Court File and Parties
COURT FILE NO.: CR-16-10000126-00MO DATE: 20170421 ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
HER MAJESTY THE QUEEN Respondent Jennifer Epstein and Sandy Tse, for the Crown
- and -
JOANE LAPRISE Accused Paul Slansky, for the Applicant (accused)
HEARD: March 27, 2017 Thorburn J.
APPLICATION TO QUASH COMMITTAL
1. THE ISSUE
[1] After a Preliminary Inquiry, Ms. LaPrise was committed to stand trial on three charges: fraud over $5,000, money laundering, and possession of proceeds of crime. She seeks to quash her committal to stand trial on these counts.
[2] The issue on this Application is whether there was any evidence that Ms. LaPrise knew or was wilfully blind as to the fraud, money laundering and proceeds of crime.
2. POSITIONS OF THE PARTIES
[3] The Crown suggests there was overwhelming evidence by which to infer that Ms. LaPrise knew she was engaged in a fraudulent enterprise.
[4] Ms. LaPrise agrees there is a prima facie case that she assisted two co-accused, Mr. Cavric and Mr. DeRosa with their business. They have both been committed to stand trial on these charges. However, Ms. LaPrise says there is no evidence or reasonable inference by which a reasonable jury, properly instructed could conclude that she knew or had suspicions about fraud and/or money laundering and deliberately chose to remain ignorant or proceeded recklessly in the face of such suspicions such that a reasonable jury properly instructed could conclude that she was wilfully blind to the fraud being perpetrated on investors.
[5] It is agreed that there is limited scope to review a decision to commit an accused to stand trial. If there is evidence upon which a reasonable, properly instructed jury could convict, the preliminary inquiry justice must commit the accused. The Crown’s case must be taken at its highest and taken as a whole. If there are competing inferences, these are for the trier of fact to resolve.
3. EVIDENCE ADDUCED AT THE PRELIMINARY INQUIRY
[6] Joane LaPrise worked for Discovery Biosciences and National Detection Clinics Limited (“NDCL”) for over 3 years. She worked directly with Messrs. Cavric and DeRosa and was the office manager for Discovery and NDCL in Welland, Ontario. She was also the liaison between the Canadian and the US office for both companies. Her role included administrative support for the NDCL sales team, distributing cheques, hiring and supervising NDCL sales staff, and hiring office staff and managing the transfer agency Select Fidelity Transfer Services which provided investors with their share certificates and processed share ownership transfers.
[7] Ms. LaPrise was also the comptroller and/or signing authority and/or President of six companies that received money from NDCL but none of the monies were used to build clinics. (One was a defunct lawn care product business.)
[8] A number of witnesses testified at the Preliminary Inquiry about the companies and Ms. LaPrise’s role in them.
[9] Elwood Henkle testified that he wanted to set up clinics for the early detection of breast cancer. This was to include building physical laboratories in the United States, and equipping them with technology. Mr. Henkle was responsible for marketing and sales and he enlisted the help of Ivan Cavric to do the back-end administration. Americo DeRosa handled the accounting and banking. According to Mr. Henkle, early in the process they decided not to use investor funds to open clinics, and instead, simply split the proceeds thereby perpetrating a fraud on the investors.
[10] Discovery Biosciences was incorporated and investors were told the company was operating out of New York although it was being run from Welland, Ontario. A second company, NDCL was incorporated and also run out of the same facility in Welland, Ontario.
[11] Investors were told that NDCL had obtained technology which could lead to the early detection of breast cancer and would be opening early-detection cancer clinics. Contrary to these assertions, no clinics were opened, no equipment was purchased and no medical staff was hired.
[12] Elwood Henkle testified that he regularly had sales meetings with Mr. Cavric, Mr. DeRosa and Ms. LaPrise.
[13] Ms. LaPrise was one of three people to bring him cheques drawn on the NDCL account with the amount filled in but the payee left blank. Mr. Henkle filled in the payee line and allotted himself 35 to 40 % commission and his sales staff were allotted 20-25% commission.
[14] Ms. LaPrise was directly involved in distributing 60% of the proceeds to sales staff, hundreds of millions of shares to head office executives, and NDCL investors’ money to numerous individuals and corporate accounts.
