COURT FILE NO.: CRIMJ(P) 271/13 DATE: 20180927
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
HER MAJESTY THE QUEEN M. Morris, Counsel for the Crown
- and -
STEPHAN HEADLEY A. Baratz Counsel for Stephan Headley
REASONS FOR RULING
RE: APPLICATION TO ADMIT TESTIMONY OF DECEASED WITNESS
BARNES J.
INTRODUCTION
[1] Stephan Headley is charged with six counts of fraud, contrary to s. 380(1)(a) of the Criminal Code, one count of personation, contrary to s. 403 of the Criminal Code, and one count of forgery, contrary to s. 368(1)(a) of the Criminal Code.
[2] The Crown made an application to admit evidence previously taken, pursuant to s. 715 of the Criminal Code. For the following reasons, the application is granted.
BACKGROUND
[3] It is the Crown’s theory that in 2005, Stephan Headley: a) defrauded Deborah Lo of $350,000 dollars by persuading her to invest in three fraudulent schemes; b) defrauded Glenford Jones of an amount just under $50,000 by cashing in Glenford Jones’ RRSP and persuading Glenford Jones to invest in a fraudulent scheme; c) impersonated Glenford Jones to obtain a line of credit and credit cards from Scotiabank and; d) uttered a forged document in support of an application to obtain credit from Scotiabank.
[4] The Crown’s application under s. 715 of the Code relates to Dean Karahojitis, who testified at the preliminary inquiry and is now deceased. Dean Karahojitis was a loans officer employed by Scotiabank. He processed and approved applications for lines of credit and credit cards. He identified Stephan Headley as the person who applied for these credit instruments. He said Stephan Headley introduced himself as “Glenford Jones”. I place the name “Glenford Jones” in quotation marks to highlight the fact that the identity of the person Mr. Karahojitis dealt with is in dispute in this trial. Mr. Karahojitis said he knew Stephan Headley as “Glenford Jones”. Glenford Jones is Mr. Headley’s half-brother.
[5] The defence’s theory is that Stephan Headley was not a financial advisor to Deborah Lo or Glenford Jones and that Ms. Lo and Mr. Jones did not rely on Stephan Headley for financial advice. Ms. Lo and Mr. Jones made their own investment decisions, understood the risks of investment, and Stephan Headley did not benefit from the investments. The defence theory is that Mr. Karahojitis and Glenford Jones conspired to defraud Scotiabank.
ANALYSIS
Relevant Legal Principles
[6] The Crown relies on s. 715(1) of the Code, which provides:
Where, at the trial of an accused, a person whose evidence was given at a previous trial on the same charge, or whose evidence was taken in the investigation of the charge against the accused or on the preliminary inquiry into the charge, refuses to be sworn or to give evidence, or if facts are proved on oath from which it can be inferred reasonably that the person
(a) is dead,
(b) has since become and is insane,
(c) is so ill that he is unable to travel or testify, or
(d) is absent from Canada,
and where it is proved that the evidence was taken in the presence of the accused, it may be admitted as evidence in the proceedings without further proof, unless the accused proves that the accused did not have full opportunity to cross-examine the witness. [Emphasis added.]
[7] There is no dispute that all the statutory preconditions under s. 715(1)(a) are satisfied in this case. Mr. Karahojitis testified at Stephan Headley’s preliminary inquiry on these charges and Mr. Karahojitis is now deceased. Despite s. 715, a judge has broad discretion not to admit such evidence where its prejudicial impact outweighs its probative value; where admission of the evidence would consume an inordinate amount of time not commensurate with its value; where “the effect of the evidence on the trier of fact is out of proportion to its reliability”; and the evidence was obtained in a manner that was unfair to the accused: R. v. Saleh, 2013 ONCA 742, 314 O.A.C. 60, at para. 80.
