court, stated the following:
Andrei was brought up in the family of well-known legal scholars that use to occupy positions of responsibility in Russia and abroad and well-known professionals in the Russian Federation and in Europe. His grandfather, Lev Matveevich Entin, a distinguished professor, President of the Foundation of European Studies, keeps lecturing in the Moscow State Institute of International Relations of the Russian Ministry of Foreign Affairs. Andrei has been brought up in the spirit of respect for law and people of legal occupation, people who professionally render legal aid and advice.
[51] Mr. Khatchatourov’s parents divorced when he was a child resulting in him living with his maternal grandparents from the age of 5 to 9. He then lived with his mother and Mr. Vitaly Razitsyn, his stepfather. He has a younger half sister, a designer, who resides in Paris, and a younger half brother who continues to reside in Moscow, and lectures at the National Research University in the Higher School of Economics and is a junior research fellow at the Centre for Comprehensive European and International studies.
[52] In 1992 when Mr. Khatchatourov was 15 years, he went to the United States as an exchange student. On his return to Russia, he was admitted to the Moscow State University of International Relations. He returned to the United States and attended the University of Wisconsin where he earned a Bachelor of Arts and Sciences. In 1998, after his mother and stepfather immigrated to Canada, he joined them on completion of his studies in Wisconsin. In 1999, he completed a course of graduate studies at the University of Ottawa where he earned an International Masters of Business Administration degree. He was employed for a short period of time with Health Canada in Ottawa as a marketing officer and then left to work in the business of renting out short-term condominium apartment accommodation under the name of Canada Suites Inc.
[53] Mr. Khatchatourov is single and does not have any children. He was 23 to 29 years of age during the time period he committed the offences in concert with Ms. Reznik. He and Ms. Rezik were in a relationship and resided together for a period of time during the commission of the offences. They now live in the same building, however, in separate apartments.
[54] He has no criminal record.
[55] He has continued to operate Canada Suites following his arrest and release on bail in January 2007. Based on several letters of the support filed on his behalf he has developed it into a prominent provider of short-term accommodation in the Toronto area. Also, as condition of bail he has been required to provide monthly reports concerning his business to the RCMP. Currently, it has has six employees and gross annual sales in excess of $450,000.
[56] In addition to continuing to develop Canada Suites, Mr. Khatchatourov has become active in his church, the Russian Orthodox Church and in contributing to charitable endeavours by offering special rates on short-term accommodation for persons receiving cancer treatments or transplant surgeries in Toronto Hospitals.
[57] On the sentencing hearing, counsel filed 30 letters from family, friends, and clients attesting to Mr. Khatchatourov’s good works with his church and community, and his honesty and integrity. As one supporter noted:
I find it difficult to connect the charges against Andrei to the person that I know: however, whatever wrongdoing has been established here, in my experience it could only have been due to a youthful immaturity. This individual is decent and kind-hearted. I cannot but stress my conviction that these matters should be placed behind him in view of the contributions he is both able and willing to make. Andrei has already re-established himself and is operating a successful company, Canada Suites.
[58] He has the strong support of his family, friends and church.
[59] Counsel has noted in his written materials that Mr. Khatchatourov has established a positive reputation in the business community as attested by several letters of reference, which include letters from the Russian Orthodox Church, a surety, his employees and several of his friends, business associates and family members. He has made positive steps toward rehabilitation.
Natalya Reznik
[60] Ms. Reznik was born in Belarus September 10, 1969. She was raised largely by her grandparents because her own mother suffered chronic depression. She attended the University of Foreign Languages and in 1989 received a Bachelor of Arts. In 1991, she married and the next year she and her husband immigrated to Canada. She has two daughters, the first born September 22, 1993 and the second, born August 16, 1995. Ms. Reznik, citing abuse, divorced her husband in 1998 but they continued to cohabit until 2001. She maintained sole custody of her daughters with her former husband paying support, which is said to be often late or behind in payments.
[61] Letters filed in support of Ms. Reznik by her daughters indicate they are close to their mother but estranged from their father. Her eldest daughter is currently attending university pursuing a degree in business management and her younger daughter is completing grade 11 in high school. Both daughters were involved in a car accident March 2011, after which both suffered stress and anxiety.
[62] Ms. Reznik has worked as an interpreter and translator. She operated an immigration consultant business, Reznik, Robertson and King. She and Mr. Khatchatourov met in 2000 and maintained an on-again and off-again relationship.
