Court File and Parties

CITATION: R. v. Kazman, 2017 ONSC 5300

COURT FILE NO.: CR-15-4269

DATE: 2017-09-08

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

HER MAJESTY THE QUEEN

– and –

MARSHALL KAZMAN

– and –

GAD LEVY

– and –

ARMAND LEVY

– and –

ALI VAEZ TEHRANI

– and –

MADJID VAEZ TEHRANI

– and –

ALIREZA SALEHI

– and –

EKATERINA CHAPKINA

– and –

KAMYAR GHATAN

Defendants

COUNSEL:

Tara Brun and Michael Coristine, for the Crown

Marshall Kazman, Self-Represented

Gad Levy, Self-Represented

Armand Levy, Self-Represented

Taro Inoue, for Ali Vaez Tehrani

Alice Barton, for Madjid Vaez Tehrani

Aaron Harnett and Christine Cole, for Alireza Salehi

Jeff Chapnick, for Ekaterina Chapkina

Walter Fox, Sayeh Hassan, and Nicholas Pham, for Kamyar Ghatan

HEARD: September 12-16, 19-23, 26-30, October 5, 11, 13, 14, 19-21, 26-28, 31, November 1-4, 7-10, 14-18, 28-30, December 1,2, 5-9, 12-16, 19-22, 2016, January 3-6, 9-12, 17-20, 23-27, 30, 31, March 21-23, 2017

REASONS FOR JUDGMENT

SPIES J.

TABLE OF CONTENTS

Introduction. 7

The Defendants. 9

Overview of the Crown’s Case. 14

Overview of the Defences. 17

Duties of the Court Where an Accused is Self-Represented. 20

The Issues. 21

The Crown’s Similar Fact Application. 22

Evidence of Prior Discreditable Conduct and Reputation. 22

General Assessment of Credibility and Reliability of the Witnesses. 24

General Comment. 24

WD.. 24

The Crown Witnesses. 25

The Defendants. 25

The Defence Witnesses. 31

Preliminary Findings of Fact. 31

Findings with Respect to the Canada Small Business Financing Program (CSBFP). 31

Findings with Respect to the SBL Loan Process. 32

Findings with Respect to the Accuracy of the Coort Analysis. 37

Findings with Respect to the Lack of Evidence of Payments by the Various Construction Companies for Leasehold Improvements, Equipment, Fixtures and Furniture. 39

Findings with Respect to the Relationship between the Defendants. 40

Findings with Respect to M&M 155 Holdings Inc. 42

Findings with Respect to Property Ownership. 45

Findings with Respect to the Invoices from the Disputed Construction Companies for Leasehold Improvements, Furniture, Fixtures and Equipment. 45

Findings with Respect to the Faxes with the Heading “HP LASERJET FAX 123456789”. 46

Findings with Respect to the Bank Reliance Evidence. 48

Common Findings of Fact with Respect to the 16 SBLs in Issue. 48

The 16 SBLs. 51

Energy Lighting and Furnishings Inc. (ELFI) – BNS – Count #1. 51

Energy Lighting Inc. (ELI) – TD – Count # 2. 64

Light House Contracting Inc. (LHC) – BOM – Count # 3. 73

Light Source Contracting Inc. (LSC) – RBC – Count # 4. 82

Qua Design Inc. (QUA) – BNS – Count # 1. 90

Roxy Design Inc. (Roxy) - CIBC – Count # 5. 110

Contempo Design Inc. (Contempo) – RBC – Count # 4. 118

Contemporary Design Inc. (CDI) – BNS – Count # 1. 133

Alta Design Corp. (Alta) – CIBC – Count # 5. 145

Modernito Design Inc. (Modernito) – BOM – Count # 3. 161

Kube Home Décor Corp. (KUBE) – CIBC – Count # 5. 170

Meez Corp. 170

Comod Corp. (Comod). 175

Kube Home Décor Corp. (Kube). 178

Homelife Forest Hill Realty Inc. (Homelife) – BNS – Count # 1. 193

Exclusive Accessories Inc. (Exclusive) – RBC – Count # 4. 220

World of Accessories Ltd. (World) – BNS – Count # 1. 233

Uzeem Corp. (Uzeem) – BNS – Count # 1. 262

Bluerock Construction Inc. (Bluerock) – CIBC – Count # 5. 273

Additional Findings of Fact. 289

Finding as to Who Prepared All of the Business Plans for the 16 SBLs. 289

Findings of Fact with Respect to Who Altered Certain Documents Provided to the Banks. 290

Findings with Respect to Mr. Levy’s Subcontracting Defence. 292

Findings with Respect to Payments to Mr. Tehrani’s Companies purporting to be for Furniture for Mr. Levy’s Companies. 294

Findings with Respect to the Disputed Construction Companies. 295

Findings with Respect to Whether the Purported Suppliers of Leasehold Improvements, Fixtures, Furniture and Equipment were Sham Corporations. 307

The Applicable Law.. 308

Circumstantial Evidence. 308

The Elements of the Offence of Fraud s. 380(1)(a) – Counts 1-5. 309

The Elements of “Laundering Proceeds of Crime" s. 462.31(1) - Count 6. 310

Willful Blindness. 310

Elements of the “Criminal Organization” Offence in s. 467.12 of the Criminal Code – Count 7. 310

Conclusions with respect to Marshall Kazman. 311

Count # 1. 311

Count # 2. 313

Count # 3. 314

Count # 4. 314

Count # 5. 315

Count # 6 Laundering Proceeds of Crime. 317

Conclusions with respect to Gad Levy. 318

Count # 1. 318

Count # 2. 320

Count # 3. 320

Count # 4. 321

Count # 5. 321

Count # 6 Laundering Proceeds of Crime. 324

Conclusions with respect to Ali Vaez Tehrani (Ali Tehrani). 324

Count # 1. 324

Count # 4. 324

Count # 5. 325

Conclusions with respect to Madjid Vaez Tehrani 325

Count # 1. 325

Count # 5. 325

Conclusions with respect to Ekaterina Chapkina. 327

Count # 1. 327

Count # 4. 327

Count # 7. 327

Conclusions with respect to Kamyar Ghatan. 327

Count # 1. 327

Count # 7. 327

Conclusions with respect to All Defendants – Count # 7 – Criminal Organization. 327

Disposition. 330

Appendix “A”. 1

Ruling on What Use Can be made of the LSUC’s Findings Revoking Mr. Kazman’s Licence to Practice Law.. 1

Appendix “B”. 1

Summary of Ownership of the Corporations Associated to Mr. Kazman, Mr. Levy, 1

Mr. A. Levy and Ms. Cohen and Related Properties. 1

Corporations Owned in Whole or in Part by Mr. Kazman. 1

Corporations Owned in Whole or in Part by Mr. Levy. 4

Corporations Owned in Whole or in Part by Mr. A. Levy. 6

Corporations Owned in Whole or in Part by Ms. Cohen aka Sade. 6

Appendix “C”. 1

Reasons for Decision for Acquitting Armand Levy of all Charges. 1

Appendix “D”. 1

Use of Handwriting Evidence. 1

Appendix “E”. 1

Disputed Construction Companies. 1

Appendix “F”. 1

Ruling on Crown’s Count to Count Similar Fact Application. 1

Appendix “G”. 1

Evidence of Prior Discreditable Conduct and Reputation. 1

Evidence of Edwin Cheng. 1

Evidence of David Richards. 2

Evidence of Deborah Bendavid. 4

Evidence of Armando Benlezrah. 6

Appendix “H”. 1

General Findings of Credibility and Reliability of the Crown Witnesses. 1

Appendix “I”. 1

General Findings of Fact with Respect to the Credibility and Reliability of the Witnesses Called by Mr. Kazman, Mr. Levy and Mr. A. Tehrani 1

The Witnesses Called by Mr. Kazman. 1

The Witnesses Called by Mr. Levy- Shelley Johnstone. 4

The Witness called by Mr. A. Tehrani-Deborah Bendavid. 4

Appendix “J”. 1

Extracts From the Canada Small Business Financing Regulations SOR/99-141. 1

Appendix “K”. 1

Definition of “Arm’s Length” in the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.). 1

Appendix “L”. 1

General Findings with Respect to 1048 Eglinton Avenue West (1048 Eglinton). 1

Appendix “M”. 1

General Findings with Respect to 559-563 Eglinton Avenue West (559 Eglinton). 1

Appendix “N”. 1

General Findings with Respect to 1040 Eglinton Avenue West, Toronto (1040 Eglinton). 1

Appendix “O”. 1

Ruling on Admissibility of the Affidavits sworn by Mr. Kazman and Mr. Levy. 1

in the RBC v. Contempo Litigation. 1

Appendix “P”. 1

The Bochner Condo. 1

Appendix “Q”. 1

The Law with respect to Causation-Reliance. 1

Appendix “R”. 1

The Law with respect to Willful Blindness. 1

Appendix “S”. 1

The Law With Respect to the Criminal Organization Offence. 1

R. v. Lindsay, [2005] O.J. No. 2870 (Ont. S.C.J.), aff’d 2009 ONCA 532, 97 O.R. (3d) 567, leave to appeal refused [2009] S.C.C.A. No. 540. 4

R. v. Sharifi, [2011] O.J. No. 3985, 2011 CarswellOnt 9044 (S.C.J.), esp. at paras. 27-39. 4

R. v. Battista, 2011 ONSC 4771, [2011] O.J. No. 6637, at paras. 9-31 . 5

Introduction

[1] The Government of Canada established the Canada Small Business Financing Program (“CSBFP”) in January 1961. The CSBFP is administered by Industry Canada and its main objective is to encourage lenders to make loans to small businesses that they might not otherwise make, due to the borrower’s lack of experience, insufficient security and/or the fact that the business is just starting up. The goal is to promote the expansion, modernization and improvement of small businesses throughout the country and thus spur on the economy and increase jobs.

[2] Applicants apply for a small business loan (“SBL” or “loan”) directly with participating banks. The loans can finance, among other things, up to 90% of the costs of purchasing leasehold improvements and fixtures and purchasing new equipment and furniture for the business. SBL proceeds cannot be used to finance inventory.

[3] Industry Canada is not involved in the application process or in a bank’s decision of whether to grant a SBL and does not deal directly with the borrowers. The lenders make all the decisions in approving a SBL and in advancing the loan funds. Industry Canada acts, in effect, as an insurer for the SBL if a lender complies with all of the requirements of the CSBFP. In that event, if a SBL goes into default, Industry Canada will reimburse the lender up to 85% of the monies advanced.

[4] In early 2009, the RCMP received a complaint from the Royal Bank of Canada (RBC) in relation to a suspected fraudulent SBL. The RCMP commenced an investigation that was ultimately expanded to more than 16 different SBLs across the five major banks: RBC, Bank of Montreal (BOM), Bank of Nova Scotia (BNS), Canadian Imperial Bank of Commerce (CIBC) and the Toronto Dominion Bank/Canada Trust (TD). The focus of this trial is on 16 SBLs that were approved during the period of June 2007 to March 2010. Although there is no agreement on specific dates, the evidence is clear that all of these loans went into default within 12 to 18 months of the intended 60-month term.

[5] All of the defendants are charged with committing the offence of fraud exceeding $5,000 for the benefit of, or at the direction of, or in association with a criminal organization contrary to s. 467.12 of the Criminal Code (count 7). The defendants Marshall Kazman and Gad Levy[^1] are also charged with laundering the proceeds of the fraud contrary to s. 462.31(1) of the Code (count 6).

[6] Mr. Kazman and Mr. Levy are also each charged with five counts of fraud over $5,000 of the banks; BNS, TD, BOM, RBC, and CIBC, and Industry Canada, contrary to s. 380(1)(a) of the Criminal Code (counts 1-5).

[7] The defendant Ali Vaez Tehrani is charged with three counts of fraud over $5,000 of the BNS, RBC, and CIBC (counts 1, 4 and 5). His brother, the defendant Madjid Vaez Tehrani[^2] (“Mr. Tehrani”) is charged with two counts of fraud over $5,000 of the BNS and CIBC (counts 1 and 5). The defendant Ekaterina Chapkina is charged with two counts of fraud over $5,000 of the BNS and CIBC (counts 1 and 4), and the defendant Kamyar Ghatan is charged with one count of fraud over $5,000 of the BNS (count 1).

[8] This is a complex case, both factually and legally. It took five months for the introduction of the evidence that featured many thousands of documents submitted on disc, more than 40 witnesses and substantial written closing submissions as well as oral submissions to bring this Court to the point where the difficult task of determining whether or not the Crown has proven any of the charges beyond a reasonable doubt could begin.

[9] The theory of the Crown is that the defendants, Mr. Kazman, Mr. Levy and former co-accused Miriam Cohen, commandeered a criminal organization of three or more persons whose primary function was to fraudulently obtain SBLs through the CSBFP from all of the major banks and use most or all of the funds for the benefit of the organization and themselves. Specifically, the Crown alleges that fraudulent documentation was provided to the banks, which caused the SBLs to be approved, that the leasehold improvements and purchase of equipment that the defendants represented to the banks were either not done or purchased and that the SBL proceeds that were not used for the new businesses were laundered among the defendants.

[10] The Crown asserts that the success of the criminal organization depended on a keen familiarity with both the CSBFP and the inner-workings of the banks - something the Crown asserts Mr. Kazman and Mr. Levy had long-since acquired through their various business dealings and a partnership that began in the late 1990s. The position of the Crown is that this was a sophisticated scheme that required planning, co-ordination, organization, operating capital, and co-operation. To that end, the Crown asserts that Mr. Kazman, Mr. Levy, and Ms. Cohen relied heavily on co-accused Mr. Tehrani, Mr. A. Tehrani, Ms. Chapkina, Mr. Ghatan, and former co-accused Mr. Salehi,[^3] as well as several unindicted co-conspirators who, through various corporations, all obtained one or more SBLs for the benefit of the organization. Armand Levy, the brother of Mr. Levy, was not a SBL borrower but the theory of the Crown is that he assisted in the criminal organization by laundering the proceeds of the fraud.

[11] During the period from June 2007 to March 2010, it is the position of the Crown that this organization fraudulently obtained at least 16 SBLs totaling approximately $2.8 million. Ms. Cohen obtained four of these loans through companies that she owned, namely Energy Lighting and Furnishings Inc. (ELFI), Energy Lighting Inc. (ELI), Light House Contracting Inc. (LHC) and Light Source Contracting Inc. (LSC), collectively referred to as the “Cohen SBLs”. Corporations owned by one of the defendants obtained the remaining 12 SBLs. Former co-accused Alireza Salehi obtained three SBLs: Roxy Design Inc. (Roxy), Contemporary Design Inc. (CDI) and Modernito Design Inc. (Modernito); Mr. A. Tehrani also obtained three: Qua Design Inc. (Qua), Contempo Design Inc. (Contempo) and Alta Design Corp. (Alta); and Mr. Tehrani obtained four, two of which are covered by the indictment: Meez Ltd. and Kube Home Décor Corp. (Kube). Mr. Tehrani also obtained SBLs for Meez Corp. and Comod Corp. (Comod) that are outside the scope of the Crown’s case but have some relevance to the matters in issue. Ms. Chapkina obtained two SBLs: World of Accessories Ltd. (World) and Exclusive Accessories Inc. (Exclusive); and Mr. Ghatan obtained one for Homelife Forest Hill Realty Inc. (Homelife). Mr. Levy obtained the last SBL in issue for his company Bluerock Construction Inc. (Bluerock).

[12] Mr. Kazman and Mr. Levy were first charged in June 2011 along with Ms. Cohen. Those charges related to what I have described as the Cohen SBLs. The charges were expanded in October 2012 when the other defendants were charged and 13 more SBLs were added to the indictment. This was later reduced to the 16 SBLs involving the five major banks, which are before me.

[13] On April 10, 2015, after a lengthy Preliminary Inquiry that had not been completed, the Attorney General of Ontario preferred an indictment against the defendants.

The Defendants

[14] Marshall Stephen Kazman was called to the bar in the early 1980’s and practiced law for 22 years, first with his father, and then as a sole practitioner. He described himself as a “jack of all trades,” doing a lot of civil litigation, real estate, corporate/commercial and some criminal law at the provincial court level.

[15] In September 2006, the Law Society of Upper Canada (“LSUC”) revoked Mr. Kazman’s licence to practice law. The Appeal Panel of the LSUC and the Divisional Court upheld this decision. Mr. Kazman was able to continue practicing while the case was under appeal but he could not issue cheques without permission from the LSUC. In Appendix “A”, I set out my ruling on how the reasons for this revocation can be used in my determination of the charges against Mr. Kazman.

[16] After Mr. Kazman lost his licence he continued as a paralegal under the business name Dufferin Paralegal Ltd. (Dufferin Paralegal). Paralegals were not licenced at the time by the LSUC.

[17] While Mr. Kazman was practicing law he started a business called Spiritual Awakenings, which took small groups of people on adventure tours. One of the trips he described was to Peru. Mr. Kazman also described a family property in Caledon that he owned at the material time that had a nice spring. He used different companies over a number of years including Blue Glass Water Company (Blue Glass) to sell carbonated spring water in blue bottles to high-end restaurants using the water from that spring. Mr. Kazman admitted owning one construction company and was also a signing officer at the bank for a number of other corporations that were purported to be legitimate construction companies and involved in several of the SBLs in issue. It was also Mr. Kazman’s evidence that Mr. Levy was actually the controlling mind and beneficial owner of these corporations, which Mr. Levy disputes. It is the Crown’s position that these were Mr. Kazman’s companies and that they were sham corporations. I refer to these corporations as the “Disputed Construction Companies” and the particulars of these companies, from the documents entered as exhibits, are set out in Appendix “E”. Their ownership and control is one of the central factual issues that I must determine.

[18] Mr. Kazman met Mr. Levy around the late 1990’s through Mr. Levy’s then accountant Victor Almalah. After Mr. Kazman acted for Mr. Levy on a civil litigation matter, they and their spouses became good friends. Mr. Kazman also met Mr. Levy’s brothers Armand and Dov Levy. Mr. Levy has a large family and had many clients and he referred a lot of legal work to Mr. Kazman. A lot of Mr. Almalah’s and Mr. Levy’s clients had obtained SBLs and Mr. Kazman defended them on their guarantees. Mr. Kazman denied knowing much about how SBLs worked and he was not an applicant for any of the 16 SBLs before me although I did hear evidence about a SBL he obtained for his paralegal business, Dufferin Paralegal. The companies that Mr. Kazman admitted to owning in whole or in part are set out in Appendix “B”. I have also set out the companies associated to Ms. Cohen in that Appendix. With respect to the companies in Appendix “B”, in cases where Mr. Kazman testified that he had other partners, I will refer to the corporation as “owned” by him for ease of reference, recognizing that he was only a part owner.

[19] Mr. Kazman was married to Maxine Henry. He reported to the Canada Revenue Agency (CRA) that he was married for the 2005 tax year and then that he was separated for the years 2006 to 2010 inclusive.

[20] Mr. Levy was born in Morocco and came to Canada around 1982 and finished high school here. He then started working for a cousin in a clothing business and then for his brother-in-law in a furniture business. Mr. Levy quickly became successful with his own clothing store, Jigolos, and he bought his first property; 617 College Street in Toronto, where he continued to operate that store. Mr. Levy incorporated a number of other companies and had two clothing stores on Bloor Street in rented premises.

[21] Although Mr. Levy denied he was a specialist for obtaining SBLs, signs for one of his companies, Fairbank Financial & Accounting Ltd. (Fairbank), suggest otherwise. His sign for that company described this business, in part, as “Consulting, Investments, Mortgages, Business Finance Specialists, Business Plan Specialists”. Mr. Levy also testified that he had a number of construction companies. His first company was MDC Modern Design Concept Inc. (MDC Modern), which was incorporated in April 2001. He incorporated a number of different construction companies after this as well as other types of corporations. Appendix “B” sets out all of the corporations Mr. Levy admits to owning, in whole or in part, that were referred to in this proceeding.

[22] Mr. Levy also introduced Mr. Kazman to Avi Luska, who later became a partner of Mr. Kazman’s in certain properties that they purchased together. Their first big project was 493-495 Queen Street West, which they renovated with loft apartments on the second floor. According to Mr. Kazman, they sold the building for a nice profit and then bought 677 Queen Street West (677 Queen) and then 2897 Dundas Street (2897 Dundas) with a third partner, Ari Yakobson.

[23] In the late 1990’s or early 2000’s, while he was still in practice, Mr. Kazman met Ms. Cohen and her father, Jack Sade. They were carrying on a lighting business called Save Energy Lighting (Save Energy) in the same plaza on Cocksfield Avenue, Toronto, where Mr. Kazman had his law office. They came to him and asked him to prepare some will and power of attorney documents. Mr. Kazman developed a business relationship with Ms. Cohen and her father and did other legal work for them including corporate litigation. Eventually Ms. Cohen became his business partner in certain property purchases. As well, Mr. Kazman testified that Ms. Cohen and her father loaned him money from time to time. They became good friends and Mr. Kazman admitted that he developed an intimate relationship with Ms. Cohen that probably began prior to the SBLs in issue, although Mr. Kazman then changed his evidence to say only that it could have begun prior to the SBLs. No further details of this relationship are in evidence.

[24] Mr. Kazman also introduced Ms. Cohen to Mr. Levy. Mr. Levy admitted this and said that it was perhaps two to three years before he prepared a Business Plan for Ms. Cohen for her first SBL in June 2007. Mr. Levy testified that he used to see her all the time after that and that Mr. Kazman told him that they were partners in properties. Mr. Levy, however, downplayed his relationship with Ms. Cohen.

[25] Mr. Kazman and Mr. Levy became partners in certain properties that were purchased, starting in 2007 with the purchase of 1040 Eglinton Avenue West, Toronto (1040 Eglinton), although they do not agree on which properties and over what time period they were partners. I have also set out in Appendix “B” the particulars of properties that were referred to in evidence where the ownership is not in dispute. In that Appendix, I also include particulars of the properties where ownership is disputed between Mr. Kazman and Mr. Levy as it may be relevant to their knowledge of the purported renovations done at these properties using SBL proceeds. However, who in fact owned each property and when is not otherwise important. As I explained to Messrs. Kazman and Levy multiple times, the reasons for their falling out and whether or not one of them had been taken advantage of by the other, and issues of that sort, were collateral to the issues in this proceeding.

