ONTARIO

SUPERIOR COURT OF JUSTICE

Court File No.: CR13-50000428-0000

Date: 20140711

B E T W E E N:

HER MAJESTY THE QUEEN

Cheryl Blondell and Valerie Culp for the Crown

– and –

ANDRE LEWIS

Adam Schultz for Mr. Lewis

Heard: July 3, 2014

REASONS FOR SENTENCE

CORRICK J. (orally)

Introduction

[1] Following a 39-day jury trial, Mr. Lewis was found guilty of one count of defrauding the public of an amount exceeding $5,000. Mr. Lewis represented himself at trial. He called no evidence.

Circumstances of the Offence

[2] Between January 1, 2004 and October 27, 2011, Mr. Lewis defrauded numerous people of $7,527,630 in an elaborate mortgage investment scam in the nature of a “Ponzi scheme”. Mr. Lewis, through his various companies under the banner of Lexxco Investment Corporation, lured members of the public to invest their money with him in private mortgages. He offered an attractive rate of interest at the time, typically 10%. Mr. Lewis placed ads in newspapers, had radio ads, and slick promotional material explaining the benefits of private mortgage investments. He advertised that the investment was safe and secure. He backed up this claim with a promissory note he gave investors promising the return of their principal at the end of the term.

[3] Mr. Lewis did invest a small portion of the money he received from investors in mortgages that did not turn out to be as safe and secure as he advertised. Most of the properties were sold under power of sale at a loss to the investors. The bulk of the money however, was deposited into various bank accounts held by Mr. Lewis and his wife. The bank records demonstrate that most of the investors’ money was used to pay “interest” to other investors, pay company and personal expenses, make point of sale purchases and make cash withdrawals. Caroline Hillyard, the forensic accountant, testified that between 2007 and 2011, Mr. Lewis withdrew cash from his accounts 1,888 times for a total of $1,893,014.14. The evidence at trial showed that Mr. Lewis used the funds to support a lifestyle that included sending his children to private school, being driven around to meet potential investors in a white stretch limousine, taking his staff to Trinidad to celebrate Carnival and finely finishing and furnishing his corporate office.

[4] A total of thirty-three victims testified at the trial. Some of them were knowledgeable investors; others were not. Some victims gave Mr. Lewis all of their savings; others mortgaged their homes to invest with him.

[5] Many of the victims were retired or near retirement, and invested the money they were using to finance their retirements with Mr. Lewis. Nine victims invested a total of $1,149,339 in self-directed registered savings plans with Mr. Lewis. Ten of the victims were more than 70 years old at the time of the trial; six of them were more than 80 years old.

The Impact on the Victims

[6] Victim Impact Statements were filed on behalf of 17 of the victims. They speak of the financial and emotional devastation Mr. Lewis’s crime has caused in their lives. Many people wrote that they endure sleepless nights, stress, anxiety and lack of trust. Some have had suicidal thoughts. Many expressed dismay that they are now unable to pass on an inheritance to their children.

[7] Some victims who were retired have been forced to seek employment to avoid losing their homes. Diane Hunter wrote that she had been retired since 2002, but now must clean houses for a living. She and her husband have been battling depression since they lost all of their money to Mr. Lewis.

[8] Irena and Alexander Jaworski mortgaged their home to invest with Mr. Lewis. They wrote that they are having difficulty making payments and will have to sell their home.

[9] One victim, who at 84 years of age lost her life savings to Mr. Lewis, wrote that her entire lifestyle has changed as a result. She has tried to keep her financial loss a secret from her family and friends for fear that they will think she is stupid. She once lived in a comfortable retirement community and was able to have her meals in the dining room. She had a car, which allowed her to drive to visit her husband, who is in a nursing home suffering from Alzheimer’s disease. She no longer can afford a car and must rely on public transit. She was forced to move into the same nursing home as her husband. She is concerned that the only legacy she will be able to leave her children will be a debt for her funeral arrangements.

[10] The daughter of Mr. and Mrs. vanRijn, both of whom are in their 80’s, wrote of the suffering her parents have endured after realizing that the life savings they had invested with Mr. Lewis had disappeared. They have become hermits in their apartment, unable to plan for anything because of the lack of financial resources.

Circumstances of the Offender

[11] Mr. Lewis is 50 years old. He was born in Canada. He has some family roots in Antigua. He married Karen Lewis in 2001. They have six children, ranging in age from 5 to 19 years. They separated in 2007, reconciled for a time and separated again in 2009.