[63] Subsequent to being charged, Ms. Reznik sold her home in order to pay legal fees and support her family. Counsel advised that an impaired driver struck and injured her in 2007. She has been receiving accident benefits as a result however; she was required to assign them to Legal Aid Ontario to pay for her legal defence. In 2009, Ms. Reznik returned to providing translation services, initially unpaid in order to re-establish herself in the Russian speaking community. In 2011, Ms. Reznik secured a contract with an oil and gas company in Russia to translate operational manuals. Between 2009 and 2011, she lost her parents and grandmother who raised her.
[64] Ms. Reznik enjoys the strong support of family and friends as evinced by the 13 letters tendered in support. They reflect views that Ms. Reznik is a deeply devoted mother, with a close extended family, who has the potential to become a contributing member of society. She also has a letter of support from the Russian Orthodox Church whose priest describes her as a valued member of their congregation. The writers speak of her honesty, integrity, sense of responsibility and her caring nature. Both daughters write of the love and guidance provided by their mother and the anxiety they feel fearing her incarceration.
[65] She currently rents a home with Mr. Khatchatourov, although they reside in separate apartments.
[66] Ms. Reznik has no criminal record.
[67] There has been no indication that either offender bears any sense of remorse or made any effort to make restitution, (see R. v. A.(K.) 1999 3756 (ON CA), 1999, 137 C.C.C. (3rd) 554 (OCA) at 570; R. v. Valle-Quinter (2002), 2002 45123 (ON CA), 169 C.C.C. (3rd) 140 (OCA) at 164).
Position of the Parties
[68] The Crown’s position is that a fit sentence for each accused, having committed complex large-scale frauds is 6 years incarceration. In addition, the Crown seeks a fine in lieu of forfeiture in the amount of $423,580.41 for Andrei Khatchatourov and $71,954.63 for Natalya Reznik, pursuant to s.462.37 of the Criminal Code, and, restitution under s. 738 of $1,167,869.95 to Canadian Mortgage and Housing Corporation (CMHC), the amount paid out to the financial institutions insured against their losses resulting from the frauds.
[69] Counsel for Mr. Khatchatourov suggested than an appropriate sentence would be a conditional sentence of two years less one day with 240 community service hours and three years probation. Alternatively, the Court should impose a conditional sentence of two years less one- day with a restitution order for half the amount he received or two years less one-day incarceration without a restitution order. In any event, he opposes a fine in lieu of forfeiture for reasons that will be discussed below.
[70] Counsel for Ms. Reznik submitted that a fit sentence for her would be a conditional sentence of two years less one day and probation, without any restitution or fine in lieu of forfeiture.
Period of Incarceration
[71] The Crown, relying on such decisions as R. v. Bogart (2002), 2002 41073 (ON CA), 167 C.C.C. (3rd) 390 (OCA), R. v. Dobis (2002), 2002 32815 (ON CA), 163 C.C.C. (3rd) 259, R. v. Drakes and Brewster, 2009 ONCA 560, [2009] O.J. No. 2886 (OCA) submits that where there have been large scale complex frauds with breaches of trust and/or devastating consequences to victims, Courts have imposed substantial jail sentences. Typically, in such cases, the sentences have been in the 3 to 5 years range to give effect to the paramount sentencing objectives of general deterrence and denunciation. However, in this instance, due to what counsel described as a plethora of aggravating factors taking it beyond the typical range, the accused should each receive a sentence of 6-years incarceration.
[72] It is the position of defence counsel that the appropriate range of incarceration for such frauds is 18 months to 3 ½ years. In the circumstances of first time offenders and offences, where there has been no breach of trust, the only victims were the financial institutions whose losses were insured by CMHC, a conditional sentence of 2 years less a day is appropriate.
[73] Let me deal first with the request for a conditional sentence.
[74] I am mindful of the direction provided in R. v. Priest (1996), 110 C.C.C. (3rd) at 295 and objectives of sentencing as codified in s.718, proportionality as set out in s. 718.1 and s. 718.2 of the Criminal Code that I should consider community based dispositions first and impose more serious forms of punishment, such as incarceration only when necessary.
[75] The Supreme Court of Canada in R. v. Proulx, 2000 SCC 5, [2000] 1 S.C.R. 61 provided a comprehensive review of the conditional sentencing provision set out in s.742.1 of the Criminal Code. The Supreme Court made clear that a conditional sentence is available for all offences in which the statutory prerequisites are satisfied. There is no presumption that a conditional sentence is inappropriate for any specific offence.
[76] Under s.742.1 a court may order a conditional sentence where:
- the offence does not call for minimum term of imprisonment;
- the court imposes a sentence of imprisonment of less than 2 years;
- the safety of the community would not be endangered by the offender serving the sentence in the community; and,
- a conditional sentence would be consistent with the fundamental purpose and principles of sentencing set out in ss.718 to 718.2 of the Criminal Code.
