R. v. Sanmugam, 2012 ONSC 6663

COURT FILE NO.: CR-12-70000158-0000

DATE: 20121123

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

HER MAJESTY THE QUEEN – and – ARVIND SANMUGAM Defendant

Grace Hession David , for the Crown

Anthony LaBar , for the Accused

DUCHARME J.

REASONS FOR SENTENCE

I Introduction

1## Introduction

Mr. Sanmugam entered a guilty plea to three counts of fraud contrary to s. 380(1)(a). I sentenced him on November 9, 2012. These are my reasons for sentence.

II. Position of the Crown

2## Position of the Crown

The Crown seeks a penitentiary sentence of three years and, relying on s. 719(3) of the Criminal Code submits that Mr. Sanmugam should be given credit for pre-trial custody on a one to one basis. Ms. David also asks for a restitution order in the amount of $1,109,405.

III. Position of the Defence

3## Position of the Defence

The defence suggests that the appropriate sentence for these offences was two years less a day to be followed by three years probation. Mr. LaBar did not argue that Mr. Sanmugam was entitled to enhanced credit for his pre-trial custody. However, he did emphasize the devastating effects that a sentence of two years or more would have on Mr. Sanmugam’s immigration status. The defence joined in the request for a restitution order, with Mr. LaBar emphasizing Mr. Sanmugam’s desire to make full restitution to his victims.

IV. Circumstances of the Offender

4## Circumstances of the Offender

Mr. Sanmugam was born in 1960, although his counsel, apparently on Mr. Sanmugam’s instructions, refused to tell me where he was born. I am told Mr. Sanmugam lived in India from the age of 14. He speaks English and Tamil and he learned French from 1974 to 1983 at the Alliance Française in India. He claims to have completed a B.A. in English Literature at Loyola College at the University of Madras in India. He subsequently enrolled in a M.A. in Public Administration at the University of Madras but he did not complete this program as he immigrated to Canada.

5Mr. Sanmugam says that he came to Canada in 1985 to avoid any involvement with Tamil fighters who were active in southern India. He first came to Canada on a visitor’s visa. He later was granted a Temporary Resident Permit which he has since renewed annually.

6Mr. Sanmugam first worked as a night cashier at a Canadian Tire store and as assistant manager of a muffin shop at Union Station in Toronto. In 1986, he worked as a waiter at a Red Lobster restaurant and also taught English courses to new immigrants and refugees in Canada. From 1987 to 1996 his main source of income was from preparing reports on university and colleges in the US and Canada for foreign applicants. During this time he also invested in a variety of businesses in India all of which failed. The rise of the internet put an end to his university advisory business. From 1996 to 2000, Mr. Sanmugam provided guided tours for visitors to Toronto. From 2000 to 2005, Mr. Sanmugam continued to be involved in the tourism business. He did guided tours for people visiting the Maritimes and Quebec. In 2005, Mr. Sanmugam ran a business helping to arrange accommodations for new immigrants and refugees to Canada. From 2006 to 2010, Mr. Sanmugam was involved in what Mr. LaBar called “market commentary.” I was not told anything more about this other than this is the subject of a separate proceeding before the Ontario Securities Commission.

7In 2007, Mr. Sanmugam invested in a cafe and bakery company that ultimately failed. He also claimed to be involved with other business ventures. One was the Canadian Peacemakers Corporation which “sourced equipment to police training operations worldwide.” Another business that he claimed to have been extensively involved in was the “World Police Academy.” Apparently, he helped develop a police training academy located somewhere in India. The goal of this was to bring Canadian police forces to India for police training. I have not been provided with any further details about these organizations and am skeptical about whether or not they in fact exist. However, the Crown does not dispute these claims so I will accept them for what they are worth. I will observe that I find it curious that, if Mr. Sanmugam played such a pivotal role in an organization such as this, I have received no letters of support attesting to his good work in these areas.

