Court File No. 10-05327

SUPERIOR COURT OF JUSTICE

HER MAJESTY THE QUEEN

v.

MOHAMMAD MEHDI TOOZHY

and

SAMEEN SIDDIQI

RULING ON APPLICATIONS FOR

DIRECTED VERDICTS

BEFORE THE HONOURABLE MADAM JUSTICE M. FUERST

on November 23, 2012,

at NEWMARKET, Ontario

APPEARANCES:

P. Campbell Counsel for the Crown

J. Navarrete Counsel for Mohammad Mehdi Toozhy

L. Ben-Eliezer Counsel for Sameen Siddiqi

FRIDAY, NOVEMBER 23, 2012

RULING ON APPLICATIONS FOR DIRECTED VERDICTS

Fuerst, J (Orally)

The charges again the defendants relate to three bank loans obtained in 2005 and 2006 under the federal small business financing program.

Counsel for Mohammad Mehdi Toozhy (who I shall refer to throughout as Mr. Toozhy to avoid confusion with other named persons) and Sadeem Siddiqi seek directed verdicts of acquittal. Mr. Navarrete on behalf of Mr. Toozhy seeks directed verdicts of acquittal on all counts against his client, other than Count 7. Mr. Ben-Eliezer on behalf of Mr. Siddiqi seeks directed verdicts of acquittal on all charges against his client.

The Test on a Directed Verdict Application

In R. v. Arcuri (2001), 2001 SCC 54, 157 C.C.C. (3d) 21, the Supreme Court of Canada reiterated at paragraph 21 that the test on an application for a directed verdict, which is the same as for committal for trial at a preliminary hearing, is whether there is “any evidence upon which a reasonable jury properly instructed could return a verdict of guilty.” The court held that whether evidence is direct or circumstantial, the presiding judge must determine whether there is sufficient evidence to permit a properly instructed jury, acting reasonably, to convict. If the Crown has not presented direct evidence as to every element of the offence, the judge must decide whether those elements may reasonably be inferred from the circumstantial evidence. This necessitates weighing the evidence as a whole in the limited sense of assessing whether it is reasonably capable of supporting the inferences that the Crown asks the jury to draw. The judge does not ask whether he or she would conclude that the accused is guilty. The judge does not draw factual inferences, choose between competing inferences, assess credibility, or consider the inherent reliability of the evidence. The task is an assessment of the reasonableness of the inferences to be drawn from the circumstantial evidence. The judge determines whether the evidence as a whole, if believed, could reasonably support the inferences required to establish the essential elements of the offence.

Doherty, J.A. described the process of drawing factual inferences in R. v. Morrissey (1995), 1995 CanLII 3498 (ON CA), 97 C.C.C. (3d) 193 at 209, emphasizing that,

“[t]he inferences must... be ones which can be reasonably and logically drawn from a fact or group of facts established by the evidence. An inference which does not flow logically and reasonably from established facts cannot be made and is condemned as conjecture and speculation.”

The Positions of the Parties

Mr. Navarrete submits that the Crown did not adduce any evidence of fraudulent intent on the part of his client. All three companies in respect of which loans were obtained were viable entities. He acknowledges that there is some evidence of misrepresentation by Mr. Toozhy concerning related borrowers on count 7, but not on the other counts. The first loan was obtained by Mohammad Karim Toozhy, there is no evidence that he and Mohammad Mehdi Toozhy are the same person, and accordingly there was no misrepresentation by Mr. Toozhy in respect of the second loan.

Mr. Ben-Eliezer submits that there is no evidence that the invoices from companies associated to Mr. Siddiqi were false, no evidence that he knew the invoices would be used to obtain loans, no evidence that he had anything to do with the preparation of the loan applications, and no evidence that he knew the money that was paid to Aspen Ridge Equipment and AGF Technologies was from the small business loan program.

On behalf of the Crown, Mr. Campbell submits that Mr. Toozhy made misrepresentations to obtain the loans. He points to similarities in the three invoices as evidence that they were false. Outstanding small business loans to related borrowers were not declared to the lenders. He contends that with respect to the first loan, Mohammad Karim Toozhy is the defendant Mr. Toozhy, and there was a misrepresentation as to identity. Even if they are different people, the loan was obtained by Mr. Toozhy who was a Director of the company. Mr. Campbell submits that the banking records and expert testimony of Mr. Coort show that the loan proceeds were misused, because the equipment did not exist. Some money paid to the purported supplier came back to the borrower and some went to Iran. It can be inferred from the evidence, including the receipt of money into bank accounts that he controlled, that Mr. Siddiqi was in on the scheme with Mr. Toozhy, supplied the false invoices and profited from the loan proceeds.