[15] Joe Allen who ran the NDCL sales team testified that, a. “if there were … really anything that needed dealing with, it was, you know, Joane [LaPrise] would handle it”; b. Mr. Cavric told him Ms. LaPrise would “handle everything” regarding his payment; c. He was paid 60% sales commission at the time and she must have known the sales revenue because she personally faxed copies of the investor cheques that had been sent to Rochester to him; d. Ms. LaPrise faxed him photocopies of the cheques so he knew which investors had paid for shares; e. whenever investors called the Rochester number for NDCL, the calls were automatically forwarded to Welland, Ontario where Ms. LaPrise would handle the calls and forward them to the appropriate person.
[16] Tabitha Dempsey testified that she made telephone calls to ask prospective investors if they were interested in receiving information regarding NDCL. She worked for Ms. LaPrise and others and her instructions came from Ms. LaPrise.
[17] Ms. Costiff said that she was a sales support person who called prospective investors and made follow-up calls to confirm they were interested in receiving information. She received most of her instructions from Ms. LaPrise. Ms. Dempsey and Ms. Costiff both initially worked out of Ms. LaPrise’s home. Ms. Costiff testified that she and Ms. Dempsey were paid by cheques drawn from companies for whom they did no work.
[18] Ms. Laprise hired her friend to work for the field agency and provided her with instructions. Her friend oversaw the daily happenings at the office and was responsible for maintaining shareholder records and effecting transfers, processing and issuing share certificates.
[19] As office manager for NDCL and by virtue of fielding calls from New York and forwarding them to Ontario, Ms. LaPrise must have known that the information given to investors that the company headquarters was in New York was not true. She would also have seen that the New York address on all written communications was not true.
[20] She also knew that investors were told that “NDCL has appointed Select Fidelity Transfer Services as their transfer agency and has asked us to send out directly all new certificates issued”. Contrary to this clear suggestion that these were two arm’s length companies, she knew that the Select Fidelity office was located in the same office and run by the same people as NDCL. She was thereby privy to this misleading information.
[21] Lastly, Ms. LaPrise issued millions of NDCL shares to people in the NDCL head office and was herself issued millions of shares in NDCL “for no apparent reason”. Different members of the head office were signing share certificates for millions of shares to one another. By contrast, NDCL’s largest investor was only issued 281,500 shares. Moreover, she signed documents as office manager on the form where Ms. Dempsey falsely stated that she was an accountant when Ms. LaPrise knew she simply ran errands in the office and was not an accountant.
4. CONCLUSION
[22] The cumulative effect of the evidence adduced at the Preliminary Inquiry taken at its highest, includes the following: a. The only purpose of Discovery and NDCL was to build clinics for the early detection of breast cancer; b. Ms. LaPrise had a close and ongoing relationship with the founders of these companies: Henkle, Cavric and DeRosa, for about three years; c. She held a senior position of power within Discovery, NDCL and the transfer agency for about three years; d. She hired and supervised Ms. Dempsey and Ms. Costiff who in turn solicited investors and followed up with them to obtain money for clinics; e. The only thing the sales personnel sought money for, was to set up clinics for the early detection of breast cancer; f. Large sums were raised. Ms. LaPrise had signing authority and/or held positions of authority in the companies to which the monies were transferred; g. Ms. LaPrise was party to many suspicious practices such as: i. preparing cheques with amounts but no payees, ii. issuing vast numbers of shares to herself, Mr. Henkle, Mr. Cavric, Mr. DeRosa and others without a stated reason, iii. paying employees from accounts for companies they did no work for, iv. preparing letterhead suggesting the offices were in New York when they were not, and v. making it appear that NDCL and the transfer agent were arms-length when they were not; and h. Over the three year period, no money was spent to build any clinics, or purchase any equipment for breast detection although this was the only stated purpose of the companies.
[23] Together, these factors demonstrate that there was evidence adduced that would allow for a conclusion that Ms. LaPrise knew or at the very least, she had suspicions and deliberately chose to remain ignorant or proceeded recklessly in the face of such suspicions such that a reasonable jury properly instructed could conclude that she was wilfully blind to the fraud being perpetrated on investors.
[24] For these reasons the Application to quash the committal for trial is rejected.