[77] The issue in this instance is whether for these offenders in the circumstances of the offences committed a period of incarceration less than 2 years is an appropriate, and if so should be served as a conditional sentence.
[78] The defence argued that it must be less than 2 years and served conditionally for Andrei Khatchatourov otherwise, he will lose the business Canada Suites, which he has worked diligently to develop since being charged. Counsel for Ms. Reznik argued that her incarceration would deprive her children of her support and guidance.
[79] I am not persuaded that those positions have merit in the circumstances that warrant the imposition of a conditional sentence. It is somewhat ironic, in my view, that counsel would argue for a community-based disposition for Mr. Khatchatourov in order to maintain the continued success of his business, which was used to manage the stable of properties acquired through the fraudulent transactions. While I am sympathetic to the anxiety suffered by Ms. Reznik’s daughter in the thought of the loss of the daily succour of their mother, they are now in their teens. Although estranged from their father there is the requirement he continue to support his children. Also, there appears to be a strong network of family, church and friends. I note as well that Ms. Reznik engaged knowingly in fraudulent activity when both children were of tender years, thereby apparently willing at that time to put them at risk of losing her comfort and guidance had her fraudulent activity been detected earlier.
[80] Counsel for Mr. Khatchatourov argued, he should be treated as a youthful first offender and it was only through his immaturity that he became involved in the criminal activities. While he is a first offender and I accept he was relatively young, 23 years, when his criminal ingenuity first displayed itself, I must consider the fact that he continued with his criminal endeavours until he was 29 years. It stopped only when he was arrested and charged. By that time, he was neither youthful nor were his acts impulsively committed out of immaturity. He was highly educated and knowledgeable with respect to the ways of real estate transactions and mortgage financing such that he was able to perpetrate sophisticated acts of deception, taking in mortgage brokers, lending institutions and lawyers in order to perpetrate his crimes with Ms. Reznik.
[81] Ms. Reznik is a first offender as well, however, I accept that she acted jointly with Mr. Khatchatourov throughout the series of fraudulent transactions over a 6-7 year period. She operated as a paralegal helping those within her community with immigration matters and thereby initiated contact with many of their targets. She was not simply the person who recruited the nominees or investors through that role and left the rest to Khatchatourov and/or others as suggested by counsel. She was actively involved in the frauds.
[82] Theirs was a large scale, complex series of frauds committed over many years involving 11 properties and 27 mortgage applications that resulted in substantial loss initially to the financial institutions and then the public purse through insurance coverage provided by the CMHC. The offenders displayed significant expertise and sophistication in the manipulation of individuals, institutions and documentation necessary to advance their scheme.
[83] I am of the view that a sentence of less than 2 years imprisonment would be unfit. The sentence for each offender must be greater than 2 years incarceration to give effect to the sentencing objectives of denunciation and general deterrence.
Aggravating and Mitigating Factors
[84] Counsel contends that the aggravating factors of breach of trust and devastating consequences to victims in relation to large scale frauds noted in Bogart, Dobis and Drakes, relied on by the Crown are absent in this matter.
[85] The Crown acknowledged that while this was not a traditional breach of trust case in which the offenders acted in a trust capacity, such as bank manager, lawyer or other with a fiduciary duty nonetheless, the accused committed like breaches by misusing and abusing powers of attorney to effect their fraudulent scheme.
[86] The accused were not in a position of trust with respect to the financial institutions they deceived. However, in the conduct of their scheme they violated the trust of those who agreed to either assist them or invest with them. Some had their identities stolen and became entangled in the subsequent default proceedings and investigations. The Viniks believed that Ms. Reznik would help them through their difficult financial circumstances. The Graniks and Viniks, had an expectation the accused, Mr. Khatchatourov would legitimately manage their investments, through Canada Suites. Further, the accused misused and fabricated numerous powers of attorney to effect their fraudulent scheme.
Kostytyn Granik gave a power of attorney to Natalya Reznik in 2000 to deal with banking and financial matters as he and his wife travelled between the Ukraine and Canada. Ms. Reznik used that power of attorney without consent to sell the condominium at 410 – 10 Yonge Street, March 20, 2002, in Kostytyn Granik’s interest to Yevgeniy Yukhymenko.
Mr. Khatchatourov used a forged power of attorney in the name of Yevgeniy Yukhymenko later to sell the same property.
Andrei Khatchatourov used a false power of attorney in the name of Eugini Krisanov and Oleg Ilyashenko to purchase 730 Lansdowne Avenue, May 2, 2003.