8Mr. Sanmugam claims to have been active in a variety of charitable organizations including the Word Wildlife Fund in both Canada and India. In 2009, Mr. Sanmugam claims to have been accepted into the MBA program at HEC [Hautes Études Commerciales] at the Université de Montréal. He did not complete this program due to his arrest but he hopes to complete this program after serving his sentence. Again, I have received no documentation attesting to his involvement in any of these charitable activities or his studies at HEC. However, as the Crown has not challenged these submissions, I will accept them for the purposes of sentencing.

9Mr. Sanmugam married a Canadian woman in 1989 and in 1995 they had a boy. In 1998 the couple had a daughter. In 2001 Mr. Sanmugam separated from his wife and mother of two of his children. In 2002 Mr. Sanmugam began his relationship with Julie Wingink, another Canadian woman, with whom he still has a relationship. Ms. Wingink provided a letter of support to the court in these proceedings. They have had two daughters born in 2003 and 2004.

10Mr. LaBar tells me that in addition to completing his MBA, he hopes to pursue various unspecified entrepreneurial interests after being released from jail. Mr. Sanmugam also describes himself as a writer and poet and indicates that he hopes to publish a book when he is released.

V. Circumstances of the Offences

11## Circumstances of the Offences

Obviously the facts of the offence are a central consideration in determining the appropriate sentence in any criminal case. In particular, the nature of the offence and the accused person's role in the offence are very important in any assessment of his or her moral culpability.

12Mr. Sanmugam held himself out as a licensed and educated “market commentator” and venture capitalist. He told his victims that he was educated at Cambridge University in England and that he named his securities company “Bunting & Waddington” after his favourite professors. He indicated to his victims that he had staffed his firm with many securities traders and that he was adept at making money for his clients. He targeted people who had no financial knowledge and who were not sophisticated in financial matters. Bunting & Waddington was never properly registered with the Ontario Securities Commission or with any of the other provincial securities commissions in Canada. Mr. Sanmugam was not licensed to trade securities or to offer advice in the trading of securities in any capacity in the Province of Ontario or anywhere else in Canada.

13At the preliminary inquiry, Mr. Douglas Fox, Principal and Chief Compliance Officer of Risk Management Services Inc., was qualified as an expert in the area of securities trading and profit analysis with respect to Mr. Sanmugam’s trading for two of the three victims. Mr. Fox noted in his expert report which was filed as an exhibit at the preliminary inquiry that with respect to the trading activity for both William and Barbara Blizzard and Tuhina Biswas, there “does not appear to be any method or system for the trading and it does not appear to follow any portfolio strategy.”

Count 6: Barbara and Bill Blizzard

14### Count 6: Barbara and Bill Blizzard

William and Barbara Blizzard are an elderly retired couple of frugal means who, at the material time, lived in Barrie, Ontario. They have no investment knowledge and are not sophisticated in financial matters. In early fall of 2007 the Blizzards were told of an amazing investment opportunity when Mr. Sanmugam travelled from Toronto to meet the Blizzards at their home. He told them that if they supplied him with $100,000, they could expect to make $8,000 profit each month. Their monthly fee for having Mr. Sanmugam invest their money was $3,500. The Blizzard’s mortgaged their house and gave Mr. Sanmugam a total of $118,700 to invest at the beginning of September 2007. Over the course of time, the investment portfolio for the Blizzards made no money and the investment statements they received indicated that they were trading heavily in margin. The Blizzard’s mistakenly believed that the margin amount (which was in the hundreds of thousands of dollars) was pure profit so they obligingly paid Mr. Sanmugam his $3,500 each month. They also withdrew from the capital and further contributed to the depletion of their investment account because they thought their portfolio was making the kinds of profits that Mr. Sanmugam promised. Their withdrawals were made in an effort to pay back the mortgage that the bank had granted them.

