COURT FILE NO.: CV-11-9210-00CL

DATE: 20181231

SUPERIOR COURT OF JUSTICE – ONTARIO

(COMMERCIAL LIST)

RE: CAJA PARAGUAYA DE JUBILACIONES Y PENSIONES DEL PERSONAL DE ITAIPU BINACIONAL, Plaintiff

AND:

EDUARDO GARCIA OBREGON a.k.a. EDUARDO GARCIA a.k.a. EDDIE OBREGON, CLAUDIA PATRICIA GARCIA a.k.a. PATRICIA GARCIA a.k.a. CLAUDIA PATRICIA DE GARCIA a.k.a. CLAUDIA SANTISTEBAN, LIGIA PONCIANO, MANAGED (PORTFOLIO), CORP., GENESIS (LA), CORP. (ONTARIO CORPORATION NUMBER 1653094, GENESIS (LA), CORP. (Alberta CORPORATE ACCESS NUMBER 2013145921), FC INT, CORP., FIRST CANADIAN INT, CORP., UNION SECURITIES LIMITED, SCOTT COLWELL, MARTY HIBBS, HIBBS ENTERPRISES LTD., COLUMBUS CAPITAL CORPORATION, ANTONIO DUSCIO, LEANNE DUSCIO, LEANNE DUSCIO carrying on business as THE QUEEN ST. CONSERVATORY, CATAN CANADA INC., VIJAY PAUL, GREG BAKER, BRADLEY F. BREEN, LOU MARAJ, 2138003 ONTARIO INC., MACKIE RESEARCH CAPITAL CORPORATION, FIRST CANADIAN CAPITAL MARKETS LTD., FIRST CANADIAN CAPITAL CORP., FC FINANCIAL PRIVATE WEALTH GROUP INC., JASON C. MONACO, DANIEL BOASE, PAOLO ABATE, NIKOLAOS SYLIANOS TSIMIDIS, GENESIS LAND DEVELOPMENT CORPORATION, LIMITED PARTNERSHIP LAND POOL (2007), and GP LPLP 2007 INC., Defendants

AND RE: EDUARDO GARCIA, FC INT, CORP., GENESIS (LA), CORP. (ONTARIO CORPORATION NUMBER 1653094), and PATRICIA GARCIA

AND:

UPPER CANADA EXPLORATIONS LIMITED, PARKSIDE RESOURCES CORPORATION, GLOBAL SPORT TECHNOLOGIES CORP., and CAJA PARAGUAYA DE JUBILACIONES Y PENSIONES DEL PERSONAL DE ITAIPU BINACIONAL

BEFORE: S.F. Dunphy J.

COUNSEL: John De Vellis and Christopher Gaytan, for the Plaintiff

Alina Sklar, for Anthony Duscio

HEARD at Toronto: November 30 and December 18, 2018

REASONS FOR DECISION

[1] This was an application to find Mr. Anthony Duscio in contempt of orders issued by me on May 14, 2018 and May 23, 2018. Those orders effectively froze all of the assets of Mr. Duscio worldwide and required their detailed disclosure. The orders were issued following a lengthy trial itself the culmination of a multi-year legal marathon to unravel, among other things, a $7.3 million fraud perpetrated by Mr. Duscio in 2008. Despite my orders, Mr. Duscio disclosed essentially no assets and instead proceeded to sell and transfer away substantially all the assets that he appears to have had. None of this was known to the plaintiff until after its investigators discovered it afterwards. It is not yet known how many of these assets have been lost beyond recall. Mr. Duscio has yet to lift a finger to attempt to recover any of them in a serious way.

[2] At the conclusion of the hearing on December 18, 2018, I found Mr. Duscio guilty of contempt beyond a reasonable doubt and sentenced him to be incarcerated until February 7, 2019 (50 days). On that day, he will be brought before me and I shall consider whether there is reason to believe that Mr. Duscio is willing and able to purge his contempt. If a change in attitude accompanied by positive steps at purging his contempt have been demonstrated by that date, his final sentence may be mitigated.

[3] Whether the plaintiffs have found only the tip of the iceberg of assets hidden by Mr. Duscio or its bottom may never be known absent a serious change of heart of Mr. Duscio.