Mr. Khatchatourov used the forged power of attorney to facilitate the sale of the same property November 25, 2003.
Natalya Reznik used a forged power of attorney in the name of Alex Gigger to facilitate the sale of 1601 – 889 Bay Street, March 1, 2005.
Andrei Khatchatourov used a forged power of attorney in the name of Oleg Ilyashenko to facilitate the sale of 809 – 889 Bay Street on October 25, 2003.
Andrei Khatchatourov used a forged power of attorney in the name of Alexandre Ermakov to facilitate the sale of 338 Harvie Avenue, July 15, 2003.
[87] Defence counsel argued that the only victims were the named financial institutions in the indictment, and others such as the Viniks and Graniks or persons whose identities were misused, the nominees should not be considered victims by the court in the assessment of an appropriate sentence. The breadth of the financial devastation may not have been a great as in cases such as Drakes, but the financial consequences were significant nonetheless. There was financial loss to the Viniks and the Graniks. The Viniks lost their home and they went bankrupt. They may have been ancillary victims or collateral damage in the greater scheme to defraud financial institutions, but they were still victimized by the offenders’ predatory exploitation of them as a means to commit the frauds.
[88] Although the accused were not in a position of trust vis-à-vis the financial institutions, this is not a situation as in R. v. Kirk, (2004), 2004 7197 (ON CA), 188 C.C.C. (3d) 329 (O.C.A.) as relied on by the defence to suggest a strictly a commercial relationship existed in this case akin to the accused failing to perform a contract after receipt of customer deposits. The abuse of the trust placed in them by the ancillary victims, and the misuse and falsification of power of attorneys in their names is an aggravated aspect of their criminality deserving of a denunciatory consequence.
Aggravating Factors
There was a significant degree of premeditation of planning and co-ordination to perpetrate each fraud. The series of frauds involved 11 properties, 27 mortgage transactions, and 3 attempts to obtain additional mortgage financing over a period that exceeded 6 years.
It was a joint and common enterprise perpetrated by the two offenders each with differing but complimentary roles. Ms. Reznik found the nominees and by using her position as a paralegal assisting immigrants and enlisted their participation unwittingly in the fraudulent scheme. The enticement was that they would improve their credit rating and be able to buy property in the future, thereby exploiting their dreams. Mr. Khatchatourov ran and managed the portfolio properties under Canada Suites and dealt with the banks and the lawyers. However, Ms. Reznik was also directly involved with the mortgage brokers and the falsified mortgage application documentation.
The accused had a sophisticated knowledge of what was needed to satisfy the banks and other lending institutions to secure financing. The frauds were perpetrated largely by the use of stolen identities and falsification of documentation. In this matter, they used:
- forged government citizenship cards in the names of nominees,
- forged social insurance (SIN) cards,
- falsified Canada Revenue Agency notices of assessment,
- altered bank statements and account information,
- letters of employment,
- altered and forged incorporation documents involving Canada Suites,
- the offenders deceptively commissioned MLS listings after forged purchase and sale agreements were created to prop up the inflated value of the properties to justify the mortgage financing,
- misused and forged powers of attorney to complete transactions and direct payment of proceeds.
The nature and extent of the loss to the financial institutions after power of sale proceedings, subsequently borne by CMHC through insurance coverage exceeded $1 million dollars.
Each accused derived personal financial gain, Mr. Khatchatourov in the amount of $423,580.41 and Natalya Rezik in the amount of $71,954.63.
The motivation for the frauds was to fund and establish what appeared to be a legitimate business and to portray themselves as wealthy and successful business people within the Russian community.
Ultimately, the losses of the financial institutions insured by CMHC, the frauds were perpetrated on the public purse, which factors into the seriousness of the offence. (See R. v. Bogart (2002), 2002 41073 (ON CA), 167 C.C.C. (3rd) 390 at para. 23 and R. v. Sasha Alexander, unreported June 9, 2010 (SCJ)).
No restitution has been made or offered by either accused
The serial frauds perpetrated ended only after the accused were charged.
The accused ensnared many others in their scheme, some falling under suspicion and investigation by the police. At least one other, Sasha Alexander, was charged and pleaded guilty for his role in the mortgage fraud in relation to the property at 151 Old Surrey Lane. Several of the lawyers involved were investigated and have been subject to professional discipline proceedings.
Mitigating Factors
[89] I take into account that the accused do not have criminal records, they have maintained the conditions of their bail releases and not involved in other criminal activity since being charged. Further, it is to their credit that they have pursued legitimate business interests, and in Mr. Khatchatourov’s case participated in community and charitable activities. Both accused have strong family and community support.