[8] In conducting this analysis the trial judge should consider two factors: 1) the fair treatment of the accused; and 2) society’s interest in admitting probative evidence to get at the truth of the matters at issue: R. v. Potvin, 1989 1 S.C.R. 525, at pp. 552-553. The Court of Appeal for Ontario in R. v. Saleh at para. 81, describes this balancing process as follows:
When an accused seeks to exclude otherwise admissible evidence on the basis that its reception would render the trial unfair, it is critical to remember that a fair trial is a trial that appears fair, both from the perspective of the accused and from the perspective of the community. A fair trial is not the most advantageous trial possible from the accused’s point of view: R. v. Lyons, 1987 2 S.C.R. 309, at p. 362. A fair trial is not a perfect trial. A fair trial is a trial that satisfies the public interest in getting at the truth, while at the same time preserving procedural fairness to the accused: R. v. Harrer, 1995 3 S.C.R. 562, at para. 45.
[9] The defence submits that the prejudicial value of admitting the evidence outweighs any probative value it may have and admission of the evidence is unfair to the accused, thus favoring exclusion. The Crown describes Mr. Karahojitis’ evidence as highly probative and not prejudicial to the accused. The Crown submits that admission of the evidence will not render the trial unfair and urges the court to admit the evidence.
Dean Karahojitis
[10] Mr. Karahojitis testified at the preliminary inquiry. He gave his evidence in chief and was cross-examined by counsel for the accused. The accused has different counsel at trial. Mr. Karahojitis identified Stephan Headley as a person he knew as “Glenford Jones”. An important component of the Crown’s case is that Stephan Headley impersonated his brother Glenford Jones.
[11] Mr. Karahojitis said he was a senior commercial account manager for small businesses at a Scotiabank branch. His job was to bring new business to the branch. He said that "Glenford Jones” had a personal account at another Scotiabank, and was referred to him by that branch to seek a commercial loan.
[12] Mr. Karahojitis said he worked for Scotiabank until 2007. He said he worked at Scotiabank for 13 years before he was dismissed because of this case. Mr. Karahojitis said he first met “Glenford Jones”, in August 2004, when “Glenford Jones” completed an application to borrow money from Scotiabank. He said he introduced “Glenford Jones” to his team leader Wayne Ellis.
[13] Mr. Karahojitis said he met "Glenford Jones” once to twice a month over a period of six to eight months. He said he dealt with "Glenford Jones” on a professional basis. He testified that "Glenford Jones” said he needed financing for his company, Laers Inc.
[14] Mr. Karahojitis said “Glenford Jones” provided supporting documentation for the loan application, and he submitted the documents to Scotiabank’s loan underwriters to assess risk and provide the necessary approval. “Glenford Jones” was to use a portion of the money advanced to purchase an IBM server for his business. He said “Glenford Jones” gave him several documents in support of the application, and executed necessary documents in his presence. The documents included an IBM invoice to “Glenford Jones” and Laers Inc. for $131,000.
[15] Mr. Karahojitis said Mr. “Glenford Jones”, as president of Laers Inc., applied for a corporate visa card for Stephan Headley. Mr. Karahojitis said Mr. “Glenford Jones” signed the Credit Agreement for business in his presence.
[16] Mr. Karahojitis was shown a Ministry of Transportation picture of Stephan Headley dated May 20, 2010. Mr. Karahojitis said he recognized this picture as that of “Glenford Jones”. He was shown a Ministry of Transportation picture of Glenford Jones dated August 19, 2008. Mr. Karahojitis said he had not seen this picture before. Mr. Karahojitis said Scotiabank approved an approximately $250,000 loan for “Glenford Jones” to purchase the IBM equipment.
[17] Mr. Karahojitis said that on August 6, 2004, he received an Application Package from Mr. “Glenford Jones”. Mr. Karahojitis said the documents included financial statements for the company Laers Inc. “Glenford Jones” was listed as president. He said he reviewed the financial statements and noted that they had been prepared by V.P., a chartered accountant. He said he contacted the Institute of Chartered Accountants to verify that V.P. was a chartered accountant. The Institute gave him a professional number for V.P., which he cross-referenced with the number of the chartered accountant on the financial statement. It was the same number. He called V.P., who confirmed that he had prepared the financial statement for Laers Inc.