[4] It is evident from Mr. Duscio’s trial evidence and his cross-examination evidence that he conducts significant amounts of business without records and either holds assets for others or has others hold assets for him, all without any records to demonstrate the bona fides of these arrangements. The circumstances of this case certainly give rise to a well-founded suspicion that such secret arrangements have been neither bona fide nor arm’s length. This is not the stuff of mere speculation: Mr. Duscio’s testimony before me from trial until now has included numerous examples of such arrangements involving considerable amounts of money, particularly in relation to the viatical business where large sums of money from assigned life insurance policies are involved.

[5] In excess of four hundred thousand dollars that might have been available to satisfy the plaintiff’s proprietary and monetary claims has simply disappeared in a relative handful of weeks after Mr. Duscio was informed of the magnitude and nature of the verdict that was being finalized and ordered to disclose and not dissipate his assets. The plaintiff may well end up with little to nothing to show for its efforts as a result and the explicit orders of this court have been flagrantly ignored.

[6] Compliance is the main goal of sentencing in contempt matters, Mr. Duscio has shown himself adept at hiding assets and leaving few tracks. Mr. Duscio has not suggested that there is anything he can or will now do to bring back the assets he has transferred and disclose all of his dealings although the plaintiff retains a glimmer of hope that his attitude may yet change. The leniency I have shown in sentencing to this point – and it is CONSIDERABLE leniency – is motivated solely by the existence of that flickering hope that a change of attitude may yet succeed in achieving a purging of the flagrant contempt thus far shown for this court’s orders. Absent such hope of compliance, I should have imposed a sentence many multiples longer than the one I have done here. I may yet be compelled to do so should the hope of compliance give way to the certainty of irreparable loss.

[7] I gave oral reasons at the hearing with more detailed reasons to follow. These are those reasons.

Factual Background

[8] On May 14, 2018, I completed a lengthy trial involving fraud and breach of fiduciary duty allegations against a number of defendants. The facts were complex, the sums of money involved significant and the number of transactions to be broken down and analyzed elevated.

[9] While complex, there was no doubt whatsoever as to the outcome. I advised the parties at the close of argument that there would be findings of fraud made as against the two defendant groups (the Garcia Defendants and the Duscio Defendants) and that judgments would certainly issue even if the precise amounts involved would take some time to refine.

[10] In the case of Mr. Duscio, his liability stemmed from involvement in the “Columbus Notes” affair whereby approximately $7.3 million of the plaintiff’s funds were diverted to the purchase of a series of utterly worthless and, as it turned out, forged promissory notes. The evidence revealed that the first of these notes was issued by a company that did not even exist yet. Once incorporated, the note issuer (at least as far as the proceeds of the plaintiff’s funds was concerned) was de facto controlled by Mr. Duscio. Mr. Duscio was at the time an undischarged bankrupt. All of the notes bore forged signatures of a third party who did not at all events have any position in the newly-created company (once founded), the promised security did not exist and the funds were used for purposes entirely different from those represented. Instead of being invested, much of the proceeds were diverted for Mr. Duscio’s personal purposes and hundreds of thousands of dollars were funneled out of the country to pay secret commissions to a fiduciary of the plaintiff as part of the scheme. The entire sordid affair was a blatant fraud of the worst sort with Mr. Duscio at its epicentre and from which he derived very significant personal benefits.

[11] At the close of argument, the plaintiff asked for an interim order preventing the principal defendants from dissipating their assets. A draft of a Mareva-like order was proposed and had been circulated to the parties beforehand.

[12] The events giving rise to this claim dated from almost ten years in the past and the litigation had been on-going for seven years. Given Mr. Duscio’s state of bankruptcy at the time of the events giving rise to the claim and the annulling of his discharge as a result of his involvement in this scheme, I was satisfied that all or substantially all of any assets of Mr. Duscio were very likely proceeds of this fraud and thus potentially the object of a tracing remedy. I was further satisfied that, given the way in which the trial had unfolded and the nature of the frauds I found had been practiced by the defendants, there was considerable risk that assets might be placed beyond the plaintiff’s reach during the time it would take to complete what would be a very complex set of final reasons. Mr. Duscio freely admitted during the trial to engaging in transactions involving what were effectively secret trusts designed to shield the true nature of transactions from being discovered.

[13] After further discussion, I ordered that all of the assets of Mr. Duscio should be frozen pending the delivery of my final judgment with the exception of his employment earnings which alone he could continue to access to pay his ordinary living expenses. Given the late hour, an oral order was made in lieu of the more complex interim order proposed by the plaintiff and pending revision and finalization of that proposed order. However, I ordered the parties to return on May 23, 2018 with disclosure of their assets and required living expenses so as to be able to finalize more detailed terms for the interim order. The oral order was intentionally broad, recognizing that there would be an opportunity in a few days to deal with any refinements needed to accommodate legitimate issues.