[90] Counsel suggested that the accused should benefit from having significantly shortened the trial by making certain admissions such as the admissibility of documentation relied on by the Crown and that frauds had been committed.
[91] While some benefit is warranted, it is, in my view, a factor of marginal consideration because the bulk of the documents relied on by the prosecution were business records and as such admissible, in any event.
[92] The admission that frauds had been committed was a tactical or strategic choice made by counsel and the nature of the defence advanced. Dishonest lawyers and mortgage brokers and others prepared the falsified documents and perpetrated the frauds, not their clients – a defence rejected by the jury. The evidence of frauds having been committed in this case was overwhelming.
Range of Incarceration
[93] Considering the gravity of the offences and responsibility of the offenders and the need to emphasize the principles of denunciation and general deterrence in large-scale frauds both accused shall be sentenced to periods of incarceration in the penitentiary. I accept that the appropriate range of sentence for the type of frauds committed by these offenders is 3 to 5 years. ( R. v. Bogart, supra at para 36 in reference to R. v. Dobis supra; R. v. Topp, 2008 20991 (ON SC), [2008] O.J. No. 1766 at para. 31; R. v. Palantzas, [2009]O.J. No. 3862 at para. 53)
[94] The cases relied on by counsel in which lesser periods of incarceration were imposed all had a number of significant mitigating factors, absent from this case. Accused who pleaded guilty, cooperated and assisted with the investigations, made restitution or assisted with the recovery of funds, committed offences because of addiction or need and who expressed remorse and accepted responsibility for their criminal conduct.
[95] In R. v. Bunn (2000) 2000 SCC 9, 140 C.C.C. (3d) 505 (S.C.C.) a lawyer who converted $86,000 of trust funds was disbarred, lost a twenty year career and “suffered humiliation and torment…amplified with the realization that his invalid wife and teenage daughter must share in the embarrassment and debasement of his personal debacle”.
[96] In R. v. Moulton, [2001] S.J. No. 702 (Sask. C.A.) a cattleman pleaded guilty to defrauding the Saskatchewan Government and a farmer’s cooperative by misappropriating $273,000.
[97] In R. v. Massoudinia, [2002] O.J. No. 5504 (S.C.J.), an offender who defrauded approximately 1400 people of in excess of $2 million dollars in fees paid to a non-existent modeling agency pleaded guilty, expressed remorse and offered to attempt to make restitution.
[98] In R. v. Berenbaum, [1997] O.J. No. 5468 three accountants, pleaded guilty to defrauding the accounting firm they worked for of approximately $1.8 million collectively. They had cooperated fully with the forensic accounting firm, made “virtually, full restitution” prior to plea and facilitated their professional expulsion as chartered accountants.
[99] The court of appeal in R. v. Clarke, 2004 7246 (ON CA), [2004] O.J. No. 3438, stated that a low level bank employee who made an unauthorized redemption of $20 million of customer’s mutual funds, discovered the next day without any actual loss, warranted a period of incarceration at the bottom of the 3 to 5 year range. Although the offender held a position of trust with the bank, he had not been entrusted with the information that allowed him to commit the offence.
[100] The offenders in R. v. Coffin (2006), 2006 QCCA 471, 210 C.C.C. (3d) 227(Que. C.A.), R. v. Kennedy, [2000] MBCA 44 (Man. C.A.), and R. v. Bortolussi, 1997 26458 (ON SC), [1998] 1 C.T.C. 145 (O.C.J. Gen Div.) all pleaded guilty.
[101] The absence of such factors in this instance are not cited as aggravating factors, but rather as factors that distinguish the cases relied on by the defence and to emphasize that if otherwise present would serve to mitigate sentence and warrant leniency. Clearly, the offenders must not be penalized in their absence, but neither should they expect leniency.
[102] Where within the appropriate range the offender is to be sentenced is dependent on the presence of aggravating factors, of which there are many in this instance, and mitigation factors, of which there are few. The aggravating factors delineated above together with the serial nature of the frauds committed out of pure greed move the sentence to the higher end of the range. The mitigating factors noted; their lack of criminal records, expediting the trial proceedings marginally, contributions to their church and community, acknowledged strong family support and rehabilitative efforts, are taken into account to moderate the severity of the sentence to some degree. However, I bear in mind that in major frauds general deterrence and denunciation are the most important sentencing principles, mitigation factors, and rehabilitation, secondary in the consideration. (See R. v. Bogart supra at paras. 29-31)
[103] Defence counsel did not seek to differentiate between the offenders as to the length of incarceration that would be appropriate and I see no basis to do so either in this case. Andrei Khatchatourov and Natalya Reznik shall each be sentenced to 4 years imprisonment, (48 months) in the penitentiary.
