Court File and Parties

COURT FILE NO.: CR-15-10000211 DATE: 20160708 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: HER MAJESTY THE QUEEN – and – MARVIN CLARKE and MONIQUE CLARKE Accused

Counsel: Christopher Ponesse, for the Crown Enzo Battigaglia, for the Accused

HEARD: Voir Dires - January 5, 11, March 7, Trial - April 18, 19, 20, 21, 22, May 20, 26, 2016

BEFORE: B.A. Allen J.

REASONS FOR DECISION ON THE TRIAL

THE CHARGES

[1] Monique Clarke stands charged under s. 380(1) of the Criminal Code with fraud over $5,000 involving an allegation of defrauding her employer, Acxsys Corporation/Interac Association Corporation. Together with her husband, Marvin Clarke, Monique Clarke is also charged with possession of proceeds obtained from crime contrary to s. 354(1) of the Criminal Code.

[2] Originally, charges were brought separately in relation to Acxsys Corporation and Interac Association. The Crown withdrew the possession of proceeds charge against Mr. Clarke before the commencement of the trial proper. Before closing arguments the Crown withdrew the two charges against Ms. Clarke in relation to Interac Association on the view that the two companies operate their business together and separate charges are not necessary. Following closing arguments the Crown also withdrew the possession of proceeds charge against Ms. Clarke.

[3] Ms. Clarke therefore stands charged with the single offence of fraud in relation to Acxsys Corporation.

BRIEF BACKGROUND

[4] Ms. Clarke was employed as the payroll administrator in the payroll department with Acxsys Corporation/Interac Association when the allegations of fraud arose. Interac Association is a subsidiary of Acxsys Corporation. I will hereafter refer to Ms. Clarke’s employer as “Acxsys”. Her position in payroll required her to use a desktop computer. Acxsys uses the services of ADP, a corporate payroll service provider, to administer its direct deposits of employees’ pay into their personal bank accounts.

[5] The Crown alleges Ms. Clarke devised a scheme where she changed the status of “terminated” employees to “active”, changed the ex-employees’ direct deposit bank account numbers, and changed earnings which amounts were then deposited into seven different accounts at the four banks. It is alleged Ms. Clarke also used her position as the payroll administrator to grant herself remuneration to which she was not entitled.

[6] The scheme was discovered on February 11, 2014 when Bank of Montreal (“BMO”) informed Acxsys that the payee name (a former employee of Acxsys, Jeffrey Lee) for a deposit into a BMO account did not correspond with the account holder, Marvin Clarke. Mr. Lee had been terminated by Acxsys on January 7, 2013. Ms. Clarke was suspended on February 11, 2014.

[7] Acxsys retained Deloitte Forensics Inc. to conduct a forensic accounting investigation. Following the Deloitte findings, Acxsys called the police who obtained production orders to gain possession of the bank account records for the seven accounts into which the impugned amounts were deposited. Ms. Clarke and Mr. Clarke were subsequently arrested.

[8] This matter comes before the court as a judge-alone trial following three pre-trial applications.

[9] On the first application I decided under s. 8 of the Charter that Mr. Clarke had standing to challenge the production order associated with one of the BMO accounts: [R. v. Clarke 2016 CarswellOnt 6599 (Ont. S.C.J.)]. The defence conceded Ms. Clarke has no standing in relation to any of the bank account records seized by the police.

[10] On the second application, for reasons set out in the decision, I found the police violated Mr. Clarke’s rights under s. 8 of the Charter and ruled the bank account records for one of the bank accounts held jointly by Mr. Clarke and Carmelita Williams inadmissible against Mr. Clarke: [R. v. Clarke 2016 CarswellOnt 4623 (Ont. S.C.J.)]. The Crown withdrew the proceeds of crime charge against Mr. Clarke.

[11] The defence brought a further application under s. 30 of the Canada Evidence Act seeking the exclusion of the ADP payroll records. I admitted the ADP records for trial: [R. v. Clarke 2016 CarswellOnt 4633 (Ont. S.C.J.)]. The bank records from the four banks were admitted pursuant to s. 30 of the CEA.

THE TRIAL

Overview of Trial Evidence

[12] For trial the Crown called three witnesses who were co-workers of Ms. Clarke while she was employed at Acxsys: Mirielle Khayat, Assistant Vice President of Finance, Lesli Knapp, Senior Accountant, and John Lyras, the Payroll Manager. The Crown also called a Deloitte forensic accountant, Emily Babaloa. She authored the forensic accounting report of Deloitte’s investigative findings on the fraud.

[13] The parties agreed to have certain evidence adduced at pre-trial applications be adopted for trial. The evidence of Brian Casey, a computer forensics investigator with Deloitte, and Stephen Boon, a manager in Client Services with ADP, became part of the Crown’s case at trial.

[14] As the defence is entitled to do, it did not call a defence.

Crown Motions to Re-open Its Case

[15] The Crown brought two motions to re-open its case during the trial.

[16] The first motion was brought after the Crown had closed its case. No defence was called but the parties agreed that the defence would present its closing argument first. Just before defence counsel commenced his closing Crown counsel rose to request to re-open the Crown’s case because Crown counsel had neglected to have the bank records made an exhibit at trial. The parties had not agreed to the records being used as evidence at trial: [R. v. Sadikov 2014 CarswellOnt 752, at para. 30 (Ont. C.A.)]; R. v. Erven (1978), [1979] 1 S.C.R. 926, at p. 932 (S.C.C.); and R. v. Gauthier (1975), [1977] 1 S.C.R. 441, at p. 454 (S.C.C.). Defence counsel objected to the filing of the bank records.

[17] I allowed the Crown to re-open its case for the following reasons.

[18] A trial court has the discretion to allow a party to re-open its case. The standard in exercising the discretion will depend on what stage in the trial the application is made. The emphasis in allowing re-opening is to rectify an oversight or inadvertence provided there was no prejudice to the accused: R. v. Robillard, [1978] 2 S.C.R. 728 (S.C.C.). Three factors to consider are: (a) whether the evidence is relevant to a material issue; (b) potential prejudice to the opposing party; (c) the effect of re-opening on the expeditiousness of the trial: R. v. Hayward (1993), 86 C.C.C. (3d) 193 (Ont. C.A.).

[19] The Supreme Court of Canada held that the scope of a trial judge’s discretion to allow the Crown to re-open its case grows narrower as the trial proceeds due to the increasing likelihood of prejudice to the accused’s defence as the trial advances. The Court discussed the increasing prejudice and the narrowing of discretion as the re-opening is requested at later stages in the trial process. The stages considered were: (a) before the Crown has closed its case; (b) when the Crown has closed its case and before the defence has elected whether or not to call evidence; (c) where the defence has already begun to respond to the Crown's case: R. v. G. (S.G.), [1997] 2 S.C.R. 716, at para. 30 (S.C.C.).

[20] On the first motion I found that Crown counsel’s failure to file the bank records was the result of inadvertence. The bank records are critical to a determination of Ms. Clark’s guilt. The bank records were subject matter in three pre-trial applications. As noted above, I had admitted the records pursuant to s. 30 of the CEA as business records. I found Crown counsel simply neglected through inadvertence to take the procedural step of filing them as an exhibit for trial.

[21] I also considered the stage in the proceedings at which Crown counsel sought to re-open. It was after the Crown closed its case. The defence elected not to call a defence and defence counsel had not begun his closing argument. At this point if there was prejudice to the defence it was negligible. The bank records were not surprise evidence unknown to the defence. They had been disclosed much earlier and as noted earlier were the subject matter of admissibility hearings. It was expected that the bank records would be evidence at trial.

[22] On the second motion the Crown requested to re-open to have the four production orders for the bank records obtained by the police be entered as evidence for trial. This time defence counsel was well into his closing argument.

[23] I refused to allow Crown counsel to re-open on the second motion. The prejudice to the accused was increased by this late-stage request. Defence counsel was moving along formulating his closing address when Crown counsel again rose interrupting the train of the defence’s presentation. I found it not fair to the defence’s right to full answer and defence to allow the Crown’s evidence to be a moving target as far along the process as during the middle of the defence’s closing.

[24] I also considered that Crown counsel should have been alerted to the opportunity to enter the production orders when, before defence counsel began his closing, he sought to re-open to file the related bank records.

[25] Further, I cannot overlook the added fact that Crown counsel did something similar toward the end of the defence’s application to exclude the ADP records. During his own closing argument, Crown counsel requested to re-open the Crown’s case to recall Det. John Crilly to prove the bank account numbers on the ADP records corresponded with the account numbers on the seven bank accounts. He had neglected to have Det. Crilly testify to this during the application. I allowed the Crown to re-open finding inadvertence on the part of the Crown. I recognized any prejudice to the defence would be reduced by the fact the Crown’s request was made not during trial but in a pre-trial application.

[26] On the second motion to re-open at trial, Crown counsel asserted that he assumed the production orders would be evidence for trial in spite of a discussion during the pre-trial proceedings that consent has to be obtained for voir dire evidence to be utilized at trial. In deciding this motion, I also took into account that before the close of evidence at trial, I specifically asked counsel to put into writing their agreements. They did so and agreement on the admission for trial of the four production orders was not included.