15In November of 2008 the Blizzards began to get margin calls from TD Waterhouse Discount Brokerage where they had their investment portfolio account. They were not sure what margin calls were, but they became alarmed and tried to get in touch with Mr. Sanmugam. Mr. Sanmugam would not personally return their phone calls and instructed his assistant to re-assure them that everything would be fine. By this time the Blizzards had ceased paying Mr. Sanmugam the $3,500 fee because they could see that their portfolio was drastically reduced in value. The couple lost hope and lodged a complaint with the Investment Industry Regulatory Organization of Ontario (“IIROC”), but they received no assistance because Mr. Sanmugam was not licensed with this entity. They were told that their matter was being forwarded to the Ontario Securities Commission for review. In September of 2010 they read in the newspaper that Mr. Sanmugam had been arrested by the police in connection with the Zink and Biswas matters. They immediately filed a complaint with the police but by then there was no money left in their investment account. The Blizzards sold their house to pay off their mortgage and now live in rental accommodation. The Blizzard’s loss totalled $118,700.00.

Count 5: Linda Zink

16### Count 5: Linda Zink

Ms. Zink is an elderly widow who lives in Vancouver, British Columbia. She has no investment knowledge and was always financially provided for by her late husband. She met Mr. Sanmugam in the fall of 2008 while she was on a visit to Toronto. One morning she was walking her grandchildren to Bishop Strachan School and she met Mr. Sanmugam who was dropping his children off at the same school. The two became friendly and began to speak with each other. Mr. Sanmugam told Ms. Zink that he was a professional investor and that if she would entrust her money with him, he would ensure that she would eventually have all her bills, credit cards and lines of credit paid off. He also promised her that she would eventually be able to afford a second residence in Toronto so she would have her own residence when she visited her grandchildren. Ms. Zink became interested and began to meet regularly with Mr. Sanmugam to discuss the investment plan.

17Mr. Sanmugam told Ms. Zink that he would have to review her finances and tell her how much she should invest with him. He also warned her to keep their plans a secret so that she would not be talked out of the plan by anyone. Over a period of time, and under Mr. Sanmugam’s direction, Ms. Zink transferred a total of $662,000 to Mr. Sanmugam by liquidating securities portfolios that her deceased husband had left her and by mortgaging her properties. She conveyed to Mr. Sanmugam all of her assets in secret. A production order obtained by the police show the amounts entering Mr. Sanmugam’s account and they are then dispersed to other accounts that he controlled for the purposes of trading or for the purposes of supporting his other business ventures. Over time, Ms. Zink began to hear less and less from Mr. Sanmugam and eventually, her son inquired as to her relationship with Sanmugam and this was when the family discovered that she had lost her life savings to him.

18Ms. Zink initiated civil proceedings against Mr. Sanmugam in April of 2009. Her total loss as a result of Mr. Sanmugam’s fraud was $662,000.00

Count 7: Tuhina Biswas

19### Count 7: Tuhina Biswas

Dr. Tuhina Biswas met Mr. Sanmugam on the “e-harmony” dating website in October of 2008. Mr. Sanmugam held himself out as a venture capitalist and owner of the securities investment firm Bunting & Waddington. He told Dr. Biswas that he had two degrees – one in English literature from Cambridge University in England, two MBA degrees as well as the Certified Financial Analyst designation. He also told Dr. Biswas that he had a PhD in Abstract Analysis. None of this was true. Sanmugam told her that he usually generated $150,000 a month from trading for his clients.

20Sanmugam suggested that Dr. Biswas invest with him in an investment plan that would assist her in the financial support of her disabled brother. At the material time, Dr. Biswas’ mother and brother lived in the house that her deceased father had provided from his life savings. There was no mortgage on the home prior to Dr. Biswas’ involvement with Sanmugam. Dr. Biswas’ brother requires almost $5,000 monthly in special care and medications and Sanmugam assured that his investment skills could easily provide that kind of financial support. In March of 2009, Sanmugam convinced Dr. Biswas to invest with him and at his urging, she opened an online trading portfolio with TD Waterhouse Brokerage. In order to provide capital for the investment, Dr. Biswas and her mother mortgaged their home and with the proceeds of that mortgage, they gave Mr. Sanmugam $328,705 to invest. Even though she is trained as a medical doctor, Dr. Biswas has no financial background and is an unsophisticated investor. Dr. Biswas’ mother, Chitra, is a retired teacher and has no investment knowledge either.