Fine in Lieu of Forfeiture
[104] The Crown has brought an application for the court to order that the offenders forfeit their proceeds of crime pursuant to s.462.37 in the amounts received by each, as reflected by the cheques issued in their interest in the various transactions. In Mr. Khatchatourov’s case, it amounts of $423,580.41 and with respect to Natalya Reznik, $71,954.63. In addition, the Crown has applied for a restitution order pursuant to s.738 as against the offenders, jointly and severally, in the amount of $1,167,869.95 payable to CMHC. The language of s.672.37(1) is mandatory, whereas the application under s.738 is discretionary. I shall deal with the application for a fine in lieu of forfeiture first.
[105] Section 462.37(1) of the Criminal Code provides,
(1) Subject to this section and ss.462.39 and 462.41, where an offender is convicted, or discharged under s.730, of a designated offence and the court imposing sentence on the offender, on application of the Attorney General, is satisfied, on a balance of probabilities, that any property is proceeds of crime and that the designated offence was committed in relation to that property, the court shall order that the property be forfeited to Her Majesty to be disposed of as the Attorney General directs or otherwise dealt with in accordance with the law.
[106] However, if the property cannot be made subject to an order then pursuant to s.462.37(3):
(3) The court may, instead of ordering the property or any part of or interest in the property to be forfeited, order the offender to pay a fine in an amount equal to the value of the property or the part of or interest in the property. In particular, a court may order the offender to pay a fine if the property or any part of or interest in the property a) cannot, on the exercise of due diligence, be located; b) has been transferred to a third party; c) is located outside Canada; d) has been substantially diminished in value or rendered worthless; or e) has been co-mingled with other property that cannot be divided without difficulty.
[107] In the circumstances of this case, the funds received by the offenders as a discreet sum of money is not available and it would appear that subsection (e) applies.
[108] The objectives of forfeiture are to deprive the offender of the proceeds of crime and to deter others from committing crimes in the future, to ensure that crime does not pay.
[109] The Supreme Court of Canada in R. v. Lavigne, 2006 SCC 10, [2006] 1 S.C.R. 392 (SCC) made clear that on the criteria being met in s.462.37(1) Parliament has made the provisions mandatory “by requiring forfeiture and making the provision apply to the widest possible range of property”.
[110] Where forfeiture of the proceeds of crime is not always practicable, the court has limited discretion with respect to a fine imposed instead of forfeiture. An offender’s ability to pay is not a factor in determining the fine under s.462.37. It becomes a consideration only in determining the time to be given to the offender to pay the fine (s. 462.37(4) and later in a determination as to whether a warrant should issue for non-payment s. 462.37(5).
[111] The statutory criteria having been met, I intend to order the offenders to pay fines in lieu of forfeiture. However, I wish to address an argument raised by counsel for Mr. Khatchatourov in opposing its imposition.
[112] In response to the Crown application for a fine in lieu of forfeiture, Counsel for Khatchatourov submitted that Khatchatourov would be “willing to embrace” restitution in half the amount requested by the Crown as the fine.
[113] He argued that even though the criteria for a fine in lieu are met in this instance, if the court were to impose a fine in lieu of forfeiture and make a restitution order, which he encouraged contrary to his original position, “an anomaly may occur which would be extremely prejudicial to an offender.
[114] In substance, his argument is as follows: if the offender does not pay the fine, without reasonable excuse he will be sentenced to a period of imprisonment. The sentence of imprisonment in default of payment will therefore be used to accomplish what the fine in lieu of forfeiture sought to accomplish – to prevent crime from paying and to deter crime. However, if a restitution order has not been paid by the offender, it continues to survive and may be enforced against the offender over the course of the offender’s life. When the restitution order is eventually paid, the offender will have suffered a double punishment. Firstly, the fine would have been discharged by the offender having served an additional prison term consecutive to a jail term imposed as punishment for the actual crime. Secondly, the debt owed would have been discharged by payment of the restitution order. The proceeds of crime in other words, will have essentially been “recovered” twice.
[115] Further, he argues that if the fine is paid there is no guarantee that the amounts paid under the forfeiture regime would be applied to the restitution order. If not, judgment could still be enforced against the offender on full amount of the restitution order thereby resulting in double recovery.
[116] The notion that the offender would suffer double punishment by being incarcerated for non-payment of the fine or that the proceeds of crime could be “recovered twice”, are specious.