[27] Putting agreements in writing ought to have made Crown counsel especially mindful of the evidence he sought to rely on a trial. But this was not the case.

[28] However, notwithstanding my refusal to allow the four production orders to be filed, the ADP and banking records together contain the evidence to establish what Det. Crilly would have attested to.

THE EVIDENCE

Authenticity and Reliability of the Banking and ADP Records

The Banking Records

[29] As noted above, in [R. v. Clarke 2016 CarswellOnt 4633 (Ont. S.C.J.)], I admitted the banking records pursuant to s. 30 of the CEA. Outside of the author of a record testifying to prove the contents of the record, the record is hearsay. The CEA contains a hearsay exception for business records. The statute allows business records which contain information relevant to the matter before the court to be admitted if the statutory prerequisites are met. Section 30(3)(a) and (b) provide that if an affidavit or certificate is filed with the record that attests to the copy’s authenticity and that it was made by the person who made the copy, the record is admissible in evidence in the same manner as if it were the original of the record.

[30] The banking records in the case at hand were filed with the prescribed affidavits attesting to the fact the records are true copies and to their authenticity and to their generation and use in the usual and ordinary course of the bank’s business. In spite of the hearsay quality of the business records they are admitted pursuant to s. 30 as documents produced and regularly relied upon in the banking business.

[31] Earlier courts have commented on the rationale of the business records exception.

As a general rule, documents made in the ordinary course of business are admitted to avoid the cost and inconvenience of calling the record keeper and the maker. As a matter of necessity the document is admitted. Proof that a document is made in the normal and ordinary course of business, prima facie, fulfils the qualification that in order for hearsay to be admitted it must be trustworthy.

[R. v. Martin, [1997] S. J. No. 172 (Sask. C.A.)]

It would appear that the rationale behind that section [s. 30 of the Canada Evidence Act] for admitting a form of hearsay evidence is the inherent circumstantial guarantee of accuracy which one would find in a business context from records which are relied upon in the day to day affairs of individual businesses, and which are subject to frequent testing and cross-checking. Records thus systematically stored produced and regularly relied upon should, it would appear under s. 30, not be barred from this Court’s consideration simply because they contain hearsay or double hearsay.

R. v. Grimba and Wilder (1977), 38 C.C.C. (2d) 469 (Ont. Co. Ct.)

[32] The Supreme Court of Canada in Ares v. Venner pointed out that a business record meeting the criteria set out in that case should be received in evidence as prima facie proof of the facts stated therein. The Court however observed this should in no way preclude a party wishing to challenge the accuracy of the records or entries from doing so: Ares v. Venner, [1970] S.C.R. 608, p. 626 (S.C.C.). That is, an opponent of the record may, at trial, still challenge the authenticity of a business record. The authenticity of a record is to be proven at a preliminary admissibility stage and an evaluation of the truth of the evidence is left to the trial stage where guilt or innocence is determined.

[33] Authentication amounts to proof that a record is what it purports to be, that it is an original or a genuine copy. Only a prima facie demonstration of authenticity need be established at the admissibility stage and the ultimate question of authenticity is to be left for the trier of fact at trial. Put another way, the determination of a preliminary question of fact in respect of authenticity is a preamble to the trial function of looking at the contents of the statement as reliable proof of the truth of its contents: Ares v. Venner and R. v. Evans, [1993] 3 S.C.R. 653 (S.C.C.).

[34] In final argument defence counsel challenged the authenticity and reliability of the bank records. However, as will be seen, there was no evidence proffered at trial to cause me to doubt the ultimate authenticity and reliability of the bank records’ contents. The CEA s. 30(3)(c) affidavits together with a comparison of their contents with the ADP records allow me to arrive at that conclusion.

[35] I therefore accept the bank records from the four banks, BMO, Bank of Nova Scotia (“BNS”), Royal Bank of Canada (“RBC”) and Toronto Dominion Bank (“TD”) as proof of the truth of their contents.

The ADP Records

Stephen Boon’s Evidence for ADP

[36] The ADP records contain critical information for the Crown’s case. ADP payroll records are completed by clients like Acxsys to transmit payroll data to ADP and are at the centre of the evidentiary inquiry in this case. Critical facts that underlie the allegations against Ms. Clarke are found in the ADP and banking records. At the admissibility stage, the defence raised questions on both the reliability and authenticity of the ADP records.

[37] I mentioned earlier that the parties agreed that the evidence of Stephen Boon, the Customer Services manager with ADP, be adopted for trial. Mr. Boon’s testimony together with other evidence, form the basis of my finding that the ADP records before the court are authentic and reliable print outs of records stored in ADP’s computer mainframe and are acceptable at trial for the truth of their contents.

[38] I will recount a summary of Mr. Boon’s evidence.

[39] Mr. Boon had been a manager in Client Services with ADP for 12 of his 14 years’ employment there. Mr. Boon spoke with facility about ADP’s normal, everyday functions in providing payroll services to clients like Acxsys. He testified that ADP provides its online products through a website. His evidence was that for the most part it is the client that enters its payroll data into ADP’s system, information such as employee names, employee banking information for direct deposit, salaries, deductions and benefits, etc. Mr. Boon pointed out that in exceptional circumstances his department assists with entering payroll data on behalf of clients.

[40] Mr. Boon testified he is familiar with ADP forms and the types of services provided to clients. The ADP documents at issue are Payroll Entries Reports (“PERs”) and Payroll Registries (“PRs”). He offered detailed testimony and was conversant on the majority of the various acronyms, code numbers and short forms of words on both the PERs and PRs. He explained the figures recorded on both types of reports. He confirmed that the records before the court are the types of records used in the ordinary and usual course of ADP’s payroll services.

[41] The PERs and PRs before the court contain payroll information for Acxsys employees covering the period August 1, 2013 to January 31, 2014. Among the employee names on those records − nine employees who were actually terminated employees − are of interest at this trial. The implications to the fraud allegations of the employees at issue actually being “ex-employees” will become evident as the evidence unfolds.

[42] The purpose of a PER is to confirm the specific entries made by the client in relation to a specific payroll. A PER is system-generated by ADP from information provided by the client generally with no human input by ADP. PRs are final reports generated by ADP after clients’ current payroll information is entered. Mr. Boon indicated that ADP’s payroll reports are stored electronically with ADP, are immediately available to clients, and do not normally appear in print form. They are generally viewed on computer monitors.

[43] The PERs contain employee names, employee numbers, earnings, including bonuses, benefits, expenses and deductions including deductions for taxes, CPP, etc. They also contain pay dates, period end dates, run dates for the reports and information about events related to the pay such as adjustments and changes. Of note is that PERs also contain employee bank account numbers.

[44] Mr. Boon described the process by which clients like Acxsys transmit their payroll data to ADP. He explained that Acxsys enters its payroll information into the PRs and PERs on ADP’s website. ADP then activates the “submit” function on the ADP program allowing Acxsys payroll personnel to press a button to “submit” their payroll information to ADP. ADP generates final reports that are sent to ADP’s computer mainframe. The client is afforded the opportunity to review the final reports generated by ADP before ADP transmits it to ADP’s computer records.

[45] Once the submit button is pressed ADP’s computer program then begins moving the client’s funds and distributing them to the banks of employees for direct deposit. On ADP’s end, once the submit button is pressed there is no further opportunity for ADP personnel or the client to enter additional payroll information.

[46] Mr. Boon explained that before “submit” is pressed additional information can be entered. He referred to what he described as an exceptional situation where the client might contact ADP Client Services by phone before “submit” is activated and verbally authorize changes to the information. Mr. Boon explained there is a 48-hour window before submission during which ADP could cancel a payment if a client wants to change the information.

[47] Mr. Boon referred to this process as a “special run” that can occur in the midst of a pay period. Client Services then enters the changed information on behalf of the client. Therefore, exceptionally, during the narrow period between “input” and “submit”, Client Services, on the authorization of the client, can make changes to the information. When there are changes, the client would not be able to see any changes made by Client Services until ADP generates the final report enabling the client to compare its data with the final report.

[48] Defence counsel raised the question about ADP being able to unilaterally change the payroll information before submission. Mr. Boon indicated that was possible but concluded from his review of the records before the court there is no evidence that any such unilateral alteration had been made.

[49] Therefore, in the normal course the human input in the ADP system is by the client’s payroll administrator entering payroll data before ADP transmits the data to its records.

[50] Mr. Boon testified he did not personally create the reports and that prior to trial he had not seen the records before the court. He did not print off the records or personally retrieve the documents from the ADP computer mainframe. Mr. Boon testified he could not confirm the veracity of the contents of the reports and he could not verify if the documents before the court were produced from the mainframe. He agreed with defence counsel that the ultimate accuracy of the information in the reports depends on the accuracy of the person who entered the information. But he confirmed that the documents, in terms of their format, layout, and the types of information recorded, appear to be those regularly produced and used by ADP for its clients.