[14] When I asked Mr. Duscio for his position on the interim order proposed by the plaintiff he advised me that “I don’t agree with it” adding “I have no intentions of divesting the houses and the house. So I don’t think we need to go there”.

[15] I personally explained the order I was making to Mr. Duscio in the following terms:

I’m freezing a lot because the information I have leads me to reasonably to infer that all or substantially all the assets [of] both is the proceeds of all this. And if, if the evidence shows that it’s not, then we will deal with that in due course…Mr Duscio, I’m referring – nothing will be spent other than your wages, all right?... [This] means everything else just stays were it is until we sort it out later. Okay? So you’re not going to transfer assets to anyone else. You can pay your VISA bills and your, you know, and buy food and all, do all the stuff you normally do with wages and payroll, but nothing else until we find out where it all came from and what there is, all right?

[16] On May 22, 2018, Mr. Duscio contacted Law Help Ontario by telephone and prevailed upon one of the lawyers there to contact Ms. King (the plaintiff’s lawyer) to request her to advise me that Mr. Duscio would be unable to attend court the next day because he was allegedly at risk of losing his employment were he to do so, having exhausted his vacation time attending the trial. No such objection was raised by him in court on May 14. The excuse appears to have been somewhat exaggerated given that Mr. Duscio was then employed through a temp agency that subsequently informed the plaintiff that he was permitted to take whatever time off he chose.

[17] At all events, the hearing proceeded on May 23, 2018 in the absence of Mr. Duscio. A second, more detailed order was made at that time. That order expressly prohibited Mr. Duscio from dealing with any of his assets worldwide – whether in his name or held for him – and required him to deliver a sworn affidavit listing all of his worldwide assets by June 6, 2018.

[18] Nothing whatever turns on the differences, if any, between the sparse order given orally from the bench on May 14, 2018 and the more detailed order made on May 23, 2018. There are no material breaches of the May 14 order alleged to have occurred in the nine days separating it from the more detailed May 23 order. Both orders had the effect of prohibiting any disposition of all of Mr. Duscio’s assets worldwide save his wages subject to further order.

[19] Mr. Duscio delivered the required affidavit of assets on June 6, 2018. The affidavit listed very few assets. As shall be detailed below, Mr. Duscio in fact possessed very significant assets that he failed to disclose in that affidavit. He used the period of time between the delivery of the affidavit and the time when the plaintiff’s patient detective work revealed the extent of his deception to systematically liquidate and transfer – potentially beyond reach - substantially all of those assets. Numerous undisclosed bank accounts were unearthed. Two houses in Florida were sold and their proceeds substantially disappeared, a large portion by way of a wire transfer to Lichtenstein with Mr. Duscio the apparent beneficiary. Other amounts were sent to persons alleged by Mr. Duscio to be creditors under handshake arrangements. Of course throughout, Mr Duscio remained an undischarged bankrupt.

[20] The plaintiff brought this motion for contempt on October 2, 2018. The path to bringing Mr. Duscio before the court was not a simple one. He had changed email addresses. His palatial residence is on a large, gated property that did not permit process servers easy access to the front door. Diligent attempts were made to serve him without success. An order for substituted service was required and obtained. Mr. Duscio still did not show in court. The details of all of this are not relevant for present purposes. Suffice it to say that a bench warrant was eventually issued to cause Mr. Duscio to be brought to court. While he successfully avoided apprehension by police, the warrant was sufficient to get his attention and he appeared in court on November 14, 2018, although without counsel. Mr. Duscio’s counsel had been removed from the record on the eve of the trial and he defended himself.

[21] On November 14, 2018, I rescinded the bench warrant and ordered Mr. Duscio to submit to cross-examination on November 22, 2018. I also adjourned the hearing of the contempt motion until November 30, 2018 to proceed with or without counsel.

[22] The cross-examination ordered took place as ordered on November 22, 2018. Mr. Duscio appeared and had the assistance of counsel, Ms. Sklar. Ms. Sklar also represented him at the sentencing hearing on December 18, 2018.