[117] Firstly, any consequence for non-payment of the fine in lieu of forfeiture is separate from any punishment imposed for the commission of the crime. As noted in Lavigne at para 16:
Parliament’s intention in enacting the forfeiture provisions was to give teeth to the general sentencing provisions. While the purpose of the latter provision is to punish the offender for committing a particular offence, the objective of forfeiture is to deprive the offender and the criminal organization of the proceeds of their crime and to them from committing crimes in the future. The severity and scope of the provisions suggest that Parliament is seeking to avert crime by showing that the proceeds of crime themselves, or the equivalent thereof, may be forfeited.
[118] Further, Deschamps J. stated at para. 26:
The actual objective of part XII.2 is to deal with the proceeds of crime separately from, and in addition to, the punishment for committing a crime. The fine imposed in this instance has some special features: there are special rules for imprisonment and default of payment (s.462.37(4) and (5)). The fine or imprisonment imposed as the primary sentence punishes the commission of the designated offence, while forfeiture or a fine instead of forfeiture deprives the offender of the proceeds of his or her crime and deters potential offenders and accomplices.
[119] Secondly, there are legislative mechanisms to ensure if payment is made with respect to the fine in lieu of forfeiture that it would be applied to the restitution order. Section 462.49(2) provides that the property of an offender may be used to satisfy such other forfeiture provisions not required to satisfy orders for restitution or compensation of victims of crime made pursuant to the Criminal Code or any other act of Parliament. In addition, s.14.6 of the Crown Attorneys Act, RSO 1990, c.C.-49 provides that money provided to the government paid as a fine under s.462.37(3) shall be credited to a separate non-interest bearing account in the consolidated revenue fund and that the amounts standing to the credit of the accounts may be used to reimburse the fund for any expenditures relating to victim restitution.
[120] Thirdly, I am not prepared to exercise my very limited discretion not to order a fine, as recognized in Lavigne at para. 35 where the objectives of the provisions do not call for a fine to be imposed at all, such as where “the offender did not profit from the crime and (if) it was an isolated crime committed by an offender acting alone”. Like circumstances do not prevail here.
[121] The Crown suggested that in order to alleviate any concern the restitution order could contain provision that the amount with respect to the fine could be subtracted from the restitution order should the offenders be imprisoned for default in payment of the fines in lieu of forfeiture. In my view, such a reduction would be contrary to the objectives of the proceeds of crime provisions that require punishment for non-payment in order to impress on the offender and others that crime does not pay, and the objective of a restitution order to compensate victims for loss. On making the restitution order there is nothing to prevent the victim from proceeding to filing the order to obtain judgment in the full amount ordered as permitted pursuant to s.741 of the Criminal Code.
[122] However, it would be appropriate to ensure payment of the fine in lieu of forfeiture is credited to the amount of restitution ordered that there is a term to that effect in the proceeds of crime order.
Restitution
[123] The Ontario Court of Appeal in R. v. Biegus, 1999 3815 (ON CA), [1999] O.J. No. 4963 at para. 22 stated the court is required to consider and weigh an offender’s ability to pay, although it is not an overriding consideration. Most importantly, as noted in R. v. Zelensky, 1978 8 (SCC), [1978] 2 SCR 940 a restitution order should be made with restraint and caution. The order should not be to enforce a civil obligation where the amount taken is unclear. Rather the purpose of a compensation order is as part of the sentence. (See also R. v. Castro, [2010] ONCA 718 at paras. 26 and 43).
[124] In R. v. Castro, Weiler J.A. stated at para. 27:
Reviewing courts have however, consistently held that no single factor is itself determinative of whether a compensation order should be granted and that the weight to be given to individual considerations will depend on the circumstances of each case. Those circumstances include two considerations I wish to emphasize: the nature of the offence and, when money has been taken, what has happened to the money.
[125] In this instance, the offenders were involved in a joint and common enterprise to defraud the financial lending institutions. While the financial institutions were the direct victims, they were compensated through insurance CMHC. It is not a victimless crime as some might suggest. The frauds caused loss to the public purse and the public should be compensated.
[126] I bear in mind, however that making a restitution order is part of the sentencing process and that it:
- Emphasizes the sanction imposed upon the offender;
- Makes the accused responsible for making restitution to the victim;
- Prevents the accused from profiting from crime; and
- Provides a convenient, rapid and inexpensive means of recovery for the victim.