[51] At the admissibility hearing I acknowledged that while Mr. Boon was not the creator of the records and could not confirm they were printed from the mainframe, the precision of the details in his evidence persuaded me that he had sufficient knowledge of the PERs and PRs before the court for me to conclude they were business records used in the normal course of ADP business.

[52] At the admissibility hearing, defence counsel raised the argument that because of the “possibility” for errors and manipulation or alterations to the information, the veracity and accuracy of the information are in question.

[53] I made the observation that the potential for manipulation of computerized records is a reality in today’s electronic world and noted that if such records were excluded because of “a mere possibility” for manipulation, none of this type of evidence would ever come before the courts. I adopted the observations of Professor David Paciocco, as he then was, that with today’s modern electronic advancements it would be completely unrealistic to refuse electronic documents and records even in a case with fears about manipulation. Paciocco commented:

The point is that fear of what is new cannot be allowed to impede the incorporation of newer technologies. After all, law is a practical discipline and it functions in the real world. It would be unrealistic to reject electronic documents and emails, notwithstanding realistic fears of ease of manipulation.

[David. M. Paciocco, “Proof and Progress: Coping with the Law of Evidence in a Technological Age”, (2013) 11 Canadian Journal of Law and Technology, 181, at 183]

[54] I held that it is left for the trier of fact at trial to determine their weight with the possibility of manipulation being one among other considerations for the trial court to keep in mind. In a similar vein, Professor David M. Tanovich commented:

Presumably, a party will always be able to find an expert to say that material downloaded to the internet “could be” manipulated without easy detection or that they cannot say for certain that it was not. Arguably, that is a question of weight and ultimate reliability.

[David M. Tanovich, “R. v. Andalib-Goortani: Authentication & The Internet”, (2014) 13 C.R. (7th) 140, at p. 141; author’s quotation marks]

[55] I found at the admissibility stage that Mr. Boon’s evidence was sufficient to establish the prima facie authenticity and reliability of the ADP records.

Establishing Ultimate Authenticity and Ultimate Reliability of ADP Records through Comparison

The Law

[56] Modern cases dealing with various types of computer-generated records have applied the premise introduced by [R. v. Moxley] and adopted by [R. v. Monkhouse] and other cases. That is, to establish prima facie proof the proponent need not have direct personal knowledge of the information in the records and the original records need not be available to demonstrate the authenticity of the records as the true records of the business in question.

[57] As I noted in discussing the banking records, there is no need at the admissibility stage to prove the veracity of the information on the record. This is left to the trier of fact at trial where the ultimate question of authenticity is to be determined: R. v. Evans. It is therefore my added task at the trial stage to decide the ultimate reliability and authenticity of the ADP records. I believe this can be achieved through comparing information in the banking records with corresponding banking and other payroll information in the ADP records.

[58] As I found in my admissibility decision, courts have held that authentication and reliability can be achieved by reference to the factual background surrounding the making of a statement or record and by comparison with other evidence: R. v. Evans, R. v. Brown, at para. 34 (Ont. S.C.J.); and R. v. Andalib-Goortani 2014 ONSC 4690, at para. 26 (Ont. S.C.J.). R. v. Khelawon, [2006] 2 S.C.R. 787, at para. 100 (S.C.C.) held that the factual context to be considered is not limited to only the circumstances surrounding the making of the statement. Other corroborating evidence to establish reliability can be considered.

The Evidence

The Crown’s Position

[59] Crown counsel argues that relevant data in the ADP records matches related data in the banking records. He highlighted and tracked the information on the PERs and PRs for the ex-employees/payees (“ex-employees”) documented on the ADP payroll records and traced the banking information on the ADP records to the bank account records and account holders on the seven accounts in the four banks.

[60] The Crown argues that the ultimate authenticity and reliability of the ADP records can be established through their comparison with the banking records that have themselves been established as reliable, authentic and acceptable as proof of the truth of their contents.

[61] The defence maintains that the contents of both the ADP and banking records are hearsay and cannot be relied upon as ultimately authentic or reliable.

Overview of the Function of Acxsys’s Payroll Department

[62] Critical to a determination on the fraud allegation is an appreciation of Acxsys’s payroll and finance departments and Ms. Clarke’s role in the interface between Acxsys’s payroll functions and ADPs payroll services.

[63] In addition to Mr. Boon’s evidence on behalf of ADP, the Crown relies on the evidence of Acxsys employees, Lesli Knapp, senior accountant.

[64] When Ms. Knapp was first hired she was employed as the payroll administrator, the same job that Ms. Clarke held at the time the fraud allegations arose. When Ms. Clarke was hired Ms. Knapp trained Ms. Clarke. Ms. Clarke took on the payroll administrator position on a full-time basis in about July 2013. Ms. Knapp was able to demonstrate a practical working knowledge of the position Ms. Clarke held at Acxsys.

[65] Ms. Knapp’s position as senior accountant required her to oversee all of Ms. Clarke’s work. She explained that the payroll administrator’s position while Ms. Clarke was employed at Acxsys required Ms. Clarke to manually key into the PERs and PRs on ADP’s website the payroll information she received from the human resources and finance departments. As a first step the payroll administrator would print off a draft of those reports and check them for accuracy against the backup documentation from the human resources and finance departments.

[66] As a second step Ms. Knapp would perform a detailed check of the draft printout of the PRs and PERs and sign off on them if they were accurate. The last step was for Mr. Lyras to conduct a higher level review of the PERs and PRs to ensure accuracy. If no errors were found Mr. Lyras would approve and sign off on the PERs and PRs.

[67] If there were errors the records would be sent by Mr. Lyras to Ms. Knapp then to Ms. Clarke for correction. It would be Ms. Clarke’s responsibility to correct them. The corrected records would be sent back to Ms. Knapp and Mr. Lyras for approval. After approval Ms. Clarke would be responsible for processing the payroll by submitting the approved payroll information to ADP’s website. This would activate ADP’s function of processing the information for direct deposit of funds into employees’ bank accounts.

[68] The Crown alleges that it was after final approval by management that Ms. Clarke made the impugned changes on the PERs and PRs.

[69] Ms. Knapp was shown the PERs and PRs before the court. She explained the meaning and purpose of the entries of data related to earnings, benefits, and adjustments to employment status, modes of pay, year-to-date data and bank account numbers changes.

[70] Ms. Knapp explained it was not unusual to have terminated employees remain on PRs after termination. This means that even if there were ex-employees’ names on payroll records during the approval process this would not necessarily trigger a concern.

[71] Ms. Knapp explained that Acxsys’s fiscal year, like that of banks, is a calendar year. The PRs are chronological from January to December of each year. If an employee is terminated within a calendar year that terminated employee could remain on a PR all year until T4s are issued the following year in March. Once T4s are issued the payroll administrator was responsible for notifying ADP so that the terminated employee could be purged from Acxsys’s payroll. It was therefore also Ms. Clarke’s responsibility during the relevant period to have ensured terminated employees were removed from the payroll.

[72] Ms. Knapp testified if she discovered terminated employees remained on the PR beyond the appropriate time she would advise Ms. Clarke to purge the names. She indicated she instructed Ms. Clarke on a number of occasions in relation to the PRs before the court to purge the terminated employees but Ms. Clarke did not do so.

[73] The PRs and PERs before the court show Ms. Clarke receiving excess bi-weekly pay over several months. Ms. Knapp testified that she had not noticed at the relevant time that Ms. Clarke had received excess pay and that had she realized this she would have reported it to Mr. Lyras.

The PRs and PERs and Banking Records before the Court

[74] Critical to a finding of authenticity and reliability of the ADP records is the establishment of a comparative connection to the banking records.

[75] There are nine terminated ex-employees documented on the PERs and PRs that are of interest to this trial. PERs not only contain Acxsys payroll information, they also contain employees’ bank account numbers. This provides ADP with information required to process deposits of employee pay into corresponding bank accounts.

[76] Crown counsel asserts that the bank account numbers associated with the ex-employees on the PERs correspond with bank account numbers in the banking records. However, as will be seen, the ADP bank account numbers and the bank account numbers in the banking records are not entirely the same.

[77] The bank account numbers comprise long strings of digits. The first set of numbers in a string is a three-digit institution number, followed by several more digits referencing the transit/branch number which is followed by a longer string of digits which is the individual account number. Ms. Babaloa was able to identify the institution numbers for RBC and BNS as 003 and 002 respectively. There is no evidence to confirm the institution numbers for BMO and TD.

[78] The bank account numbers in the ADP records generally have more digits than those in the seven bank accounts. The PERs have an extra digit, a “2” between the transit/branch number and the account number. But when the two bodies of records are studied together, looking at the bank account numbers, it is evident that the ADP records and the banking records show a common and corresponding series of digits as between each of the PER bank account numbers for the ex-employees and each of the personal bank account numbers in the banking records.

[79] For the purpose of drawing a comparison, and for simplicity, I find it sufficient to focus only on the digits in the bank account numbers in the ADP records and the corresponding digits in the bank account numbers in the banking records.