[12] It appears that Mr. Lewis has usually been employed as an entrepreneur. Before starting Lexxco, he had a business printing t-shirts. He incorporated Lexxco Investment Corporation in 2002.

[13] As is often the case in frauds of this nature, Mr. Lewis has lost everything – his home and his business. He is the subject of a number of civil suits.

Legal Parameters

[14] Until September 15, 2004, the maximum sentence for the offence of fraud over $5,000.00 was ten years in prison as set out in s. 380(1)(a) of the Criminal Code. The maximum sentence was raised to fourteen years on September 15, 2004. Mr. Lewis has been convicted of defrauding the public between January 1, 2004 and October 27, 2011. He is therefore entitled to be sentenced in accordance with the provision as it stood on January 1, 2004, when the maximum penalty was ten years.

Positions of the Parties

[15] Ms. Culp submits that eight years in prison is the appropriate sentence for a fraud of this scale. She also submits that Mr. Lewis should receive credit at the rate of 1.25 days for each day he has spent in pre-sentence custody because he was responsible for much of the delay in getting this matter to trial.

[16] She also seeks restitution orders to compensate the victims, a fine in lieu of forfeiture, and an order for a DNA sample.

[17] Mr. Schultz submits that the priority should be to have the victims compensated. To accomplish that, Mr. Lewis must be in a position as soon as possible to begin earning money so that he can make restitution. Mr. Schultz submits that Mr. Lewis has already served the equivalent of four years if I credit him 1.5 days for each day he has spent in pre-sentence custody. Although Mr. Schultz concedes that four years is at the lower end of the appropriate range of sentence for this crime, it would permit Mr. Lewis to begin earning an income to compensate his victims.

[18] Alternatively, Mr. Schultz submits that a further sentence of two years is appropriate. Mr. Lewis is anxious to make restitution, and agrees with the amounts Ms. Culp has submitted is owed each victim.

Principles of Sentencing

[19] The principles of sentencing that I am bound to consider are set out in the Criminal Code. The first is the fundamental purpose of sentencing set out in s. 718, which is to “contribute to respect for the law and the maintenance of a just, peaceful and safe society” by imposing sentences that give effect to one or more of the following objectives: denouncing unlawful conduct, deterring the offender and others from committing crimes, separating offenders from society, where necessary, assisting in the rehabilitation of the offender, providing reparations for harm done to the victim or to the community, and promoting a sense of responsibility in the offender.

[20] The second principle I must consider is proportionality as set out in s. 718.1. Any sentence imposed must reflect the gravity of the offence and the offender’s degree of responsibility.

[21] Thirdly, I am required by section 718.2 to impose a sentence taking into account any relevant aggravating or mitigating circumstances relating to the offence or the offender.

[22] Finally, I must consider sentences imposed on similar offenders for similar offences committed in similar circumstances. I have reviewed the numerous cases dealing with large scale, long-term frauds that counsel have provided to me. I do not propose to set out the details of each of them. Counsel agree that the appropriate range of sentence for a large-scale fraud of this nature is between three and eight years in prison. It is important to recognize that the cases in which the sentence imposed was less than five years for frauds involving a breach of trust have significant differences that distinguish them from this case.

[23] In R. v. Cruz 2010 ONCJ 640, R. v. Banks 2010 ONCJ 339, and R. v. Bogart (2002), 167 C.C.C. (3d), the accused pleaded guilty; a significant mitigating factor. In R. v. Khatchatourov 2014 ONCA 464, the principal victim of the fraud was a government agency. The two accused persons were not in a position of trust vis-à-vis that agency. In addition, it cannot be said that the consequences of a $1,000,000 loss to the public purse were devastating.

[24] Of course, sentencing is a profoundly individualized process driven by the unique facts of every offence and the unique characteristics of every offender. The sentencing principles set out in the Criminal Code must be applied to the unique circumstances of the case. However, a review of the jurisprudence reveals that convictions for large scale, long-term frauds involving a breach of trust that has devastating consequences for the victims will attract a substantial penitentiary term. It is also clear from the cases that denunciation and general deterrence are the paramount considerations in determining a fit sentence for this crime.

Aggravating and Mitigating Circumstances

[25] As I have already indicated, s. 718.2 of the Criminal Code mandates a consideration of any relevant mitigating or aggravating circumstances related to the offence of the offender.