[26] Mr. Kazman and Mr. Levy had a falling out sometime in 2010, likely around the time of the Uzeem SBL in early 2010.With respect to the SBL Mr. Levy obtained for Bluerock in March 2010, Mr. Kazman alleges that the two leases Mr. Levy provided to the CIBC for this SBL were frauds, that no renovations were done or equipment supplied and that this entire SBL was a fraud. There is no doubt that their relationship had broken down by this point.

[27] Mr. A. Levy did not obtain a SBL and the bulk of the evidence that I heard about his involvement in the alleged criminal organization was about some SBL proceeds that he received from companies associated with Mr. Levy, which Mr. Levy testified were personal loans to his brother or his companies. There was also evidence of certain payments Mr. A. Levy or his companies made to Mr. Levy and his companies and in some cases other companies that Mr. Levy testified were loans from his brother.

[28] At the end of the Crown’s case, Mr. A. Levy brought motion for a directed verdict which I dismissed; see R. v. Kazman, 2016 ONSC 8194.

[29] Mr. A. Levy elected not to testify. At the end of the trial the Crown simply relied only on their earlier submissions in defence of the motion for a directed verdict in support of their case against Mr. A. Levy. I determined at the end of the oral submissions that the Crown had not proven the allegations against Mr. A. Levy beyond a reasonable doubt and directed his acquittal on counts 1 and 7, with reasons to follow, which are set out in Appendix “C”.

[30] Mr. Tehrani and his brother, Mr. A. Tehrani, were born in Iran. Mr. A. Tehrani is the older of the two and they have four brothers. While in their teens, Mr. Tehrani and Mr. A. Tehrani were sent by their parents to Italy to study jewellery; the family business. They decided not to go back home and came to Canada with an older brother in 1984 as immigrants in the investor category. As required, they opened a jewellery manufacturing facility immediately upon arrival. Both Mr. A. Tehrani and Mr. Tehrani worked in the business for five to six years.

[31] After leaving this family business, Mr. A. Tehrani opened a jewellery design office for himself. Although Mr. A. Tehrani did not mention this, he and Mr. Tehrani operated a fine food business together for about four years until the business was sold. After Mr. A. Tehrani got married and had children, he decided to spend more time with his family and so he started working for The Brick and then for Leon’s, where he worked for almost ten years while he learned the furniture business.

[32] After leaving Iran, Mr. Tehrani also worked in the family jewellery manufacturing business for a few years and, after he got married, he began to work as an employee for a jewellery store. After the fine food business he operated with his brother, he and his wife and her sister opened a home décor, furniture and accessories store called Bizarre Shoppe Ltd. (Bizarre) in 1989, which they operated in premises Mr. Tehrani leased on the first floor and basement of 654 College Street, Toronto (654 College). Mr. A. Tehrani testified that he spent a lot of his free time at Bizarre learning the ins and outs of operating a store from his brother.

[33] In 2002 or so Mr. Tehrani started importing vintage Vespa scooters. Jigolos was operating nearby and Mr. Tehrani met Mr. Levy at Bizarre as Mr. Levy was passionate about motorcycles. This is how Mr. A. Tehrani and Mr. Salehi also met Mr. Levy. Mr. Tehrani operated Bizarre until 2005 or 2006. In the meantime, his wife's sister had become a dental hygienist and he had two young children so his wife was staying at home more. As a result Mr. Tehrani decided to open a new business.

[34] Mr. Tehrani and his partner, Reza Moghaddam, incorporated Meez Ltd. in November 2005. By agreement dated December 1, 2005, the Bizarre lease was formally assigned to Meez Ltd. Although Mr. Tehrani did not give details, apparently Mr. Moghaddam decided to go back to Iran at some point and Mr. Tehrani then brought Mr. Salehi in as a partner. He did not know Mr. Salehi, who at the time was selling a Subway restaurant, which he had been operating on College Street. An employee who was working for both of them introduced them to each other.

[35] Mr. Tehrani testified that he entered into an agreement with Mr. Salehi dated May 18, 2006 and executed May 26, 2006, which confirmed that Mr. Salehi had agreed on an “initial investment fee of $35,000”. Mr. Salehi was to work full-time for the business for a period of three months and make a decision by August 31, 2006 whether to enter into a business partnership agreement with Meez Ltd. If an agreement was not reached by then the money invested by Mr. Salehi in the amount of $35,000 was to be considered an unsecured loan that Mr. Tehrani took full responsibility to repay. Notes at the bottom of the agreement set out the payments by Mr. Salehi of $10,000 from TD and $25,000 from CIBC reflecting his investment.[^4]

[36] Mr. A. Tehrani testified that he wanted to be a partner with Mr. Tehrani in Meez Ltd. as well but, according to Mr. Tehrani, Mr. Salehi did not agree. He did not want two brothers against him.

[37] At the end of the Crown’s case Mr. A. Tehrani brought a motion for a directed verdict which I dismissed with reasons to follow.

[38] Although Mr. Salehi is no longer a defendant, the SBLs he obtained are relevant to the Crown’s case in at least two respects. First of all, the evidence of how Mr. Kazman and/or Mr. Levy may have participated in Mr. Salehi’s SBLs is relevant to the charges against them. Secondly, the evidence related to Mr. Salehi’s SBLs may shed light on other renovations purported to have been made to the same premises.

[39] Ms. Chapkina immigrated to Canada at the age of 24 in November of 1999 from what was then the U.S.S.R., now known as the Russian Federation. She has a university degree in humanities, which is considered above a Canadian Bachelor’s degree but somewhat below a Canadian Master’s degree. Ms. Chapkina worked part-time in a paralegal office and for an immigration lawyer. In September of 2006, Mr. Kazman, who was then working as a paralegal through Dufferin Paralegal, hired Ms. Chapkina. She worked initially as a legal assistant/receptionist but, over time, Ms. Chapkina became more involved in operating Blue Glass for Mr. Kazman. Ms. Chapkina testified that when she was arrested she immediately resigned and mailed the keys to Mr. Kazman’s office back to him and that she had no further contact with him or Mr. Levy until trial.

[40] At the time that Mr. Ghatan obtained a SBL for Homelife Realty, he was a successful real estate agent. He had received several merit awards from Homelife Realty for his sales and was also a member of their Diamond Club based on his gross sales commissions. He wanted to open a brokerage using the SBL funds.

Overview of the Crown’s Case

[41] The Crown’s case began with the evidence of Cpl. Thompson, a 24-year veteran with the Financial Crimes Division of the RCMP who explained the course of her investigation. She is the officer-in-charge of this case and was the main investigating officer. In addition to outlining the theory of the Crown’s case against the defendants, Cpl. Thompson testified about her attendances at certain of the premises in issue and the pictures that she took, although these attendances were some time after the SBLs in issue.

[42] Most of Cpl. Thompson’s evidence was for the purpose of giving the defendants notice of the Crown’s theory of the case through the use of charts summarizing information from various sources and describing the flow of funds that were then elaborated on by Paul Coort, a Forensic Accountant retained by the RCMP to assist with the investigation. Mr. Coort prepared an analysis of the records of more than 90 different bank accounts that were either provided voluntarily or in response to court production orders. Through his written report and viva voce evidence, facilitated by the charts first introduced through Cpl. Thompson, Mr. Coort explained, to the extent he could, the source and flow of funds with respect to the 16 SBLs and various corporations associated with Ms. Cohen, the defendants and Mr. Salehi; (the “Coort Analysis”).

[43] Much of the Crown’s case is documentary. As part of the investigation, the RCMP obtained the SBL file from the bank in question for each of the 16 borrowing companies as well as a few other SBLs and bank records for more than 90 accounts alleged to be involved in circulating the loan proceeds. These bank records were introduced into evidence as business records through Cpl. Thompson and in reliance on affidavits sworn by bank representatives pursuant to s. 29(1) of the Canada Evidence Act, R.S.C. 1970, c. E-10 (CEA). In addition, various bank representatives were called to permit cross-examination by the defendants. The bank account statements, cheques and drafts withdrawn from a particular account at the bank were admitted into evidence as authentic and as proof, in the absence of evidence to the contrary, of the entry and the transactions therein recorded; i.e., truth of the contents. Who in fact signed the cheques was not proven based only on the proof of the authenticity of the cheque but that did not become an issue once the defendants testified.

[44] Cheques and drafts from other banks, which represented deposits made into a particular account, were not technically covered by s. 29(1) of the CEA but they were accepted by the bank that received the deposits and on that basis I considered those deposits proven.

[45] I made certain rulings as to how the rest of the bank records could be used. The most important one was related to the fact that some of the SBL files contain typed notes summarizing conversations between bank employees with the borrower and other third parties, notes referring to site visits conducted by a representative of the bank, observations made and, in some cases, the details of conversations between the bank representative and a particular defendant. I ruled that since the contents of the notes as to what various representatives of the bank observed and/or said or were purportedly told by a particular defendant is hearsay, that if any party wanted to rely on this information the bank employee in question would have to be called as a witness, subject to there being an applicable hearsay exception. The only exception agreed to was that I would consider a note that stated that a site visit had occurred as fact. To the extent the bank files contain statements that bank employees suspected fraud on the part of any defendant or were investigating fraud, or comments of that nature, they have been ignored.

[46] Other documents in the SBL files such as Business Plans, copies of Guaranteed Investment Certificates (GICs), Notices of Assessment (NOAs) from the CRA and leases that purport to be between the borrower and third parties were proven to be true copies of the originals in the banks’ loan file and were also proven to be authentic pursuant to s. 29(1) of the CEA. However, who filled in or prepared the document, where applicable who signed the document and who provided the document to the bank was not proven by admission of the bank records.

[47] The RCMP also obtained certified copies of various government records including the photos and signatures of the defendants, Ms. Cohen and Mr. Salehi from the Ministry of Transportation (Driver’s Licence File), Corporate Profiles of the various corporations from the Ontario Ministry of Government Services records from the CRA, and Parcel Register Abstracts (Abstract) from the Land Registry Office for the various properties in issue. These were admitted pursuant to s. 24 of the CEA.

[48] From the Driver’s Licence Files I have a known signature from each of the defendants, Ms. Cohen and Mr. Salehi; the Known Signatures. Although in most cases the signing of documents was admitted, where necessary I have been able to make findings as to who signed particular documents or cheques by comparing the signature on the document in question with the Known Signature. There was no dispute that as a matter of law, as the trier of fact, I am able to make such comparisons and draw factual conclusions. I have set out in Appendix “D” a brief summary of the law on this issue that I applied.

[49] With respect to the CRA files, I also made a number of rulings. Some of the CRA files contain information about audits conducted by CRA employees and in some cases this includes observations made by that employee of a particular business and/or discussions with a particular defendant. As this information is hearsay I did not rely upon it. No one from the CRA was called as a witness.

[50] The Crown also called Lorenzo De Franco, a long-time employee with Industry Canada, working exclusively with the CSBFP, who explained the process of obtaining a SBL from the perspective of Industry Canada, including the completion by the borrower of the Loan Registration Form. He also identified the documents sent out or received by Industry Canada and in particular the Loan Registration Acknowledgment and the Claim for Loss Calculation forms that related to those of the 16 SBLs where the bank made a claim to Industry Canada. An issue arose as to the accuracy of the loss calculation set out in those forms but it is not necessary for me to determine those issues at this time. It is clear, however, that to the extent that assets purportedly purchased by SBL proceeds were appraised, the appraisers called by the Crown gave the assets they did see nominal values which resulted in the banks, in all cases, deciding to abandon those assets.

[51] The Crown, Mr. Kazman and Mr. Levy called a number of bank representatives who, in some cases, provided further evidence identifying bank records but also spoke to the SBL process at their bank and provided what I will describe as the “Bank Reliance Evidence” as it relates to the evidence from the banks as to what information provided by a defendant was relied upon in approving the SBL.

[52] In addition, the Crown called various witnesses who testified to the issue of whether or not certain leasehold improvements were made to some of the properties in issue and/or whether or not furniture, fixtures and equipment was supplied. These witnesses included third party landlords and other tenants who are not involved in these allegations and others who had firsthand knowledge of the properties before the SBL in issue was obtained.

[53] The Crown asserts that Mr. Kazman, Mr. Levy and Ms. Cohen used the vast majority of the SBL proceeds to purchase properties and renovate those properties, as well as make payments for mortgages, outstanding loans, legal bills, luxury vehicles, and various other personal expenses. It is the position of the Crown that the Coort Analysis reveals millions of dollars being circulated among various companies associated with the defendants with very little in the way of operating businesses. It is the position of the Crown that the sheer volume of funds being randomly circulated back and forth between many of Mr. Kazman's, Mr. Levy's, and Ms. Cohen’s sham corporations proves to be the most incriminating evidence in an overwhelming case for them.

Overview of the Defences

[54] This is a case colloquially known as one of “cut throat” defences. Each of the defendants, save for Mr. A. Levy, testified on their own behalf and all of the defendants blamed Mr. Levy for any fraud perpetrated on the banks. Mr. Levy on the other hand, testified that he was the victim.

[55] Mr. Kazman’s position is that he knew nothing of the alleged fraud. His overarching defence is that he trusted Mr. Levy and was victimized by him just as the other defendants and others were. Mr. Kazman’s position is that there was no criminal organization. He asserts that Mr. Levy is a “control freak”, something even Mr. Levy admitted, and that Mr. Levy was a “master manipulator”; a business loan specialist, who facilitated and obtained business loans for people which included, preparing business plans, leasing out his premises when it was advantageous for him to do so, drafting the leases, and altering documents before they were provided to the banks. Mr. Kazman also relies in part on the fact that based on the Coort Analysis, Mr. Levy and his corporations received significantly more of the money from the various SBLs than any other defendant.

[56] Mr. Kazman acknowledged being the signing officer at the bank for all but one of the Disputed Construction Companies, and the one who signed many of the cheques analyzed by Mr. Coort. He testified that Mr. Levy controlled all of the Disputed Construction Companies and directed him to receive all payments and how to make cheques payable and controlled all of the money that flowed through these accounts. Mr. Kazman maintains that he did so only to make a fee (2 to 10% or a flat fee) based on the total amount of money going through the accounts and that he had no knowledge of any fraud or any reason to suspect a fraud. Mr. Kazman emphasized that at that time he trusted Mr. Levy, who had assured him that everything was aboveboard. Mr. Kazman maintains that given how he was paid, he only paid attention to the total deposits and that he had no way of knowing the source of the funds or any reason to suspect there was any fraud in the use of the SBL proceeds.

[57] In summary, it is Mr. Kazman’s position about cheques payable to him and his companies that they were either loans or payment of the percentage or flat fee that Mr. Levy paid him for administering the various bank accounts. In terms of cheques he signed in favour of Mr. Levy and his companies, from one of his companies, he typically said this was in repayment of a loan given to him by Mr. Levy. As for all of the other cheques he signed on behalf of the Disputed Construction Companies, Mr. Kazman testified that he did so at the direction of Mr. Levy and had no reason to suspect any fraud. On its face it is not possible to determine the veracity of this evidence but I will consider the issue again after I have reviewed the evidence for the 16 SBLs.

[58] Mr. Kazman also submits that there is no evidence that he had any “…keen familiarity with CSBFPs and the inner workings of banks…” as alleged, or ever represented himself as a SBL specialist. The only evidence is that in his capacity as a lawyer/paralegal he assisted a number of clients who were sued as a result of SBLs. Similarly, he asserts there is no evidence that he was involved in the preparation of business plans, the completion of any of the SBL application documentation, or the creation or alteration of the GICs and NOAs submitted to the banks or that he counseled or coached or advised any of the defendants to submit false documents to the bank. In fact, in some cases he asserts that there is no evidence that he even knew that there was a SBL.

[59] Mr. Kazman produced a number of notes in his handwriting, which referred to loans from Ms. Cohen to him personally or a company he owned or owned with other partners and the repayment of loans. The details are not important. These notes are material only because they show that there were real loans between Mr. Kazman and Ms. Cohen and the informality of documentation to evidence those loans. Mr. Kazman also produced some typed Promissory Notes evidencing loans made by Ms. Cohen to him personally and in some cases to a corporation and Mr. Levy as well. As one example, on October 30, 2009, Mr. Kazman, Mr. Levy and Mr. Kazman on behalf of 846 Realty Corp. (846 Realty), signed a Promissory Note securing a $100,000 loan from Ms. Cohen. Mr. Kazman submitted that as a result there was legitimately money passing back and forth between them and that this had nothing to do with money laundering.

[60] Mr. Kazman also testified that he had other sources of income in the relevant period. He received a demand loan for almost $701,000 from Mr. and Mrs. D’Imperio on August 15, 2006. He testified that he repaid $200,000 of that loan in April 2007.

[61] Mr. Kazman argued that there was a failure on the part of the Crown to prove its case by failing to call Ms. Cohen and Mr. Salehi. I do not accept that submission. They could have been called by anyone. It was up to Crown counsel to decide whether or not to call either of these former defendants as witnesses. I must assess the evidence that I heard and not speculate about what I might have heard.

[62] It is Mr. Kazman’s position that the first order of business is to determine whether the evidence discloses beyond a reasonable doubt whether the work and services were provided or not. He submits that if the Crown cannot establish that work and services and equipment were not supplied or completed beyond a reasonable doubt based on the admissible evidence then the charges in whole or in part must be dismissed. Mr. Kazman argues that in most of the cases the Crown has failed to establish beyond a reasonable doubt that the leasehold improvements and equipment were not supplied, that the businesses established were not bona fide, and that bona fide efforts were not made to operate these businesses.

[63] In addition to the bank witnesses, Mr. Kazman called a couple of witnesses who spoke to discreet issues.

[64] Mr. Levy’s position is that he knew nothing of the alleged frauds. He testified that he had nothing to do with the Cohen SBLs. As for the others, he admitted being the subcontractor to some of the Disputed Construction Companies, which he alleged were in the control of Mr. Kazman and that in that role one or more of his companies did the leasehold improvements and in other cases that one of his companies was the contractor used by the borrower for the supplier of furniture, fixtures, and equipment. He denied preparing all of the Business Plans provided to the banks and denied the suggestion that he was the person who fraudulently altered any GICs or tax documents. He also testified that if one of his companies was involved in the leasing and/or renovation of a property that the lease was legitimate and the leasehold improvements were done and all equipment required by the borrower was provided. He ended with "I am the victim of everybody".

[65] With respect to all of the cheques passing between him, Mr. Kazman and Ms. Cohen, Mr. Levy gave various explanations. Like Mr. Kazman, for the most part it was his position that various cheques were loans or repayments of loans but there were other explanations that he and Mr. Kazman gave. For example, Mr. Kazman testified that some cheques to him were for legal services provided or money due from the sale of his Blue Glass water. Mr. Levy testified that some of the payments he made were for lights purchased from Ms. Cohen and that some of the money received from Mr. Kazman was for construction work he did for him. In giving their evidence, for the most part, there was no documentation with respect to the payment and they relied primarily on what was stated on the RE line of the cheque when it was filled in. Mr. Levy in particular testified that if the cheque referenced "on account" and was for an even amount; i.e., no cents, that it was for money loaned or paid back. Mr. Kazman did not give that evidence. I agree that it would make sense that either one was making or receiving a loan that it would be an even dollar amount. They both testified that if the cheque referenced an invoice number, it was for subcontracting or for a purchase of lights, furniture, or home décor accessories. In Mr. Kazman’s case however, he disputed the suggestion that Mr. Levy’s companies did any subcontracting for the companies that he admitted owning, but of course he did not admit to owning any of the Disputed Construction Companies.

[66] With respect to some of the cheques received from the Disputed Construction Companies, Mr. Levy testified that the cheque could be for work that he did for Mr. Kazman’s company, i.e., one of the Disputed Construction Companies, as a subcontractor or payment for supplies purchased by Mr. Kazman. However, not all of these cheques refer to an invoice number. When Mr. Levy was asked why he would be paying money to Mr. Kazman pursuant to an invoice he very quickly came up with three properties owned by Mr. Kazman that he claimed to do subcontracting, namely two homes and one condo owned by Mr. Kazman..

[67] Mr. A. Levy’s position was that the Crown did not prove its case against him. He routinely asked all of the witnesses who were called whether or not they knew him or had any business dealings with him. The only contact that I heard about was that on one occasion Mr. A. Levy went to pick up some furniture for his brother from Mr. Tehrani and he introduced Mr. Ghatan to his brother. When his brother, Mr. Levy, testified, he addressed the issues that I was concerned about when I dismissed Mr. A. Levy’s motion for a directed verdict. Although, as I will come to, I have significant concerns about the credibility and reliability of Mr. Levy’s evidence, his evidence about payments to and from Mr. A. Levy which he testified were for legitimate purposes was not contradicted unless I were to assume that Mr. A. Levy is somehow fixed with knowledge of the source of the funds, because he and Mr. Levy are brothers, which of course cannot be the case absent some evidence to support that inference. As already stated, I have attached my reasons for acquitting Mr. A. Levy at Appendix “C”.

[68] As for the other defendants, who took out one or more SBLs, they all took aim at Mr. Levy and took the position that they were victims of a fraud scheme orchestrated by him. They all professed to have trusted him and that they had no experience in SBLs, no knowledge of any altered documents that were provided to the bank, which they claimed must have been altered by Mr. Levy without their knowledge, no experience in construction, which is why they relied on Mr. Levy, who agreed to do their leasehold improvements, to determine what needed to be done and to provide them with equipment for their store. They all testified that to the best of their knowledge all of the leasehold improvements were done and all of the furniture, fixtures and equipment were supplied in accordance with the invoices provided to the banks. All of the defendants, save for Ms. Chapkina, professed to have dealt with Mr. Levy only, not Mr. Kazman. Ms. Chapkina testified that both Mr. Kazman and Mr. Levy used their construction companies for her renovations. All of the defendants testified to having no knowledge of any fraud, or any reason to suspect fraud. None called any other witnesses save for Mr. Inoue who called Deborah Bendavid who obtained a SBL that is not part of the indictment before me.