[80] Also of note in doing the comparison is that the names of the bank account holders associated with the bank account numbers in the banking records are different from the names of the Acxsys ex-employees who are payees in the ADP records. What this means is that with the ADP payroll activities at issue the employees named in the PERs as set to receive certain payments from Acxsys are not the persons named as account holders in banking records as recipients of corresponding direct deposits from ADP. However, as the Crown points out, the amounts of pay and the pay dates recorded in the PERs correspond with the deposit dates and the amounts of pay variously deposited into the seven bank accounts.

[81] What this all means will become easier to understand with the comparative review that follows.

[82] The payroll activities at issue are associated with the following nine ex-employees of Acxsys: V. DiLauro, N. Dragoun-Estrada, W. Karkukly, J. Lee, J. Levinson, S. MacKeown, J. Sing, K. Stachensheid and A. Thevathas.

[83] Mireille Khayat, Vice President, Finance for Acxsys, testified she recognized each of those names as employees who had been terminated from Acxsys at different times. The PERs and PRs dated from August 1, 2013 to January 31, 2014 provide employment and banking information for those ex-employees that is pertinent to the fraud allegation against Ms. Clarke.

[84] The seven bank account holders whose accounts received the direct deposits in question are: M. Orticello, V. Blackwood, C. Brown, K. Blair, F. Bryan, C. Gobourne, and jointly Marvin Clarke and Carmelita Williams. Ms. Khayat testified she did not recognize the names of the seven account holders as being associated with Acxsys during her ten years working there. Except for Marvin Clarke and Carmelita Williams, there is no evidence as to whom the other six accounts holders are or their relationship, if any, to Ms. Clarke.

Review of ADP Records of the Ex-Employees together with Banking Records

[85] Crown counsel called Emily Babaloa from Deloitte, an expert in forensic accounting. She authored a report for Deloitte dated March 2014. Her task was to review the PERs and PRs together with the banking records for the period January 1, 2013 to January 31, 2014 to investigate unauthorized payments set for ex-employees and unauthorized excess payments set for Ms. Clarke.

[86] During her testimony, referring to the relevant contents of the PERs and PRs, she explained how she arrived at her findings that the quantum of the fraud in relation to the ex-employees is $309,663 and in relation to Ms. Clarke’s excess payments is $12,335.67. As will be seen, an authorized raise for Ms. Clarke not realized by Ms. Babaloa at the time she prepared her report meant the actual unauthorized excess payments totalled $12,282.78.

[87] In his closing argument at trial Crown counsel reviewed the ADP and banking records from a number of perspectives and traced the evidence that, in the Crown’s view, proves the amounts of the unauthorized payments set to be paid to the ex-employees and to Ms. Clarke.

[88] In my summary of the evidence, for simplicity, I do the comparison of the banking and ADP records from a singular perspective. My approach is to examine the records from the vantage point of the payroll activities related to the nine ex-employees focusing on the bank account numbers, pay dates and pay amounts set in the PRs and PERs for those persons. Using the bank account numbers, I trace the payment amounts and payment dates to direct deposits into the bank accounts of the seven account holders.

[89] In argument, Crown counsel presented its comparison of the records by way of an impressive brief of illustrative graphs and tables. Without detracting from his position on hearsay, defence counsel stated he did not dispute that the Crown’s closing materials accurately reflect the data contained in the ADP and banking records.

[90] ADP’s payroll process is rather complex and the data in the PERs and PRs is not easily decipherable. The forensic accountant from Deloitte, a customer service manager from ADP and Acxsys employees from payroll and finance provided explanations. Of interest to the comparisons of ADP payments and bank direct deposits are what ADP refers to as pay adjustments. FIN adjustments are the adjustments of interest to this case.

[91] FIN adjustments are year-to-date earnings updates. Senior accountant, Ms. Knapp, explained that a FIN adjustment is a payroll function used to record an amount in a PER that reflects an adjustment to an employee’s earnings. Ms. Knapp testified FIN adjustments are rarely done.

[92] FIN adjustments are recorded as negative figures to indicate the amount is not actually paid out. A positive earnings figure, for example $1,000, is recorded on the PER on the earnings line and the same figure in the negative, for example -$1,000, is recorded on the year-to-date line which in effect “zeroes out” the $1,000. The negative amount on the year-to-date line is intended to show the employee did not get paid the amount. That is, the use of FIN adjustments in the ADP records on the year-to-date line makes it appear as though the payments were not to be made. However, on the PERs before the court where FIN adjustments were made a line below the FIN adjustment line shows the positive earnings figure. This indicates the ex-employee was actually set to be paid the positive earnings amount.

[93] In contrast to Ms. Knapp’s evidence that FIN adjustments are rare the ADP records before the court contain several dozen FIN adjustments in relation to the earnings of the nine ex-employees. In preparing my summary, I again strive for simplicity. Each of the PERs where there are FIN adjustments indicate the ex-employees were ultimately to be paid the positive earnings amounts and those same amounts, as will be seen, were deposited variously into the seven bank accounts. For that reason my summary contains only positive earnings figures since in the result those are the amounts that were actually to be paid out. I have placed asterisks next to figures where FIN adjustments were made.

[94] I will first summarize the payments set for the nine ex-employees and next the excess payments Ms. Clarke was set to receive.

V. DiLauro (actually terminated June 14, 2014)

• The PER dated August 16, 2013 for ex-employee, V. DiLauro, shows bank account number, 001037323958551, and a pay amount of *$2,576.54. The BMO bank account number for account holder, K. Blair, is 0373 3958-551 and shows a direct deposit of $2,576.54 on August 16, 2013.
• The PER dated August 30, 2013 for ex-employee, V. DiLauro, shows bank account number, 001037323958551, and a pay amount of *$3,076.54. The BMO bank account number for account holder, K. Blair, is 0373 3958-551 and shows a direct deposit of $3,076.54 on August 30, 2013.
• The PER dated September 13, 2013 for ex-employee, V. DiLauro, shows bank account number, 001037323958551, and a pay amount of *$3,576.54. The BMO bank account number for account holder, K. Blair, is 0373 3958-551 and shows a direct deposit of $3,576.54 on September 13, 2013.
• The PER dated September 27, 2013 for ex-employee, V. DiLauro, shows bank account number, 001037323958551, and a pay amount of *$4,576.54. The BMO bank account number for account holder, K. Blair, is 0373 3958-551 and shows a direct deposit of $4,576.54 on September 27, 2013.

Total pay for V. DiLauro - $13,086 [1]

W. Karkukly (actually terminated October 24, 2013)

• The three PERs dated November 8, November 22, and December 6, 2013 for ex-employee, W. Karkukly, shows bank account number, 001037323958551, and pay amounts of *$3,857.54 for each of those three dates. The BMO bank account number for account holder, K. Blair is 0373 3958-551 and shows direct deposits of $3,857.54 on each of those three dates.

Total pay for W. Karkukly - $15,430

J. Levinson (actual terminated February 1, 2013)

• The PER dated August 16, 2013 for ex-employee, J. Levinson, shows bank account number, 002221152221520179922, and a pay amount of *$2,658.54. The BNS bank account number for account holder, M. Orticello, is 22152 01799 22 and shows a direct deposit of $2,658.54 on August 16, 2013.
• The PER dated August 30, 2013 for ex-employee, J. Levinson, shows bank account number, 002221152221520179922, and a pay amount of *$3,000.00. The BNS bank account number for account holder, M. Orticello, is 22152 01799 22 and shows a direct deposit of $3,000.00 on August 30, 2013.
• The PER dated September 13, 2013 for ex-employee, J. Levinson, shows bank account number, 002221152221520179922 and a pay amount of *$3,658.54. The BNS bank account number for account holder, M. Orticello, is 22152 01799 22 and shows a direct deposit of $3,658.54 on September 13, 2013.
• The PER dated September 27, 2013 for ex-employee, J. Levinson, shows bank account number, 002221152221520179922, and a pay amount of *$4,658.54. The BNS bank account holder, M. Orticello, is 22152 01799 22 and shows a direct deposit of $4,658.54 on September 27, 2013.

Total pay for J. Levinson - $13,976

N. Dragoun-Estrada (actually terminated September 13, 2013)

• The four PERs dated October 30, November 8, November 22 and December 6, 2013 for ex-employee, N. Dragoun-Estrada, shows a bank account number, 001243923977862, and pay amounts of *$2,679.37 for each of those four dates. The BMO bank account number for account holder, F. Bryan is 2439 3977-862 and shows direct deposits of $2,679.37 on each of those four dates.