[26] There are very few mitigating circumstances in this case. Mr. Lewis has no criminal record, which is a mitigating feature.

[27] I turn now to consider the aggravating features. Ms. Culp pointed out that many of the features of this case are deemed to be aggravating circumstances in s. 380.1 of the Criminal Code. That provision was not in force on January 1, 2004 and I therefore do not rely on it. However, many of the same features are considered aggravating factors on sentence in the jurisprudence. I take my guidance from that.

[28] The aggravating factors of this case are as follows:

1. This was a large scale sophisticated fraud that was perpetrated over several years. Thirty-three victims lost a total of $7,527,630.00. Mr. Lewis created slick promotional material, including DVDs, brochures, radio and television ads that were designed to lure and deceive investors.

2. Mr. Lewis breached the trust of the people who entrusted their money to him. He was their advisor. He was licenced and regulated by FSCO. He abused that status to take advantage of people. His guile had no limits. He used any and all means to develop a rapport with his victims to extract their money. For example, when he learned that Mr. Persad was from Trinidad, he told him that he too was from Trinidad. He asked the Jaworskis if they were Christians. When they said they were, he told them that he too was a Christian. When the vanRijns told him that a former financial advisor had stolen their money and fled to the Netherlands, he told them that he had investigators all over the world who could track the advisor down. He read from the Bible to the vanRijns when he learned that they were Christians. He showered his victims with chocolates, cookies and flowers.

3. The impact on the victims has been devastating. I have already outlined the effect Mr. Lewis’ crime has had on them. Their victim impact statements are compelling and demonstrate that their financial losses are only part of the losses they have suffered. Many now suffer from depression, anxiety, loss of joy and loss of trust. Mr. Lewis was indiscriminate about who he preyed upon. He took money from people who he knew could not afford to lose it.

4. This crime was driven by pure greed. Mr. Lewis used his victims’ money for his personal benefit. He did not stop on his own accord, but persisted even when things began to unravel. Mr. Lewis continued to lure victims knowing that their money was in jeopardy.

5. Mr. Lewis still has not acknowledged that what he did was criminal. He does not appear to understand or acknowledge that taking people’s money on the understanding that the money would be invested in mortgages is fraud if he does not invest it in mortgages, whether or not he intended to lose the victims’ money. His statement to the court prior to sentencing focused on his desire to grow his business and make money for his clients. This refusal to recognize his criminality increases his risk of reoffending.

6. It is difficult to accept as genuine Mr. Lewis’ stated remorse for the consequences his actions have visited on his victims. For example, in an emotional statement to the court, he said that it broke his heart to read the victim impact statement of the vanRijns. This stands in stark contrast to the callousness he showed in preying on these people, who were in their 80’s, after he had learned that a former financial advisor had absconded with their money.

Determination of a Fit Sentence

[29] In the circumstances of this case, the protection of the public, denunciation, and deterrence, both general and specific, are of paramount importance. In addition, promoting a sense of responsibility in Mr. Lewis for his actions cannot be overlooked.

[30] Accordingly, before crediting him for the time he has spent in pre-sentence custody, I am of the view that a sentence of seven years in prison is required to adequately address the relevant sentencing principles, and is in keeping with sentences imposed on similar offenders in similar circumstances.

Credit for Pre-Sentence Custody

[31] Mr. Lewis has been in custody for 989 days, or 32½ months since his arrest on October 27, 2011. Mr. Schultz argues that he should receive the maximum credit of 1.5 days for each of the 989 days, pursuant to s. 719(3.1) of the Criminal Code, based on the fact that this time does not count toward parole or statutory release. In addition, Mr. Lewis has been the victim of beatings in the jail and has been housed in protective custody for most of the time he has been incarcerated.

[32] Ms. Culp submits that Mr. Lewis is not entitled to receive enhanced credit for the time spent in pre-sentence custody at the rate of 1.5 days for each day because he was responsible for most of the delay in getting this matter to trial. Ms. Culp submits that the court should credit Mr. Lewis with 1.25 days for each day.

[33] The Supreme Court of Canada in R. v. Summer 2014 SCC 26 held that, “the loss of early release, taken alone, will generally be a sufficient basis to award credit at the rate of 1.5 to 1, even if the conditions of detention are not particularly harsh, and parole is unlikely.” The court further indicated that, although the onus is on the offender to demonstrate his entitlement to enhanced credit, the fact that the offender has been detained in pre-sentence custody is enough to give rise to an inference that he has lost eligibility for early release.