[18] Mr. Karahojitis said he then submitted the package to the loan underwriters. The underwriters issued an approval. Once he was authorized to proceed with the loan, he was required to verify the address of “Glenford Jones” and to inspect the IBM server, which he did with “Glenford Jones’ ” assistance. He called IBM and spoke to someone to confirm the IBM invoice given to him by “Glenford Jones”. He did not recall who he spoke to at IBM.
[19] Mr. Karahojitis said “Glenford Jones” took him to his place of business on the Queensway where he verified the existence of the IBM server. Mr. Karahojitis said once he confirmed the value of the server, he advanced bank drafts as follows: $93,100 dated January 28, 2005; $37,975 dated January 28, 2005. He could not explain why the money was advanced in two instalments of bank drafts totaling the value of the server. He said the drafts were sent to “Glenford Jones” on January 28, 2005, or shortly thereafter. He said he signed the drafts. He said a corporate Visa card was issued for Mr. “Glenford Jones”.
[20] Mr. Karahojitis said “Glenford Jones” as president of Laers Inc. requested a corporate credit card for Stephan Headley. He said Mr. “Glenford Jones” requested that a credit card with a limit of $10,000 should be provided to Mr. Stephan Headley.
[21] Mr. Karahojitis said he, “Glenford Jones”, and Wayne Ellis met in August 2005 to discuss “Glenford Jones’ ” arrears. He said the reason for the arrears were not known. He said they did not get a satisfactory answer for the arrears. He said during the meeting “Glenford Jones” showed assets in excess of $400,000 with TD bank. He said he and Wayne Ellis asked “Glenford Jones” to move those assets over to Scotiabank to minimize Scotiabank’s risk.
[22] Mr. Karahojitis said he kept copies of some client’s documents at his home with the intent to work at home. He said the bank always had the collateral documents. He said he had no intent to do anything illegal. Mr. Karahojitis said the documents he kept at home were shredded.
[23] Mr. Karahojitis testified that he kept the documents relating to Laers Inc. in his garage. Mr. Karahojitis said he and Mr. Ellis were investigated because of this matter, and both fired from Scotiabank in 2007 as a result. Mr. Karahojitis explained that the particular incident investigated was when Mr. “Glenford Jones” came to the bank waving a starter cheque for an account that had not been opened. Mr. Karahojitis said this incident occurred one morning in 2006. He said he saw Mr. “Glenford Jones” flash the cheque. He said he saw Mr. “Glenford Jones” run out. There was no loss to the bank.
[24] Mr. Karahojitis said the issue was that the starter cheque had a signature similar to his. He said the signature was not his. He said he has no idea what happened to the cheque.
Position of the Parties
[25] The Crown submits: a) Mr. Karahojitis’ testimony has nothing to do with the allegations involving Deborah Lo; b) that the defence had ample opportunity to cross-examine Mr. Karahojitis; c) the defence was in possession of all the disclosure; d) nothing new has arisen since Mr. Karahojitis was cross-examined; e) the evidence is essential to the Crown’s ability to prove the allegations against the accused that involve Scotiabank and the impersonation of Glenford Jones; f) there is nothing unfair in the manner in which the evidence was gathered; and, g) the evidence is highly probative with no prejudicial effect to the accused, and thus admission creates no unfairness to the accused.
[26] The defence argues that this evidence is highly prejudicial because: a) Mr. Karahojitis is Glenford Jones’ accomplice; b) he identified Stephan Headley as the main perpetrator who impersonated “Glenford Jones”; c) he said “Glenford Jones” took him to see the IBM server and said he saw the IBM server; d) Mr. Karahojitis said he called an unidentified IBM employee to verify the server and supporting documentation and the employee confirmed that it was the correct server; e) there is no evidence that the IBM server ever existed; f) Dean Karahojitis said he called a chartered accountant to verify a document submitted in support of the credit application and the accountant is expected to testify that he never spoke to Mr. Karahojitis; and, g) Mr. Karahojitis recommended approval of the loan to Scotiabank underwriters, and once it was approved, issued the bank drafts to “Glenford Jones” that were somehow deposited in Stephan Headley’s bank account. They submit that there is evidence that Mr. Karahojitis signed off on starter cheques on an account linked to this case which had not yet been issued.