[69] The defendants have no obligation to provide evidence but they did provide some documentation to support their positions. Mr. Tehrani seemed to be the most organized in that regard, followed closely by Mr. Ghatan. As for Mr. Kazman, he produced some documentation and was able to get some documents from Ms. Cohen. There was a lot of evidence about Mr. Levy’s documents and the Crown and the other defendants assert that he must have more documentation than what he produced and dispute his claim that the documents in storage were lost. Although his evidence on this issue changed, which is relevant to his credibility, I do not have enough evidence on this point to come to any conclusion, particularly as Mr. Levy had no onus to produce documents in support of his position.

[70] To the extent that the defendants were not able to corroborate their evidence by documentation, I have not drawn an adverse inference. The Crown argues that once they were charged, common sense would dictate that one would preserve the documents that would confirm one’s position but my concern is that undermines the fact that the onus is on the Crown to prove its case against the defendants.

[71] Mr. A. Tehrani, Ms. Chapkina and Mr. Ghatan also argue there is no evidence of any kickbacks to them, that they lost their own money and had no motive to commit fraud. Mr. A. Tehrani adds that he had a steady job making good money at Leon’s, which he gave up to open his businesses.

Duties of the Court Where an Accused is Self-Represented

[72] I endeavoured to ensure trial fairness for Messrs. Kazman, Levy and A. Levy, who were self-represented. That involved providing a comprehensive memorandum explaining how the trial would proceed including the burden of proof and the information the defendants needed to know with respect to what the Crown has to prove with respect to the various charges. This memorandum was supplemented with a number of other memoranda dealing with the various evidentiary and legal issues that arose and I continued to provide memoranda right until the commencement of the closing submissions.

[73] In addition, I provided guidance and information to these defendants on the record as the case progressed as needed. I am grateful for the fact that these defendants were respectful of the Court and when they strayed into areas that were not relevant, accepted my rulings without further argument. I also thank Crown and Defence counsel who, in the true tradition of the bar, pointed out times when further advice on a particular issue would be beneficial to the self-represented defendants.

[74] For all of these reasons I am satisfied that these defendants received the fairest trial possible in all of the circumstances.

The Issues

[75] There were no formal admissions made by any of the defendants. However, as everyone but Mr. A. Levy testified, issues of identity were admitted and, for the most part, the defendants acknowledged their signatures on various documents. Those defendants who took out one or more of the 16 SBLs in issue acknowledged that they had made those applications and that their corporations received the SBL funds.

[76] Although again not formally admitted, no issues of accuracy were raised with respect to Mr. Coort’s report, although Mr. Levy argued that it misrepresented the facts because, for the most part, Mr. Coort only looked at bank account records for a specific period of time; not from the opening to the closing of the account. Mr. Levy also testified that he had bank accounts that Mr. Coort did not see but he never put that suggestion to Mr. Coort. I deal with this issue below as part of my preliminary findings of fact.

[77] To the extent the Crown’s case depends on documents from the banks, government sites and Industry Canada, the authenticity of those documents was not disputed save for certain GICs, NOAs and T1 General income tax returns (“T1 General”), that were provided to the banks as part of a SBL application. The fact these documents were altered by someone before the bank in question received them is not contested but who altered the documents is in dispute.[^5] The defendants whose loans are implicated by these altered documents all point to Mr. Levy as the person who must have done the alterations in the course of preparing their business plan package. Mr. Levy vigorously disputes this. There are other factual misrepresentations in the documents in the bank files that the defendants who obtained SBL loans prepared, filled in and/or signed that they downplay.

[78] The Crown must prove beyond a reasonable doubt that the banks relied to their detriment on the forged documents and misrepresentations and that their economic interests were put at risk. The Crown did not call any witnesses from the banks’ underwriting departments who actually approved the 16 SBLs in issue and relies instead on bank representatives who dealt with some of the defendants. The Defence submits that the Crown has not proven that the banks relied on these forged documents to their detriment. I will deal with this issue factually as I review each of those SBLs and then consider the law before making my findings.

[79] For each of the 16 SBLs, there is an issue as to whether or not there were in fact any leasehold improvements done and furniture, fixtures and equipment supplied as the invoices provided to the banks would suggest, or at least whether or not all of the leasehold improvements were done and whether or not all of the furniture, fixtures and equipment was supplied. The defendants dispute this but have varying knowledge of what was apparently actually done for various reasons.

[80] Although evidence of the default of the SBLs, appraisal of the remaining assets, bank losses and claims to Industry Canada was introduced, the Crown does not rely on actual losses as part of its case although that will be an issue on sentencing should there be any convictions. The Crown’s position is that it does not have to prove actual loss resulting from the fraud, which was not disputed.

[81] In summary, based on the documentation, a lot of relevant facts are not in dispute. There are, however, a number of factual issues that will largely depend on an analysis of the documents and, more importantly, an assessment of the credibility and reliability of the witnesses who gave relevant evidence to those issues.

The Crown’s Similar Fact Application

[82] The Crown brought a “count-to-count” similar fact application that everyone agreed should be argued and decided at the end of the case. It related to all of the defendants with the exception of Mr. Ghatan. I have set out my reasons for ruling in favour of the Crown’s application in Appendix “F”. For reasons stated in this Appendix, I have concluded that the similar fact evidence is sufficiently similar as to render it admissible on a count-to-count basis, as evidence of mens rea, on identity issues and to rebut possible defences..

Evidence of Prior Discreditable Conduct and Reputation

[83] None of the defendants have a criminal record. The Crown did not argue that any of the defendants put their character in issue when they testified. However, as I advised the defendants, the rule, which prevents the Crown from leading evidence of bad character of a defendant, does not apply to any defendant leading evidence of bad character of a co-defendant. A defendant is entitled to cross-examine witnesses and lead evidence of the bad character of a co-defendant without waiting for that co-defendant to put his or her character in issue so long as such evidence is logically relevant to the defence of the defendant. This evidence can only be used to help raise a reasonable doubt on behalf of the cross-examining defendant and cannot be used to help prove the guilt of the testifying co-defendant.

[84] The Crown did submit that Mr. Tehrani was underreporting his income to the CRA and relied on his tax returns and that does appear to be the case. The Crown made it clear, however, that it was not saying that because he misrepresented his taxes that this makes him less believable. It is the Crown’s position that he did not declare his income because it was fraudulent. I chose not to rely on this evidence, as there could have been any number of reasons for the underreporting.

[85] As already stated, I have ruled with respect to the use to be put to the revocations of Mr. Kazman’s licence to practice law in Appendix “A”. However, in addition to this issue which Mr. Levy pursued in cross-examination of Mr. Kazman, during their cross-examinations of each other they each made many and various allegations of discreditable conduct allegedly illustrating bad character that was denied by the other. This evidence was aimed primarily at how their relationship broke down and whether or not Mr. Kazman was carrying his weight in terms of making his financial contributions and whether or not Mr. Levy took advantage of Mr. Kazman at the end by registering mortgages on properties Mr. Kazman claimed an interest in and Mr. Kazman’s assertion that Mr. Levy obtained the Bluerock SBL behind his back. Each blames the other and their animosity towards each other at trial was palpable when they were examining each other. That is relevant to how I assessed their evidence when they testified about how the other was dishonourable in various ways.

[86] Although the Bluerock SBL is before me, as I explained to Messrs. Kazman and Levy, the time necessary to determine whose position was correct on the major issues between them was not something that could be undertaken in the trial. Although the timing of when their relationship broke down is relevant, who was at fault and whether or not it amounted to prior discreditable conduct is a collateral issue and not something that I can determine as it would amount to a complex trial within a complex trial. Neither of them pursued a civil action and the prejudicial effect on the trial in trying to get to a point where I could make any findings of fact far outweighed any possible probative value to this evidence, which certainly was not readily apparent in any event.

[87] Mr. Kazman called Edwin Cheng and David Richards to give evidence of possible discreditable conduct by Mr. Levy. They both testified about their experience with Mr. Levy when they obtained SBLs with his assistance for their franchised businesses. Mr. Inoue called Deborah Bendavid who obtained a SBL for her company Kidshill Ltd. (Kidshill). I also heard some evidence in this regard from Armando Benlezrah, the owner of Bonded Contracting and Design Inc. (Bonded), the purported contractor and supplier to Bluerock.

[88] I have summarized all of this evidence in Appendix “G”.

General Assessment of Credibility and Reliability of the Witnesses

General Comment

[89] In assessing the credibility and reliability of all of the witnesses, I have taken into account that the events they gave evidence about were a number of years ago, and particularly if no documents exist, that it is natural that memories fade. Furthermore, as Ms. Barton submitted, some witnesses clearly had a better memory of events than others.

WD

[90] In making my decision, given that save for Mr. A. Levy, the defendants testified, the principles set out in W.(D.) v. The Queen (1991), 1991 CanLII 93 (SCC), 63 C.C.C. (3d) 397 (S.C.C.) (WD) apply. I must acquit a defendant if I believe his/her evidence or, even if I do not believe his/her evidence, I am left in a reasonable doubt by it. If I am not left in doubt by his/her evidence, then I must ask myself whether, on the basis of the evidence, which I do accept, I am convinced beyond a reasonable doubt by that evidence, of his/her guilt. In my analysis, I am not bound by the strict formulaic structure set out in WD, but rather must adhere to the basic principle underlying the WD instruction that the burden never shifts from the Crown to prove its case beyond a reasonable doubt.

[91] In considering the evidence, I am entitled to believe all, some, or none of each witness’s evidence. Further, in assessing the evidence of each of the defendants who testified, I am entitled to consider it in the context of all of the other evidence. However, I must remind myself that this is not a credibility contest. WD prohibits me from concluding that the Crown has met its burden simply because I might decide to prefer the evidence of some or all of the Crown witnesses to that of a defendant. As I am faced with contradictory versions of what happened in this case, I would add that if, after considering all of the evidence, I am unable to decide whom to believe, I must acquit.

[92] Assessment of a witness’s credibility includes evaluation of his or her demeanor as testimony is provided to the trier of fact in the courtroom -- this includes "non-verbal cues" as well as "body language, eyes, tone of voice, and the manner of speaking”: R. v. N.S. (2010), 2010 ONCA 670, 102 O.R. (3d) 161 (C.A.), at paras. 55, 57. However I must be mindful of the fact that a trier's subjective perception of demeanor can be a notoriously unreliable predictor of the accuracy of the evidence given by a witness: Law Society of Upper Canada v. Neinstein (2010), 2010 ONCA 193, 99 O.R. (3d) 1 (C.A.), at para. 66; R. v. Smith, 2010 ONCA 229, at para. 11. Demeanour evidence alone cannot suffice to found a finding of guilt: R. v. K.(A.) (1999), 1999 CanLII 3756 (ON CA), 123 O.A.C. 161 (C.A.), at p. 172.

[93] With these principles in mind I will first make some general assessments of the credibility and reliability of the various witnesses, although I recognize that assessing the evidence of a witness is not an all or nothing proposition.

The Crown Witnesses

[94] I deal with my assessment of the credibility and reliability of the Crown’s witnesses in Appendix “H”. For the reasons set out there, I find that the evidence of Cpl. Thompson, Mr. Coort, Mr. De Franco, the various bank witnesses, the appraisers (with some exceptions), and the other Crown witnesses, to be both credible and, for the most part, reliable.

The Defendants

[95] Because this is a case where some co-defendants have given evidence against another defendant, I begin with the general observation that I must consider the case for and against each defendant separately and bear in mind when I consider the evidence of each co-defendant that s/he may have an interest of his/her own to serve. Apart from that, the evidence of the defendants is assessed in the same way as any other witness, subject to the application of WD.

(a) Mr. Kazman

[96] I found serious problems with Mr. Kazman’s evidence and in many respects I have concluded that it was self-serving and not reliable. He was evasive at times and on occasion, as I will point out, his evidence was internally inconsistent. It seemed that his evidence would shift if he thought he could say something helpful to his position, not realizing that it was inconsistent to evidence he had already given. For example, Mr. Kazman would on the one hand claim to have no knowledge of Ms. Cohen’s business dealings and, on the other hand, he would offer an explanation on a particular issue, suggesting he did know. In the same way he would profess having no knowledge of a particular SBL and yet he would testify that it was legitimate and the leasehold improvements were made. Both cannot be true. On other occasions, as I will come to, his evidence was simply incredible and nonsensical. The only positive aspect of Mr. Kazman’s evidence was that on occasion he would agree with a seemingly obvious proposition in cross-examination - something Mr. Levy was not capable of doing.

[97] Mr. Kazman’s demeanour as a witness did not assist me in the assessment of his credibility. However, he was on the stand for a number of days and I would not conclude that he is so easily duped as he suggested to me he was in his dealings with Mr. Levy.

[98] As I will come to, in the case of the SBL obtained by Mr. A. Tehrani from the RBC for Contempo, litigation ensued and Mr. Kazman and Mr. Levy swore affidavits, which were filed with the court. I have dealt with the admissibility and use of these affidavits in Appendix “O”. Although I concluded that these affidavits are not admissible as evidence in this trial, they can be used for the purpose of impeachment and, in particular, I may consider any inconsistencies in these prior sworn statements to these defendants’ sworn evidence when assessing their credibility as witnesses. This gives rise to one of the biggest issues I have with the veracity of Mr. Kazman’s evidence.

[99] Mr. Kazman swore that he was the President and General Manager of Northwood Contracting (Northwood), which is one of the Disputed Construction Companies. His affidavit suggests that he had personal knowledge of the leasehold improvements done for Contempo, which he completely resiled from at trial when he claimed that he knew nothing of the operation of this company, which he said was totally controlled by Mr. Levy.

[100] Mr. Kazman’s explanation was that he drafted the affidavit at Mr. Levy’s direction. I do not believe that. If Mr. Kazman was relying on information from Mr. Levy, given his civil litigation experience, he was well versed in the boilerplate language that he should have added to his affidavit to reflect this. His submission that this was not necessary given Mr. Levy was also filing an affidavit is clearly not an answer to this - something any lawyer would know. Further, his position further undermines his credibility as it means he was prepared to swear an affidavit that contained information from another that he did not swear he believed to be true; in an affidavit he knew was being presented to the court. Mr. Kazman submits that the affidavit was true for what it actually attests to but, as I will come to, I have found to the contrary.

[101] For these reasons and for reasons set out elsewhere in this judgment, I have concluded that on the disputed parts of his evidence, I do not believe Mr. Kazman, nor does his evidence raise a reasonable doubt in my mind.

(b) Mr. Levy

[102] Before I get into an assessment of Mr. Levy as a witness, I will consider the evidence before me that he attempted to interfere with the evidence of Mr. Tehrani. Mr. Tehrani testified that on one occasion during the course of the trial Mr. Levy whispered to him in court that he should make sure he told the Court that Mr. Levy just prepared his first Business Plan and that he, Mr. Tehrani, copied the others. Mr. Tehrani could not remember the date but he immediately told Ms. Barton about this. In answer to questions from Mr. Levy, Mr. Tehrani repeated this evidence. Although, as I will come to, I have concerns with some of Mr. Tehrani’s evidence, I accept this evidence as true. The fact Mr. Levy would attempt to interfere with the evidence is of concern but it is only one relatively small factor in how I have assessed his evidence.

[103] Much of Mr. Levy’s evidence was very general in many respects. As Mr. Chapnick submitted, most questions were answered in one of the following four ways: 1) I did the work; 2) this cheque/draft was for a loan; 3) this cheque/draft was repayment of a loan; or 4) I deny that and/or there is no formal proof - referring to the fact there was no document that would prove the point one way or the other.

[104] When confronted with the allegation that his co-accused attributed alteration of GICs and the creation of fabricated NOAs to him, Mr. Levy denied the allegation. When confronted by the Crown with the fact that co-accused, who did not know each other, had similarly altered documents presented to the banks, Mr. Levy responded “not me”.

[105] It was clear that Mr. Levy did not have specific recall about specific cheques or drafts. If there was a reference to an invoice number he testified that the payment was for that invoice but he could only say it was for lights if the payment was to Save Energy or for furniture if the payment was to one of Mr. Tehrani’s companies. As I will come to, where there was a payment to Mr. Kazman with an invoice number, his evidence became incredible given other evidence he gave.

[106] Mr. Levy was also quick to say that if a cheque Re: line said “on account” it was for a loan or repayment of a loan but his evidence that he would only loan or be paid back even amounts, by which he meant no cents, did not hold up when compared with all of the cheques and drafts that he testified were for loans.

[107] Mr. Levy often answered questions with a request to see an invoice or document, knowing there was none. What I also found very troubling was that in cross-examination Mr. Levy would very often not admit evidence that he said in chief. I appreciate this is not a memory contest but if what he said in chief was the truth I would have expected him to at least admit that the suggestion being put to him was true. This was not a case where the cross-examiner was misquoting him.

[108] There were also internal inconsistencies in Mr. Levy’s evidence. As Mr. Inoue submitted, when Mr. Levy testified about business plans and was shown the Contempo Business Plan he identified it as the one that he prepared. This was in fact, however, Mr. A. Tehrani's second SBL. Mr. Inoue's position is that an honest answer would have been that he didn't know or could not tell. I agree. Similarly, in his testimony, Mr. Levy admitted providing two Business Plans to Ms. Chapkina but he later retracted this and said he only provided one. Although Mr. Levy testified in chief that he knew nothing about what I will call the Bochner Condo, upon cross-examination he testified that he was aware of the Bochner refinancing matter when it happened in 2008.

[109] Mr. Levy came across as a confident witness and he seemed impressed with himself in terms of how he was able to answer questions in cross-examination that he appeared to believe rebutted the suggestion being put to him. His demeanour did not assist me but I have found one aspect of his personality to be relevant. According to Ms. Chapkina, in Mr. Kazman’s office they called Mr. Levy "the king" or "the emperor" because of his attitude and the way he presented himself. There was evidence from Mr. Kazman and some of the other defendants that Mr. Levy was a “control freak” and with respect to the 3042 Keele Street property, in cross-examination by the Crown, Mr. Levy admitted “I am a control freak”, “I watch over everything”. I found this evidence relevant to some extent in dealing with the Disputed Construction Companies, as I will come to.

[110] For these reasons and for reasons set out elsewhere in this judgment, I have concluded that on the disputed parts of his evidence, I do not believe Mr. Levy, nor does his evidence raise a reasonable doubt in my mind.

(c) Mr. Ali Vaez Tehrani

[111] Mr. A. Tehrani testified that he has been taking medication for pain and depression for five years, which he said has affected his memory. He testified that he takes Tylenol 3 for pain in his back, neck and shoulders and Nabilone and some Cymbalta for depression and to calm him down but I believe Nabilone is for chronic pain as well. He is also a diabetic. In answer to questions from Mr. Levy, Mr. A. Tehrani admitted that his memory was better when he had his businesses. At one point in answering questions for Mr. Kazman, Mr. A. Tehrani said that he had “so much problem with my memory” because of the medication that he could not remember what he did last week. Towards the end of Mr. Kazman’s cross-examination, Mr. A. Tehrani said that he was doing his best and queried why should he go into details “who, what, what they are doing. I don’t know anything about that”. He testified that he was relying only on his memory and that his memory was failing. Mr. A. Tehrani denied that he was claiming memory loss to get out of answering questions.

[112] Mr. Inoue submitted that there is no evidence that Mr. A. Tehrani remembers more than he admitted. However, no evidence was called to support Mr. A. Tehrani’s claim that any of the medication he is taking would have an adverse impact on his memory and in my view, having raised this, it was up to Mr. A. Tehrani to call some evidence in support of his position.

[113] I appreciate that some people have better memory than others but in the case of Mr. A. Tehrani his alleged loss of memory was extreme. Although he did give the impression he was trying to be responsive to questions asked in cross-examination, he answered many, many questions with “I can’t remember”. In addition, when he did have an answer he prefaced the answer to almost every question with “If I’m not mistaken; I can’t be 100% certain” and then he would go on to answer the question or make a statement. It was clear he was trying to protect himself from being contradicted.

[114] Having considered all of his evidence, I find that Mr. A. Tehrani was using his medication and alleged memory issues as an excuse not to answer many questions. I accept that there would be things he would not be sure of but the extent of his alleged memory loss was extreme and very selective. There were only a few things that he seemed certain of and what he did remember was surprising and self-serving. The most obvious example is that he supposedly remembered getting an envelope from Mr. Levy to take to the bank that was of a certain colour and size and was sealed when he could not remember things that would have been much more important at the time. The envelope has only become important now because the banks were given fraudulent documents. For example, he could not remember much about the TD GIC he brought to the bank or any detail about discussions with Mr. Levy about how he wanted the premises renovated. As I will come to, I do not accept Mr. A. Tehrani’s evidence about the envelope and the only explanation for this evidence is that Mr. A. Tehrani was adopting what he knew his brother was going to say about this same topic.

[115] As I will explain, there were many times that I found Mr. A. Tehrani’s evidence to be incredible. It simply did not make sense given his background, experience and what, on his own admission he had at stake when he attempted to start these businesses. Furthermore, in certain respects I have been able to make a positive finding that Mr. A. Tehrani was not being truthful with respect to some of his evidence because of certain documents, which are reliable.

[116] I also found that Mr. A. Tehrani’s evidence was unreliable in the sense that when he was being cross-examined; particularly by Ms. Brun, he would change his evidence to accept a suggestion she was making because it was a “good point”.

[117] As for demeanour, Mr. A. Tehrani came across as a very unsophisticated witness and perhaps as someone who is not very smart. Some of this could be attributed to the fact that English is not his first language. It was also part of his defence, however, as he repeated many times that he trusted Mr. Levy.

[118] For these reasons I find that I do not believe much of Mr. A. Tehrani’s evidence. Furthermore, as I will come to, for certain SBLs, it does not raise a reasonable doubt.

(d) Mr. Tehrani

[119] Mr. Tehrani came across as a much smarter, sophisticated witness as compared to his brother. Ms. Barton was well prepared with documentation that she took him through to address the various allegations by the Crown of money laundering. There is also the fact that he repaid, in full, the first SBL that he obtained for his company Meez Corp. There is no question that that was a legitimate SBL and business.