[23] During the cross-examination, Ms. Sklar advised that she would be seeking an adjournment of the November 30 hearing due to conflicts in her schedule and interjected to advise Mr. Duscio to refuse to provide answers to numerous proper questions on the grounds that these would be addressed by him in an affidavit. No such affidavit was filed by November 30, 2018. Indeed, the affidavit was only filed the morning of the resumption of this hearing on December 18, 2018 and was sworn that date.

[24] The liability phase of the contempt hearing was held on November 30, 2018. Ms. Sklar did not enter a formal appearance, through Mr. Duscio presented a letter requesting an adjournment. The promised affidavit of Mr. Duscio was not forthcoming.

[25] I declined the request for an adjournment with oral reasons delivered at the hearing and proceeded with the hearing of the motion on the merits. The motion had already been adjourned on the basis that it would proceed that day with or without counsel and had been outstanding for almost two months. Mr. Duscio knew the date of the hearing when seeking counsel and chose counsel who was not available on the date fixed by the court on those terms. He had no basis or reason to assume an adjournment would be permitted.

[26] The plaintiff – who bears the burden of proof beyond a reasonable doubt – presented evidence of breach of my order that was overwhelming. None of that evidence was viva voce – all of it was evidence presented by way of affidavit in advance of the hearing with the exception of one small affidavit. Written argument (in the form of a factum and a supplementary factum) had also been delivered. There was no mystery whatsoever as to the nature of the case Mr. Duscio had to meet.

[27] Mr. Duscio did not testify on November 30 and maintained that he could not present his defence in the absence of counsel. He offered the unsworn explanation that he had not understood the original orders. That remains effectively the only explanation offered to this court at the hearing on December 18, 2018 with the benefit of an additional affidavit and the assistance of counsel.

[28] I released a short handwritten endorsement that day that provided in its material parts as follows:

The plaintiff has proven beyond a reasonable doubt violations by Mr. Duscio of parag. 1(a), 2 and 8 of my order of 23 May 2018 subject only to whatever defence can be offered. The plaintiff has amply demonstrated Mr. Duscio’s knowledge of that order – knowledge which he also had when a non-dissipation and freezing order was made orally in court at the conclusion of the trial on May 14, 2018. Mr. Duscio pleaded that he did not feel able to offer a coherent defence to this without his lawyer. Although I have not adjourned the hearing as he requested, I will allow him to present any defence he has to offer on December 18, 2018. He was unable to produce any facts that might offer a defence before me. I will not proceed to pronounce judgment until December 18 and he shall have an opportunity to displace the weight of the plaintiff’s evidence at that time, with or without counsel. However, while liability and sentencing are normally separate hearings, it will not be so here. If liability is found, sentencing will follow.

There is no question that assets have been dissipated. Purging contempt would require evidence that the proceeds of the two Florida house sales have been returned to one of the frozen bank accounts. That money must be returned whether or not contempt is found. (emphasis in original)

[29] The matter returned before me on December 18, 2018. Ms. Sklar appeared along with Mr. Duscio. An affidavit of Mr. Duscio sworn December 18, 2018 was delivered to me at the opening of the hearing. The affidavit contained no information concerning efforts by Mr. Duscio to procure the return of the assets transferred by him.

issues to be decided

[30] The following issues were decided on December 18, 2018:

a. Is Mr. Duscio to be found in contempt of either or both of my orders of May 14 and May 23, 2018; and

b. If so, what is the appropriate penalty to be imposed?

[31] As noted, I gave brief oral reasons at the time with these written reasons to follow.

Analysis and discussion

(a) Is Mr. Duscio to be found in contempt of either or both of my orders of May 14 and May 23, 2018?

[32] The test on such matters is well established and was reviewed by the Supreme Court of Canada in the case of Carey v. Laiken, [2015] 2 SCR 79, 2015 SCC 17. The requirements on a motion for civil contempt are:

a. The order must state clearly and unequivocally what should and should not be done: Carey para. 33

b. The party must have actual knowledge of the order: Carey para. 34; and

c. The party must have intentionally done the act prohibited by the order or intentionally failed to do that which the order compels: Carey para. 35.

[33] The moving party plaintiff bears the burden of proof of establishing each of these beyond a reasonable doubt.

(i) Did the orders state clearly and unequivocally what should be done or not done?

[34] The May 14 order was made orally at the close of trial. It was made following a request for a detailed interim order by the plaintiff with a draft “Mareva-type” order in hand. I unequivocally advised Mr. Duscio that a finding of fraud was being made in respect of the Columbus Notes matter which amounted to approximately $7.3 million. I also advised him that an order was being made then and there that prohibited him from disposing of any of his assets all of which were to remain frozen with the exception of his employment earnings from which he could pay his living expenses until a more detailed interim order was put in place on May 23, 2018.