[27] The defence submits that different counsel represented Mr. Headley at the preliminary inquiry, and Mr. Headley’s counsel at trial will be deprived of the opportunity to ask Mr. Karahojitis additional questions.
[28] Disclosure was provided to the accused’s former counsel prior to the preliminary inquiry. Disclosure comprised several boxes of documents. These documents included two fictitious IBM documents. One document is an IBM purchase order made out to “Glenford Jones” and Laers Inc. This invoice was for computer servers “Glenford Jones” and Laers Inc. are alleged to have been purchasing. It is alleged that this was part of a scheme to mislead Scotiabank to advance funds for the purchase of non-existent servers. Mr. Karahojitis was cross-examined on the IBM purchase order at the preliminary inquiry.
[29] The second document was part of a series of documents found at Mr. Karahojitis’ home by his widow. She gave them to former Scotiabank manager, Wayne Ellis, who in turn gave the documents to the police. This document is an IBM invoice to a company linked to Mr. Stephan Headley called 1590 Group Inc. Mr. Karahojitis testified that he had never heard of 1590 Group Inc. The defence argues that this evidence calls Mr. Karahojitis’ credibility into question, and Mr. Headley will be deprived of an opportunity to cross-examine him on the IBM invoice. This adds to the unfairness, which weighs in favor of the exclusion of Mr. Karahojitis’ prior testimony.
[30] The defence further submits that without Mr. Karahojitis’ testimony the Crown will be unable to prove the charge of impersonating “Glenford Jones” and all the allegations with Scotiabank as complainant. Thus, the admission of Mr. Karahojitis’ preliminary inquiry testimony without the opportunity to cross-examine him at trial will render the trial unfair to the accused.
[31] The parties agreed that the invoice was part of a set of documents discovered by Mr. Karahojitis’ widow in his garage. She gave the documents to Wayne Ellis, who in turn provided the documents to the police.
[32] The defence submits that should the court rule in favour of admission of the evidence, the court should provide a Vetrovec warning to the jury The jury should be further instructed to consider their inability to assess Mr. Karahojitis’ demeanor in deciding whether to rely on his evidence in reaching a decision in the trial (a s. 715 instruction).
Discussion
[33] At the preliminary inquiry, Mr. Karahojitis identified Mr. Headley as the perpetrator of the offences. His evidence that he knew Mr. Headley as “Glenford Jones” is particularly damaging to the accused. The inability to cross-examine one of his central accusers at trial seems unfair. However, upon closer analysis, I conclude that the admission of the evidence does not create an unfair trial for Mr. Headley.
[34] At the preliminary inquiry, counsel for Mr. Headley was in possession of disclosure. Disclosure included the fictitious IBM purchase order. Defence counsel elected to cross-examine Mr. Karahojitis on this document. Disclosure included the fictitious IBM invoice found at Mr. Karahojitis’ house. Defence counsel elected not to cross-examine Mr. Karahojitis on this document.
[35] The inability to fully cross-examine the witness can be one of the grounds for excluding otherwise admissible evidence. The focus of the analysis is not on the use made of the opportunity to cross-examine but rather whether there was a “full opportunity to cross examine the witness” [emphasis added]: R. v Saleh at paragraph 71.
[36] Mr. Headley had full opportunity to cross-examine and confront Mr. Karahojitis at the preliminary inquiry. He utilized this opportunity to cross-examine on areas the defence now asserts impugn his credibility. The Crown will call the real Glenford Jones and the accountant as witnesses. The defence says Wayne Ellis will be called as a defence witness. In the result, the defence is able to illicit all of the evidence required to impugn Mr. Karahojitis’ testimony despite Mr. Karahojitis’ unavailability to testify at the trial.