[34] Mr. Lewis has satisfied me that he is entitled to enhanced credit for the 989 days he has spent in pre-sentence custody at the rate of 1.5 to 1. Accordingly, he will be given credit for 4 years.

Fine in Lieu of Forfeiture

[35] Ms. Culp seeks a fine in the amount of $7,527,630.00 pursuant to s. 462.37(3) of the Criminal Code. Section 462.37 provides for the forfeiture of the proceeds of crime where an offender is convicted of a designated offence. Fraud over $5,000 is a designated offence. If the court is satisfied that a forfeiture order should be made in respect of any property but the property cannot be made subject to an order, the court may order the offender to pay a fine in an amount equal to the value of the property.

[36] Section 462.37(3) sets out the situations in which the court may order the offender to pay a fine. They include where the property cannot, on the exercise of due diligence, be located; where the property has been transferred to a third party or is located outside of Canada; or where the property has been commingled with other property that cannot be divided without difficulty.

[37] The evidence showed that victims were defrauded of $7,527,630.00. It also showed that he transferred money to third parties, including Pegi Gros and other victims. He transferred money to Antigua. There was evidence that he was investigating the possibility of developing a project in Antigua known as the International Plaza Antigua. As I have already indicated, Mr. Lewis withdrew nearly $2,000,000.00 in cash from his bank accounts. These funds have not been traced, and it is therefore not possible to make a forfeiture order in respect of them.

[38] The Crown has proven that the entire amount of $7,527,630.00 was in the possession and control of Mr. Lewis, and that the designated offence of fraud was committed in relation to that amount. There is a basis for making an order for a fine in lieu of forfeiture.

[39] Mr. Lewis will therefore be fined in the amount of $7,527,630.00. He must be given a reasonable time to pay that fine. Ms. Culp suggests five years. In my view, that is not sufficient. Mr. Lewis will be given ten years from the date of his release from prison to pay the fine.

[40] Section 462.37(4) sets out minimum terms of imprisonment that must be imposed in default of payment of the fine, depending on the amount of the fine. Where the fine exceeds one million dollars, the minimum term of imprisonment is five years. In default of payment, Mr. Lewis will be sentenced to five years in prison consecutive to the sentence that I have today imposed.

Restitution

[41] Ms. Culp seeks restitution for each of the victims as set out in the schedule attached to these reasons. Mr. Lewis indicated to the court that he is eager and able to make restitution to his victims. He agreed with the amounts owed to each of the victims outlined in the schedule.

[42] In cases involving breaches of trust, the paramount concern in determining whether a restitution order should be made is the claim of the victims. Mr. Lewis personally benefitted from the money his victims entrusted with him. He cannot be seen to benefit from his crime.

[43] I will make individual orders for restitution for each of the victims in accordance with the schedule attached to these reasons.

DNA Order

[44] Ms. Culp seeks a DNA order. Mr. Schultz opposes it. Fraud over is a secondary designated offence. Before making the order, I am required to consider Mr. Lewis’s criminal record, the nature of the offence and the circumstances surrounding its commission and the impact such an order would have on his privacy and security of his person. Having considered these factors, and in the exercise of my discretion, I decline to make such an order.

Non-communication Order

[45] During Mr. Lewis’s custodial sentence, he is prohibited from communicating directly or indirectly with any of the victims in this matter, except through his counsel. The names of the victims are listed in the schedule of restitution payments attached to these reasons.

Summary

[46] Mr. Lewis is sentenced to three years in prison after being credited for four years of pre-sentence custody. He is ordered to make restitution to the victims in the amounts set out in the attached schedule. He is ordered to pay a fine in the amount of $7,527,630.00 within ten years of his release from prison, in default of which he is sentenced to five years in prison consecutive to the three years I have just imposed. He is prohibited from communicating with the victims listed in the restitution schedule, except through counsel.

Corrick J.

Released: July 11, 2014

COURT FILE NO.: CR13-50000428-0000

DATE: 20140711

ONTARIO
SUPERIOR COURT OF JUSTICE

HER MAJESTY THE QUEEN
– and –
ANDRE LEWIS

REASONS FOR sentence

Corrick J.

Released: July 11, 2014