[35] My explanation of the effect of the May 14 order was plain, unambiguous and unequivocal. I am fully satisfied beyond reasonable doubt that the May 14 Order clearly and unequivocally prohibited Mr. Duscio from divesting himself of any assets, including real estate.

[36] The May 14 order was effectively superceded by the order of May 23, 2018 – the latter order amplifying the former, but in no way detracting from it and on terms substantially tracking the draft circulated on May 14, 2018 that Mr. Duscio received. The May 23 order provided in its material parts:

1: …that…the Duscio Defendants…are restrained from, directly or indirectly, by any means whatsoever: (a) selling, removing, dissipating, alienating, transferring, assigning, encumbering, or dealing with any assets, whether solely or jointly owned, wherever situated in the world…(the “Accounts and Assets”).

2: …that paragraph 1 applies to all of the …Duscio Defendants’ Accounts and Assets, whether or not held in their own name, whether solely or jointly owned, and wherever located in the world, including any Accounts and Assets which they have the power or authority, directly or indirectly, to dispose of or to deal with, including where a third party holds or controls the Accounts and Assets in accordance with the… Duscio Defendants’ instructions.

8. …that … the Duscio Defendants shall, by June 6, 2018 … provide [plaintiff’s counsel] sworn affidavits (the “Affidavits”) setting out particulars of, value and location of any and all their current and historical worldwide assets, whether in their own name or not, and whether solely or jointly owned, including without limitation (i) all tax returns for the years 2005 to current (ii) any statements from banks or investment accounts, securities, cash, real property, vehicles and other personal property, (iii) any and all Accounts and Assets, and (iv) any accounts and assets situated anywhere in the world including, but not limited to, ….the United States”.

[37] These orders were clear and unequivocal in setting out what Mr. Duscio was required to do (produce a complete list of all assets of any kind worldwide) and what he was required not to do (sell, remove or otherwise deal with any of those assets worldwide).

[38] I find that the operative portions of the May 23 order – the portions relevant to this motion – were clear and unequivocal. As with the May 14 order, these provisions prohibited him from disposing of any of his assets worldwide with exceptions made ONLY for his wages. The May 23 order also required the preparation of a detailed list of all assets.

(ii) Did Mr. Duscio have actual knowledge of the two orders in question?

[39] I have recited at length what was explained to Mr. Duscio at the May 14 hearing. He was present in court and interacted with me. He made objections and comments. I have not the slightest hesitation in finding that he had actual knowledge of exactly what was required of him on May 14.

[40] Ms. King took it upon herself to send a detailed email to Mr. Duscio the following day that reminded him – accurately – that “the Court has made an order that your assets….be frozen and you do not dissipate any accounts or assets pending further order of the court” and that “the only money you are entitled to use or spend is monies that come from a third-party arm’s length employer”.

[41] The email in question was sent to the same email address Mr. Duscio had provided Ms. King during the course of the trial as being current and to be used for purposes of contacting him. He has not denied receiving it. I find that he received this email in fact.

[42] The email from Law Help Ontario sent to Ms. King on May 22, 2018 quoted Mr. Duscio as advising that I had “granted a non-dissipation order” and mentioned as well that a tracing order would be sought. This too confirms Mr. Duscio’s understanding of what he was not to do.

[43] What then of the terms of the May 23 Order? This second order amplified the May 14 order but did not alter its essential substance of freezing Mr. Duscio’s worldwide assets and prohibiting him from dealing with them pending further order. It also contained a requirement for the preparation of a detailed listing of worldwide assets.

[44] Mr. Duscio chose not to attend in court on May 23, 2018. He had notice of the hearing, of its subject-matter and importance. His claimed work impediments were not raised on court on May 14, 2018 nor have they been corroborated by his employer.

[45] Despite his absence, I am satisfied beyond reasonable doubt that this order too came to his direct attention such that he had actual knowledge of its contents. This finding arises, among other sources, from the following:

a. The order was personally served upon Mr. Duscio during the course of the execution of the Anton Pillar order on May 24, 2018 at Mr. Duscio’s residence;

b. Mr. Duscio provided the required affidavit (sworn on June 6, 2018) of his world-wide assets, which affidavit stated that it was prepared “pursuant to the order of The Honourable Mr. Justice Dunphy dated May 23, 2018”; and

c. Mr. Duscio played a role in preparing his own affidavit and the similar affidavit of Mrs. Duscio and provided the information to his former lawyer that was used to prepared drafts of both.