21Mr. Sanmugam continually told Dr. Biswas that her portfolio was profitable and that he was investing in reliable blue chip investments that provided predictable dividends. However, in reality, Sanmugam was trading on margin for the Biswas account and like the Blizzards, Dr. Biswas did not understand trading on margin and thought the sums in her margin account were profits instead of debt. Dr. Biswas withdrew cash from the capital in her investment portfolio under the belief that she was not depleting capital but only taking profit from dividend returns. Sanmugam would often move sums of money from the discount brokerage account into Dr. Biswas’ chequing account or her mother’s account and tell them these sums were profits that they could withdraw and spend in whichever way they wished. Sanmugam was able to do this because he had the password to Biswas’ account.

22At the same time and during the course of her relationship with Sanmugam, Dr. Biswas also lent him money to assist him with his many problems. In April of 2009 she learned that Mr. Sanmugam was being sued by Linda Zink so Dr. Biswas lent him money to assist with the legal bills from that lawsuit. Dr. Biswas also lent Mr. Sanmugam money to assist in his start up coffee company, Chez Lee Loo in India. Dr. Biswas estimates that she gave Mr. Sanmugam $170,000 in funds over and above the funds from the mortgaged home.

23By November of 2009, Dr. Biswas’ trading account had been seriously depleted of funds. In June of 2010, Dr. Biswas learned from a friend that Mr. Sanmugam had approached her friend on the same internet dating website which she found disturbing because in January of 2010, Sanmugam had asked her to marry him. Dr. Biswas became extremely concerned once Sanmugam was charged in May of 2010 with the fraud against Zink and around that same time she learned that Sanmugam was living in a common-law relationship with Julie Winget and that he had two children with her. She filed a report against Sanmugam with the police at the end of July 2010. Dr. Biswas’ loss as a result of Mr. Sanmugam’s fraud was $328,705.00.

VI. Relevant Principles of Sentencing

24## Relevant Principles of Sentencing

The purpose and principles of sentencing are set out in s. 718 of the Criminal Code . Generally speaking, the fundamental purpose of sentencing is to foster respect for the law and to maintain a just, peaceful and safe society. The court attempts to achieve this purpose by imposing just penalties that have one or more of the following objectives:

(1) denouncing unlawful conduct [s. 718(a)];

(2) deterring this offender and others from committing offences [s. 718(b)];

(3) imprisoning offenders where necessary to separate them from law abiding members of society [s. 718(c)];

(4) assisting in rehabilitating offenders and in appropriate circumstances encouraging their treatment [s. 718(d)];

(5) providing reparation for harm done to victims of the community [s. 718(e)]; and

(6) promoting in offenders a sense of responsibility for and acknowledgement of the harm they have done to victims and to the community [s. 718(f)].

25Section 718.1 of the Criminal Code provides that the fundamental principle of sentencing is that a sentence must be proportionate to the gravity of the offence and to the degree of responsibility of the offender. Section 718.2 of the Criminal Code also requires the court to take into account other principles, including these:

(a) that a sentence may be increased or decreased depending upon the presence of any relevant aggravating or mitigating circumstances relating to the offence or to the offender [s. 718.2(a)];

(b) that a sentence should be similar to those imposed on similar offenders for similar offences committed in similar circumstances [s. 718.2(b)];

(c) where consecutive sentences are imposed, the combined sentence should not be unduly long or harsh [s. 718.2(c)];