Total pay for N. Dragoun-Estrada - $10,717

J. Lee (actually terminated January 7, 2013)

• The PER dated August 16, 2013 for ex-employee, J. Lee, shows bank account number, 003059025156328, and a pay amount of *$2,500.00. The RBC bank account number for account holder, C. Brown, is 5156328 and shows a direct deposit of $2,500.00 on August 16, 2013.
• The two PERs dated October 25 and November 8, 2013 for ex-employee, J. Lee, show bank account number, 001030023989399, and pay amounts of *$2,576.32 for each of those two dates. The BMO bank account number for account holder, C. Gobourne, is 0300 3989-399 and shows direct deposits of $2,576.32 on each of those two dates.
• The three PERs dated November 22, December 6 and December 20, 2013 for ex-employee, J. Lee, show bank account number, 001237723990917, and pay amounts of *$4,576.32 for each of those three dates. The BMO joint bank account number for account holders, Marvin Clarke and Carmelita Williams, is 2377 3990-917 and shows direct deposits of $4,576.32 on each of those three dates.
• The PER dated January 3, 2014 for ex-employee, J. Lee, shows bank account number, 001237723990917, and a pay amount of *$5,576.32. The BMO joint bank account number for account holders, Marvin Clarke and Carmelita Williams, is 2377 3990-917 and shows a direct deposit of $5,576.32 on January 3, 2014.
• The PER dated January 10, 2014 for ex-employee, J. Lee, shows bank account number, 001237723990917, and a pay amount of *$39,984.78. The BMO joint bank account number for account holders, Marvin Clarke and Carmelita Williams, is 3990917 and shows a direct deposit of $39,984.78 on January 10, 2014.

Total pay for J. Lee - $72,519

S. MacKeown (actually terminated February 22, 2013)

• The 10 PERs dated August 16, August 30, September 13, October 11, October 25, November 8, November 22, December 6, December 20, 2013 and January 3, 2014 for ex-employee, S. MacKeown, show bank account number, 0042117221176574409, and pay amounts of *$4,325.00 for each of those 10 dates. The TD bank account number for account holder, V. Blackwood, is 6574409 and shows direct deposits of $4,325.00 on each of those 10 dates.
• The PER dated September 27, 2013 for ex-employee, S. MacKeown, shows bank account number, 0042117221176574409, and a pay amount of *$6,110.68. The TD bank account number for account holder, V. Blackwood, is 6574409 and shows a direct deposit of $6,110.68 on September 27, 2013.
• The PER dated January 10, 2014 for ex-employee, S. MacKeown, shows bank account number, 0042117221176574409, and a pay amount of *$15,000.00 (a bonus). The TD bank account number for account holder, V. Blackwood, is 6574409 and shows a direct deposit of $15,000.00 on January 10, 2014.
• The two PERs dated January 17 and January 31, 2014 for ex-employee, S. MacKeown, show bank account number 0042117221176574409 and pay amounts of *$5,325.00 for each of those two dates. The TD bank account number for account holder, V. Blackwood, is 6574409 and shows direct deposits of $5,325.00 on each of those two dates.

Total pay for S. MacKeown - $75,011

J. Sing (actually terminated January 3, 2013)

• The PER dated October 11, 2013 for ex-employee, J. Sing, shows bank account number, 002221152 221520179922, and a pay amount of *$2,407.68. The BNS bank account number for account holder, M. Orticello, is 22152 017992 and shows a direct deposit of $2,407.68 on October 11, 2013.
• The PER dated October 25, 2013 for ex-employee, J. Sing, shows a bank account number, 002221152 221520179922, and a pay amount of *$4,619.16. The BNS bank account number for account holder, M. Orticello, is 22152 01799 22 and shows a direct deposit of $4,619.16 on October 25, 2013.

Total pay for J. Sing - $7,027

K. Stachelscheid (actually terminated November 15, 2012)

• The PER dated August 30, 2013 for ex-employee, K. Stachelscheid, shows bank account number, 0030590225156328, and a pay amount of *$4,245.00. The RBC bank account number for account holder, C. Brown, is 5156328 and shows a direct deposit of $4,245.00 on August 30, 2013.
• The PER dated September 13, 2013 for ex-employee, K. Stachelscheid, shows bank account number, 0030590225156328 and a pay amount of *$5,245.00. The RBC bank account number for account holder, C. Brown, is 5156328 and shows a direct deposit of $5,245.00 on September 13, 2013.
• The PER dated September 27, 2013 for ex-employee, K. Stachelscheid, shows bank account number, 0030590225156328, and a pay amount of *$6,745.00. The RBC bank account number for account holder, C. Brown, is 5156328 and shows a direct deposit of $6,745.00 on September 27, 2013.
• The seven PERs dated October 11, October 25, November 8, November 22, December 6, December 20, 2013, and January 17, 2014 for ex-employee, K. Stachelscheid, show bank account number, 0030590225156328, and pay amounts of *$6,324.54 for each of those seven dates. The RBC bank account number for account holder, C. Brown, is 5156328 and shows direct deposits of $6,324.54 on each of those seven dates.
• The PER dated January 10, 2014 for ex-employee, K. Stachelscheid, shows bank account number, 0030590225156328, and a pay amount of *15,015.22 (a bonus). The RBC bank account number for account holder, C. Brown, is 5156328 and shows a direct deposit of $15,015.22 on January 10, 2014.
• The PER dated January 31, 2014 for ex-employee, K. Stachelscheid, shows bank account number, 0030590225156328, and a pay amount of *$6,324.08. The RBC bank account number for account holder, C. Brown, is 5156328 and shows a direct deposit of $6,324.08 on January 31, 2014.

Total pay for K. Stachelscheid - $88,171

T. Ashami (actually terminated July 5, 2013)

• The two PERs dated August 16, and August 30, 2013 for ex-employee, T. Ashami, show bank account number, 001243923977862, and pay amounts of *$2,679.60 for each of those two dates. The BMO bank account number for account holder, F. Bryan, is 2439 3977-862 and shows direct deposits of $2,679.60 on each of those two dates.
• The PER dated September 13, 2013 for ex-employee, T. Ashami, shows bank account number, 001243923977862, and a pay amount of *$3,719.60. The BMO bank account number for account holder, F. Bryan, is 2439 3977-862 and shows a direct deposit of $3,719.60 on September 13, 2013.
• The PER dated September 27, 2013 for ex-employee, T. Ashami, shows bank account number, 001243923977862, and a pay amount of $3,927.76. The BMO bank account number for account holder, F. Bryan, is 2439 3977-862 and shows a direct deposit of $3,927.76 on September 27, 2013.

Total pay for T. Ashami - $13,007

Total of direct deposits to seven bank accounts $309,663.

Allegation of Excess Payments to Monique Clarke

[95] It is evident from the banking records that no bank accounts were set up in Ms. Clarke’s name. Thus, in dealing with this portion of my decision I am not comparing information in ADP records related to Ms. Clarke with banking records. I decided to deal here with the payments to Ms. Clarke because I thought it best for continuity to cover the entire review of ADP records together in one part of the decision.

[96] Ms. Babaloa’s report reviews the bi-weekly earnings payments set for Ms. Clarke from May 24, 2013 to January 31, 2014. Crown counsel took Ms. Babaloa through the PERs and PRs for each of the 12 bi-weekly pay periods at issue and asked her to explain how she arrived at her findings on the excess payments to Ms. Clarke.

[97] For each of the bi-weekly pay periods, Ms. Babaloa calculated the total excess amount paid by deducting Ms. Clarke’s regular pay from the increased amounts and adding up the differences. However, she did not take into account an authorized pay raise Ms. Clarke was set to receive as per the PR dated January 3, 2014. Ms. Babaloa stated the excess payment for that pay period was $1,215.87. Taking the pay raise into account the excess payment actually was $1,162.98. The excess above her regular pay therefore totals $12,282.78 rather than $12,335.67. In testimony, Ms. Babaloa agreed her findings did not take into account that authorized pay raise.

[98] The excess payments are as follows:

• The PR and PER dated May 24, 2013 show regular bi-weekly pay for Monique Clarke of $2,115.38 and a payroll deposit of $2,835.18, an excess of $719.80.
• The PR and PER dated June 7, 2013 show regular bi-weekly pay for Monique Clarke of $2,115.38 and a payroll deposit of $2,915.38, an excess of $800.00.
• The PR and PER dated July 5, 2013 show regular bi-weekly pay for Monique Clarke of $2,115.38 and a payroll deposit of $3,115.38, an excess of $1,000.00.
• The PR and PER dated July 19, 2013 show regular bi-weekly pay for Monique Clarke of $2,115.38 and a payroll deposit of $2,718.38, an excess of $603.00.
• The PR and PER dated August 2, 2013 shows regular bi-weekly pay for Monique Clarke of $2,115.38 and a payroll deposit of $2,915.38, an excess of $800.00.
• The PR and PER dated October 11, 2013 show regular bi-weekly pay for Monique Clarke of $2,115.38 and a payroll deposit of $3,115.38, an excess of $1,000.00.
• The PR and PER dated November 8, 2013 show regular bi-weekly pay for Monique Clarke of $2,115.38 and a payroll deposit of $3,315.38, an excess of $1,200.00.
• The PR and PER dated November 22, 2013 show regular bi-weekly pay for Monique Clarke of $2,115.38 and a payroll deposit of $3,315.38, an excess of $1,200.00.
• The PR and PER dated December 6, 2013 show regular bi-weekly pay for Monique Clarke of $2,115.38 and a payroll deposit of $3,315.38, an excess of $1,200.00.
• The PR and PER dated December 20, 2013 show regular bi-weekly pay for Monique Clarke of $2,115.38 and a payroll deposit of $3,315.38, an excess of $1,200.00.
• The PR and PER dated January 3, 2014 show regular bi-weekly pay for Monique Clarke of $2,168.27 and a payroll deposit of $3,331.38, an excess of $1,163.11. As noted above, the Deloitte report indicates the excess pay to be $1,215.87 because it did not take account of a pay raise during this pay period.
• The PR and PER dated January 31, 2014 show regular bi-weekly pay for Monique Clarke of $2,168.27 and a payroll deposit of $3,568.27, an excess of $1,400.00.