Analysis

For the reasons that follow, I conclude that there is some evidence on which a reasonable jury properly instructed could convict each defendant on each charge against him. I recognize that there may well be competing inferences to be drawn from the evidence, but on this application only the inferences that favour the Crown can be considered: R. v. Sazant, 2004, SCC 77. As long as there is available a reasonable inference in favour of the Crown it must be considered, regardless of its strength: R. v. Sheardown, 2010 ONSC 4235.

I will first address the counts that relate to the third loan in the series.

Counts 7, 8 and 9

Counts 7, 8 and 9 relate to a $250,000 loan made by the Bank of Montreal to 1482416 Ontario Ltd. Mr. Toozhy is shown in the Ministry of Government Services records as a Director of the company. The company address is shown as 170 Maple, Richmond Hill. On May 24, 2006, Mr. Toozhy authorized the registration of the business name SMTEE Manufacturing.

The Loan Application and Agreement was signed by Mr. Toozhy on behalf of the numbered company on August 30, 2006. In it the purpose of the loan was stated to be, “[t]o finance the purchase of new equipment.” The document indicates that the bank took a chattel mortgage as security. With the Loan Application and Agreement is an invoice bearing a fax date of August 30, 2006. It is from AGF Technologies and is dated June 29, 2006. It lists seven pieces of equipment at a total cost of $365,279.12.

The invoice is addressed to the numbered company operating as SMTEE Manufacturing at 151 Amber Street, Unit 4, Markham, phone number 905-944-0289. That address and telephone number also appear on a Loan Registration Form in respect of a small business loan made earlier, by a different bank, to a different numbered company carrying on business as SMT Manufacturing with Mr. Toozhy shown as its responsible officer.

In the Loan Application and Agreement regarding SMTEE Manufacturing, Mr. Toozhy declared that there was no other Government Guaranteed Loan in the name of a person related to the borrower, including a corporation controlled by the same person who controls the borrower. There is some evidence that that was a false statement. The documents show that at the time, the numbered company carrying on business as SMT Manufacturing had an outstanding small business loan in the amount of $250,000, and that Mr. Toozhy was a Director and President of that company.

There is some evidence that the invoice dated June 29, 2006, was false. It lists, albeit in a different order with different prices and without serial numbers, the same seven pieces of equipment that are listed on the invoice dated September 20, 2005, in respect of the loan to SMT Manufacturing. This has significance because the two invoices were issued by two different businesses. The invoice to SMTEE Manufacturing was issued by AGF Technologies, while the invoice to SMT Manufacturing was issued by Aspen Ridge Equipment. Notwithstanding that the business names on the invoices are different, the invoices have other similarities. They each bear the same grammatically incorrect salutation, “We thank you for you [sic] patronage”. As well, they each bear the same Business Number used for taxation purposes, 873373468RT0001.

There is some evidence that the loan proceeds were not used to purchase equipment for SMTEE Manufacturing. The loan was advanced on September 1st, 2006, to a law firm that, in turn, paid just over $245,000 to AGF Technologies. Mr. Coort gave expert evidence describing the flow of the money from that point. It was deposited into the bank account of AGF Technologies on September 5th, 2006, where it was comingled with approximately $85,000. On September 29th, 2006, AGF Technologies purchased five bank drafts totalling just over $20,000 in favour of SMTEE Manufacturing, but redeemed one of them. The remaining four were deposited into the SMTEE Manufacturing account. Also on September 29th, AGF Technologies issued a cheque for $175,000 to Aspen Ridge Equipment, which the latter company deposited to its bank account. Before that deposit Aspen Ridge Equipment had only $13.27 in its account. After the deposit, Aspen Ridge Equipment wire transferred $175,000 to Bank Melli Iran, in favour of Mehrnegar Toozhy. On October 3rd, 2006, AGF Technologies purchased six bank drafts totalling approximately $10,000 in favour of SMTEE Manufacturing. The drafts were deposited into the SMTEE Manufacturing account.

It can be reasonably inferred that the loan proceeds were not used to purchase the equipment listed on the invoice, but rather that some of it flowed to SMTEE Manufacturing and some of it flowed to Iran.