[120] As I will come to however, there were aspects of Mr. Tehrani’s evidence that I have found to be untrue. As I will explain I do not believe his evidence about a sealed yellow envelope. There is, as well, the fact that he did his best to distance himself from his brother’s SBLs and yet was willing to borrow large sums of money for his brother at prohibitively high interest rates. It simply made no sense to me. As well, as I will come to, I do not accept his evidence that all of the money paid to him by Mr. Levy’s companies was for furniture he sold to Mr. Levy. There are other aspects of his evidence that I have not accepted as well, that I will come to. On occasion Mr. Tehrani gave evidence that was simply nonsensical. For example, he gave an incredible story about how his accountant "saw he was successful" and recommended an overseas investor. Subsequently, the accountant kept Mr. Tehrani’s tax and business records because of a business dispute. Given Mr. Tehrani was underreporting his income his accountant would not have known that he was successful and when this was pointed out to Mr. Tehrani he had no answer to this.

[121] For these reasons I found Mr. Tehrani was not a credible witness. In some cases however, his evidence still raised a reasonable doubt. In other cases it did not. I will deal with these issues as I review the evidence.

(e) Ms. Chapkina

[122] Ms. Chapkina appeared to have good recall of the events in issue and for the most part I found she was doing her best to recount those events accurately. Her evidence was internally consistent and for the most part unshaken in cross-examination. Her demeanour did not change when she was cross-examined.

[123] I accept that Ms. Chapkina was not a sophisticated businessperson and apart from her experience with Blue Glass, she had no business experience. Ms. Chapkina was clearly very much influenced by Mr. Levy and more so by Mr. Kazman, who she clearly trusted to act in her best interests. The evidence concerning what I call the Bochner Condo makes that very, very clear. As Mr. Chapnick submits, this evidence demonstrates Ms. Chapkina’s naiveté if not blind trust in Mr. Kazman. Mr. Chapnick argues that Ms. Chapkina had no reason to suspect any mala fides and was not willfully blind to anything. However, there is no doubt that Ms. Chapkina is also an intelligent woman and I believe she had to know more than what she sometimes admitted. As I will come to however, there were times when I found her evidence to be incredible.

[124] Unlike some of the other defendants, I did not get a sense that Ms. Chapkina’s evidence was impacted by any malice towards Mr. Kazman or even Mr. Levy. To the extent that she was able to shed some light on Mr. Kazman’s role in certain matters that I must determine, I found her evidence very compelling.

[125] As I will come to, I have come to the conclusion that some of the evidence Ms. Chapkina gave is not true and in each case, to the extent it goes to an essential element of an offence that the Crown must prove, I have considered whether or not it raises a reasonable doubt in my mind.

(f) Mr. Ghatan

[126] Mr. Ghatan gave evidence and was cross-examined by both Mr. Levy and the Crown.

[127] Mr. Fox submits that Mr. Ghatan was not shaken in cross-examination but as I will come to, he did change his evidence on occasion and I have difficulty with some of it.

[128] I noted that when Mr. Ghatan was questioned about the loan he arranged with Mr. Levy that he now knows came from the Bankays, he became very agitated with Mr. Levy and he testified that Mr. Levy had destroyed his life to which Mr. Levy responded that he was the victim. At another point in his evidence Mr. Ghatan testified emotionally and said that he was upset because of what Mr. Levy did to his life - he lost a great deal including his licence and ability to work as a real estate agent, something he appears to have been good at. He also expressed upset because of what Mr. Levy had done to all of the other defendants. I accept that Mr. Ghatan is very upset about what has happened to him but that does not assist me in assessing his credibility as a witness one way or another save to consider this in terms of any adverse evidence he gave about Mr. Levy.

[129] There was otherwise nothing in Mr. Ghatan’s demeanour to assist me in assessing his evidence. As I review his evidence I will make my findings of fact relevant to him and Homelife largely based on the documents in evidence and the Coort Analysis, bearing in mind that I do not have to believe his denials of participation in any fraud that I may find and that the Crown bears the onus throughout to prove its case against Mr. Ghatan beyond a reasonable doubt.

The Defence Witnesses

[130] I deal with my assessment of the credibility and reliability of the witnesses called by Mr. Kazman, Mr. Levy and Mr. Inoue in Appendix “I”. For the reasons set out there I find those witnesses to be credible and their evidence to be reliable with the exception of Armando Benlezrah, the principal of Bonded, who was called by Mr. Levy. I found Mr. Benlezrah to be a wholly untruthful witness and find that none of his testimony can be relied upon for the reasons set out in Appendix “I”. I also have issues with the evidence of Deborah Bendavid given her flip-flop from her statement to Cpl. Thompson.

Preliminary Findings of Fact

[131] In order to decide this case there are many, many factual findings to be made. I will deal first, to the extent I can, with those preliminary findings of fact that relate to evidence that applies to the whole case or to an aspect of it that is broader than the evidence and issues that pertain only to an individual SBL in issue. At this stage I have only made findings of fact that do not rely on the similar fact evidence. My preliminary findings are as follows.

Findings with Respect to the Canada Small Business Financing Program (CSBFP)

[132] Mr. De Franco explained the CSBFP based on his 20 years of experience with Industry Canada. He reviewed the relevant legislation and in particular the Canada Small Business Financing Act, S.C. 1998, c. 36 (the Act) and the Canada Small Business Financing Regulations, SOR/99-141 (the Regulations). Appendix “J” sets out the relevant provisions.

[133] Anyone can apply for a SBL, be they an individual, a partnership or a corporation, provided it is a Canadian controlled corporation. There are some exceptions such as, for example, charitable or non-profit organizations. In this case for all of the 16 SBLs in issue, a corporation that was 100% owned by one of the defendants obtained the SBL.

[134] The loan limit for most of the time in issue in this case was $250,000. It was increased on April 1, 2009 to $500,000 for two loans maximum but the limit for equipment and leaseholds was $350,000 and the balance could be used to purchase real property. The attraction for the borrower is that the borrower only has to give a personal guarantee in favour of the lender for 25% of the loan amount.

[135] According to Mr. De Franco, decisions related to granting loans rest entirely with the lenders, in this case banks, and their own established criteria. Lending rules are not necessarily consistent from bank to bank. Industry Canada is not involved in the process or in the decision of granting the loan. They do not deal with the borrowers whatsoever. There are certain parameters for the loan, however, to qualify for the program. The bulk of the requirements for the lender are set out in section 5(1) of the Regulations. For example, inventory cannot be financed. Furthermore, if the loan is for too much money or there is a disclosure of revenue of the small business exceeding $5 million, then Industry Canada will not register the loan. I note as well that s. 8 sets out the Due Diligence Requirements that the banks must follow.

[136] After the loan is approved, the next step is for the borrower to inform the bank when the leasehold improvements and delivery of furniture, fixtures and equipment, has been completed. The borrower then provides the bank with invoices from its contractor(s) and the bank starts to advance funds. Once the funds have been released, either partially or in full, a Loan Registration Form must be completed and submitted to Industry Canada for registration along with a fee, which is 2% of the loan amount. Industry Canada then issues a Loan Acknowledgement form, which is provided to the lender.

[137] Mr. De Franco gave evidence about what happens if a SBL goes into default. I have not considered this evidence, as it is not relevant to the issues that I must determine. As already stated, this evidence may become relevant at sentencing if there are convictions.

[138] Mr. De Franco stressed in his evidence that the CSBFP is not a guarantee. It is more akin to an insurance policy for the lenders. The lender has to satisfy compliance with the Regulations otherwise a claim for loss could be rejected. If, for example, a lender does not provide a copy of an invoice as proof of purchase of an asset or proof of payment for the asset, that asset is deducted and not eligible for a claim. Where a claim is accepted, the bank only pays 90% of the loss. As Mr. Kazman submitted, provided the banks grant the SBL in accordance with the Regulations, given their ability to claim most of their loss from Industry Canada, the banks are well secured.

[139] Back in 2007 there was a provision in the Regulations that if the landlord and tenant were not at “arm’s length” then the loan for the leasehold improvements would have to be secured by a mortgage on the landlord’s property. This was to discourage situations where the owner of the property improved the property by having a family member open a business to do improvements like air conditioning, electrical, that would have no benefit to the small business. I will come to the definition of “arm’s length”.

[140] Finally, the documents from Industry Canada were proven authentic and introduced through the evidence of Mr. De Franco.

Findings with Respect to the SBL Loan Process

[141] Although the precise application process for each of the SBLs in issue varied to some extent depending on the bank applied to, there were a number of steps that were uniform and a number of documents provided to and from Industry Canada that existed in each case. To understand my analysis of the 16 SBLs, some attention to the loan process generally will assist.

(a) Business Plan

[142] Most of the loan files contain a copy of a Business Plan for the SBL in question. Given the evidence of Mr. Levy and the defendants, Business Plans were provided to the bank in all cases and so I have assumed that some have been lost. All of the Business Plans in evidence, including the ones Mr. Levy admitted to preparing, were designed and formatted in the same way and the content is very similar. There is a cover page, sometimes with a graphic and, according to Mr. Levy, this is always followed by a Table of Contents in the Plans he prepared,[^6] which is followed by typed information under the headings: Executive Summary, which as the heading suggests, explains what the new business intends to do and who will operate it; Introduction, which explains where the business will operate and how it will thrive; Mission Statement, which is typically a short statement saying that the business will operate with integrity and maintain a high standard of “Value, Design, Quality Products and Services”; and a section headed Management, which describes the owner of the borrower and their experience suitable for the new business in question. There is also a section on Financing, which sets out what the estimated start-up costs for the business will be, how much the borrower is prepared to invest of their “own equity” and the amount of the SBL sought, including the amortization period and that it will be “collaterized [sic] by all the Equipment, Furnishings, Fixtures and Leasehold Improvements”. Each of the Financing sections also includes an itemized list of Estimated Start-Up Cost which totals the amount of the SBL sought.

[143] Through his company Fairbank, Mr. Levy admitted preparing the first Business Plan for Ms. Cohen, Mr. Tehrani, Mr. A. Tehrani, Ms. Chapkina and Mr. Ghatan. He denied preparing more than one Business Plan in the case of Ms. Cohen and those defendants who obtained more than one SBL.

[144] Mr. Levy testified that the banks required a business plan before approving a SBL. There is no evidence from any of the bank representatives that confirms this save for the BNS representative who testified that they were required in some cases. It is clear from the evidence however, that if a business plan was provided it was read by the bank representative and in fact, some of the defendants also testified that the account manager they met with was very interested in the business plan and in a couple of cases required changes to the financial projections.

[145] In a few instances the Crown relies on what is alleged to be misrepresentations in the Business Plan but the relevance of the Plans in this case is primarily the question of who prepared the Plan, given the evidence that a package, including a Business Plan, was provided by the defendants to the bank and in most cases the package included fraudulent documents.

[146] There is no evidence that Mr. Kazman assisted in any way in the preparation of Business Plans, loan applications, or any other loan documents, real or altered.

(b) Loan Application Documents

[147] The loan application process varied depending on the bank. In each case however, there were certain documents provided as part of the loan application and this included a financial statement of some sort completed by the borrower, by hand, setting out personal information as to income, assets and liabilities. I will review these forms in the context of each of the 16 SBLs. However, it is important to note that many of the documents were signed by the borrower and in doing so they were certifying the accuracy of the contents of the document, which is important to some of aspects of the Crown’s case.

[148] In most but not all cases, the SBL loan files contain copies of GICs, NOAs, and T1 Generals, which I have found were fraudulent either because they were entirely forged or altered to change the information from the original document. In all cases the fraudulent documents enhanced the financial resources of the borrower. Mr. Chapnick argued that there is no evidence the bank asked for GICs and NOAs and that the only evidence is that Mr. Levy asked for these documents. It is his position that as a result, the Crown has not proven that the banks relied on this information, to the extent they were presented with fraudulent documents, in deciding whether or not to grant the SBL. That is an issue I will have to consider on all of the evidence as it varies; for example, the representative from the BNS said it was customary to get them. I will also have to consider to what extent any of the defendants in question were aware of these alterations and if possible who created what I will call the fraudulent documents. The evidence is clear that they were altered or prepared in a professional manner and that the differences from the original authentic document would not be obvious.

[149] In addition, the SBL loan files all contain a copy of either an Offer to Lease or an Agreement to Lease which was clearly to provide evidence that a location for the proposed business had already been found. In some cases, as I will come to, those leases were fabricated.

[150] Once the SBL was approved, the borrower applied to open at least one bank account with the bank in question and executed a banking agreement, a personal guarantee for approximately 25% of the SBL amount and certain security documents such as a promissory note and documents permitting registrations of the equipment financed by the bank under the Personal Property Security Act, R.S.O. 1990, c. P.10.

[151] Invoices from purported contractors for leasehold improvements, furniture, fixtures and equipment are found in the SBL loan files and save for a couple of exceptions I will come to, they were paid from the SBL proceeds. In some cases these invoices were paid directly by the bank to the contractor pursuant to a direction signed by the borrower. In other cases the bank paid the SBL proceeds to the borrower who then paid the invoice.

(c) Start-up Capital

[152] Under the CSBFP, banks require an "injection" of start-up capital in order to release loan proceeds. Every business plan clearly states how much money the borrower is prepared to invest “his/her own equity”. The whole purpose of showing "start-up capital" to the bank is to represent that the borrower has money to help run the business. This makes sense since the SBL proceeds cannot be used to pay for inventory or the operating costs of the business. If the supposed start-up capital never existed or is quickly paid back to the original lender, it begs the question of how the borrower ever intended to actually run the business.

[153] During the trial the Crown repeatedly took the position that the start-up capital in the CSBFP had to be non-borrowed funds. The Crown’s position is that the phrase "his/her own equity" which is found in the Business Plans means the funds are not borrowed. I agree that the Business Plans represented that the borrower would invest their own equity but it was silent on how that equity could be acquired. Mr. Fox argued the opposite and developed an elaborate argument that in reality, the start-up capital for a new small business in Canada will often come from borrowed sources and gave detailed reasons for this but there was no evidence to support this argument. However, there was no evidence presented that the Act required that the start-up capital not be borrowed funds.. There was no evidence that any of the defendants had been advised that the start-up capital could not be borrowed. Furthermore, in most cases start-up capital was in fact injected into the business from various sources. When asked about this Ms. Coutts from the RBC, who is well versed in the SBL process, could not say although she did know that the bank wants the clients to have assets in case they get into a cash flow problem.

[154] For these reasons I have not considered the fact that the start-up capital was borrowed, even if that is the case, to be relevant save to the extent it may shed light on the relationship between the defendants.

(d) Loan Registration Form

[155] The Loan Registration Form is a Government of Canada form that is filled in for each of the SBLs by hand. The form is identical for each of the 16 SBLs. As I will come to, in some cases it was completed by the bank representative and in other cases by the borrower.

[156] The main significance of this form from the Crown’s perspective is that it contains a section headed “Borrower’s Acknowledgement and Consent” where the borrower (or responsible officer of the company) certifies certain facts, including para. 1 (b) that:

… the total amount of the proposed loan and the principal amount outstanding, in respect of the borrower and all borrowers related to the borrower within the meaning of the Regulations, does not exceed $250,000 (including outstanding SBLA loans. [Emphasis added, hereinafter referred to as the Loan Limit Clause]

[157] Para. 1 (e) of the Loan Registration Form has a box next to it that provides for a checkmark indicating “yes”, “no” or “not applicable” and an initial by the borrower and asks:

… if the loan or part of the loan is to finance leasehold improvements, the borrower and the landlord are at arm’s length. [Emphasis added, hereinafter referred to as the Arm’s Length Clause]

[158] At the bottom of the Loan Registration Form, just above the signature of the borrower, it states in bold that “it is an offence to make any false statement or misrepresentations on this registration form and is subject to punishment as stated in section 15” of the Act. I have summarized the evidence and the law as to the meaning of the terms “related” and “arm’s length” in Appendix “K”. Save for the SBL Mr. Levy obtained for Bluerock, each of the defendants certified that they were not in breach of the Loan Limit Clause or the Arm’s Length Clause. Where the Crown asserts that there was a misrepresentation or omission by the borrower in the Loan Registration form, that will be dealt with when the SBL in question is reviewed. For the purposes of this case, borrowers are related when one borrower controls, directly or indirectly in any manner, the other borrower. There is no doubt that in the case of those defendants who obtained more than one SBL in quick succession, that all of their borrower companies were “related” and so the only question is did the amount of their loans add up to more than $250,000.

[159] There are other more difficult questions with respect to the Arm’s Length Clause. I have found that in many cases the Crown’s position is inconsistent with the legal definition at the time in question. Furthermore, every bank witness that was called had no idea about the legal definition of the term and appeared to give evidence about it based on what one might consider the layperson’s meaning of the term to be. There was also no evidence called to contradict the evidence of the defendants that the term was not explained to them. Furthermore, there was no evidence that Bluerock SBL was treated any differently even though Mr. Levy represented that the borrower and the landlord were not arm’s length.

(e) Loan Registration Acknowledgment

[160] The Loan Registration Acknowledgment is also a Government of Canada form that is identical in format for each of the 16 SBLs. It is a form Industry Canada provides to the bank in question and includes the name of the borrower, the date of loan approval and when the loan was disbursed. According to Mr. De Franco, this is the date of the first advance only, not all of the advances. This form also included the total amount of the loan and the registration fee.

(f) Payment of Invoices for Leasehold Improvements and the Supply of Equipment, Furniture and Fixtures

[161] In the case of each SBL the bank in question was provided with invoices purporting to show leasehold improvements that had been done to the rental property and the purchase of equipment, furniture and fixtures for the business. The SBL funds were used to pay these invoices although up to 25% of the invoices were the responsibility of the borrower, to pay from his/her own funds towards the invoice.

(g) Default/Appraisals

[162] Most of the SBL loan files contain documents related to the default of the SBL loan in question and appraisals of the borrower’s assets. This evidence will be referred to below for each of the SBLs.

(h) Internal Bank Notes

[163] Most of the SBL files contain copies of internal notes made by bank employees. When these records were admitted into evidence through the SBL files I made a number of evidentiary rulings that I have already referred to, that no party objected to.

Findings with Respect to the Accuracy of the Coort Analysis

[164] Mr. Coort was tendered as an expert in forensic accounting and for the reasons set out in Appendix “H”, I found him to be a credible and reliable witness. There was some debate about whether it was necessary to qualify him as an expert as his report was essentially factual, but I decided to err on the side of caution

[165] As I have said, no issues of accuracy were raised with respect to any of the factual information that is set out in the Coort Analysis. I find that it is entirely reliable to the extent that he analyzed banking records that were provided to him. Issues, however, were raised as to whether or not the Coort Analysis presents an incomplete picture.

[166] Mr. Levy testified that the Coort Analysis misrepresents the facts for two reasons. First of all, because for the most part with respect to his companies, Mr. Coort only looked at bank account records for a specific period of time; not from the opening to the closing of the account. Mr. Levy testified that tracing does not work this way and that you have to go back to the opening of the account. He disputes the proposition that if an account has no money and then gets $100,000 from a SBL, which is spent on the purchase of a property, that this is using SBL proceeds to buy the property. That argument I do not accept. If the only source or major source of funds is the receipt of funds from a SBL then obviously the defendant has used SBL proceeds to purchase the property if Mr. Coort was able to trace the funds from the SBL to the purchase of the property.

[167] Mr. Levy also testified that he pre-bought all of the lumber, tiles, drywall and other supplies years earlier and that he stored all of those supplies in the basements of 1040 and 1048 Eglinton Avenue West. Mr. Levy said earlier bank statements would have shown all of those purchases. He testified that later he used trailers to hold the materials behind the stores. I do not accept this evidence. Given the Eglinton properties were usually leased and had parking for tenants behind them, this evidence did not make sense. Furthermore, many invoices refer to renovations on the lower level at those locations for the benefit of the tenant. Mr. Levy did not own a warehouse devoted to the storage of construction material during the material time. In addition, Mr. Levy was not consistent on this point. When Mr. Coristine cross-examined Mr. Levy about how he was paying for work for Alta, Mr. Levy said that he saw some payments to Home Depot but that Mr. Coort did not see his credit card statements.

[168] Mr. Levy’s second reason for challenging the Coort Analysis is his evidence that he had bank accounts that Mr. Coort did not see. It is significant that although Mr. Levy put to Mr. Coort that he did not always have the entire bank records from the opening to closing of an account, he never put to him that he missed other accounts that Mr. Levy had. As a result, I don’t know what Mr. Coort would have said as to how likely this is.

[169] If I consider Mr. Coort’s evidence about how he prepared his Analysis, I am able to come to a conclusion. For every SBL where one or more of Mr. Levy’s companies received money, Mr. Coort had the account where the funds were deposited to analyze. He traced the source and destination of all payments in and out of the accounts for Mr. Levy’s corporations and others that he did have and I would have thought that process would have provided some evidence of the existence of other bank accounts, if they existed. The evidence of Mr. Coort was that he would flag certain accounts and request them if needed. Mr. Coort certainly would have seen any cheques or drafts to and from these other accounts when he reviewed the bank records for the accounts he had and to the extent those were identified they were either from corporations that I am now aware of or from unknown sources. There are only a relatively few payments where the source or destination is unknown. Mr. Levy did not testify that any of the unknown sources were from other accounts of any of his corporations.

[170] I also would have expected that the account that received funds from a borrower would be the account used to buy construction materials and pay employees and suppliers. There is some evidence of that with payments to various people Mr. Levy hired. Even if that were not the case, as the Crown submitted, the accounts Mr. Coort analyzed would have had to send the money received in payment of invoices to another account since it was Mr. Levy's position that this other account Mr. Coort did not see was used for supplies and payroll. Mr. Levy denied this suggestion and said that he had money in his other accounts that we do not have that he used but that does not explain why Mr. Coort would not have realized there were other accounts in the analysis he did do. In my view if there were in fact other accounts as Mr. Levy alleges, Mr. Coort would have seen that and based on his evidence, I am satisfied that he would have asked Cpl. Thompson to obtain the records of those other accounts.