[37] Mr. Karahojitis is deceased and he will not be able to explain, further clarify or seek to rehabilitate evidence at trial that will adversely impact his credibility. Some examples include: 1) Chartered Accountant V.P will testify that he has never prepared financial statements for Laers Inc. or Glenford Jones, and he has never heard those names before and he never spoke to Mr. Karahojitis. 2) Mr. Karahojitis’ former spouse will testify that she found documents in Mr. Karahojitis’ garage. She turned those documents over to Mr. Wayne Ellis, who will testify that the documents contained an IBM invoice made out to 1590 Group Inc. - Mr. Karahojitis had testified that he had never heard of 1590 Group Inc. before. 3) Mr. Karahojitis testified that he called IBM to verify the IBM purchase order and saw the computer server at “Glenford Jones’ ” office. A witness from IBM will testify that the IBM purchase order and the IBM invoice are both fictitious documents. 4) Wayne Ellis will testify that Mr. Karahojitis was investigated and fired for signing a fraudulent bank starter cheque. 5) A memo written by Mr. Karahojitis to Scotiabank underwriters will be introduced into evidence. In this memo, Mr. Karahojitis lists all the steps he took to verify the authenticity of the documents submitted by “Glenford Jones”, all of which will be contradicted by evidence previously described.
[38] The defence theory is that Mr. Headley and his brother Glenford Jones were working together in a factoring business. Factoring is where an entrepreneur purchases the debts owed to a company at a deep discount, and then tries to turn a profit by collecting the full value of the outstanding debts. Glenford Jones’ role was to actively solicit funds for this enterprise. In this endeavor, Glenford Jones, unbeknownst to Mr. Headley, developed this plan with Mr. Karahojitis to defraud Scotiabank.
[39] Mr. Karahojitis’ inability to refute evidence damaging to his credibility inures to the benefit of Mr. Headley. Thus, the admission of the evidence will not be unfair to Mr. Headley. Ironically, admission may be advantageous to Mr. Headley, but exclusion will be more advantageous to Mr. Headley because without Mr. Karahojitis’ evidence, the Crown’s ability to prove the counts of impersonation of Glenford Jones and the offences with Scotiabank as complainant will be irreparably damaged.
[40] An accused’s entitlement to a fair trial means an entitlement to a trial that appears fair “both from the perspective of the accused and the community””: Saleh at para. 81. The deprivation of a tactical advantage does not constitute trial unfairness. The circumstances of this case suggest that Mr. Karahojitis would have a strong incentive to give damaging evidence about the accused. Therefore, the jury will be given a Vetrovec instruction. From the perspective of the community, excluding otherwise admissible evidence simply because it will be more advantageous to the accused will provide the trier of fact with an incomplete picture of the evidence underlying the allegations and interfere with the community‘s interest in a just resolution of the matter on its merits. Thus, it is unfair to the community to exclude the evidence.
[41] Despite the fact that there will be evidence from other witnesses at trial that will be very damaging to Mr. Karahojitis’ credibility, the impact of the visual effect of confronting a witness with powerful evidence impugning his credibility before the trier of fact cannot be underestimated. To address this concern, the jury will be instructed that in deciding whether to rely on this evidence, they should consider the fact that they did not have the opportunity to observe Mr. Karahojitis’ demeanor. Counsel have agreed that if ruled admissible, the jury will hear a recording of Mr. Karahojitis’ preliminary inquiry testimony and have access to his preliminary inquiry transcript. On balance, the admission of the evidence will ensure a fair trial both from the perspective of the accused and the community.
[42] The evidence is relevant, material and reliable. The probative value of admission far outweighs any prejudicial effect, and the specter of unfairness is nowhere to be found. Therefore, the Crown’s application is granted.
Barnes J