ONTARIO

SUPERIOR COURT OF JUSTICE

Court File No.: 46/12
Date: 20130801

Re: Her Majesty The Queen v. George Schwartz

Before: K.L. Campbell J.

Counsel:
Freya Kristjanson, for the Ontario Securities Commission, respondent

Marcus Bornfreund, for George Schwartz, appellant

Heard: July 24, 2013

ENDORSEMENT

[Provincial Offences Act Appeal]

A. Overview

[1] On February 24, 2011, the appellant, George Schwartz, appeared before the Honourable Mr. Justice R. Bigelow of the Ontario Court of Justice and pled guilty to two alleged violations of the Securities Act, R.S.O. 1990, chap. S.5. Subsequently, in his written sentencing submissions, the appellant raised questions regarding his liability for these offences. These issues were fully discussed at the next court appearance on March 26, 2011. After a recess permitting the parties to further discuss the issues, the appellant confirmed that he was, in fact, not resiling from his admissions of guilt, and he conceded the accuracy of the agreed statement of facts tendered in support of his earlier pleas of guilty. On March 29, 2011, after the appellant had revised his written sentencing submissions so as to fully and unequivocally admit his guilt in relation to the charges, and the trial judge was satisfied that the appellant was prepared to admit his guilt regarding these two offences, the trial judge sentenced the appellant to a 90 day term of imprisonment, to be served intermittently, and a 12 month term of probation, which required the appellant to perform 100 hours of community service.

[2] The appellant now appeals against both his conviction and sentence pursuant to s. 116(2)(b) of the Provincial Offences Act, R.S.O. 1990, chap. P.33. The appellant claims that his conviction is a “miscarriage of justice” as his guilty pleas were not unequivocal, voluntary and informed. Alternatively, the appellant contends that his sentence of imprisonment is “cruel and unusual punishment” and should be reduced to one of “time-served.”

B. The Main Background Facts

1. The Guilty Pleas

[3] The guilty pleas personally entered by the appellant on February 24, 2011 were the result of a negotiated resolution of the outstanding charges that involved many previous discussions between the parties and numerous judicial pre-trial meetings. Indeed, before the appellant was arraigned, Bigelow J. indicated, on the record, that he had “pre-tried the case rather extensively” with the parties, and noted that the appellant was “well aware of his right to have a trial.” Bigelow J. said that the appellant was also “well aware” that he would only accept a “guilty plea” if there was a “set of facts admitted which would constitute the offence.” Finally, Bigelow J. indicated that he had already provided the parties, during their pre-trial discussions, with a “range of sentence” that he felt was appropriate given what he had been told about the nature of the alleged offences, and so the appellant was also aware of that.

[4] The appellant was then arraigned and personally pled guilty to two offences, namely: (1) that between July 1, 2007 and July 1, 2008 he contravened Ontario Securities law by trading in securities of U308 Resources Inc. at a time when he was subject to a temporary cease trading order dated December 4, 2006 by the Ontario Securities Commission, as extended; and (2) that between July 1, 2007 and December 1, 2008, he traded in securities of U308 Resources Inc. without being registered to trade in such securities. Both offences were alleged to have been committed in Toronto, and were said to be contrary to s. 122(1)(c) of the Securities Act. Under this provision, the appellant was liable, upon conviction, to a fine of not more than $5 million, or imprisonment for a term of not more than five years less a day, or both.

[5] Following the arraignment and plea, the agreed statement of facts that had already been signed personally by the appellant and by counsel for the Ontario Securities Commission (OSC) was entered as an exhibit. After reviewing this document, Bigelow J. expressed his satisfaction that the facts outlined in the document constituted the offences. The trial judge then asked the appellant, for the purposes of the record, if he had reviewed the agreed statement of facts and if he agreed that those facts were accurate, and the appellant replied “yes.” The trial judge then entered a finding of guilt with respect to both counts. The matter was then adjourned to March 26, 2012 for sentencing.