[171] The significance of this issue is that although Mr. Levy was adamant that he spent a lot of money at suppliers for all his various construction jobs, and certainly the various invoices suggest extensive and expensive leasehold improvements, the bank records show very little money going out to suppliers such as Home Depot, Rona, Lowes, etc. The amount of money spent at suppliers especially pales in comparison to the money Mr. Levy was bringing in through the same construction companies. Mr. Levy's answer to this discrepancy was that "the Crown didn't do its job by getting all of his bank accounts", or "the bank accounts obtained did not go back far enough," but for the reasons stated I do not accept that evidence. As I will come to, for the Cohen Loans I have concluded that no leasehold improvements were done and no furniture, fixtures or equipment was supplied - the SBLs were entire shams. In the case of some of the others, I have concluded that at least some leasehold improvements were done and some furniture, fixtures and equipment was supplied but given the absence of money being spent by Mr. Levy on payroll and supplies, and other evidence I have determined that not all that was represented to the bank was done. Whether or not the defendant in question was aware of this is something I have considered for each of those SBLs based on the evidence I have.

[172] For these reasons, even if there is some truth to Mr. Levy’s position, I find that it would not materially impact on the Coort Analysis. The likelihood of Mr. Coort missing any significant account belonging to Mr. Levy or one of his corporations is in my view virtually non-existent.

[173] With respect to Mr. Tehrani, however, the Crown acknowledged that not having the Meez Ltd. account(s) was an unfortunate oversight. Mr. Tehrani testified that he had a regular and US dollar account at TD for Meez Ltd. He had the same for As Is as well as HSBC accounts, both Canadian and US dollar. He had personal accounts including a home equity line of credit that the RCMP was not aware of (the source of the 'mystery' start-up capital for Uzeem), and he also gave evidence (confirmed by his brother) that they had a joint account at TD, opened when they owned a condo together.

[174] I also have to be mindful as to whether I have all of the records of a particular account. For example, Mr. Chapnick pointed out that the RCMP's records for Exclusive stopped just as the business started running, so could say nothing about the business conducted by that company once it started. Furthermore, repayments by Mr. Tehrani for the Blue Deer and Oakwood loans that I will come to, were both after the period studied by the RCMP. Mr. Coort agreed that these repayments would result in the numbers changing accordingly for Mr. Kazman and Mr. Tehrani.

[174]

Findings with Respect to the Lack of Evidence of Payments by the Various Construction Companies for Leasehold Improvements, Equipment, Fixtures and Furniture

[175] The Crown submitted that given the general lack of evidence of money being spent by the construction companies in question for leasehold improvements, equipment, fixtures and furniture, that an inference should be drawn in all cases that at the very least any work that was done was done cheaply and that all or some leasehold improvements that were billed were not done, that all or some furniture, fixtures and equipment was not supplied as invoiced and that the invoices were therefore fraudulently inflated. Having found there are unlikely any missing bank accounts I considered whether or not I could draw such an inference.

[176] I found that the difficulty with drawing such an inference in general is that, as I will come to, the evidence is clear that at least from the drywall in, in some cases a lot of work was done to renovate the premises. For example clearly a lot of work at least from the drywall in was done to renovate the Homelife offices, which begs the question where did the money come from to pay for those leasehold improvements?

[177] Considering the totality of the evidence, it is clear that sometimes Mr. Levy would do the work by paying cash or hiring his contractors Danil or Morningstar and other suppliers, for example of HVAC systems. Those payments however do not necessarily explain all of the work I have found was done based on the evidence.

[178] Given the volume of transactions in the banking records of the various construction companies and the money that is circling after each of the SBLs between Mr. Levy, Mr. Kazman, Ms. Cohen and their related companies, and the fact that payments could have been made by cash, in cases where it appears that leasehold improvements were done and equipment, furniture and fixtures was supplied, it must be that this was paid for in some manner, I presume cash. For that reason I determined that I cannot draw the inference in all cases that simply because there is no evidence that the contractor company paid for certain leasehold improvements and/or equipment, furniture and supplies that it was not in fact done or supplied. Instead that is one factor I have considered with all of the other evidence.

[179] For that reason I have not accepted the Crown’s submission that the absence of a record of these payments means that the work was not done or the equipment was not supplied.

Findings with Respect to the Relationship between the Defendants

[180] The nature of the relationships between the defendants, if any, at the material time, is of course relevant, particularly to the criminal organization charge. However, to the extent that the Crown has proven that there was a relationship between one or more of the defendants, that does not necessarily imply that one defendant had knowledge of any wrongdoing by the other.

[181] There is no dispute that Mr. Kazman provided legal services to Ms. Cohen and they were partners in certain properties. He also testified that she loaned money to him. There is no evidence that they were partners in any businesses although they were partners in certain properties. Mr. Kazman did admit that he and Ms. Cohen were intimate and when he was asked when, he said it was probably before the SBLs in issue, but that he was not sure. He was not asked how long this intimate relationship was. In his written submissions he stated it was only one occasion but that was not his evidence at trial.

[182] An issue at trial was to what extent Ms. Cohen told Mr. Kazman about her businesses. He testified that she did not confide in him about the day-to-day operations of her businesses. However, as I will come to, despite this evidence, on many occasions it seemed that Mr. Kazman did know about her business plans.

[183] Mr. Kazman also provided legal services to Mr. Levy and they were partners in certain properties as well. The evidence is clear that despite any issues in their relationship they were very close for most of the time period in issue. In fact Mr. Levy chose Mr. Kazman as his best man when he got married instead of one of his brothers. Nevertheless, Mr. Kazman submits that he did not know about Mr. Levy’s businesses and that Mr. Levy was a very secretive individual.

[184] Mr. Levy said that by 2010-2011 Mr. Kazman owed him almost $2 million. He admitted it would have been less in 2008. He said he started lending Mr. Kazman money in 2006 and that by 2008 Mr. Kazman could have owed him between $1.3 and $1.4 million. He said he had everything in writing with promissory notes. At the end he didn’t care about keeping the promissory notes because he knew he wouldn’t get the money although he also said that Mr. Kazman was giving him partial payment on these loans.

[185] As already stated, by 2010 Mr. Kazman and Mr. Levy had a falling out and parted company. Part of the dispute between them was Mr. Kazman said that he was a partner with Mr. Levy in four properties, whereas Mr. Levy said it was only two. Mr. Kazman filed cautions as a result against the properties in 2010 but there has been no judicial determination as to ownership. The hostility between them was palpable at the trial.

[186] Mr. Kazman and Ms. Chapkina worked together during the relevant period and it was not until Ms. Chapkina was charged that she left his employment. Although Ms. Chapkina did not agree with Mr. Kazman that they had a father/daughter relationship, they were clearly very close and there is no doubt that she trusted him.

[187] Mr. Kazman recalls buying a stool from Mr. A. Tehrani when he was operating Contempo and he testified that this is when he met him for the first time. Mr. A. Tehrani agreed with this and explained that Mr. Kazman told him at the time that he knew Mr. Levy. Mr. A. Tehrani was adamant that he did not deal with Mr. Kazman for the leasing or leasehold improvements for any of his SBLs. Although the Crown argues that Mr. Kazman must have met Mr. A. Tehrani at the time loans were made to him from him and/or Ms. Cohen, I do not agree as it is just as likely that those loans were entirely arranged by Mr. Levy. I accept, on the evidence, that Mr. Kazman and Mr. A. Tehrani had no direct dealing for any of Mr. A. Tehrani’s SBLs but there is still the issue of who controlled the Disputed Construction Companies that purportedly did the leasehold improvements and purchased furniture, fixtures and equipment and as a result received SBL proceeds.

[188] Both Mr. Kazman and Mr. Tehrani testified that despite the fact that Mr. Tehrani was borrowing significant sums of money from Mr. Kazman’s companies that they did not meet each other at the time as the loans were arranged by Mr. Levy. The Crown takes the position that this evidence is incredible but given the relationship between Mr. Levy and Mr. Kazman, I disagree. There is no evidence of any relationship between Mr. Kazman and either of the Tehranis at the material time.

[189] Mr. Kazman and Mr. Ghatan met for the first time when Mr. Ghatan moved into the first floor of 1048 Eglinton Avenue West (1048 Eglinton) where Mr. Kazman had his Dufferin Paralegal office on the second floor. He did not know that Mr. Ghatan had applied for a SBL. They both agree they had no dealings with each other save for one letter Mr. Kazman was asked to prepare for Mr. Ghatan to the Real Estate Board. I accept that this was the only contact between Mr. Kazman and Mr. Ghatan prior to the charges.

[190] Mr. Levy knew everyone at the material time although he downplayed his relationship with Ms. Cohen and Ms. Chapkina. According to Mr. Levy, Mr. Kazman introduced him to Ms. Cohen. He had seen her in Mr. Kazman’s office but he never had any discussions with her until she came to see him about the preparation of a Business Plan. In this regard, as I will come to, his evidence was internally inconsistent. Mr. Levy’s relationship with the Tehranis went back to when Mr. Tehrani was operating Bizarre. Mr. Levy testified that he had had no prior dealing with Mr. Ghatan before he applied for his SBL and this was confirmed by Mr. Ghatan. I accept that evidence.

[191] Mr. Levy and his brother, Mr. A. Levy, appear to have had a close relationship at the material time. Mr. Kazman and Mr. A. Levy knew each other as a result of Mr. Kazman’s friendship with Mr. Levy and there is evidence of loans between them. For example, Mr. Kazman’s company, Blue Deer Holdings Inc. (Blue Deer), advanced $100,000 to Mr. A. Levy’s company, Blue Beach Avenue Corporation. There was no evidence to contradict the evidence of Mr. Kazman that this was a loan.

[192] The other defendants had little or no dealings with Mr. A. Levy. The only evidence of any contact with the other defendants is that Mr. A. Levy picked up some furniture that Mr. Tehrani had sold to Trust Inc. in May 2010.

[193] It is the position of the Tehranis that they never met Ms. Cohen, Ms. Chapkina or Mr. Ghatan until these criminal proceedings. Ms. Chapkina and Mr. Ghatan confirm this. I accept this evidence. The evidence, however, is clear that Mr. A. Tehrani, Mr. Tehrani and Mr. Salehi were close and as I have stated at one point Mr. Salehi and Mr. Tehrani were partners in Meez Ltd.. The evidence of Mr. A. Tehrani and Mr. Tehrani is that Mr. Tehrani supplied furniture for inventory to Mr. A. Tehrani’s and Mr. Salehi’s stores.

Findings with Respect to M&M 155 Holdings Inc.

[194] The Crown alleges that M&M 155 Holdings Inc. (M&M) was Mr. Levy’s company, no doubt because he incorporated this company as first director on September 7, 2007, was President and Secretary and a signatory on the CIBC bank account along with Mr. Kazman. Mr. Levy disputes the Crown’s position. Although Mr. Levy was clearly associated with this company, for the reasons that follow, I find that it was Mr. Kazman who was actually the beneficial owner and the directing mind of this company.

[195] Mr. Kazman admitted that M&M stood for “Maxine and Marshall;” his and his wife’s first names. I presume, given that this company purchased what Mr. Kazman described as his wife’s dream home at 155 Sandringham Drive, Toronto (Sandringham), that the “155” in the corporate name is a reference to that property.

[196] Mr. Kazman testified that Mr. Levy agreed to help him buy Sandringham and that M&M held title to this property for the benefit of Mr. Kazman. As I understand the evidence, Mr. Kazman would not have been able to get financing to purchase the property on his own and he might have lost his deposit had Mr. Levy not assisted him in getting mortgage financing. There was some evidence as to why a corporation was used, rather than Mr. Levy personally, but clearly Mr. Levy had the ability to obtain a mortgage that Mr. Kazman could not.

[197] Mr. Levy introduced a document entitled “Declaration of Trust” with the words “and Partnership Agreement” stroked out, dated October 30, 2007 (“M&M Declaration of Trust”). Mr. Kazman testified that he did not recall the details of this document but he admitted that he or Mr. Levy prepared it, that the initials looked like his and that he and Mr. Levy both signed the document. Although it does not matter, in my view as the lawyer, Mr. Kazman likely prepared the M&M Declaration of Trust. It is formatted and has similar language to the Whitehorse Contracting Inc. (Whitehorse) Declaration of Trust that I will come to, that Mr. Kazman admitted he probably prepared.

[198] The recitals of the M&M Declaration of Trust confirm that the company was to become the registered owner of Sandringham. Para. 2 states that Mr. Levy is the sole shareholder, officer and director of the company and Mr. Kazman testified to this before he was shown this document. Para. 3 states that Mr. Levy holds 100% of the shares of the company as a bare trustee for Marshall; Mr. Kazman. Para. 4 states that the company holds title to the said property solely as bare trustee and para. 5 states that the property is to be 100% beneficially owned by Mr. Kazman. Para. 6 provides that Mr. Levy does not have any interest in the property or in the bank account of the company and that this was correct at the time the document was signed. [Emphasis added] Para. 8 provides that all expenses for utilities, taxes, etc., are to be paid by Mr. Kazman alone and that Mr. Levy is not to be responsible for the same.

[199] Mr. Kazman testified that since Mr. Levy was the owner of M&M that he had to open the bank account and that Mr. Levy was a signatory on the bank account. They needed an account to pay the mortgage that M&M obtained for the purchase of the property, as the banks usually like pre-authorized cheques for that purpose. All of this makes sense and I accept this evidence.

[200] Mr. Levy put to Mr. Kazman that he was only authorized to sign cheques to pay insurance and taxes for Sandringham, but Mr. Kazman testified that Mr. Levy used the M&M bank account for whatever purposes he wanted. Mr. Kazman’s evidence, however, is at odds with the clear terms of his agreement with Mr. Levy.

[201] Mr. Coort analyzed M&M’s CIBC account from September 11, 2007, when it was opened, until December 31, 2010. There are significant deposits into the account from Mr. Kazman or his companies including $118,000 noted “3^rd Mortgage advance – 155 Sandringham”. Payments out of the account include monthly mortgage payments related to Sandringham, to three different mortgagors and other payments clearly personal to Mr. Kazman.

[202] As to who controlled M&M’s account, I find it was Mr. Kazman and that, contrary to his evidence, Mr. Levy was not and did not use it for whatever purposes he wanted. Based on the Coort Analysis, the account was used to pay the three mortgages on Sandringham and what appear to be other expenses associated to the maintenance of the property, payments for the most part to Mr. Kazman and his wife and his companies. There are also payments to Mr. Levy and some of his companies but those do not alter my view overall that M&M was really Mr. Kazman’s company. I believe those would have been to reimburse Mr. Levy for payments he made for Sandringham such as insurance. This is what the M&M Declaration of Trust provides for and this conclusion is the only one in my view that makes any sense given the reason the company was incorporated.

[203] The Coort Analysis assumed M&M was Mr. Levy’s company and so my conclusion does alter some of his mathematical conclusions but nothing more.

[204] There are clearly disputes between Mr. Kazman and Mr. Levy concerning M&M now. Mr. Levy alleged in questions to Mr. Kazman that he did not know that Mr. Kazman put a second mortgage on Sandringham and that Mr. Kazman paid it out of the M&M account. Mr. Levy also complained that Mr. Kazman sold Sandringham, without telling him, when Mr. Kazman owed a lot of money to Mr. Levy. Mr. Levy also complained that Mr. Kazman bounced cheques, presumably by not putting enough money into the M&M account and that this hurt his; Mr. Levy’s, credit rating. These are other collateral issues that do not need to be resolved in this proceeding.

[205] The incorporation of M&M illustrates the closeness of the relationship between Mr. Kazman and Mr. Levy at the time Sandringham was purchased; October 2007. It also illustrates that despite that closeness, as a lawyer, Mr. Kazman prepared an agreement to protect his and his wife’s interests in Sandringham. The fact Mr. Kazman needed Mr. Levy’s help to purchase his wife’s dream home also suggests that he had financial issues at the time and certainly carrying this home was expensive. The mortgage payments alone were over $5,000 per month.

[206] Although of no relevance to these proceedings, two payments to Sheila L. Montero in trust that total $216,262.12 made on September 26and October 29, 2007 demonstrate my concerns about Mr. Kazman’s credibility as a witness. In cross-examination, Mr. Coristine put to Mr. Kazman that this was to purchase Sandringham on October 30, 2007. Mr. Kazman refused to "guess" and said that Ms. Montero acted on numerous real estate transactions. He professed not to know who acted on the purchase of Sandringham. I find this evidence incredible. Mr. Kazman testified that Ms. Montero worked out of his office after he lost his licence and she was clearly doing his real estate deals. Clearly, given the timing, funds were being deposited to M&M for the purchase of Sandringham. There is no doubt that Ms. Montero was acting on that purchase. On September 12, 2007 Mr. Kazman received $150,000 into his personal CIBC account from Ms. Montero Re: 155 Sandringham purchase from Kazman. As Mr. Kazman never owned this property personally, but apparently had entered into an Agreement of Purchase and Sale, the only logical conclusion is that this related to the purchase of the property by M&M. On the day of the purchase; October 30, 2007, $150,000 was transferred out of Mr. Kazman’s account to an unknown source; I presume the vendor’s solicitor.

[207] The other relevance of M&M is that, as I will come to, the Coort Analysis establishes that its account received various payments that the Crown alleges were part of the money laundering. For example, Mr. Kazman was asked by Mr. Coristine about money from Icon Contracting (Icon) going first to Mr. Kazman’s company, Cramarossa Design & Renovations Inc. (Cramarossa), and then to M&M to pay the mortgage. He put to Mr. Kazman that he put it through two companies before it reached its ultimate goal. Mr. Kazman responded that he did not direct where the funds would go but this does not make sense since he was the one writing the cheques and there is no issue that he was in control of Cramarossa.

Findings with Respect to Property Ownership

[208] As already stated, there is a dispute between Mr. Kazman and Mr. Levy as to who had an interest in various properties at various times. As I stated during the trial, I am not able to make factual findings about the disputed properties. However, to the extent that Mr. Kazman claims that he had an ownership interest in a property, that evidence may be relevant to his knowledge of any SBL involving that property. I have included evidence relevant to the properties owned by Messrs. Kazman and Levy and Ms. Cohen in Appendix B.

Findings with Respect to the Invoices from the Disputed Construction Companies for Leasehold Improvements, Furniture, Fixtures and Equipment

[209] For each of the 16 SBLs, with the exception of Mr. Ghatan’s, invoices from one of the Disputed Construction Companies or construction companies owned by Mr. Levy and/or Mr. Kazman were provided to the borrower and the bank. As Mr. Kazman argued, all of the invoices from the Disputed Construction Companies look like invoices from Mr. Levy’s companies. There is some difference in the formatting but what is most significant is that their general content is the same for all of the SBLs. I will come back to the significance of this.

[210] Typically the first invoice provided to the borrower has a heading “Leasehold Improvements. First Part [sometimes referred to as Phase I]: Demolition & Disposal”. This invoice typically lists, without any further detail or price breakdown, the following (what I will hereinafter refer to as a “Total Gut Job”):

-Removal & Dispose of all Partitions and Existing walls.

-Removal & Dispose of all Existing plumbing and Fixtures.

-Removal & Dispose of all Electrical wiring and Fixtures.

-Removal & Dispose of existing carpets, tiles and borders.

-Removal & Dispose of Existing Heating & Air Conditioning System (HVAC).

[211] In some cases this phase included demolition and removal of this existing storefront. This invoice then goes on with the heading: “Second Part [sometimes referred to as Phase II]; Completion of Work” (hereinafter called “Total Rebuild”). Here, there is more variation but this part of the invoice typically includes the following:

-Supply and Install new partitions and replace new walls complete with bulkhead as needed.

-Supply and Install new Electrical panel, new wiring and new light fixtures.

-Supply and Install new doors, Hardware, and Custom drop ceiling light fixture.

-Supply and Install new Plumbing and Plumbing Fixtures (usually for a washroom).

-Supply and Install new HVAC by York System Model High Efficiency 100.0 afue with high force air duct (or some other similar product).

[212] Again in some cases this invoice would include installation of a new storefront.

[213] Typically there would be a second invoice for “Furniture, Fixtures and Equipment” provided to the borrower. Under each heading there is a list setting out, generally, what the item is, the number of items and in some cases serial numbers. In some cases these typical two invoices were broken down into three or more invoices and there may have been more than one purported contractor shown as the supplier on the invoices.

[214] The similarity of the invoices, particularly the first invoice for a “Total Gut Job” in each case does suggest that they were all prepared by or on behalf of the same person or persons. Given that Mr. Levy admitted that he and his staff prepared the invoices from his construction companies, the striking similarity of the invoices suggests that he prepared all of them, including the ones that came from one of the Disputed Construction Companies. This conclusion is reinforced by the fact that he admitted that one or more of his companies were in fact the contractor for each of the SBLs (save for the Cohen SBLs) although he maintained that he did so as a subcontractor to Mr. Kazman. This demonstrates his interest in the Disputed Construction Companies. That said, Mr. Kazman at one point admitted that he might have typed up an invoice for Mr. Levy and although he later submitted that he corrected this, there is no reason to believe that he could not have done so.

Findings with Respect to the Faxes with the Heading “HP LASERJET FAX 123456789”

[215] There are a number of documents in the bank loan files that have a fax header with a date and time, then “HP LASERTJET FAX 123456789” and a page number. I have referred to this as the HP Fax Number. Although 123456789 is not a phone number as it is only nine digits and not ten, the uniqueness of this number and how it appears on these documents along with the reference to HP LaserJet Fax makes it clear that the documents with this unique fax header were faxed to the bank in question from the same fax machine.