26In R. v. Nasogaluak , 2010 SCC 6 , [2010] 1 S.C.R. 206 the Court held at para. 43:

The language in ss. 718 to 718.2 of the Code is sufficiently general to ensure that sentencing judges enjoy a broad discretion to craft a sentence that is tailored to the nature of the offence and the circumstances of the offender. The determination of a "fit" sentence is, subject to some specific statutory rules, an individualized process that requires the judge to weigh the objectives of sentencing in a manner that best reflects the circumstances of the case. [Citations omitted.] No one sentencing objective trumps the others and it falls to the sentencing judge to determine which objective or objectives merit the greatest weight, given the particulars of the case. The relative importance of any mitigating or aggravating factors will then push the sentence up or down the scale of appropriate sentences for similar offences. The judge's discretion to decide on the particular blend of sentencing goals and the relevant aggravating or mitigating factors ensures that each case is decided on its facts, subject to the overarching guidelines and principles in the Code and in the case law. [Emphasis added.]

27The Courts have often emphasized, most recently in R. v. Drabinsky , that the dominant sentencing objectives in cases of large scale commercial fraud must be denunciation and deterrence. Given that the loss to the victims in this case totalled more than 1 million dollars, I think the same objectives are most important in this case. I will discuss each of these principles in turn.

(A) Denunciation

28### Denunciation

Denunciation as a principle of sentencing was explained by Chief Justice Lamer in R. v. C.A.M. , 1996 230 (SCC) , [1996] 1 S.C.R. 500 (S.C.C.) at para. 81 :

Retribution, as well, should be conceptually distinguished from its legitimate sibling, denunciation. Retribution requires that a judicial sentence properly reflect the moral blameworthiness of that particular offender. The objective of denunciation mandates that a sentence should also communicate society's condemnation of that particular offender's conduct. In short, a sentence with a denunciatory element represents a symbolic, collective statement that the offender's conduct should be punished for encroaching on our society's basic code of values as enshrined within our substantive criminal law . As Lord Justice Lawton stated in R. v. Sargeant (1974), 60 Cr. App. R. 74, at p. 77 : "society, through the courts, must show its abhorrence of particular types of crime, and the only way in which the courts can show this is by the sentences they pass". The relevance of both retribution and denunciation as goals of sentencing underscores that our criminal justice system is not simply a vast system of negative penalties designed to prevent objectively harmful conduct by increasing the cost the offender must bear in committing an enumerated offence. Our criminal law is also a system of values. A sentence which expresses denunciation is simply the means by which these values are communicated. In short, in addition to attaching negative consequences to undesirable behaviour, judicial sentences should also be imposed in a manner which positively instills the basic set of communal values shared by all Canadians as expressed by the Criminal Code .

[Emphasis added.]

29In Drabinsky , the Court of Appeal made it clear at para 162 that the quantification of an appropriate sentence in a case such as this requires a consideration of denunciation. Specifically they linked the length of the sentence to its denunciatory effect. In this case, an appropriate sentence must denounce criminal conduct that targets vulnerable investors, that defrauds them of their life savings and has the potential of undermining confidence in the financial services sector.

(B) Deterrence

30### Deterrence

Justice Charron explained deterrence as a sentencing principle in R. v. B.W.P. , 2006 SCC 27 , [2006] 1 S.C.R. 941 (S.C.C.) at para. 2 :

Deterrence, as a principle of sentencing, refers to the imposition of a sanction for the purpose of discouraging the offender and others from engaging in criminal conduct. When deterrence is aimed at the offender before the court, it is called "specific deterrence", when directed at others, "general deterrence". ... General deterrence is intended to work in this way: potential criminals will not engage in criminal activity because of the example provided by the punishment imposed on the offender. When general deterrence is factored in the determination of the sentence, the offender is punished more severely, not because he or she deserves it, but because the court decides to send a message to others who may be inclined to engage in similar criminal activity.