2. The General Nature of the Securities Offences

[6] According to the agreed statement of facts, during the time period outlined in the charges, the appellant had been working as a consultant with U308 Resources Inc., an energy company, that was not registered with the OSC, but which was, nevertheless, engaging in the illegal distribution of securities. The agreed statement of facts also indicated that: (1) the appellant acted in furtherance of these illegal securities transactions by permitting his electronically imprinted initial to appear on the share certificates as if he were the treasurer of the company when, in fact, he had no official role with the company; and (2) the appellant engaged in this conduct at a time when he was subject to a “cease trade order” issued by the OSC.

3. Raising Issues Regarding Liability

[7] Just prior to the sentencing hearing, the appellant filed materials with the court in furtherance of his sentencing submissions. He also provided some, but not all, of these materials to the OSC Prosecutor. These materials caused Bigelow J. to become concerned about whether the appellant was planning to bring an application to withdraw his guilty pleas, as they suggested that the appellant might have defences to these charges. For example, the materials suggested that the appellant was taking position that there was no valid cease trade order operative at the relevant time. These materials also appeared to question whether the appellant’s actions constituted trading.

[8] At the outset of the proceedings on March 26, 2012, Bigelow J. raised these concerns with the parties. The OSC Prosecutor agreed that there was an important issue that needed to be vetted with the appellant. During the course of the initial dialogue on the subject, it appeared that the appellant was, indeed, suggesting that he had legitimate defences to the charges, and the trial judge raised the possibility of striking the guilty pleas, rescheduling the trial proceedings on an expedited basis, and disqualifying himself from any further involvement in the case.

[9] The appellant suggested, however, that if the Prosecutor was able to convince him of the ongoing, operative nature of the cease trade order in question, he was prepared to agree with the allegations and maintain his guilty pleas. In response, the Prosecutor indicated that he was prepared to try to explain the situation to the appellant as to why he was incorrect about the extension of the cease trade order. Bigelow J. indicated that he was prepared to hold the matter down to permit the parties to discuss the case one more time. However, before adjourning the matter briefly, Bigelow J. made it clear to the appellant that in order to proceed upon the guilty pleas, there had to be a “clear indication” from the appellant that he intended to plead guilty to the charges, and accept facts upon which he could appropriately make a finding of guilt. The appellant expressed his agreement with the opportunity to engage in a further discussion with the OSC Prosecutor.

4. Confirming Guilt and Admitting Supporting Factual Basis for the Guilty Pleas

[10] The matter was then held down for several hours to permit the parties to meet and further discuss these issues. When the parties returned in the afternoon, the Prosecutor explained that they had engaged in a “very frank discussion” and that the appellant was now prepared to “continue with the matter.” The Prosecutor also indicated that the appellant had been advised that, if he was to continue with the guilty pleas, “he has to accept the facts and acknowledge his guilt,” and plead guilty “for the proper reasons” and not just to get the matter over with expeditiously. The Prosecutor indicated that he had made it “very clear” to the appellant that he would take “no part” in a proceeding where the appellant entered a guilty plea but was, in fact, not guilty. The Prosecutor also indicated that they some discussion about sentencing, and the appellant knew that there would be no “joint submission” and that the submissions would be “open” in that each party would ask for the sentence they considered appropriate.

[11] In response the appellant stated that he consented to all that the Prosecutor had just said. More particularly, he acknowledged that they had engaged in “fruitful discussions” and confirmed that he was now prepared to “make an unequivocal plea of guilty on both charges.” Thereafter, in response to a series of questions posed by Bigelow J., the appellant confirmed all of the following:

• That he was “not resiling at all” from the agreed statement of facts that he had personally signed along with the Prosecutor.

• That he was prepared to concede that he was subject to the alleged “cease trade order” during the time period covered in the information.