[216] I have found documents with this HP Fax Number in the following loan files:

a) ELFI - the first Northwood invoice re: leasehold improvements;

b) ELI - the fraudulent NOA for Ms. Cohen for 2006;

c) LHC - the second Northwood invoice re: furniture, fixtures and equipment;

d) LSC - the fraudulent HSBC GIC statement;

e) Contempo - the documents faxed to the bank included, a fax coversheet faxed May 20, 2008 which enclosed Mr. A. Tehrani’s 2007 property tax assessment, and the two Northwood quotes dated May 1, 2008, and the first Northwood invoice, the Opening Balance Sheet for Contempo as at June 1, 2009 faxed on June 6, 2008, a fax coversheet faxed on July 2, 2008 which stated the GST number, a fax coversheet faxed on July 14, 2008 which stated it attached the final invoice #9221 for furniture, fixtures and equipment, and an Invoice Direction Payment form and the second Northwood invoice faxed on July 14, 2008;

f) Modernito - letter on the letterhead of Trust Inc. Realty Corp. signed by Mr. Levy dated March 3, 2009 to Lipman Zener Waxman, Lipman firm in the loan file which attached an Amendment to Lease and a fax coversheet on the letterhead of Trust Inc. Realty Corp. to Michelle Panagiotakos (law clerk) at Torkin Manes from Mr. Levy/Trust Inc. Realty Corp. dated March 5, 2009;

g) Meez Corp. - pages from the Business Plan, the NOA for Mr. Tehrani for 2005, fax cover page for a fax sent purportedly from Mr. Tehrani on behalf of Meez Corp. (but does not have his signature) to Mr. Copeland attaching two Northwood invoices dated November 9 and 14, 2006, and Creative Contracting invoice dated September 11, 2006;

h) Homelife - a letter from Mr. Levy on behalf of MGM Inc. to the Lipman firm dated March 4, 2010 dealing with what happened to the Homelife assets;

i) Mosaic - the BOM loan file contains a fax coversheet from Mosaic dated November 29, 2006 to the Lipman firm and the fax header is cut off a bit but clearly shows that it is from the HP Fax Number. The same is true for the Northwood invoice in the loan file dated November 28, 2006 for furniture, fixtures and equipment.

[217] Given that this fax header appeared on items (f), (h) and the fax coversheet referred to in (i), I conclude that it must have been Mr. Levy or someone on his behalf that was using this particular fax machine. On this basis I find that all of these faxes with the HP Fax Number were faxed by Mr. Levy or someone on his instructions.

[218] I will deal with the significance of this finding as I review the individual SBLs.

Findings with Respect to the Bank Reliance Evidence

[219] I will set out the relevant evidence of the bank representatives that were called when I review the evidence of the 16 SBLs. Various issues arise with this evidence that I may have to deal with, depending on my findings of fact. The defendants point out that the Crown did not call any of the bank underwriters who, on the evidence, are the people who actually decided whether or not a particular SBL should have been approved. In short, they submit that the Crown has not proven beyond a reasonable doubt that any deceit caused a detriment to the banks.

[220] The Crown relies on the witnesses that it did call from the various banks who all testified that if they had known that the applicant had lied in any of the documents provided to the bank or filled out at the bank that they would have terminated the application process and not even submitted the SBL application to the underwriters. The Crown also relies on the plain language of the forms, which require the borrower to certify the accuracy of the information and, in the case of the Loan Registration Form, provides that it is an offence to give false information.

[221] In my view, generally speaking, the Crown may be able to prove reliance without calling each of the underwriters if the evidence establishes that the bank representative in question would not even have forwarded the application to the underwriting department. There is a legal issue that arises, however, which I deal with at Appendix “Q” and when I consider the various counts of fraud.

Common Findings of Fact with Respect to the 16 SBLs in Issue

[222] There are many facts that are common for each of the 16 SBLs in issue. I set them out here to avoid the need to repeat this evidence for each loan. To the extent these facts represent a pattern; I have considered them in coming to my decision on the Crown’s count-to-count similar fact application. These facts are as follows:

a) There is a temporal connection between all 16 loans, spanning the 32-month period of June 2007 - March 2010;

b) The corporation that obtained the SBL (borrowing company) was 100% owned by the defendant who incorporated the company. This was typically admitted and was also reflected in representations made to the bank and CRA;

c) All borrowing companies were newly incorporated within a short period before or after applying for a SBL;

d) For every SBL, the principal of the company gave a personal guarantee to the bank for 25% of the SBL;

e) All bank accounts for the borrowing companies were opened after the SBL was approved and each defendant was the sole signing officer on the business account of the company;

f) Except for the SBLs for Meez Corp. and Uzeem, the defendant went to a bank that was not their usual bank for the purpose of applying for the SBL;

g) Each defendant alleges that this was because Mr. Levy told them to go to this particular bank;

h) Of the 16 SBLs, five borrowers obtained multiple loans;

i) Where a defendant obtained multiple loans, they did so in quick succession;

j) None of the borrowers who obtained multiple SBLs returned to the same bank for his or her subsequent loans save for the Uzeem SBL;

k) None of the borrowers who obtained multiple SBLs advised the bank they went to after the first one of their prior SBL(s);

l) A company associated to Mr. Kazman acted as the landlord for five of the 16 borrowing companies, if I include ELI. In some cases no rent payments or insufficient rent payments were made to the landlord company in accordance with the lease provided to the bank;

m) Companies associated with Mr. Levy acted as landlords for six of the 16 loans;

n) Business Plans were located in 13 of 16 loan files, having been provided by each borrower to the bank;

o) Mr. Levy admits that he prepared the Business Plan for the first SBL obtained by each of the defendants;

p) Most of the SBLs involved the bank receiving fraudulent documents, namely fraudulent GICs and/or NOAs and/or T1 Generals;

q) All of the defendants testified that they did not know that fraudulent documents were being provided to the bank;

r) For many of the SBLs, the start-up capital could be traced back to prior loan proceeds and/or related parties;

s) No one (except Mr. Tehrani) questioned whether they could get a better deal from someone else in terms of the renovations;

t) Each defendant, save for Ms. Chapkina, claimed to have dealt exclusively with Mr. Levy in terms of the leasehold improvement, fixtures, furniture and equipment. They did not concern themselves with the name of the construction/supplier company that invoiced them;

u) A construction/supply company that was either associated to Mr. Kazman and/or Mr. Levy was involved in each SBL save for the Bluerock SBL[^7];

v) Each defendant claimed to have no construction experience and left decisions as to what needed to be done, at least behind the drywall, to Mr. Levy;

w) The invoices provided by each contractor/supplier were remarkably similar in format, description of leasehold improvements, description of furniture, fixtures and equipment, and pricing;

x) In many cases, the equipment purportedly sold to the borrowing corporation was identical to equipment sold to one or more other borrowing corporations and in some cases with identical serial numbers;

y) For every SBL, the invoices provided to the bank for the leasehold improvements represent that there was a Total Gut Job and Total Rebuild, very often including the existing HVAC and storefront;

z) For all the SBLs, payment of the contractor/supplier invoices from the SBL proceeds and start-up capital left relatively little behind in the company to purchase inventory and operate the business;

aa) Except for Homelife, each new business reported very little in the way of sales – significantly less than what was projected in the Business Plan provided to the bank;

bb) Each new business defaulted on its SBL and closed within a short period of time; typically within 16 months of its intended 60-month term;

cc) In those cases where asset appraisals were conducted, the value of remaining assets was consistently a small fraction of the amount paid; the resulting value was less than $2,000 and of insufficient value to even warrant a sale of the assets by auction;

dd) In several cases, appraisers were redirected by the borrowers to third party locations such as storage facilities where assets did not resemble most of those assets listed on the invoices;

ee) All loans involved the contractors circulating significant portions of the loan proceeds to companies associated to Mr. Kazman, Mr. Levy and/or Ms. Cohen, as well as other related entities. Those companies then further circulated the SBL proceeds to other companies also associated to Mr. Kazman, Mr. Levy and/or Ms. Cohen;

ff) A significant number of cheques between related parties generically reference “on account” in some form; and

gg) Despite significant activity regarding circulation of funds, bank records for all contracting companies contain little if any evidence of “routine” operating expenses such as rent, payroll, and/or purchases relating to the invoices. Many of these same bank records all contain substantial periods of inactivity.

The 16 SBLs

[223] I heard evidence about other SBLs involving the defendants including Mosaic for Mr. Levy, Dufferin Paralegal for Mr. Kazman, Meez Corp. and Comod Corp. for Mr. Tehrani, as well as the SBLs obtained by Mr. Cheng, Mr. Richards and Ms. Bendavid. I have already dealt with the relevance of the latter three SBLs. As for the others involving the defendants, only Dufferin Paralegal is caught by the Indictment. The other SBLs are relevant for other reasons, which I will come to.

Energy Lighting and Furnishings Inc. (ELFI) – BNS – Count #1

(a) The ELFI SBL

ELFI (Cohen) was approved for a $169,830 SBL[^8] from the BNS on July 11, 2007

[224] ELFI was incorporated by Ms. Cohen on June 21, 2007 and was registered to her home address of 49 Henry Welsh Drive (49 Henry Welsh). Mr. Kazman admitted that he may have incorporated this company for her and I find that likely given he was doing legal work for Ms. Cohen and was at least in a business relationship with her as well at this time.

[225] The ELFI loan file from the BNS contains an Agreement to Lease dated July 3, 2007 between ELFI as the tenant and TCM Property Management Inc. (“TCM Property”) as the landlord, for a lighting and furnishings store of 2,500 square feet (SF) on the main floor of 489 Champagne Drive, Toronto (489 Champagne), for five years to commence June 15, 2007, with rent at $1,900 per month plus HST and utilities. Based on the Known Signature of Ms. Cohen, I find that she signed the Agreement to Lease purportedly on July 9, 2007. The loan file also contains a photocopy of Ms. Cohen’s Social Insurance Number (SIN) and Driver’s Licence with her date of birth (DOB), which corroborates my conclusion.

[226] The lease is also purported to have been signed on July 3, 2007 on behalf of the landlord by Mark Vandross as President with a signature that is simply a capital “M” and capital “V”. Mr. Kazman admitted that the handwriting on the lease looks similar to his handwriting, but testified that the signature is not his. Both Mr. Kazman and Mr. Levy denied knowing anything about this lease. No evidence was given about who Mark Vandross is or whether such a person even existed.

[227] Cpl. Thompson testified that when she arranged for corporate searches to be done, no company by the name of TCM Property Management was found. There may be some issue about that search. Cpl. Thompson’s evidence was that any company which included the name TCM Property Management would have come up in the search. However, this is at odds with a statement on the face of the Statement of No Match Found document issued by the Ministry of Government Services that states that after entering the information “exactly as it is printed above” i.e., TCM Property Management, a record for TCM Property Management could not be found. The name on this statement does not include “Inc.” Although Cpl. Thompson’s evidence makes sense given how many search engines work, this issue was never resolved by someone with personal knowledge of the corporate search process.

[228] Mr. Kazman denied the Crown’s suggestion that TCM Property was his company. He admits that he had a company called TCM Management Inc., which was incorporated in August 1998. He also testified that Ms. Cohen and Mr. Levy knew that he had this company and submitted that Mr. Levy used this company without his knowledge and just made a small change to the name. Mr. Kazman also queried that if he was involved in this loan, why would he use a company that could be associated with him since any one of thousands of names could have been used?

[229] The Crown called Ian Pianosi, one of the principal owners of Pianosi Bros. Construction Limited (Pianosi Bros.), which is a development and building corporation that has been in operation since 1958. He confirmed that Pianosi Bros. has owned 489 Champagne since December 7, 1966 and this is what is recorded in the Abstract. Based on photographs entered into evidence, I would describe 489 Champagne as a commercial unit in a commercial strip mall.

[230] Mr. Pianosi testified that from 1990 until at least 2007-2009, the tenant at 489 Champagne was Save Energy, which was owned by Jack Sade. He saw a woman named Miriam working there a couple of times whom he understood to be Mr. Sade’s daughter. Mr. Pianosi produced a copy of his lease with Save Energy, which states that the square footage of the unit is 2,000, 500 SF less than the ELFI lease. Mr. Pianosi was cross-examined by Mr. Kazman on various articles of that lease with respect to Mr. Pianosi’s position that his tenants could not make any alterations, even painting the premises, without the written consent of the landlord. This issue is not relevant as I accept that Save Energy could have done some work to the unit contrary to the terms of the lease provided it did not come to the attention of the landlord.

[231] Mr. Pianosi testified that he had never heard of ELFI and was not familiar with TCM Property. He was shown a copy of the ELFI/TCM Property Agreement to Lease and testified that it is false and had nothing to do with his property. He did not recognize the name Mark Vandross or the signature for the landlord and testified that it was not his or the signature of any of his family or any employee of Pianosi Bros. Mr. Pianosi testified that he was never approached by either Mr. Sade or Ms. Cohen about subletting their unit to another company. In any event, I note that even if Save Energy illegally sublet the unit to ELFI that would have made Save Energy the sub-landlord. I find that there is, therefore, no doubt that this lease is a fraud. TCM Property had no interest in this property.

[232] Ms. Cohen applied for a SBL by an application signed on July 10, 2007. The application stated that a business plan was provided. Mr. Levy testified that he prepared one Business Plan for Ms. Cohen and that it was for her first SBL and so it must have been the one in the BNS loan file for ELFI dated August 1, 2007. The Business Plan states that ELFI will feature floor to ceiling lighting fixtures offered to builders, designers and retail and wholesale trades. This is significant as here and elsewhere in the Business Plan it is clear that there would be a showroom open to the public. The Business Plan also represented that Ms. Cohen would invest $100,000 of her “own equity”.

[233] According to Mr. Levy, Ms. Cohen had all the information ready to go as Mr. Kazman had already spoken to her. When he met with her, Mr. Kazman was present; Mr. Levy denied meeting Ms. Cohen privately. Mr. Levy admitted that he prepared the various financial projections and said that he then gave the Business Plan to Mr. Kazman to give to Ms. Cohen. Ms. Cohen paid $2,500 to Fairbank for it. He testified that apart from this, he had nothing to do with the location, the leasehold improvements and did not do any subcontracting. He denied suggesting the names for any of Ms. Cohen’s SBL companies or advising Ms. Cohen how to prepare the loan application form or preparing the lease and queried why he would since she had Mr. Kazman.

[234] Mr. Kazman admitted that he knew that at some point in mid-2007, Ms. Cohen was in search of new business opportunities. He also admitted that he introduced Ms. Cohen to Mr. Levy but he denied having any involvement in this SBL. He testified that he recalled that Mr. Levy and Ms. Cohen met and that he understood that she was going to try various aspects of business different from Save Energy. In cross-examination, Mr. Coristine put to Mr. Kazman that he must have had a conversation with Ms. Cohen about ELFI. Mr. Kazman said that he didn’t know that it was such a big deal, but he agreed she might have “mentioned it” to him and that she might have mentioned she was working on a business proposal with Mr. Levy. He denied asking any questions, although admitted that he may have asked her if she needed help.

[235] Mr. Coristine also put to Mr. Kazman he would have at least asked Ms. Cohen where she was going to open her new business. There was a long pause and before he answered I observed that Mr. Kazman was looking at the lease from the binder he had on the witness stand. I believe I noted this on the record when I asked that he put his papers away. Mr. Kazman then testified that he did not ask where her new business would operate. Given Mr. Kazman’s admitted relationship with Ms. Cohen, and his hesitation before answering this question, I do not accept that he did not know very much if anything about ELFI.

[236] The loan file contains a form entitled Summary of Personal Finances that is completed in handwriting. There is no evidence about who completed this form but it was signed by Ms. Cohen on July 9, 2007 under a note that her signature certified that the information is “accurate and complete”. This form states Ms. Cohen has been the Treasurer of Save Energy for 12 years, has an HSBC GIC in the amount of $129,750 and that her gross employment income is $47,653. The loan file also contains a form entitled “Statement – About You” signed by Ms. Cohen on July 13, 2007 as the President of ELFI below a statement that states that her signature “certifies the information about you as an individual in this application and any other information provided in the future is accurate and complete”. In this form her gross annual income is typed in as $21,084.

[237] The NOA in the loan file states Ms. Cohen’s line 150 total income for 2006 was $47,653. This document is fraudulent as the NOA provided by the CRA shows her line 150 total income to be only $7,660. I have no evidence as to who prepared the altered NOA; both Mr. Kazman and Mr. Levy denied doing so, but it is clear that Ms. Cohen’s income was grossly inflated for the SBL application. Considering the evidence with respect to this SBL alone, I am not able to determine who altered the document.

[238] The loan file contains a HSBC Term Deposit statement, which purports to establish that Ms. Cohen had an investment with a starting principal of $129,750, issued June 4, 2006 to mature a year later. Lisa Pantaleo, a long-term employee of HSBC and now Senior Manager in the Government Financial Crime and Investigation Unit of the bank, testified that she was asked to verify this investment. She said that this statement had been altered in that it was not a one-year but rather a 30-day term deposit that was to run from June 4, 2006 for 30 days to expire July 3, 2007. Her evidence was reliable and was not challenged and I find that the statement for this Term Deposit in the ELFI SBL file was altered or entirely forged by someone, which included alteration of the Maturity Date as well as the Maturity Value. If one looks at the copy of this statement that the BNS had, the alteration would not be noticeable to someone who was not familiar with the information available to Ms. Pantaleo. Both Mr. Kazman and Mr. Levy denied any knowledge of this altered statement. Based on the evidence for this SBL alone, I presume Ms. Cohen was the one who provided this GIC to the bank, but I am not able to determine that she did so knowing that it had been altered.

[239] Ms. Cohen signed a personal guarantee on July 13, 2007. The middle paragraph of that document states that by signing the document she certified that the information “about you as an individual in this Service Request and any other information provided now and in the future is accurate and complete.”

[240] Finally the loan file contains a Loan Registration Form signed by Ms. Cohen on August 1, 2007 and witnessed by Josie Alulio. On that form, the box certifying that the landlord and borrower are at arm’s length is checked off. I have found that Ms. Cohen had provided a lease that was a fraudulent document and so she at least misrepresented who her landlord was. She was in fact purporting to start her business in a unit rented by a company she owned with her father, which clearly would not be at “arm’s length”.

(b) BNS Reliance Evidence

[241] I have already set out the information on the various forms that Ms. Cohen signed where she certified that the information that she had provided to the banks was accurate.

[242] Mr. Kazman called Giusieppe (Josie) Alulio, who was the Account Manager for small business at the BNS branch at Dufferin and Finch in 2007, as a witness. She testified that she remembers Ms. Cohen and that she dealt with her with respect to her ELFI loan. Ms. Cohen was a customer at a different BNS branch and had been referred to her. Ms. Alulio could remember parts of the SBL process but it was five years ago and she testified without any notes so there were understandable gaps in her memory.

[243] Ms. Alulio recalled meeting Ms. Cohen at the branch but she was not sure when. Mr. Kazman showed her the Credit Agreement for the business from the ELFI BNS loan file dated July 13, 2007. She identified her signature on this document and testified that she met with Ms. Cohen on that date to sign the documents. There were other documents completed at that time. Ms. Alulio would have met with Ms. Cohen before then as well to collect information to process the loan application including identification and other documentation with respect to the loan although she could not recall specifics or the number of meetings she had with Ms. Cohen.

[244] Ms. Alulio had no recollection of whether or not she was given the Business Plan that is in the SBL file. She testified that business plans were required in certain circumstances and if they were provided they would be accepted at face value and the bank would depend on the document being accurate and truthful. She said that it was also customary for the borrower to provide a T1 General or NOA. Ms. Alulio had no recollection of other documents.

[245] Ms. Alulio testified that she relied on the client being honest and the bank relied on all of the documents received as being truthful and accurate. If she discovered that the client had lied about assets then she would not lend the money. I presume by that evidence that she meant that she would not further process the application and send it to the underwriters.

[246] Ms. Alulio could not recall if the lease was part of the loan requirements but if she got one she would depend on it being truthful. If she found out that the borrower had no right to be at the premises or that there was another business there that was related she would have been concerned.

[247] Ms. Alulio agreed with the suggestion that part of the normal practice, and what she was trained to do, was to go through the bank documentation with the client before the client initialed the documents. She would draw the client’s attention to the terms and conditions and make sure that the client understood them.

[248] With respect to Ms. Cohen’s representation on the Loan Registration Form that the landlord and borrower were at arm’s length, Ms. Alulio testified that if the client asked her a question about “arm’s length” she would either answer the question or direct the client to someone who could answer the question. She did not recall if she explained what arm’s length means to Ms. Cohen. However, she testified that if she were told that the landlord and the contractor were one and the same she would refer the issue to the adjudication department and her manager. They would at least ask for more information and possibly an asset appraisal to ensure fair market value. The decision would not be up to her. The concern would be that if they were all in “cahoots” they might not be charging fair market value for the work done.

(c) The Purported Renovations to 489 Champagne and Purchase of Equipment, Furniture and Fixtures

[249] The BNS was provided with two invoices from Northwood. The first dated August 1, 2007, in the amount of $91,690, was for the usual Total Gut Job. It is significant that this invoice has a fax header showing a date of August 1, 2007 and a reference to HP LASERJET FAX 123456789 p. 1. For reasons already stated, I find that Mr. Levy or someone on his behalf faxed this invoice from Northwood to the BNS. This makes it clear that contrary to his evidence Mr. Levy had some involvement in the ELFI SBL.

[250] I note that the ELFI lease supposedly began July 15, 2007, which is only two weeks before the first Northwood invoice. As the Crown submits, this means that Ms. Cohen found a contractor, had the unit gutted and rebuilt, as well as invoiced the bank, all within two weeks of taking possession of the unit. I heard some evidence that a tenant might be given possession earlier than the commencement date set out in the lease but if that happened here it would not have been before the lease was signed on July 3^rd, which could have added a couple more weeks. Either way a lot of work was purportedly done in a very short period of time.

[251] The second Northwood invoice dated August 15, 2007 was for “Furniture & Fixtures and Equipment” and totaled $112,917.

[252] Ms. Alulio remembered receiving invoices in this case but could not recall from who or the name of the contractor. She testified that when an invoice comes in from a borrower there has to be confirmation from the borrower before funds are released to pay the invoice. If someone else came in to drop off the invoice and asked for payment she would not advance any money without the borrower’s consent from their account. That would always be needed from the borrower, as it is their money. I accept this evidence; it makes sense.