[127] Counsel for Ms. Reznik submitted that no restitution order is appropriate, whereas counsel for Mr. Khatchatourov, as noted above, submitted that he was willing to make restitution in half of the total amount with respect to cheques issued on the various transactions. Both counsel acknowledged having admitted the total loss of $1,167,869.95 for the purposes of the trial however, it had not been admitted with respect to a request for restitution. Further, they correctly point out that the amount claimed includes legal fees, disbursements and other expenses not appropriate as part of a restitution or compensation order. In R. v. Devgan (1999), 1999 2412 (ON CA), 136 C.C.C. (3rd) 238 (OCA), with respect to a compensation order s.725 (1) now 738.1, it was noted at para. 36:
The court in R. v. Brunner found that s.725 (1) was never intended to confer upon the criminal courts the right to award civil loss of use damages to a victim. I also read this section as compelling the conclusion that it does not permit the making of a compensation order for legal costs incurred to recover property lost or damaged as a result of a criminal offence. Parliament never intended to confer upon the criminal courts the right to award compensation for legal fees and disbursements as part of a compensation order. An order under this section is limited to an amount representing the actual loss of the property.
[128] Counsel for Khatchatourov argued that if he is incarcerated his business will fail and if his business fails, he will not be able to make restitution. Counsel for Ms. Reznik argued that she is of meager means and has little income. She has been endeavoring to re-establish herself in her community and employment as a translator.
[129] The offenders are relatively young; Khatchatourov is in his mid-30s and Ms. Reznik in her early 40s. Both of them have many productive years ahead of them to pursue any business interests. Further, I note that there has been no explanation as to what happened to the money that was illegally obtained.
[130] The offenders were equal participants in a joint and common enterprise and as such, they are equally responsible for the loss they created. In R. v. Eizenga, 2011 ONCA 113, [2011] O.J. No. 524 (OCA) as noted at para. 108:
…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 (as long as the amount ordered does not exceed the amount lost by the victims). This is in keeping with the principle that a restitution order is part of a sentence and should not serve to displace the civil remedies necessary to ensure full compensation to victims: R. v. Zelensky, 1978 8 (SCC), [1978] 2 S.C.R. 940; Devgan at para. 26
[131] In this instance, the offenders shall be jointly and severally responsible for the total amount disbursed to them, as reflected by the cheques issued in the property transactions.
[132] Accordingly, each offender shall be jointly and severally responsible to make restitution to the Canadian Mortgage and Housing Corporation in the amount of $495,535.04.
Sentences
Period of Incarceration
[133] Andrei Khatchatourov is hereby sentenced to 4 years incarceration on Count 1, and 4 years on Counts 2 to 11 to be served concurrently with Count 1.
[134] Natalya Reznik is sentenced to 4 years incarceration on Count 1 and 4 years incarceration on Counts 2 to 7 and 9 to 11 to be served concurrently to Count 1.
Fine in Lieu of Forfeiture
[135] On being satisfied that the requirements of ss.462.37(1) and 462.37(3) have been met, Andrei Khatchatourov is ordered to pay a fine in lieu of forfeiture of proceeds of crime in the amount of $423,580.41 and Natalya Reznik a fine in lieu of forfeiture of proceeds of crime in the amount of $71,954.63. In considering their financial circumstances as presented by counsel, and the time required to pay as reasonable in all the circumstances, each offender shall be given 4 years to make payment after release from incarceration on the offences committed (see R. v. Wu, 2003 SCC 73, [2003] 3 S.C.R. 530 (SCC) and R. v. Lavigne, supra at paras. 45 to 48).
[136] Andrei Khatchatourov, in default of payment of the fine shall be imprisoned for a term of 3 years consecutive to any other term of imprisonment in accordance with s.462.37(4)(a)(vi) of the Criminal Code.
[137] Natalya Reznik, in default of payment of fine shall be imprisoned for a term of 18 months consecutive to any other term of imprisonment in accordance with s.462.37(4)(a)(iv) of the Criminal Code.
[138] Each order with respect to a fine in lieu of forfeiture shall require the Attorney General to transfer all payments received from the offenders made with respect to the fine payable to the satisfaction of the restitution order.
Restitution
[139] Andrei Khatchatourov and Natalya Reznik shall be jointly and severally responsible to make restitution in the amount of $495,535.04 to the Canadian Mortgage and Housing Corporation.
A.J. O’Marra J.
Released: June 14, 2012
COURT FILE NO.: P427/09
DATE: 2012/06/14
ONTARIO
SUPERIOR COURT OF JUSTICE
HER MAJESTY THE QUEEN
– and –
ANDREI KHATCHATOUROV and NATALYA REZNIK
Accused
REASONS FOR Sentence
(Delivered orally in court)
A.J. O’Marra J.
Released: June 14, 2012