Total excess payments set for Ms. Clarke - $12,285.91 and not 12,335.67 as Deloitte reported.

Conclusion on Ultimate Reliability of ADP Records

[99] I find the concordance between the information on the banking records and the information on the ADP records mutually enhances their respective authenticity and reliability.

[100] As for the banking records, I find the CEA s. 30 affidavits and the concordance with the ADP records establish the ultimate reliability and authenticity of the banking records.

[101] Regarding the ADP records, on admissibility I found that Mr. Boon’s evidence from his 14-year experience in ADP’s customer service department established threshold authenticity and reliability of the ADP records.

[102] As forecasted earlier, the comparison of the records shows that the account numbers recorded on the PERs differ from the account numbers on the seven accounts. I find it is likely that for some administrative purpose Acxsys adds more digits to the bank account numbers in its payroll records than the account numbers in the banking records. Nevertheless, the evidence demonstrates irrefutably that there is a core series of digits in common between the bank account numbers on the PERs and the corresponding account numbers associated with the seven bank accounts.

[103] I agree with the Crown it would strain chance to think it is just a coincidence that these two sets of records have the same core series of digits for bank account numbers.

[104] Also referenced earlier, the seven bank accounts have pay deposit amounts and deposit dates that correspond with the information in the ADP records. Neither can the dates and earnings amounts in the PERs just by sheer coincidence correspond exactly with the dates and deposit amounts in the respective bank accounts. I find this adds credence to the view that the ADP bank account numbers reference the account numbers in the banking records. This, to my mind, sufficiently establishes that the unauthorized transfers of funds from Acxsys through ADP’s payroll system are the same funds that found their way into the seven impugned bank accounts.

[105] In conclusion, I accept that the comparison of the ADP records with the banking records further reinforces the accuracy and trustworthiness of the ADP records. I am confident about the ultimate authenticity and reliability of the information in the ADP records that is relevant to the allegation of fraud. I accept the ADP records as proof of the truth of their contents.

THE LAW

The Law of the Circumstantial Case

[106] There is no direct evidence of the actus reus or mens rea in relation to Ms. Clarke. But I find the evidence is clear from the unauthorized payments to the ex-employees that $309,663 was improperly transferred from Acxsys through the ADP payroll system and distributed to bank accounts of persons unknown to Acxsys and that someone had changed the payroll register so Ms. Clarke was set to receive $12,282.78 in unauthorized excess earnings.

[107] The Crown’s position is that there is an ample foundation in the circumstantial evidence to establish the essential elements of fraud in relation to Ms. Clarke. This is the Crown’s burden. The defence led no evidence. It will be based solely on the circumstantial evidence adduced by the Crown that a determination will be made.

[108] Courts have struggled down through the years with the proper approach to drawing inferences from circumstantial evidence. An old English decision has been relied on for the foundational principles adopted by modern courts.

[109] The rule in R. v. Hodge (1838), 2 Lewin 227, 168 E.R. 1136 (Eng. C.C.R.) provides that a trier of fact may only convict on circumstantial evidence where the evidence is not only consistent with guilt but is inconsistent with any other rational conclusion. The Supreme Court of Canada has recognized this principle, holding that in order to convict, the jury “must be satisfied beyond a reasonable doubt that the only rational inference that can be drawn from the circumstantial evidence is that the accused is guilty”: R. v. Griffin, 2009 SCC 28, at para. 33 (S.C.C.).

[110] Watt, J.A., for the Ontario Court of Appeal, also provides insight into circumstantial evidence and the principles that underlie the proper drawing of inferences:

Circumstantial evidence is any item of evidence, testimonial or real, other than the testimony of an eyewitness to the material fact. It is any fact from the existence of which the trier of fact may infer the existence of a fact in issue. It is for the trial judge to determine whether circumstantial evidence is relevant.

Where evidence is circumstantial, it is critical to distinguish between inference and speculation. Inference is a deduction of fact that may logically and reasonably be drawn from another fact or group of facts found or otherwise established in the proceedings. There can be no inference without objective facts from which to infer the facts that a party seeks to establish. If there are no positive proven facts from which an inference may be drawn, there can be no inference, only impermissible speculation and conjecture.

[David Watt, Watt's Manual of Criminal Evidence (Toronto: Thomson Carswell, 2014) at §9.01].

The Law of Fraud

Actus Reus

[111] To make out a crime the mens rea and actus reus of the offence must be established beyond a reasonable doubt.

[112] The actus reus of fraud is determined based on the following principles:

(a) the offence has two elements: a dishonest act and deprivation; (b) the dishonest act is established by proof of deceit, falsehood or “other fraudulent means”; (c) the element of deprivation is established by proof of detriment, prejudice, or risk of prejudice to the economic interests of the victim, caused by the dishonest act.

[R. v. Théroux, [1993] 2 S.C.R. 5, at para. 16 (S.C.C.) as cited from R. v. Olan, [1978] 2 S.C.R. 1175 (S.C.C.); see also R. v. Riesberry, [2015] S.C.C. 65 (S.C.C.)]

[113] The deprivation may consist of an actual loss or the placing of the victim's pecuniary interests at risk − it is not essential that an actual economic loss result from the fraud.

If the deceit which is employed imperils the economic interest of the person deceived, this is sufficient to constitute fraud even though in the event no actual loss is suffered and notwithstanding that the deceiver did not desire to bring about an actual loss.

We see nothing in Lord Diplock's speech [in Scott, supra] to suggest a different view. 'Economic loss' may be ephemeral and not lasting, or potential and not actual; but even a threat of financial prejudice while it exists it may be measured in terms of money.

[R. v. Théroux, at para. 14 and R. v. Olan, at para. 13]

[114] The words “other fraudulent means” have been the subject of interpretation by subsequent courts and held to include such activities as the use of corporate funds for personal purposes, non-disclosure of important facts, exploiting the weakness of another, unauthorized diversion of funds, and unauthorized arrogation of funds or property. The mental element of the actus reus is that the act must be voluntary: [R. v. Théroux, at paras. 18 and 19].

Mens Rea

[115] The mens rea of fraud is based on a subjective test of whether the accused subjectively appreciated the consequences of the prohibited act as at least a possibility and not on the objective test of whether a reasonable person would have foreseen those consequences. The subjective test looks to the accused’s intention and the facts as the accused believed them to be: [R. v. Théroux, at para. 21].

[116] The Crown is not required in every case to show precisely what was in the accused’s mind at the time of the criminal act. Subjective awareness of the consequences can be inferred in some cases from the act itself absent an explanation that creates doubt about the inference: [R. v. Théroux, at paras. 22 and 23].

[117] The accused did not testify in the case before me. There were no witnesses that had direct observation of fraudulent activity. Courts have spoken on the determination of subjective intent necessary to support the mens rea in these circumstances.

[118] Where there is no direct evidence of an accused’s intentions in relation to the events that gave rise to the offence charged the Crown is permitted to rely on inferences to be drawn from a body of circumstantial evidence on the evidential record to establish the accused’s intention. There must be sufficient circumstantial evidence to establish the accused had the necessary mens rea to ground the accused’s culpability: [R. v. Hong 2015 CarswellOnt 18703, at para. 38 (Ont. S.C.J.)]; see also R. v. Holmes, 2008 ONCA 604, 2008 CarswellOnt 5131, at para. 2 (Ont. C.A.); [R. v. Goey 2005 CarswellOnt 2047, at para. 44 (Ont. S.C.J.)]; and [R. v. Milec 1996 CarswellOnt 3222, at para. 14 (Ont. C.A.)].

[119] In summary, proof of fraud requires proof that the accused is subjectively aware they are undertaking the prohibited act of deceit, falsehood or dishonesty which could deprive another of their property or put their property at risk. “[T]he proper focus for determining the mens rea of fraud is to ask whether the accused intentionally committed the prohibited acts (deceit, falsehood, or other dishonest act) knowing or desiring the consequences proscribed by the offence (deprivation, including the risk of deprivation)”: [R. v. Théroux, at para. 24].

ANALYSIS

Actus Reus

Was a Fraud Committed?

[120] Defence counsel argues the actus reus has not been proven. In the defence’s view, the Crown did not prove through Acxsys’s financial records such as audits and financial statements and through Acxsys’s banking records that an actual loss to Acxsys had occurred. The defence takes the position that the essential ingredient to fraud, deprivation, has not been proven.