Mr. Toozhy was the signatory on the SMTEE Manufacturing bank account. Bank statements for September and October 2006 were addressed to the company at 151 Amber Street, Unit 5, Markham. This is some evidence that he controlled the company’s bank account.

Mr. Siddiqi was the contact officer for the AGF Technologies bank account and the Aspen Ridge Equipment bank account. Bank statements for both companies were addressed to his home address, 70 Silver Rose Crescent, Markham. This is some evidence that he controlled the companies’ bank accounts.

The corporate documents show that AGF Technologies and Aspen Ridge Equipment were both associated to Mr. Siddiqi. He authorized the registration of the business names of each one. The activity of each company is stated to be the manufacturing of industrial equipment. However, the address listed in the corporate registration for Aspen Ridge Equipment and provided on its invoice was checked by the police in 2009 and found to be a mailbox at a UPS store. The address listed in the corporate registration for AGF Technologies, and repeated on its invoice, was checked in 2009 and found to be a UPS store. It is obvious that industrial equipment could not be manufactured at either of those locations. This too is evidence from which it could be inferred that the invoice dated June 29, 2006, was false and that the loan proceeds were not used to purchase equipment.

Mr. Navarrete concedes, and I agree, that there is some evidence on which a reasonable jury properly instructed could convict Mr. Toozhy on Count 7, which alleges the making of a false statement or misrepresentation.

With respect to Count 8, on the whole of the evidence that relates to the Bank of Montreal loan, it can be reasonably inferred that Mr. Toozhy with fraudulent intent used the loan proceeds for a purpose that was not permitted, by paying them over to a company controlled by Mr. Siddiqi to disburse other than as payment for equipment.

There is some evidence on which a reasonable jury properly instructed could convict Mr. Toozhy on Counts 7 and 8.

Given the evidence that I have referred to above, including the invoice and the flow of the loan proceeds, a jury could reasonably infer that this was a scheme entered into by Mr. Toozhy and Mr. Siddiqi. A jury could reasonably infer that Mr. Siddiqi knowingly provided the false invoice to Mr. Toozhy to obtain a small business loan on the pretext it would be used to buy equipment when, in fact, it would be used to enrich others; and that with this knowledge Mr. Siddiqi received payment of the proceeds of the loan into a bank account he controlled and disbursed the funds to enrich himself and/or others. There is some evidence on which a reasonable jury properly instructed could convict Mr. Siddiqi on Counts 7 and 9.

Counts 1, 2 and 3

Counts 1, 2 and 3 relate to a $250,000 loan made by the Canadian Imperial Bank of Commerce to Ashhood Company Ltd. operating as Ashhood Technologies. Mr. Toozhy is shown in Ministry of Government Services records as a Director of the company and his address is shown as 33 Weldrick Road East, Suite 1005, Richmond Hill. The company’s address is shown as 20 Harding Boulevard, Suite 516, Richmond Hill.

The Loan Registration Form was signed in the name Dr. Mohammad K. Toozhy as the responsible officer of the company on August 9, 2005. It appears that the Loan Application was signed in the same name. Both documents state that the company’s address is 25-855 Alness Street, North York or Toronto. The Loan Application states that equipment in the amount of $298,417.52 is to be purchased with the loan. With the loan documents is an invoice from Aspen Ridge Equipment dated August 3, 2005. The invoice is addressed to Ashhood Company operating as Ashhood Technologies at 855 Alness Street, Unit 25, Toronto. It lists seven pieces of equipment and shows a total cost of $298,417.52.

The invoice particularizes the equipment in almost identical terms to the equipment listed in the two other invoices I mentioned already. It bears the same grammatically incorrect salutation, “We thank you for you [sic] patronage”. The Business Number used for taxation purposes is the same one that appears on the other two invoices. It can reasonably be inferred that this invoice is false, which is some evidence of the making of a false statement or misrepresentation.