31Given the nature of this offence and its surrounding circumstances, Mr. Sanmugam’s lack of any marketable skills and his apparent intention to continue in the business world, I think Mr. Sanmugam presents a significant risk of re-offending. Thus, specific deterrence is certainly relevant to the sentence I must impose.

32As for general deterrence, I recognize that the theory behind general deterrence has been questioned in some contexts. ¹ Critics of general deterrence question its validity on the basis that: (1) many crimes are relatively spontaneous and the offender does not stop beforehand to consider the possibility of being punished; (2) offenders are not aware of sentences imposed for particular crimes so the quantum of a sentence will not have a deterrent effect; and (3) even if an offender was aware of the range of sentences imposed for a particular crime, they would discount that range by the risk of discovery, apprehension and actual prosecution.

33Despite these criticisms, general deterrence remains one of the objectives of sentencing that Parliament has prescribed in s. 718 of the Criminal Code . In fact, in my view, general deterrence is one of the principal sentencing objectives in cases like this. Moreover, the above criticisms have little or no applicability to cases of this nature: (1) Financial frauds of this nature are rarely, if ever, spontaneous crimes. (2) The persons committing these crimes usually do so after careful and detailed advance planning. This will often involve a cost-benefit analysis on the part of the fraudster. Thus, the imposition of significant sentences for such crimes by increasing the cost of punishment can alter that calculus and deter the fraud; and (3) Eventually almost all frauds of this nature will be discovered as the money required to maintain the illusion of a successful investment program will run out. When this happens even financially unsophisticated victims are likely to realize that they have been swindled, and given the stakes involved, they are likely to go to the authorities. If the fraudster is apprehended the chances of a successful prosecution are high given the paper trail that will have been left behind.

34For all of these reasons I am of the view that general deterrence is particularly effective when dealing with criminals who are prepared to engage in large-scale, sophisticated financial frauds. Indeed, the Court of Appeal came to a similar conclusion in Drabinsky at para 159 where they stated:

The deterrent value of any sentence is a matter of controversy and speculation. However, it would seem that if the prospect of a long jail sentence will deter anyone from planning and committing a crime, it would deter people like the appellants who are intelligent individuals, well aware of potential consequences, and accustomed to weighing potential future risks against potential benefits before taking action

35Not only is general deterrence effective in this area but it is a critical sentencing objective given the impact of such crimes. These crimes not only victimize the direct victims and their extended families but they also have the potential to undermine public confidence in the financial industry more generally.

SENTENCE

79## Sentence

Mr. Sanmugam, stand up. For all of the foregoing reasons, the appropriate sentence for each of your sentences is a term of imprisonment of five years. As you have been in custody for 26 months I will credit that toward your sentence on a 1 to 1 basis.

80Therefore, I sentence you as follows:

Count #5: 34 months

Count #6: 34 months to be served concurrently with the sentence for count #5

Count #7: 34 months to be served concurrently with the sentence for count #5

81I will also make restitution orders as follows pursuant to s. 738(1) (a) of the Criminal Code as follows:

(a) You are hereby ordered to pay Mr. and Mrs. Blizzard the amount of $118,700.00

(b) You are hereby ordered to pay Linda Zink the amount of $662,000.00

(c) You are hereby ordered to pay Dr. Tuhina Biswas the amount of $328,705.00

Ducharme J.

Footnotes

1. 1R. v. Wismayer (1997), 1997 3294 (ON CA) , 115 C.C.C. (3d) 18 (Ont. C.A.) per Rosenberg J.A. at pp. 36 - 39; R. v. Edwards (1996), 1996 1522 (ON CA) , 28 O.R. (3d) 54 (C.A.) per Finlayson J.A. at p. 66; R. v. Sweeney (1992), 1992 4030 (BC CA) , 71 C.C.C. (3d) 82 (B.C.C.A.) per Wood J.A. at pp. 98 - 100
2. 2R. v. Taylor , at para 5 .