[121] However, the law does not require an actual loss be proven. Adopting the Supreme Court of Canada’s observations in R. v. Olan and R. v. Théroux, as cited above, the Court of Appeal remarked:

It is not necessary for the Crown to demonstrate an actual dollar loss. It need only show conduct that is dishonest and resulted in a deprivation to TRCL. Dishonesty is not a technical term, it is what a reasonable person would consider to be a dishonest act. Deprivation in the context of this case means only prejudice to the economic interests of TRCI.

[[R. v. Ruhland, [1998] O.J. No. 781, at para. 11 (Ont. C.A.)]]

[122] The Supreme Court of Canada, referring to earlier Ontario Court of Appeal decisions, held there need not be any misrepresentations or question of what an accused was authorized to do with the funds. The fact that the accused used the funds in a manner which was not authorized is sufficient grounds for finding the accused acted dishonestly: [R. v. Zlatic, [1993] 2 S.C.R. 29, at para. 35 (S.C.C.)].

[123] The evidence is clear that a fraud against Acxsys occurred. The names of ex-employees were used in a fraudulent scheme in which someone from Acxsys assigned certain pay to the ex-employees and had the funds transferred to the bank accounts of persons unconnected to Acxsys as employees or ex-employees. Someone from Acxsys also input into ADP records excess earnings for Ms. Clarke.

[124] The Crown argues the evidence is irrefutable that Ms. Clarke is the perpetrator of the fraud − that she took advantage of her position as payroll administrator to implement the unauthorized payroll activity that led to a loss by Acxsys.

Did Ms. Clarke Commit the Fraud?

[125] An understanding of the Crown’s position is found in the facts of Ms. Clarke’s duties and responsibilities and the nature of her access to the ADP payroll system.

[126] Ms. Khayat testified she hired Ms. Clarke part-time in July 2012. The PR dated August 16, 2013 shows a hire date for Ms. Clarke of July 6, 2012. At this time Acxsys was transitioning to a new ADP platform. The previous payroll administrator left Acxsys in the middle of the conversion. Ms. Knapp testified Ms. Clarke took on full duties in July 2013. She testified Ms. Clarke came to Acxsys very qualified and knowledgeable about the new ADP platform. Ms. Khayat, Ms. Knapp and Mr. Lyras described Ms. Clarke as a very capable, reliable and likeable person who would go beyond the call of duty to troubleshoot problems. In fact, Ms. Clarke was responsible for Acxsys successfully adopting the new ADP platform.

[127] Ms. Khayat testified about the payroll process with newly hired employees and the process with existing employees’ payroll information. She stated that employee change forms are completed by the human resources department and signed by the human resources manager. The forms are then passed to the finance department for Ms. Khayat’s signature. These forms are passed to the payroll administrator and are necessary for the payroll administrator to input new information into the ADP system.

[128] Ms. Clarke had the opportunity to commit the fraud.

[129] Ms. Khayat, Ms. Knapp and Mr. Lyras each testified that Ms. Clarke was the only payroll administrator at Acxsys during the period of review. This was the specific purpose for which she was hired. She was the only person who input Acxsys’s payroll information on the PRs and PERs and the only person who submitted the information to ADP.

[130] Also of note is that the impugned activities with the ADP records began occurring in August 2013, about a month after Ms. Clarke assumed her full-time duties. Ms. Knapp testified that there had been no such problems with payroll before Ms. Clarke came to Acxsys or after she left.

[131] Ms. Clarke was proficient and skillful with the ADP payroll system. She had access to the information that would allow her to make the impugned changes to the PERs and PRs. She had access to human resources and payroll information for existing employees, information on pay and benefits changes, employee terminations, new hires and promotions and access to employee bank account numbers.

[132] As well, Ms. Clarke as the payroll administrator had an active login password required to access ADP’s system to submit payroll information. But there were others at Acxsys who had active login passwords, Ms. Knapp as the backup for the payroll administrator, and Mr. Lyras, the payroll manager. Any changes in login passwords, any new login passwords and cancellations of passwords, had to be authorized by the payroll manager, the person with system administrator rights.

[133] Ms. Knapp testified that if the payroll administrator was absent and she (Ms. Knapp) was also absent a temporary worker could be used to fulfill the payroll administrator function. Mr. Lyras was the only person who could set up a temporary worker in the system. Ms. Knapp testified she was not aware of a temporary worker being set up by Mr. Lyras during the time Ms. Clarke worked at Acxsys.

[134] Ms. Knapp and Mr. Lyras were asked how the previous payroll administrator’s password was dealt with after her termination. Their evidence was that they both called ADP to have the previous payroll administrator’s password removed from the system. This, in the Crown’s view, means the previous payroll administrator would not have maintained her access to the system after her termination during the relevant period and therefore would not have had an opportunity to make the impugned payroll submissions to ADP.

[135] Ms. Khayat and Mr. Lyras testified they did not perform any payroll administrator functions or access the ADP website for that purpose during the period at issue. Mr. Lyras was not cross-examined at all by defence counsel and Ms. Khayat, while cross-examined, was not cross-examined about any involvement she might have had at the relevant time with payroll submissions to ADP. In my assessment these were credible and trustworthy witnesses and I have no reason to doubt their word that they did not access ADP and submit the impugned information.

[136] Ms. Knapp testified that once Ms. Clarke was hired as payroll administrator she (Ms. Knapp) was not involved in payroll submission. She did however back up Ms. Clarke’s job when Ms. Clarke was absent. Ms. Knapp pointed out however that during the relevant period Ms. Clarke was never absent during times when payroll information was submitted to ADP.

[137] Defence counsel cross-examined Ms. Knapp on a narrow point only asking a few questions about Ms. Clarke’s absences from work. Ms. Knapp was very detailed and consistent in her evidence about the functions of the payroll department and persistent in her testimony that she made no payroll submissions during the period of the fraud. I have no reason to disbelieve her evidence.

[138] Ms. Clarke had a motive to commit the fraud − benefit to herself and her family members.

[139] The ADP records and Deloitte’s report show that payments in excess of Ms. Clarke’s regular bi-weekly pay totalling $12,282.78 were to be made in Ms. Clarke’s favour between May 24, 2013 and January 31, 2014. This, the Crown argues, points to her involvement in the fraud.

[140] Furthermore, one of the seven accounts into which funds were deposited was held jointly by her husband and Carmelita Williams. In fact, it was the $39,984.78 deposited on January 10, 2014 into Mr. Clarke’s and Carmelita Williams’ joint BMO bank account number, 3990917, that drew the attention of BMO and caused the bank to alert Acxsys. This is what led to Ms. Clarke being suspended from Acxsys on February 11, 2014 and led to Deloitte and the police being called in to investigate fraud.

[141] Both the excess payments to Ms. Clarke and the large deposit to her husband’s and Carmelita Williams’ joint account raise the questions of who, other than Ms. Clarke, had the authority and opportunity to implement the fraudulent activities and who, other than Ms. Clarke, would have an interest in putting funds into an account where her husband is named as an account holder. There is a suggestion, though no direct evidence, that Carmelita Williams is Mr. Clarke’s mother. I think it is reasonable to infer that Carmelita Williams and Mr. Clarke had some type of close relationship in that they shared a bank account and that Ms. Williams would also reasonably benefit from funds in the account.

[142] There is also the further fact Ms. Clarke did not report the rather sizeable excess payments recorded in the ADP records. The ironic reality, as I find below, is that it was actually Ms. Clarke who entered that information in the payroll records and it was also her job to review the records and report inaccuracies. Therefore, it is no mystery why there is no evidence of Ms. Clarke reporting the excess pay. This in my view also points to Ms. Clarke’s culpability.

[143] Regarding the funds that were deposited into the six other bank accounts, it is not clear from the evidence how or if Ms. Clarke benefited from the funds deposited into those accounts. However, how or whether an accused benefits from a fraud is not an essential element of the offence of fraud. As discussed above, there are two elements to the actus reus of fraud, a dishonest act and a deprivation or risk of deprivation to another.

[144] The Crown raises alternative arguments.

[145] One position is that Ms. Clarke brought a risk of prejudice to the economic interests of Acxsys by her dishonest and deceitful acts of entering the fraudulent payroll information: [R. v. Théroux, at para. 16]. According to that view even if an actual loss to Acxsys is not proven, the fact that Ms. Clarke created a risk is sufficient to establish the actus reus of fraud beyond a reasonable doubt.

[146] I agree with the Crown’s position that the way in which Ms. Clarke wrongfully administered the payroll created a risk to Acxsys’s economic interests.

[147] The Crown’s further position, with which I also agree, is that fraud is proven by the fact that funds were set to go to persons unauthorized to receive them. The unauthorized transfer of $309,663 directed to unentitled persons ended up in banks accounts of persons unknown to Acxsys. This, together with the excess payment of $12,282.78, which Ms. Clarke set to be paid to herself establishes fraud. In the Crown’s view this evidence sufficiently establishes beyond a reasonable doubt the actus reus of fraud in relation to Ms. Clarke.

[148] The defence challenged the Crown’s position arguing there is circumstantial evidence that raises a reasonable doubt about Ms. Clarke’s guilt. The defence raised a number of arguments.