[253] In fact Ms. Cohen signed a supplementary receipt schedule that is in the loan file that referred to the Northwood invoices for the purpose of confirming that the loan proceeds were used for the original purpose of the loan. The BNS advanced funds to ELFI’s business accounts and ELFI paid the invoices by drafts on August 7^th and 22^nd, 2007.

[254] Ms. Alulio did recall visiting 489 Champagne on one occasion but she did not remember any specifics. She did not remember if she noticed any signs at the premises although she did testify that she believes the company was Save Energy Lighting but she had no recollection of asking Ms. Cohen about this sign. She had no recall of ELFI and no recall if she took pictures. Ms. Alulio did not recall if the ELFI SBL was funded before or after her visit. It is significant that she recalled the name Save Energy at the premises because of course there is no dispute that this company had leased and was operating from the unit. The fact Save Energy was also a lighting store would mean that Ms. Alulio would not become aware of the fraud if an explanation were given for why there was no signage for ELFI.

[255] Mr. Pianosi testified that he was not familiar with a company called Northwood Construction. He denied ever hearing of Northwood or seeing evidence of such a company at his property. He also said that in August 2007 there was no large influx of items being delivered to 489 Champagne and that, to the best of his knowledge, Mr. Sade was not planning to do any work on the property. Any work would have had to be done by the Pianosi Bros. contractors according to the terms of the lease.

[256] Mr. Pianosi testified that he regularly went to 489 Champagne, both driving by the property and going into the physical premises. He did not have a log of this but testified that they would go in twice per year to check the roof, the heating, fire extinguishers and joists, and do structural inspections. Maintenance visits were done more frequently. He testified that if another business had vehicles, a sign or mail, he would have known about it. Mr. Pianosi denied the possibility that someone could renovate their unit without him knowing given the frequency with which he and others including his brother and property managers attended at the property. In 2007 Mr. Pianosi said he would have gone to the unit at 489 Champagne at least once per month. He was adamant that he would have known if someone was hiding something to do with that unit. Mr. Pianosi was shown both Northwood invoices #4405 and #4595. He vehemently denied that any of the $210,000 worth of work was done or the equipment supplied.

[257] For reasons stated in Appendix “H”, I found Mr. Pianosi to be a credible and reliable witness notwithstanding the fact that I accept that he may have exaggerated the frequency of his attendances at the unit somewhat. He was clearly a diligent landlord and I find he would have known if the extensive renovations set out in the first Northwood invoice were made to 489 Champagne and the volume of equipment, furniture and fixtures was delivered there as set out in the second Northwood invoice.

[258] Mr. Kazman testified that he understood that Northwood outsourced to Mr. Levy’s general contracting company, MDC Modern and that since Mr. Levy did not have any trucks or construction equipment that he outsourced to other contractors as well. This is an example of where on the one hand Mr. Kazman would profess to have no knowledge of something; in this case Northwood, and then on the other hand suggest what he believed might have happened. In any event Mr. Kazman fairly admitted that he had no reason to disagree with Mr. Pianosi’s evidence and that on the face of it, it looked like work was not done at 489 Champagne and that Ms. Cohen defrauded the BNS. That opinion of course is not binding on me but it does suggest that on this point Mr. Kazman was a fair witness.

[259] Mr. Levy, however, would not concede this point. In cross-examination when Mr. Coristine suggested to Mr. Levy that ELFI was a sham based on the evidence of Mr. Pianosi, Mr. Levy said that he wouldn’t say that, that Mr. Pianosi was missing something and that the whole thing is a conspiracy by the RCMP and the banks and he does not know why everyone is charged. He gave a long rant at this point about that subject. Mr. Coristine then took him through all of the independent witnesses who were called in connection with the other three Cohen SBLs, which I will come to, and essentially Mr. Levy suggested they were all being untruthful. Mr. Levy said that the banks funded Ms. Cohen and they didn’t do their due diligence, that that is their issue and that he did not see that as part of Ms. Cohen’s problems. It seemed to me as he spoke that he had no concept of fraud. He also seemed unreasonably riled up and defensive given his position that all he knew about ELFI was the Business Plan he prepared and that he otherwise had nothing to do with this SBL.

[260] As the Crown points out, the invoice number on the second Northwood invoice suggests that Northwood issued 190 invoices after its first invoice. However the Coort Analysis of the Northwood bank account at DUCA reveals only the loan proceeds from ELFI being deposited into the account, with no other deposits whatsoever between August 8, 2007 and January 30, 2008. I agree with the Crown that there is no way 190 consecutive construction jobs were completed and invoiced by Northwood, but never paid for, let alone in such a short period of time.

[261] The Crown put that proposition directly to Mr. Kazman in cross-examination. Having already taken the position that Mr. Levy was responsible for all construction invoices for all 16 SBLs, Mr. Kazman would not comment on the specifics of the Northwood invoices to ELFI. However, having already testified to his legal background and general business experience, Mr. Kazman accepted the suggestion that a business should have sequential invoices (like cheques) so as to properly account for finances. In fact Mr. Kazman later cross-examined Mr. Benlezrah on the non-sequential nature of the Bonded invoices, suggesting it was some evidence that Bonded was a sham, but as I advised Mr. Kazman many times, questions are not evidence. I do find, however, that it is likely that whoever prepared the Northwood invoices created this gap in the invoice numbers in order to misrepresent to the bank that Northwood was a company with other contracts. I also agree with the Crown that this is further evidence that Northwood did not do the work or supply the equipment and was a sham company.

[262] Finally, as I will come to, there is no evidence of any payments by Northwood for payroll or suppliers, nor is there evidence of that by any company that Northwood paid funds to in this timeframe.

[263] For all of these reasons I find that the Northwood invoices sent to the bank set out leasehold improvements, furniture, fixtures and equipment that were never in fact done or supplied to ELFI. These invoices were completely fraudulent and induced the BNS to advance $204,607 to ELFI. Given Mr. Levy faxed the first invoice to the bank I find that he prepared both of the Northwood invoices and that both he and Ms. Cohen must have known that the bank would rely upon them in advancing the full amount of the SBL. Whether or not Mr. Kazman had any knowledge of this will depend in part on my finding of whether or not he was in control of Northwood.

(d) Did ELFI operate as a business?

[264] Based on the dates of the Northwood invoices, ELFI should have been open by the end of August 2007. I accept Mr. Kazman’s position that Ms. Cohen could operate more than one business from one location. However, given the nature of what she represented to the BNS as to what she intended with ELFI and the evidence I have already reviewed, I have concluded that there was never any such business operating from the premises leased by Save Energy at 489 Champagne, save the Save Energy business.

[265] My conclusion is reinforced by the fact that Mr. Coort concluded that his analysis of this BNS account did not show any significant deposits to ELFI from third parties which could be considered revenues from sales and that virtually all deposits into the ELFI account were from Ms. Cohen, Mr. Kazman, Mr. Levy and companies associated with them. No corporate income tax returns were filed with the CRA nor were there any GST/HST filings.

[266] There is also no evidence of the payment by ELFI of rent, utilities, taxes or any payments to employees for payroll or commissions. There is evidence in the loan file that ELFI obtained insurance for the contents at 489 Champagne as well as other coverages and that it made SBL loan payments but in my view that was simply to avoid the loan going immediately into default and does not mean it was actually in business.

[267] This evidence corroborates my conclusion that ELFI was never an operating business.

(e) The Appraisal of ELFI’s Assets

[268] The BNS declared the ELFI loan to be in default as of February 11, 2009.[^9]

[269] The Crown called Anthony Burnett from Corporate & General Inc., an appraiser retained by the Lipman firm, the lawyers for the BNS, to appraise ELFI’s assets in early June 2009. He was asked to attend at 489 Champagne and attempt to determine what happened to the company and to identify if any of the company’s property and assets remained there. In the letter from Mr. Lipman, Mr. Burnett was reminded that he dealt with Ms. Cohen for the BOM and the LHC SBL that I will come to.

[270] Mr. Burnett testified that when he went to 489 Champagne, it was occupied by a new tenant and he was directed to go to 499 Champagne Drive (499 Champagne) where Save Energy was now operating. When he attended at 499 Champagne, he met with a gentleman who told him he was the father of Ms. Cohen; I presume Jack Sade. Mr. Burnett told the gentleman that he was there to appraise the assets of ELFI. Mr. Burnett was asked to meet Ms. Cohen at a storage facility around the corner at 4500 Chesswood Drive called Centron Storage.

[271] Mr. Burnett went to Centron Storage and took three pictures at the storage unit but he did not pull items out. He testified that it was about a 12’ x 9’ unit and denied the unit was “packed” or that the assets that he saw filled the unit; there was sufficient room to move around inside. Mr. Burnett testified that he opened a couple of the boxes that were mostly parts as opposed to complete lights but admitted that he did not open the big box that is shown in the pictures in the middle of the unit. He testified that the filing cabinets were very old and of little value and that the other desks and chairs were nothing of note.

[272] As stated in his appraisal report, Mr. Burnett valued the assets “consisting of small qty of lighting fixtures, parts as well as desks and filing cabinets” at a distress value if sold on site of approximately $2,000.00 to $2,500.00, which is what the assets would fetch at auction. He testified that he knew the value because he had liquidated many lighting stores. There is a detailed list of the assets at the end of his report with an approximate asset value total of $1,815.00.

[273] When Mr. Kazman was asked in cross-examination by Mr. Coristine if he was aware that Ms. Cohen panicked when the bank was coming to do an appraisal for ELFI, he testified that she “may have mentioned it to me in passing” although he admitted that at some point the name Tony Burnett came up and that Ms. Cohen may have mentioned that Mr. Burnett was coming to see some chattels for one of her businesses that were in storage. Later Mr. Kazman said that Ms. Cohen was always “tight lipped” about her business and he denied that he suggested to Ms. Cohen that she show “crap.” This was yet another example of the many internal inconsistencies in his evidence.

[274] It is apparent from the photographs that very little remained of the furniture, fixtures and equipment supposedly purchased from Northwood at a price of almost $113,000. Mr. Burnett was shown the second Northwood invoice to ELFI. He testified that he possibly saw the office desk and assorted chairs, but he did not see a Compaq computer or a Mac graphic design computer or a complete stereo system and there was no sofa there as there was insufficient space in the unit for one. The photos Mr. Burnett took are consistent with what he described as inventory as there are mostly boxes that appear to be random and consistent with how the inventory would have been packaged when purchased. Given my other findings concerning ELFI, I accept the Crown submission that the photos represent Save Energy inventory. It is clear then that Ms. Cohen misrepresented Save Energy inventory to Mr. Burnett as being assets from ELFI.

(f) The Circulation of the SBL proceeds

[275] Mr. Coort analyzed the ELFI account from July 12, 2007, when it opened, to May 1, 2009, when it closed.

[276] There was very little activity in the account prior to August 7,2007. In the period from August 7 to August 24, 2007, Ms. Cohen deposited $100,000 into the account – the source is unknown, and the SBL proceeds totaling $168,975. In the same period the Northwood invoices were paid in full from the account and $50,000 was paid to City Commercial Realty Inc. but there is no evidence about the purpose of this payment.

[277] In the period August 31, 2007 to October 21, 2008, there were also deposits into the ELFI account from Mr. Levy’s companies Trust Inc., MDC Modern, and Mosaic and deposits by Mr. Kazman’s company 2061914 Ontario Inc. (Blue Glass) as well as deposits by Ms. Cohen personally. In the same period payments from the account were made to MDC Modern, 2061914 Ontario Inc./Blue Glass and Mr. Kazman personally as well as a $22,000 payment to Save Energy, LHC, Ms. Cohen’s third SBL, and a payment to Ms. Cohen personally. These payments represent the vast majority of the money into and out of the ELFI account in this period.

[278] Mr. Kazman put a cheque to Mr. Levy that was deposited to the ELFI account from MDC Modern payable to Ms. Cohen dated August 31, 2007, which states RE: “payment on account”. Mr. Levy said that this could have been for an invoice and that he bought so many supplies from “her and her father” and that “she supplied all of my buildings… and all of my businesses”. He then added that MDC Modern did business with Ms. Cohen and her father but that he did not deal with Ms. Cohen too much, which completely contradicted the evidence he had just given. According to Mr. Levy, Mr. Sade told him to write this cheque to Ms. Cohen. In other cases Ms. Cohen would direct him “through Kazman” to pay ELFI. According to Mr. Levy, Mr. Sade also provided all the labour for all the electrical work that Mr. Levy did. There is also the evidence I heard later from Mr. Levy as to money he loaned Ms. Cohen through both Mr. Sade and Mr. Kazman and loans he arranged for some of the defendants with funds from Ms. Cohen.

[279] It was clear in this exchange that Mr. Levy was trying to minimize his relationship and contact with Ms. Cohen. Before Mr. Levy was taken through the loans, the Crown pinned him down to his position that he had only seen Ms. Cohen once before Mr. Kazman referred her to him for the ELFI Business Plan. At no time did he mention any other existing relationship. The internal contradictions in his evidence are of course of concern and this also confirms my impression that with respect to the ELFI loan, Mr. Levy wanted to distance himself from Ms. Cohen and what I have found to be a fraudulent loan.

[280] On February 21, 2008, ELFI paid $13,000 to Lorraine Salt. Mr. Kazman testified that Ms. Salt was a partner with him, Mr. Luska and Ari Yakobson in the property at 2897 Dundas in Toronto. He testified that Ms. Cohen bought out Ms. Salt’s interest in the property at some point. Although he did not say when this occurred and was not asked about this payment, it would seem likely that this ELFI payment was a payment towards this purchase, not a business expense of ELFI.

[281] By October 21, 2008 the ELFI BNS account was overdrawn and it remained that way until it was closed in May 2009.

[282] Turning to the money Northwood received of $204,607, in two payments from ELFI in August 2007, these were the only funds Northwood received in the period from August to December 2007. Having found that the renovations, furniture, equipment and fixtures set out in the Northwood invoices were not in fact done or provided to ELFI, these payments were funds fraudulently obtained from the BNS by Northwood as a result of the fraudulent invoices. Northwood was not entitled to any of this money.

[283] The only payments made by Northwood that could have been for leasehold improvements purportedly done for ELFI, were three payments to a company called LSC Carpentry totaling $7,500 between August 14 and September 7, 2008. I did not hear any evidence about LSC Carpentry. In any event an amount this small could not represent the purported leasehold improvements done for ELFI. Furthermore, there were no payments made by Northwood that appear to relate to the purchase of equipment for ELFI as represented in Northwood’s second invoice.

[284] In the month of August to September 14, 2007, Northwood paid $187,721 in four payments to MDC Modern and Trust Inc. Realty Corp., which represents 91.7% of the total payments in the period. Mr. Kazman testified that he signed these cheques from Northwood at the direction of Mr. Levy. One of the Northwood cheques to Trust Inc. Realty Corp. signed by Mr. Kazman states RE: “on account” and was in the uneven amount of $27,494.71. Mr. Levy said this cheque was money Mr. Kazman was paying back from a loan or could have been money for another contracting job he did for Mr. Kazman. Given Mr. Levy’s evidence as to even and odd amounts, this cheque would not have been a loan repayment. If this cheque was for work done by Mr. Levy for Northwood, there is no evidence from Northwood’s account that is consistent with it doing any construction job at this time let alone a job different from the one Northwood purportedly did for ELFI. Mr. Levy was adamant that he did not do any work for the ELFI SBL. ELFI is the only company that provided money to Northwood in this timeframe and no money came into Northwood’s account that could have been from any other construction job. It is Mr. Levy’s position that these were legitimate payments to his companies and that he did not have to ask Mr. Kazman where Northwood was getting its money and that he did not know it was from a SBL. I do not accept Mr. Levy’s evidence that these payments were for amounts legitimately owed to his companies given he was not doing any other work for Northwood at this time and Northwood clearly had no other contracts in this timeframe.

[285] Northwood also made a number of payments linked to Mr. Kazman: $3,700 in two payments to Maxine Henry and $3,300 to Tony D’Imporio, who had loaned money to Mr. Kazman in August 2007. Again Mr. Kazman testified that he signed these cheques at the direction of Mr. Levy. These payments were clearly personal to him and his position is that these were for the fees he was owed for running the account.

[286] In this same period of time; July 16 to August 28, 2007, Eastern Contracting Inc. (Eastern), another one of the Disputed Construction Companies, paid Trust Inc. $103,388.10 in three payments; $20,000, $30,000 and $48,388.10. Mr. Levy suggested that these might be loan repayments but that would not be for the last payment given it is an odd amount. The source of these funds is unknown save that Eastern received a $45,000 draft from the Lipman firm and Mr. Kazman signed the deposit slip when this draft and another one were deposited into the Eastern account on August 17, 2009. There was also $55,000 paid by draft from the Lipman firm dated August 27, 2007.

(g) Summary of the Findings of Fact

[287] Based on the totality of the evidence I accept, I make the following findings of fact with respect to the ELFI SBL:

a) A fraudulent 2006 NOA, which grossly exaggerated Ms. Cohen’s actual income, was provided to the BNS as well as a fraudulent HSBC Term Deposit statement. I have also found that Ms. Cohen misrepresented to the bank that the landlord and borrower were at arm’s length but the fact is that the lease was a fraudulent document. I have not made a finding of who was responsible for creating these fraudulent documents and providing them to the BNS.

b) The Northwood invoices were fraudulent since I have found that ELFI never existed, save on paper, and that Northwood did not do any leasehold improvements for ELFI at 489 Champagne and did not supply any furniture, fixtures or equipment as set out in the Northwood invoices that caused the BNS to advance the full amount of the SBL of $169,830.

c) I have found that Mr. Levy or someone on his behalf faxed the first Northwood invoice to the BNS, that he prepared both of the Northwood invoices and that both he and Ms. Cohen must have known that the bank would rely upon these fraudulent invoices in advancing the full amount of the SBL.

d) At the time Northwood purportedly did the extensive renovations to 489 Champagne and purportedly supplied furniture, fixtures and equipment, Mr. Kazman had taken over from Mr. Vatch, the person who incorporated the company. Subject to my finding as to who was in control of Northwood, there is insufficient evidence, considering the evidence with respect to ELFI alone, to find that Mr. Kazman participated in this fraud.

e) Ms. Cohen misled the bank’s appraiser by showing him unrelated assets so the bank would not discover the fraud.

[288] If the only issue was the fact that Ms. Cohen misrepresented her income and the fraudulent GIC, I would have to consider whether or not the Crown has proven that the bank relied on this information in approving the SBL but that finding is not necessary as this pales in comparison to the fact that Ms. Cohen and Mr. Levy provided the bank with invoices from Northwood, prepared by Mr. Levy, for leasehold improvements that were not done and for furniture, fixtures and equipment that were not provided. For the same reason I do not need to consider whether or not the bank relied on the false information provided to the appraiser.

[289] For these reasons I find the entire ELFI SBL application, which resulted in Ms. Cohen and Mr. Levy deceiving the BNS into disbursing $169,830 in SBL funds to ELFI so that ELFI could pay the two fraudulent Northwood invoices, to be fraudulent.

[290] For all of these reasons Ms. Cohen and Mr. Levy clearly committed a fraud on the BNS of over $5,000 with respect to ELFI and Mr. Levy is guilty of Count 1.

[291] The key issue remaining is whether or not Mr. Kazman was a party to this fraud. It certainly makes no sense that this fraud was Ms. Cohen’s idea alone because it makes no sense that she would pay out most of the SBL funds and her start-up capital to Northwood unless she knew she had some control over the money and would be getting some of the money back. That certainly seems to be what happened.

[292] ELFI is also relevant to the money laundering count as the ELFI SBL funds took a very circuitous route and virtually all of the money ended up with Ms. Cohen, Mr. Kazman and Mr. Levy. This evidence is consistent with a desire to hide the source of the funds, which was originally the ELFI SBL.

Energy Lighting Inc. (ELI) – TD – Count # 2

(a) The ELI SBL

ELI (Cohen) was approved for a SBL from the TD on September 4, 2007 in the amount of $153,000.

[293] ELI was incorporated on July 18, 2007, not even a month after ELFI, with an office address stated to be 559 Eglinton Avenue West, Toronto (559 Eglinton). The Articles of Incorporation found in the TD loan file also show ELI at the address 559 Eglinton with a registered office at the same address. Mr. Kazman testified that he likely incorporated this company for Ms. Cohen but said that he had no interest in it. I find that he did incorporate ELI given the fact that at the very least he was doing legal work for Ms. Cohen at this time. I also find it necessarily follows that Mr. Kazman therefore knew that Ms. Cohen was using 559 Eglinton as an address for the company. This is very significant as this was an address that Mr. Kazman was familiar with as he and Mr. Luska purchased the building municipally known as 559-563 Eglinton Avenue West on May 2, 2007, only a couple of months earlier through his company 6747841 Canada Inc.

[294] It is therefore clear that Mr. Kazman must have known, at the very least, that Ms. Cohen intended ELI to have some association with his property. However he denied there was any conversation at the time with Ms. Cohen about the fact that she was leasing two properties in two locations for two businesses and that her new company ELI was using the address of his property. That evidence was totally incredible.

[295] Mr. Kazman testified that Ms. Cohen bought out Mr. Luska’s interest in this property and that he was not sure if Ms. Cohen had done so by the time of this SBL. A certificate of officers and directors for 6747841 Canada Inc. signed for CIBC on February 11, 2008 was signed by Mr. Kazman as President and Ms. Cohen, so she must have bought out Mr. Luska before that date. What I do know from the evidence summarized in Appendix “M” is that Mr. Luska was still involved in this property in the fall of 2007 given the evidence of Mr. Herman Wood, Vice-President of Harvey Kalles, which I accept. I therefore find that at the time of this SBL Ms. Cohen did not have an interest in this property. There is no dispute that Mr. Levy did not have an interest in this property at this time.

[296] The ELI loan file contains an Agreement to Lease dated June 7, 2007 between Ms. Cohen in trust for a company to be incorporated and 6747841 Property Management for 559 Eglinton, for 2,500 SF, for five years, to start on July 15, 2007; one month after the ELFI lease. This lease was signed by Ms. Cohen and by the landlord with a signature that does not look like Mr. Kazman’s or Mr. Luska’s. The tenant was to pay rent in the amount of $2,000 per month plus GST and all utilities and expenses. There was also to be a deposit of the first and last months’ rent in the amount of $4,505.