• That he agreed to have his initials placed upon the share certificates being sold, and that this constituted an act in furtherance of a trade in securities.

5. The Sentencing Proceedings

[12] Once the appellant expressly made all of these concessions. Bigelow J. indicated that it appeared that the appellant had “admitted the essential elements of the offences,” and that it was, therefore, appropriate to maintain the “findings of guilty” that had been entered on the earlier occasion. The matter was then adjourned to the following day for sentencing.

[13] On March 27, 2012, the appellant came to court with a revised version of his written sentencing submissions. By way of explanation, the appellant indicated that he “obviously” had to “modify” his submissions so as to make it “abundantly clear” that he was “guilty as charged” and that he was “pleading guilty.” As the appellant outlined, his “editorial changes” were not “drastic” but were just “reworded” so as to “fully and unequivocally plead guilty” and “admit to the charges.”

[14] In seeking the imposition of a sentence of imprisonment in the range of 12 to 15 months duration, the OSC Prosecutor stressed the importance of the need for general and specific deterrence, and relied primarily upon the following facts: (1) that over $2.38 million was lost by investors in relation to U308 Resources Inc; (2) that the appellant personally profited by some $50,000 from the investors; (3) that the appellant is a well-educated, sophisticated and experienced securities trader; and (4) for nearly the past ten years the appellant has engaged in prior similar regulatory misconduct in relation to the trading of securities.

[15] In making his sentencing submissions, the appellant conceded at the outset that he was not suggesting that he was innocent of the alleged offences, and he acknowledged his pleas of guilty. Indeed, the appellant relied upon the fact that his pleas of guilty saved the “time and expense of a lengthy trial.”

[16] In his submissions, the appellant indicated that he was 63 years old and married, with two adult children. He has no prior criminal record. He has some ongoing health issues related to his high cholesterol, diabetes, high blood pressure, depression and sleep apnea, for which he takes medication. The appellant argued that both of the offences to which he pled guilty flowed from one act of passive, regulatory misconduct on his part, namely, permitting his initials to be scanned onto the share certificates of U308 Resources Inc. as if he were the Treasurer of the corporation when he was not, in fact, the Treasurer of the company. While he had not engaged in any “pattern of egregious ongoing fraudulent conduct,” the appellant expressed his regret for having committed the two offences. Further, the appellant argued that he did not personally profit from the offences.

[17] Ultimately, the appellant sought the imposition of a “conditional discharge” or, in the alternative, an “order for community service.” The appellant argued that the trial judge need not denounce his misconduct with a custodial sentence, but he asked that, if a custodial sentence was imposed on him, that he be permitted to serve it intermittently to permit him to work.

C. The Appeal Against Conviction – The Validity of the Pleas of Guilty

[18] The appellant contends that his conviction is a miscarriage of justice as the pleas of guilty that he entered before Bigelow J. were not “unequivocal, voluntary or informed.” I disagree. The trial record in this case simply does not support this submission. Indeed, after reviewing the entire history of the proceedings in this matter, in my view it is apparent that the appellant’s pleas of guilty were all of those things – they were unequivocal, voluntary and informed. See: R. v. T.(R.) (1992), 1992 2834 (ON CA), 10 O.R. (3d) 514, [1992] O.J. No. 1914 (C.A.) at paras. 10‑44; R. v. Moser (2002), 2002 49649 (ON SC), 163 C.C.C. (3d) 286 (Ont.S.C.J.) at paras. 29‑43; R. v. Easterbrook, 2005 12676 (ON CA), [2005] O.J. No. 1486 (C.A.) R. v. Eizenga, 2011 ONCA 113, 270 C.C.C. (3d) 168, at para. 41‑65. I simply see no proper legal basis upon which to interfere with the convictions entered by the trial judge.