[149] The defence’s primary position is that the Crown has not, for the purposes of proof at trial, established the ultimate reliability and authenticity of the banking records and the ADP records. The contents of those records in the defence’s view are impermissible hearsay not capable of proving the fraud against Ms. Clarke. For reasons fully explained earlier, I reject that argument.

[150] The defence advanced the view that actual loss to Acxsys has not been proven. The Crown has produced no audits, financial statements or Acxsys records evidencing the loss. I make a further observation along these lines that there also are no bank records before the court of Ms. Clarke’s personal account where ADP would have directly deposited her pay. There are no cheques or cheque stubs showing Ms. Clarke received any of the impugned funds. The defence further posited that the Crown did not produce the draft hard copies and final PRs and PERs provided by ADP to confirm Acxsys’s payroll data.

[151] In response to the defence’s position I consider cases I referenced earlier.

[152] It is quite clear that economic loss need not be lasting or actual: [R. v. Théroux, at para. 14]. It is not necessary for the Crown to show an actual dollar amount. The Crown need only show “dishonest conduct” which has been defined as what a reasonable person would consider “a dishonest act”, an act that prejudices the economic interests of the target of the fraud; [[R. v. Ruhland, at para. 11]]. An accused that has used funds in a manner which was not authorized is sufficient grounds for finding the accused acted dishonestly. The wrongful administration of funds in which others have a pecuniary interest for purposes that have nothing to do with business may constitute fraud: [R. v. Zlatic, at para. 35].

[153] Even if the Crown were unable to prove the exact amount of the loss or potential loss, which I believe it has through the evidence, the Crown would only have to demonstrate dishonest conduct by Ms. Clarke.

[154] I find Ms. Clarke’s use of the ADP payroll system to transmit unauthorized Acxsys funds to herself and ostensibly to persons no longer employed at Acxsys with the purpose of those funds being deposited into the accounts of other persons unconnected to Acxsys is by any measure dishonest conduct.

[155] Defence counsel also sought support in the evidence of Crown witness, Brian Casey, the computer forensics investigator with Deloitte. Mr. Casey testified at the s. 8 admissibility hearing about the forensic investigation of the desktop computer Ms. Clarke used at Acxsys.

[156] Mr. Casey’s evidence was that he did not know whether a password was needed to log on to Ms. Clarke’s computer because he never tried to log on and never had access. He also testified he was not able to determine the user ID of the user who made the impugned transactions through ADP’s payroll system. He testified the user ID could not be matched to ADP activities logs.

[157] From this the defence argued that it can be inferred that other Acxsys employees such as Ms. Knapp or Mr. Lyras, who had password access, could have submitted the fraudulent payroll information.

[158] I reject this argument for reasons outlined earlier. I accept Ms. Knapp’s and Mr. Lyras’ evidence that they made no payroll submissions to ADP during the relevant period. There is no evidence that contradicts this. This argument by the defence lacks a factual foundation. There must be a factual foundation in which to ground an inference. This is what separates inference from speculation and conjecture. I am reminded of Watt, J.A.’s words referenced above:

There can be no inference without objective facts from which to infer the facts that a party seeks to establish. If there are no positive proven facts from which an inference may be drawn, there can be no inference, only impermissible speculation and conjecture.

[David Watt, Watt's Manual of Criminal Evidence (Toronto: Thomson Carswell, 2014) at §9.01]

[159] There is also the suggestion by defence counsel based on Mr. Boon’s evidence that someone from ADP could have committed the fraud since ADP personnel had access to the system during the relevant time to change information on PERs and PRs before the submit function was executed.

[160] Mr. Boon’s evidence was that before the submit button is pressed ADP personnel have access to a client’s PRs and PERs to make changes to the information. Mr. Boon explained that in the exceptional circumstance that ADP makes changes to a client’s information it is invariably at the client’s request and with the client’s authorization. He testified that ADP personnel would not make unilateral changes to a client’s payroll information. He stated that in his 14 years at ADP he has not known of any unauthorized, unilateral changes being made by ADP. Mr. Boon further indicated his review of the ADP records before the court disclosed no evidence of this type of activity by ADP personnel.

[161] There is no factual foundation for the defence’s suggestion of ADP’s possible involvement in the fraud. This suggestion by the defence is also based in impermissible speculation. No such inference can reasonably be drawn on the evidential record.

[162] Again relying on Mr. Casey’s evidence, the defence also argued that it can be inferred that the person who acted as payroll administrator before Ms. Clarke or a temporary worker could have made the impugned transactions since they would have had password access to the ADP system.

[163] There is no factual basis for an inference that the previous payroll administrator could have accessed the system after she was terminated. There is no evidence that supports the inference that the past payroll administrator, even if she retained her password after she left Acxsys, would have the capacity to access the ADP system outside of the premises of Acxsys.

[164] The Crown’s evidence is that both Ms. Knapp and Mr. Lyras called ADP to cancel her password. Ms. Knapp and Mr. Lyras saw no evidence that the past payroll administrator had ever used the password after termination. It is baseless speculation on the defence’s part to suggest the past payroll administrator could have committed the fraud.

[165] I similarly reject the defence’s argument that it can be inferred that a temporary worker could have committed the fraud. There is also no factual foundation for that inference. It too is speculative. In fact, on my view of the evidence, it is not plausible that a temporary worker could have reasonably been involved in fraudulent activity which spanned some five months. Ms. Knapp testified she knew of no temporary worker being given a login password by Mr. Lyras during Ms. Clarke’s employment at Acxsys.

[166] But there is an even more striking reason that the defence’s argument is untenable. If a temporary worker had acted as payroll administrator for a five-month period one would expect Mr. Knapp would have known this. Ms. Knapp was Ms. Clarke’s backup when Ms. Clarke was absent and a temporary worker would be called in if Ms. Knapp was absent. So Ms. Knapp and Ms. Clarke would both have had to be absent from work during those five months and be replaced by a temporary worker. Surely Ms. Knapp would have remembered such a lengthy absence from work.

[167] I draw from Ms. Knapp’s and Mr. Lyras’ evidence that Ms. Clarke made the impugned changes to the payroll after it was approved. I am persuaded by Ms. Khayat’s, Ms. Knapp’s and Mr. Lyras’ evidence that Ms. Clarke was the only person who submitted payroll information to ADP during the relevant period. I am satisfied that their evidence fills the gap in Mr. Casey’s investigation. That is, it can be reasonably inferred that Ms. Clarke of her own will used her user ID password to implement the fraud, to facilitate unauthorized transmissions of funds to herself and others not entitled to them to the financial detriment of her employer.

[168] I find the only reasonable inference that can be drawn from the evidence as a whole is that Ms. Clarke committed the fraud. In the result, the Crown has proven beyond a reasonable doubt the actus reus of fraud in relation to Ms. Clarke. None of the evidence or the defence’s arguments raises a reasonable doubt about Ms. Clarke’s guilt of the fraud.

Mens Rea

[169] When an accused does not testify, to establish the mens rea, the Crown is entitled to rely on inferences drawn from a body of circumstantial evidence on the record to establish the accused’s intention. There must be a foundation in the circumstantial evidence to establish the accused had the necessary mens rea to ground their culpability.

[170] I find there is ample basis in the circumstantial evidence to demonstrate that Ms. Clarke intentionally defrauded her employer.

[171] The evidence shows the fraudulent scheme was well thought out and seamlessly executed such that it even passed the notice of Ms. Clarke’s managers. Ms. Khayat testified she never knew Ms. Clarke had done anything wrong until she saw her being walked out of the Acxsys premises on the day she was suspended. Ms. Knapp and Mr. Lyras did not pick up on irregularities in the payroll records because Ms. Clarke stealthily made the changes after approval. Ms. Clarke’s scheme required intimate knowledge of the ADP payroll system and its interface with both the Acxsys payroll system and the bank account system. The scheme also required access to and use of personal information of terminated employees contained in Acxsys’s human resources records.

[172] The fraud was not a one-off singular event. This was not simple negligence, mistake or carelessness. It was rather a protracted and deliberate scheme by Ms. Clarke involving four banks, seven bank accounts and account holders, nine terminated employees, 58 unauthorized transactions involving bank accounts and 12 unauthorized excess payments to herself amounting to a fraud of over $300,000 executed over a five-month period. Ms. Clarke’s intention to defraud Acxsys is undeniable.

Conclusion

[173] On the totality of the evidence I conclude the Crown has proven beyond a reasonable doubt that Ms. Clarke committed fraud over $5,000 against Acxsys Corporation contrary to s. 380(1) of the Criminal Code. Nothing raises a doubt in my mind.

VERDICT

[174] For the foregoing reasons, I am satisfied the Crown has proven Monique Clarke’s guilt beyond a reasonable doubt on the offence against Acxsys Corporation on the single count on the indictment.

[175] I therefore find Monique Clarke guilty on the single count on the indictment and a conviction will be entered accordingly.

[1] All total figures of payments to ex-employees are rounded

B.A. ALLEN J. Released: July 8, 2016