[297] The TD loan file also contains a commercial lease between the same parties for the same property and on the same terms. Ms. Cohen and the landlord signed the lease on July 7, 2007. The signature for the landlord does not look like either Mr. Kazman’s or Mr. Luska’s and looks different than the signature on the Agreement to Lease.

[298] Mr. Kazman testified that 6747841 Property Management was not his company and that his company was 6747841 Canada Inc., which he registered on April 3, 2007. He testified that he was not aware of this lease and said it was another example of Ms. Cohen and Mr. Levy using a very similar name to a company registered to him; implying this was like what they did for the ELFI lease with TCM Property Management Inc.

[299] For the reasons set out in Appendix “M”, I have found that after Mr. Kazman’s company purchased this building, he and Mr. Luska renovated and leased the apartments, which are municipally 559 Eglinton, as of January 2008. In other words it is impossible that 559 Eglinton was also leased to Ms. Cohen/ELI for any other purpose, as 559 Eglinton was either being renovated into apartments or leased as apartments. I find that the ELI lease was a fraud and that ELI had no interest as a tenant in 559 Eglinton.

[300] Mr. Kazman’s evidence on ELI’s lease kept shifting. He testified that although he did not make the ELI lease in the loan file there could be another lease, but he never explained how Ms. Cohen could have leased any part of the upstairs that he was renovating into apartments. At one point in his evidence Mr. Kazman also suggested that Ms. Cohen might have used the 559 Eglinton address only as a mailing address and as an owner of the building that was not a problem for him. She was not an owner, however, when ELI began to use this address. Later in his evidence, although Mr. Kazman admitted that ELI did not have a showroom at 559 Eglinton, he maintained that the address was a mailing address for ELI. This evidence was not credible since 559 Eglinton was being renovated as two apartments that were leased in January 2008 and so any mail would have gone to the tenants of those apartments. Furthermore, ELI’s address with the TD appears to have been Ms. Cohen’s home address throughout.

[301] I note as well that 6747841 Property Management had an address on the lease shown as 561 Eglinton Avenue West (561 Eglinton). A nail salon in fact leased this unit in the building at the time so that was also false.

[302] Mr. Kazman testified that Mr. Levy not only prepared the ELI Business Plan that is in the loan file but that he also prepared the SBL application for Ms. Cohen and gave her a completed package to take to the bank. He did not suggest he had any personal knowledge of this so I have not considered this evidence, as it is hearsay. It does, however, contradict his general evidence that Ms. Cohen did not discuss her business dealings with him and is further evidence that he must have known about ELI.

[303] Mr. Levy denied preparing the Business Plan dated July 1, 2007 for ELI and he insisted that Ms. Cohen only paid him for one. This Plan does not have a table of contents or page numbers, which Mr. Levy testified would be found in a business plan he prepared, but as I will come to, that was not always the case and so this does not assist me in determining who prepared the Business Plan. This Business Plan is virtually identical to the one prepared for ELFI.

[304] Mr. Levy denied ever giving Ms. Cohen an electronic copy of the ELFI Business Plan. He testified that Ms. Cohen is a smart woman and she took the one he gave her for ELFI and duplicated it. By this he meant she scanned it and made changes. I did not hear from Ms. Cohen but the necessary changes to the name and location in the Business Plan, among others, are seamless modifications in the copy in the loan file. The Crown suggests that could only have been done on the “soft copy” but I heard no expert evidence about whether these types of changes could be made by scanning the documents and working from there. I would say though, that that route, even if possible, would require some computer knowledge beyond the basics. Without evidence from Ms. Cohen, and considering the evidence with respect to ELI only, I have no evidence to contradict Mr. Levy save for Mr. Kazman who claimed not to have any personal knowledge of ELI. What I do have however, is the evidence of the other defendants: Mr. A. Tehrani, Mr. Tehrani and Ms. Chapkina, who all testified that Mr. Levy prepared all of their Business Plans which I consider later in this decision.

[305] The ELI loan file contains an altered NOA for Ms. Cohen for 2005 stating her line 150 total income to be $44,153, whereas in fact it was $10,632. The loan file also contains the same altered NOA for 2006 as found in the ELFI loan file. As such Ms. Cohen’s 2005 and 2006 NOAs overstated her income by four and six times respectively.

[306] It is significant that the NOA for 2006 in this loan file has a fax header with the HP Fax Number dated June 22, 2007. Given my earlier finding, this means that this document was faxed to the bank by Mr. Levy or someone on his behalf. I therefore presume he provided the 2005 NOA to the bank as well. I am not able to determine on the evidence with respect to ELI alone however, whether Ms. Cohen prepared these documents and provided them to Mr. Levy or whether Mr. Levy prepared them and if so, whether or not Ms. Cohen was aware of them.

[307] The loan file contains a Small Business Banking Credit Application that was filled in by type, not handwriting, so I presume a bank representative completed it. Ms. Cohen signed it as part of her personal guarantee. This form states her income as $47,600 and omitted any reference to the guarantee she signed for ELFI and stated her employment to be self-employed for Save Energy, also without reference to ELFI.

[308] When Ms. Cohen signed the Loan Registration Form on September 6, 2007 she certified that the Loan Limit Amount did not exceed $250,000. Clearly Ms. Cohen controlled both ELFI and ELI and given the outstanding SBL that ELFI had, her representation that the total borrowed was less than $250,000 was false. Ms. Cohen also certified that the landlord and borrower were at arm’s length as stated in the Arm’s Length Clause. The lease was a fraud and this overshadows this misrepresentation.

(b) TD Bank Reliance Evidence

[309] The Crown called Myra Dacillo, who in 2007 was working for the TD bank at Bathurst and Sheppard in Toronto as a Financial Service Representative. She testified that the first application she had for a SBL was the ELI application from Ms. Cohen and that she did not work on any after that. She did not have notes of her meetings with Ms. Cohen.

[310] Ms. Dacillo did not recall if Ms. Cohen came in with a sealed envelope but she testified that when Ms. Cohen applied for a SBL she gathered the documentation. According to Ms. Dacillo, Ms. Cohen would have been in the bank when she signed the application but she did not remember if she signed in her presence.

[311] Ms. Dacillo asked for assistance from the SBL advisor at the bank since it was the first time she was processing a SBL. She was referred to the Regional Sales Manager and she reviewed the application with him. He told her what to say and recommended the loan for approval. Ms. Dacillo didn’t know if it would have mattered if the contractor was a friend of Ms. Cohen’s and she did not know what “arm’s length” meant.

[312] Ms. Dacillo did not attend at 559 Eglinton and was not asked to.

(c) The Purported Renovations to 559 Eglinton and the Purchase of Equipment, Furniture and Fixtures

[313] As I have said the Crown called Herman Wood, Vice-President of Harvey Kalles, who at the material time worked at a satellite office of Harvey Kalles at 532 Eglinton Avenue West, across the street from 559 Eglinton. I have summarized some of his evidence and my findings concerning the renovations I have found were done by Mr. Kazman and Mr. Luska in Appendix “M”. For the reasons stated there, I find that 559 Eglinton was the address on the second floor of this building and based largely on Mr. Wood’s evidence, I find that during the summer and fall of 2007, Mr. Kazman and Mr. Luska were renovating the second floor into two residential apartments, which were leased in January 2008. It would, therefore, have been impossible for any renovations to have been done by Ms. Cohen to 559 Eglinton for the purpose of ELI. It therefore follows that the invoices provided to the TD in order to obtain the SBL proceeds fraudulently misrepresented work done and furniture, fixtures and equipment supplied in order to deceive the bank into releasing the SBL funds to ELI. Ms. Cohen clearly defrauded the bank.

[314] A review of the documentary evidence in the loan file however, may assist in determining if anyone else was involved in the fraud clearly perpetrated on the TD bank by Ms. Cohen. The ELI loan file contains a quote from Eastern Contracting Inc. (Eastern) dated July 20, 2007 for the leasehold improvements and equipment, furniture and fixtures for a total of $185,000 plus applicable taxes. The file also contains two invoices from Eastern to ELI, the first dated September 10, 2007 in the amount of $88,510 for the standard Total Gut Job and Total Rebuild and the second dated October 1, 2007 in the amount of $117,021 for furniture, fixtures and equipment. The invoices were addressed to Ms. Cohen at 559 Eglinton.

[315] Mr. Kazman testified that he saw these invoices for the first time in the Crown’s disclosure and he admitted that as far as he knew Eastern did not do any work on the property, which confirms the conclusion, I have already come to. However, he would not agree that Ms. Cohen defrauded the TD bank; admitting only that there were “some issues” and that he did not want to use the word “fraud”.

[316] Mr. Kazman testified that his recollection was that he and Mr. Luska did the renovation work that was done to this property and he was not sure what company they put the work through. That was an interesting choice of words since Mr. Kazman only admitted to having one construction company: Cramarossa Design and Renovations Inc. (Cramarossa). In any event this evidence confirmed that Mr. Kazman and Mr. Luska did the work and it was unrelated to the ELI SBL. However, when Mr. Coristine showed Mr. Kazman the first Eastern invoice for 559 Eglinton, in cross-examination, Mr. Kazman said it pertained to the upstairs apartments. This was at odds with his other evidence and suggests that ELI SBL proceeds were fraudulently used to benefit his company, which owned the property via payments to Eastern. I will come back to this issue when I review the circulation of the ELI SBL funds.

[317] Mr. Kazman took the position that Mr. Levy was the directing mind of Eastern and that Mr. Levy was involved in the contracting work for ELI but he did not explain this or explain how he would know this. Mr. Levy denied this and claimed to have nothing to do with this SBL or the renovations and testified that he did not sub-contract for ELI or Mr. Kazman. I will determine the issue of who was involved in Eastern once I have considered all of the evidence. That finding will determine whether or not Mr. Kazman and/or Mr. Levy fraudulently issued the Eastern invoices to ELI, which were the basis for this fraud.

[318] Regardless of my finding in this regard however, I find that Mr. Kazman had to have known more about ELI than he admitted. Given his ongoing work renovating 559 Eglinton into apartments he would have had to have asked Ms. Cohen why she was asking him to incorporate a company with that address. This on its own, however, would not fix him with knowledge of the SBL application and the Eastern invoices.

(d) Did ELI Operate as a Business?

[319] Mr. Wood testified that he never saw a 2,500 SF lighting showroom, a lighting warehouse, furniture showroom or an electrical repair store at 559 Eglinton. He never heard of any such businesses in connection with this property. This corroborates the finding that I have already made that ELI did not operate at 559 Eglinton and that this address was for two upstairs apartments.

[320] The documents from the CRA show that initially the physical and mailing address of ELI was Ms. Cohen’s home address at 49 Henry Welsh. Effective July 31, 2007 the physical location of ELI was represented to be 559 Eglinton. The CRA file for ELI does not include any tax returns and the GST/HST returns filed for four periods from August 12, 2007 to December 31, 2010 show sales and other revenue at $0.

[321] The Coort Analysis of ELI’s bank account from August 3, 2007, when it opened, to February 21, 2008 does not show any significant deposits from third parties, which could be considered revenue from sales. Virtually all deposits into the account in this timeframe are from companies associated to Ms. Cohen, Mr. Kazman and Mr. Levy.

[322] All of the evidence points to the fact that ELI never operated, it never occupied 559 Eglinton, never did any renovations there and was a sham company to deceive the TD when it applied for and received $153,000 in SBL funds.

(e) The Appraisal of ELI’s Assets

[323] The TD declared the ELI loan to be in default on or about November 4, 2008. The TD retained David Wells in January 2009 to appraise the assets of ELI. He was given a copy of the second Eastern invoice dated October 1, 2007 that set out the assets purportedly bought from the SBL proceeds, before he did the appraisal. He was told that the assets would be located at 559 Eglinton.

[324] Mr. Wells testified that he reached Ms. Cohen after many attempts. He was told that the assets had been moved to storage in a unit on Chesswood. He was not asked what the address was and so I cannot ascertain if this was the same storage unit Mr. Burnett was asked to attend at 4500 Chesswood Drive when he was shown what Ms. Cohen represented to be the assets of ELFI although I note that the photos Mr. Wells took show the same lantern style lights in boxes as the ones that can be seen in Mr. Burnett’s photos for ELFI. In any event, Mr. Wells testified that as a result he never went to 559 Eglinton.

[325] Mr. Wells said that he met Ms. Cohen and another man at the storage unit on January 29, 2009. He does not know who this man was and said that this man stayed in the hallway. Ms. Cohen escorted him to an 8’ x 10’ storage unit on the second floor. Mr. Wells was not sure what was in all of the boxes shown in the photos he took as he did not open them all but he opened as many as he could. In the boxes he opened, he found paperwork and binders. Mr. Wells testified that he usually asks if there are other assets, but he doesn’t specifically recall asking in this case and he agreed it is not in his handwritten notes. Given his stated practice I find that he did ask the question.

[326] Mr. Wells listed the assets that he did see as part of his appraisal report. He testified that the quality of the assets he did see was secondhand “junk” and that is consistent with what can be seen in the photos he took. Mr. Wells gave these assets a liquidation value of $1,870.

[327] When asked what his impression was as to what he saw as compared to what is listed on the second Eastern invoice, Mr. Wells testified that his impression was that there should be a lot more. He saw two IBM computers, not two Mac graphic design computers as stated on the invoice. He admitted that the HP 3-in-1 fax/scanner/copier that he saw could be the one on the invoice although I note on the Eastern invoice it is stated to be one HP fax, one Canon printer and there is no reference to a copier.

(f) The Circulation of the SBL Proceeds

[328] Based on the Coort Analysis, in the period September 21 to October 4, 2007, ELI received the SBL funds totaling $153,000 and $100,000 on August 30, 2007 from an unknown source; presumably start-up capital from Ms. Cohen. The Crown’s theory is that most of this money came from two payments to Ms. Cohen from Eastern totaling $69,000: $19,000 on August 3 and $50,000 on August 29, 2007. Although that is just a theory, the timing fits and I can think of no other reason why Eastern would be giving Ms. Cohen money. Neither Mr. Kazman nor Mr. Levy tried to justify this payment as a loan as neither claim to have had any control over what Eastern did with its money.

[329] In any event from the $253,000 ELI had in its TD account it paid $205,531 to Eastern in two payments on September 21and October 4, 2007, paying in full the two Eastern invoices. In the period between October 4 to November 1, ELI also received $24,556.61 from Mosaic in two payments. Presumably if Mr. Levy had been asked about this payment he would have said it was for lights Mosaic purchased and that he was directed by Mr. Sade to make the payment to ELI. That would have been possible in theory save that I have found ELI never operated. $10,000 from Mr. Kazman’s company 2061914 Ontario Inc./Blue Glass was also paid to ELI, which I presume Mr. Kazman would have testified was a loan as it is an even amount.

[330] In the period from November 1, 2007 to February 21, 2008, ELI paid $8,000 to M&M, Mr. Kazman’s company, and $14,000 to Lorraine Salt, presumably towards Ms. Cohen’s purchase of her interest in 2897 Dundas. Neither payment appears to be related to any possible business expense of ELI.

[331] The payments by ELI to Eastern represent 81.2% of the SBL proceeds plus the start-up capital provided by Ms. Cohen. The other significant payment was a $40,000 cheque from ELI to Cramarossa, Mr. Kazman’s company. Mr. Kazman testified that this was “probably another loan” although there is no note on the cheque. He also testified that the cheque could be for money he was loaning out for Ms. Cohen. This money went to Sheila Monterose, a lawyer who was working from Mr. Kazman’s office. When this was pointed out to Mr. Kazman he said this money was for a mortgage loan or a purchase. That of course does not explain why the cheque would be payable to his construction company as opposed to Dufferin Paralegal. Regardless, this would not seem to be a legitimate business expense for ELI and if ELI was a legitimate business, this further payment left it with virtually no money to purchase inventory to get the business up and running. By October 31, 2007 the ELI account had a balance of just under $3,500.

[332] In the period from February 26 to March 19, 2008, ELI received a total of $113,397.38 from Mosaic, Blue Deer and LHC, the company that obtained Ms. Cohen’s third SBL. In March 2008, in addition to a loan payment, ELI paid $10,000 to Blue Glass and $90,000 as start-up capital to LSC, the company that obtained Ms. Cohen’s fourth SBL.

[333] Mr. Coort also analyzed the Eastern bank account at the CIBC from when it was opened on June 7, 2007 until December 31, 2008. In the seven-month period from September 2007 to February 2008, the only deposits to the Eastern account came from ELI’s payments totaling $205,531. In the period August 31, 2007 to February 29, 2008, Eastern paid out a total of $149,670.68 or 71.5% to Mosaic, Trust Inc. and MDC Modern; all companies owned by Mr. Levy. All of the payments were in uneven amounts. The only payment by cheque was to MDC Modern and the RE: line stated “on account”. Although based on the general evidence of Messrs. Kazman and Levy, these payments could have been for subcontracting by Mosaic for Eastern. There were no references to invoice numbers and Mr. Levy denied doing any work for ELI. Based on its bank account, the only contract Eastern purportedly had at this time was with ELI. Mr. Kazman’s company, 6747841 Canada Inc., received $6,502.59.

[334] The only other payment that Eastern made in this period that could have been for leasehold improvements for ELI was a payment to Creative Contracting in September 2007 of $13,733.32 but I did not hear any evidence about this company but the timing of the payment out and the payment back is unusual. I note that $8,491.16 was paid to Mosaic a few days later.

[335] During his cross-examination, Mr. Kazman was questioned by Mr. Coristine about the money paid out by Eastern and he responded that he did what he was told to do by Mr. Levy and asked why should he ask questions when it was not his money. He insisted that he did not have a clue what the money was for. He said that Ms. Cohen bought a lot of stuff from all over the world and her father was involved in different businesses.

[336] Mr. Coort analyzed the Mosaic bank account at the BOM for the period September 29, 2007 to November 30, 2008. In the October/November 2007 period Mosaic paid $62,683.49 in payments to ELFI (two payments), $24,126.59 to ELI (two payments) and $76,594.90 to Oakwood Renovations and Construction Ltd. (Oakwood) (two payments), one of the Disputed Construction Companies. The payments from Mosaic to ELFI and ELI all reference invoice numbers.

[337] Mr. Levy was asked why Mosaic would be making payments to Oakwood since he claimed it was owned by Mr. Kazman. He said that it is possible Oakwood did work for Mosaic. When asked why he would retain Oakwood given his view of Mr. Kazman as a contractor, Mr. Levy said that Oakwood would buy supplies because Mr. Kazman was well connected and Mosaic would then pay Oakwood back. This evidence made no sense. If Mr. Levy were a legitimate contractor with a number of construction companies as he asserts he was, I would have expected him to have his own accounts with suppliers.

[338] ELFI used the money it received from Mosaic in the same October/November 2007 period to pay $31,000 to Mr. Kazman personally, $10,000 to his company Blue Glass and $20,000 to Ms. Cohen personally. The funds received by Oakwood from Mosaic were virtually all paid to Mr. Kazman: $30,000 to Blue Glass and $45,000 to Ms. Cohen personally. The circuitous way these funds got to Mr. Kazman and Ms. Cohen are consistent with a desire to hide the source of the funds, which was originally the ELI SBL.

[339] In the month of November 2007, Ms. Cohen received $20,000 from Blue Glass, $60,000 from Oakwood and $20,000 from ELFI and this $100,000 was used as her start-up capital for LHC, which she paid into the LHC account at the BOM on November 30, 2007.

(g) Summary of Findings of Fact

[340] Based on the totality of the evidence I accept, I make the following findings of fact with respect to the ELI SBL.

a) The Agreement to Lease dated June 7, 2007 between Ms. Cohen in trust for a company to be incorporated and 6747841 Property Management for 559 Eglinton was a fraudulent lease as ELI had no interest as a tenant in 559 Eglinton, which were being renovated by Mr. Kazman and Mr. Luska as two residential apartments.

b) Mr. Kazman likely incorporated ELI for Ms. Cohen and therefore knew that Ms. Cohen was using 559 Eglinton as an address for the company; the upstairs units of the building. It is therefore clear that Mr. Kazman must have known at the very least that Ms. Cohen intended ELI to have some association with this address. Neither Ms. Cohen nor Mr. Levy had an interest in this property at the time.

c) Fraudulent 2005 and 2006 NOAs for Ms. Cohen that grossly exaggerated her income were provided to the bank and Mr. Levy or someone on his behalf faxed the 2006 NOA to the bank. As such I presume he provided the 2005 NOA to the bank as well. I am not able to determine on the evidence with respect to ELI alone however, whether Ms. Cohen prepared these documents and provided them to Mr. Levy or whether Mr. Levy prepared them and if so, whether or not Ms. Cohen was aware of them or how these documents got to the TD..

d) Ms. Cohen misrepresented to the TD that her total SBLs through related companies did not exceed $250,000. Ms. Cohen also certified that the landlord and borrower were at arm's length but the fact is that the lease was a fraudulent document. I have not made a finding of who was responsible for creating the fraudulent lease and who provided it to the BNS.

e) Having found that during the summer and fall of 2007 Mr. Kazman and Mr. Luska were renovating the second floor; the two residential apartments municipally known as 559 Eglinton, which were leased in January 2008, it was impossible for any renovations to have been done by Ms. Cohen to 559 Eglinton for the purpose of ELI. It therefore follows that the invoices provided by Eastern to the TD in order to obtain the SBL proceeds fraudulently misrepresented work done and furniture, fixtures and equipment supplied in order to deceive the bank into releasing $153,000 in SBL funds to ELI. Ms. Cohen clearly defrauded the bank.

f) Whether or not Mr. Kazman and/or Mr. Levy participated in this fraud will depend on my assessment of who was in control of Eastern. However, if this fraud was Ms. Cohen’s idea alone, as I said with ELFI it makes no sense that she would pay out all of the SBL funds and most of her start-up capital to Eastern unless she knew she would be getting some of