[19] While the appellant was not represented by counsel, he is not an unsophisticated litigant. He only elected to plead guilty to two of the alleged offences after many meetings and judicial pre-trial conferences, and after personally signing an agreed statement of facts to be used in support of his anticipated pleas of guilty. When arraigned, the appellant personally entered his pleas of guilty, acknowledging his responsibility for the alleged offences. Further, as Bigelow J. correctly concluded, the agreed statement of facts supported the appellant’s personal admissions of guilt.

[20] While the appellant certainly raised some issues, in his initial written sentencing materials, that appeared to call into question his guilt in relation to these offences, when these issues were raised and discussed in court, it was the appellant who suggested another meeting with the OSC Prosecutor to try to resolve his outstanding concerns. After court resumed several hours later, the appellant made it clear that he wanted to fully and unequivocally admit his guilt and he accepted the statement of facts the parties had earlier agreed upon. The OSC Prosecutor made it clear that he wanted to be no part of any proceeding where the appellant admitted his guilt while believing in his innocence, or admitted his guilt only for expedience. The trial judge then conducted his own detailed inquiry of the appellant to ensure that his admission of guilt in connection with these two offences was unequivocal, voluntary and informed. In responding to the questions from the trial judge, the appellant clearly resiled from the contents of his initial written sentencing submissions that had raised the issues of concern in the first place. Indeed, the appellant subsequently filed a revised version of these sentencing submissions to properly account for his unequivocal confirmation of his guilt, and his acceptance of the agreed statement of facts in support of his conviction for these offences. The plea inquiry that was conducted by the trial judge was comprehensive and addressed all of the relevant issues with the appellant. Ultimately, Bigelow J. satisfied himself that the appellant had, indeed, entered clear, voluntary and informed pleas of guilty and was intent on admitting his guilt in relation to these two alleged offences.

[21] On appeal, counsel for Mr. Schwartz argues that the appellant had been misled by those associated with the prosecution to believe that he might have been able to obtain a “conditional discharge,” and that this shows that his pleas of guilty were not informed. The evidence does not support this claim.

[22] As the trial judge correctly observed in his Reasons for Sentence, a conditional discharge was simply not legally available in the circumstances of this case. Accordingly, the appellant sought an unavailable sentencing disposition. However, there is no evidence that this legal misunderstanding on his part was caused by the OSC Prosecutor, or anyone else associated with the prosecution. Indeed, there is no evidence that this legal misunderstanding on the appellant’s part was caused by any third party. Moreover, the mere fact that the appellant personally had an imperfect understanding of the law is no basis for interfering with convictions based upon pleas of guilty that were otherwise unequivocal, voluntary and informed.

[23] This case is unlike R. v. Armstrong, [1997] O.J. No. 45 (C.A.), where a plea of guilty was set aside by the Court of Appeal on the basis that defence counsel for the accused had mistakenly advised her that she was eligible for a conditional discharge, which would avoid her having a “criminal record,” and that this “contributed significantly” to her decision to plead guilty. The court concluded that her plea was based on a “significant misunderstanding” as to the potential consequences of her plea. The court noted that there were also other concerns in the case pertaining to the validity of the guilty plea by the accused.

[24] In advancing his argument that the appellant was uninformed as to the consequences of his pleas of guilty, counsel for the appellant placed reliance upon the transcript of the evidence adduced by the parties on the bail pending appeal application brought by the appellant. I make no comment on the technical admissibility of this transcript, but note that there has been no application by any party to introduce “fresh evidence” on appeal. In any event, this transcript reveals only the following additional facts about this case: (1) the appellant agreed that, at no point prior to filing his sentencing submissions, did he ever mention to the OSC Prosecutor or Bigelow J. that he might be seeking a conditional discharge; (2) the appellant honestly thought, based upon his past personal experience in relation to a criminal charge in the 1990’s, that a conditional discharge was legally possible; (3) the appellant was strongly encouraged by the OSC Prosecutor to speak to duty counsel for legal advice, but the appellant did not secure any legal advice about the potential sentencing options that were legally available given his pleas of guilty, and he was never mistakenly told that a conditional discharge was available; (4) the appellant knew that the OSC Prosecutor was seeking a custodial sentence, and the appellant believed that he would probably be sentenced to a period of incarceration – but he hoped that it would not come to that; and (5) at one point during the meeting on March 26, 2012, when the appellant raised the possibility of a “conditional sentence,” the OSC prosecutor told him that this was a “non-starter” as there was no provision in the Provincial Offences Act which allowed the imposition of a conditional sentence, so it was “right off the table.” Assuming that this evidence is admissible, it does not change the analysis.