There is some evidence from which a jury could reasonably infer that Mr. Toozhy and Mohammad Karim Toozhy are the same person. Mr. Toozhy was arraigned before me and has been before me in court during the presentation of the Crown’s case. I have had an opportunity to compare him, albeit from something of a distance, to the colour photograph that forms part of the Ontario driver’s licence in the name of Mohammad Karim Toozhy: see R. v. Nikolovski, [1996] 3 S.C.R. 1197. There is a definite resemblance between the two. I am aware, however, of the danger inherent in making this kind of comparison in the courtroom, especially because of the quality of the photograph and the fact it was taken nine years ago. I do not suggest that this comparison standing alone could ground an inference of identity. There is also the fact that on the application for a driver’s licence, made on November 19, 2003, the address of Mohammad Karim Toozhy is shown as 33 Weldrick Road East, Richmond Hill. Absent the suite number, that is the address listed for Mr. Toozhy in the corporate records of Ashhood Technologies. The same address appears in Mr. Toozhy’s Driver’s Licence History beside entries bearing the same date, November 19, 2003. Additionally, there is the evidence that it is Mr. Toozhy, and not Mohammad Karim Toozhy, whose name appears in the corporate records for Ashhood.

Even if it could not reasonably be inferred that Mohammad Karim Toozhy and Mr. Toozhy are the same person, there is some evidence that the obtaining of the loan was the act of Mr. Toozhy, because he was a Director of the small business according to the corporate records, and the Loan Registration Form states that the company had only two full-time employees.

Mr. Coort gave expert evidence that the loan proceeds were deposited into a CIBC account for which Mohammad Karim Toozhy was the signatory, and that a bank draft for $250,000 issued on August 30, 2005 from Ashhood Technologies to Aspen Ridge Equipment. That bank draft was deposited into the Aspen Ridge Equipment bank account on September 2nd. Immediately before the transfer, the balance in that account was approximately $20,000. The same day, $100,000 was wire transferred to Bank Melli Iran in favour of Mehrnegar Toozhy. On September 7, 2005, a cheque for $20,000 was issued to M. Karim Toozhy. The following day $80,000 was wire transferred to Bank Melli Iran in favour of Mehrnegar Toozhy.

I already have referred to Mr. Siddiqi’s connection to Aspen Ridge Equipment and its bank account.

It can be reasonably inferred that the $250,000 was not used to purchase the equipment listed on the invoice, and that some of it flowed to Mr. Toozhy and some of it flowed to Iran.

With respect to count 1, on the whole of the evidence that relates to the Canadian Imperial Bank of Commerce loan, there is some evidence that Mr. Toozhy misrepresented his identity, and also the purpose of the loan. There is some evidence that he knowingly made a false statement and furnished false information.

With respect to count 2, on the whole of the evidence that relates to the Canadian Imperial Bank of Commerce loan, it can be reasonably inferred that Mr. Toozhy with fraudulent intent used the loan proceeds for a purpose that was not permitted by paying them over to a company controlled by Mr. Siddiqi to disburse other than as payment for equipment.

I find that there is some evidence on which a reasonable jury properly instructed could convict Mr. Toozhy on counts 1 and 2.

Given the evidence that I have referred to above, including the invoice and the flow of the loan proceeds, a jury could reasonably infer that this was a scheme entered into by Mr. Toozhy and Mr. Siddiqi. A jury could reasonably infer that Mr. Siddiqi knowingly provided the false invoice to Mr. Toozhy to obtain a small business loan on the pretext it would be used to buy equipment when, in fact, it would be used to enrich others; and that with this knowledge Mr. Siddiqi received payment of the proceeds of the loan into a bank account he controlled and disbursed the funds to enrich himself and/or others. There is some evidence on which a reasonable jury properly instructed could convict Mr. Siddiqi on counts 1 and 3.

Counts 4, 5 and 6

Counts 4, 5 and 6 relate to a $250,000 loan made by Scotiabank to 1582202 Ontario Ltd. operating as SMT Manufacturing. Mr. Toozhy is shown in Ministry of Government Services records as the Director and President of the company. His address is listed as 33 Weldrick Road East, Suite 1005, Richmond Hill. He also is shown in banking records as the Director and President of SMT Manufacturing and the person responsible for the company bank account.

The Loan Registration Form was signed by Mr. Toozhy as the responsible officer of the company on October 19th, 2005. The loan is shown as being registered in respect of equipment. Mr. Toozhy also signed a Credit Agreement. In the portion that asks for a description of the equipment, the words “See Supplementary/Receipt Schedule A” are written. With these documents is an invoice from Aspen Ridge Equipment dated September 20, 2005. It is addressed to 1582202 Ontario Ltd. operating as SMT Manufacturing, 151 Amber Street, Unit 4, Markham. This address also appears on the Loan Registration Form with the phone number 905-944-0289. The invoice lists seven pieces of equipment and shows a total cost of $402,027.42.

In the Loan Registration Form Mr. Toozhy declared that the total amount of the loan and any amount outstanding in respect of the borrower and related borrowers did not exceed $250,000. In light of my finding that there is some evidence that he and Mohammad Karim Toozhy were the same person, there is some evidence that this was a false statement or misrepresentation because of the pre-existing small business loan to Ashhood Technologies.

The invoice lists, in the same order but with some minor variances and different prices, the same seven pieces of equipment that are listed on the invoice in respect of the earlier loan to Ashhood Technologies. It bears the grammatically incorrect salutation found on the other two invoices, “We thank you for you [sic] patronage.” The Business Number used for taxation purposes is the same one that appears on the other two invoices.

Sheldon Miller, an appraiser, testified that on September 21st, 2006, he went to the Amber Street address. He found seven pieces of equipment as described on the invoice, but all of them were missing major components and none of the equipment was hooked up. The value of the equipment said to have cost over $400,000 was only $500 to $600.

There is evidence from which it could be reasonably inferred that the invoice was false and so was a false statement or misrepresentation.

Mr. Coort testified that the loan proceeds were advanced to SMT Manufacturing on October 27th, 2005, and deposited to the company’s account. That same day it provided a bank draft to Aspen Ridge Equipment for just over $400,000. The Aspen Ridge account had a balance of just over $100,000 immediately prior to this deposit. After the deposit, funds totalling $220,000 were wire transferred to Bank Melli Iran in favour of Mehrnegar Toozhy; a bank draft for just over $100,000 was issued in favour of Silver Sky Tech; cheques payable to cash totalling $45,000 were cashed; a cheque was issued to VTech Manufacturing for $10,000; and a cheque for just under $32,000 was paid to Acura of North York, such that by November 16th, 2005, the balance in the Aspen Ridge Equipment account was again just over $100,000.

I already have referred to Mr. Siddiqi’s connection to Aspen Ridge Equipment and its bank account.

It can be reasonably inferred that the $250,000 was not used to purchase the equipment listed on the invoice, and that some of it flowed to Iran, to other third parties, and/or to Mr. Siddiqi.

On the whole of the evidence that relates to the Scotiabank loan, there is some evidence that Mr. Toozhy provided a false invoice and misrepresented the purpose of the loan. There is some evidence that he knowingly made a false statement and furnished false information.

With respect to count 5, on the whole of the evidence that relates to the Scotiabank loan, it can be reasonably inferred that Mr. Toozhy with fraudulent intent used the loan proceeds for a purpose that was not permitted, by paying them over to a company controlled by Mr. Siddiqi to disburse other than as payment for equipment.

I find that there is some evidence on which a reasonable jury properly instructed could convict Mr. Toozhy on counts 4 and 5.

Given the evidence that I have referred to above, including the invoice and the flow of the loan proceeds, a jury could reasonably infer that this was a scheme entered into by Mr. Toozhy and Mr. Siddiqi. A jury could reasonably infer that Mr. Siddiqi knowingly provided the false invoice to Mr. Toozhy to obtain a small business loan on the pretext it would be used to buy equipment when, in fact, it would be used to enrich others; and that with this knowledge Mr. Siddiqi received payment of the proceeds of the loan into a bank account he controlled and disbursed the funds to enrich himself and/or others. There is some evidence on which a reasonable jury properly instructed could convict Mr. Siddiqi on counts 4 and 6.

Conclusion

The applications on behalf of Mr. Toozhy and Mr. Siddiqi for directed verdicts of acquittal are dismissed.

FORM 2

CERTIFICATE OF TRANSCRIPT (SUBSECTION 5(2))

Evidence Act

I, Tracey Beatty, certify* that this document is a true and accurate transcript of the recording of R. v. Sameen Siddiqi and Mohammad Toozhy in the Superior Court of Justice held at 50 Eagle Street West, Newmarket, Ontario, on November 23, 2012, taken from Recording No. 4911-403-20121123-090039 which has been certified in Form 1.

Tracey Beatty

Tracey Beatty, Certified Court Reporter

November 23, 2012

*This certification does not apply to this Reasons for Ruling which were judicially edited.

Transcript Ordered: November 23, 2012

Transcript Completed: November 23, 2012

Ordering Party Notified: November 23, 2012