[25] In my view, the mere fact that the unrepresented appellant sought a legally unavailable sentencing disposition, based on his own incorrect understanding of the law (not on any incorrect legal advice from anyone else), does not render the appellant’s pleas of guilty uninformed to the extent that would justify the setting aside of the convictions based upon those guilty pleas. The appellant unequivocally and voluntarily admitted his guilt with respect to the two alleged Securities Act offenses. He knew that the Prosecutor would be seeking the imposition of a period of incarceration, and he knew that the trial judge would likely impose a term of imprisonment. While the appellant optimistically hoped that a jail term would not be imposed, he realistically argued, in the alternative, that any such jail sentence should be ordered to be served intermittently to permit him to work. There is no evidence that the appellant’s mistaken understanding as to the legal availability of a conditional discharge played any significant role in his decision to plead guilty to these provincial offences. Indeed, all evidence is to the contrary. In my view, the appellant was sufficiently informed about the consequences of his pleas of guilty to ensure their legal validity. The appellant has not met his burden of demonstrating that his guilty pleas were invalid. See: R. v. T.(R.), at paras. 12, 14, 36‑38.

D. The Appeal Against Sentence

[26] In his written materials, counsel for the appellant argued that the 90 day intermittent term of imprisonment that was imposed upon him by the trial judge is an unfit sentence and should be reduced to one of time served. In his oral argument, counsel for the appellant made but passing reference to this aspect of the appeal. In any event, I disagree that the sentence imposed upon the appellant is in any way unfit.

[27] The trial judge was faced with widely divergent sentencing positions. The OSC Prosecutor sought the imposition of a 12 to 15 month term of reformatory imprisonment. The appellant, on the other hand, sought a conditional discharge, or a probationary sentence, but alternatively suggested that, if a custodial sentence was required, that he be permitted to serve the sentence intermittently.

[28] In his Reasons for Sentence, the trial judge commented that in cases involving breaches of securities regulations, the dominant sentencing principles were deterrence and denunciation. With respect to the nature of these offences, the trial judge noted that, while the appellant sought to minimize the gravity of the offences, he allowed his initials to be used to effectively create fraudulent share certificates. Bigelow J. indicated that the circumstances of the case were aggravated by the fact that the appellant had been previously involved in the violation of securities regulations in other provinces just months before the commission of the present offences. However, Bigelow J. also noted, in mitigation of sentence, that the Prosecutor had not established that the $50,000 that went to the appellant was not legitimately earned. In the result, after considering all of the circumstances of the case, the trial judge concluded that a custodial sentence in the range of 90 days imprisonment, to be served intermittently, was the sentence that was required. Bigelow J. also placed the appellant on probation for a period of 12 months, and required him to, amongst other things, perform 100 hours of community service.

[29] The authorities are clear that sentencing decisions are entitled to considerable deference on appeal. In my view, the appellant has offered no persuasive reason which might justify appellate interference with the sentence imposed by Bigelow J.

E. Conclusion

[30] In the result the appeals against both conviction and sentence are dismissed. An order shall issue accordingly. In the absence of any order to the contrary, the appellant shall begin serving the remaining portion of his intermittent/weekend sentence of imprisonment this coming weekend – surrendering on the evening of Friday, August 2, 2013.

Kenneth L. Campbell J.

Released: August 1, 2013