[46] I find that the plaintiff has proved beyond a reasonable doubt that Mr. Duscio had actual knowledge of both the existence and the terms of the two orders in question.

(iii) Has Mr. Duscio intentionally done the act prohibited by the order or intentionally failed to do that which the order compels?

[47] The plaintiff’s evidence of Mr. Duscio having breached my order is quite simply overwhelming. Mr. Duscio does not particularly dispute the existence of objective breaches so much as pleading that the breaches were not intentional. I shall return to that issue below.

[48] My order required essentially two things of Mr. Duscio that are relevant for purposes of this motion. It positively required him to list his present and historical assets including account numbers and particulars and it prohibited him from disposing of or transferring any assets over which he had control apart from his wages. He failed to do almost anything he was required to do and did about as much of that which he was prohibited from doing as he could possibly manage. If there was a more complete way to demonstrate contempt of the court’s order, it is hard to imagine.

Listing of assets (present or historical)

[49] Mr. Duscio’s affidavit of assets was sworn on June 6, 2018. His affidavit in its material part reads as follows:

The following is a list of my worldwide assets:

Vehicles (value unknown):

1988 Ferrari Testarossa

2007 Yamaha V-Star

Bank Account:

CIBC approximately $500.00

[50] That list failed to mention almost everything Mr. Duscio owned or controlled at that time and it failed to provide any particulars of the one financial account it did mention.

[51] Mr. Duscio deliberately failed to list a number of assets. Virtually all of these assets have only come to light as a result of the detective work of the plaintiff rather than from spontaneous corrections offered by a party who has become aware of an inadvertent oversight.

[52] The following additional assets were discovered by the plaintiff all of which I find Mr. Duscio was required to but failed to detail in his affidavit of June 6, 2018:

a. A 2008 Mercedes Benz CLK 2 door cabriolet automobile registered to his name at an address in Florida;

b. Real property located at 2240 NE 37 Road, Homestead, Fla (sold June 4, 2018);

c. Real property located at 11021 S. Lakeview Drive, Pembroke Pines, Fla;

d. Real property located at 7736 Starlight Road, Navajo County, Arizona;

e. Five Wells Fargo bank accounts in Mr. Duscio’s name and/or over which he had signing authority;

f. One President”s Choice Financial bank account; and

g. Two CIBC Investors Edge investment accounts.

[53] The President’s Choice account was opened in 2016 and has been dormant for some time with nominal assets. Mr. Duscio’s claim to have forgotten about it is not implausible even if this was a financial account he was required to disclose.

[54] He also claimed that his disclosure of a “CIBC” account was sufficient as the accounts are all linked to each other on-line. I find that explanation harder to accept, particularly since the TSFA account statement for March 2018 – the latest one obtained by the plaintiff – reflects investment assets with a market value of $16,283.78.

[55] On the other hand, the disclosure was sufficient to enable the plaintiff to notify CIBC of my order and, eventually, to obtain copies of the account statements. The disclosure made was partial compliance at least and, while it required the plaintiff to do what Mr. Duscio had been ordered to do, his inadequate disclosure did eventually lead to the same place.

[56] I do not propose to examine those three accounts further or to rely upon them in relation to the contempt charge before me.

[57] The current value of the 2008 Mercedes Benz automobile is not known. However, Mr. Duscio was in bankruptcy in 2008, the same year that the plaintiff’s money was fraudulently obtained by him. This was clearly an asset he was required to disclose and failed to do.

[58] One of the Wells Fargo bank accounts contained a balance of US$10,539 on June 1, 2018 prior to receipt of the proceeds of the sale of one of the Florida properties on June 4, 2018 (US$191,446.95). However, Mr. Duscio arranged to transfer $175,000 to a Lichtenstein account (to be discussed below) on June 5, 2018 and a further $25,000 to an account in the name of Centurion Policy Services LLC on June 6, 2018 such that the balance in that account on the date he swore his affidavit (June 6, 2018) was only $1,441.30. As shall be seen, both transfers were to accounts controlled by him and Mr. Duscio lied under oath about both transfers when cross-examined about them on November 22, 2018.

[59] At all events, Mr. Duscio mentioned none of the Wells Fargo accounts, whatever their balances on June 6, 2018, but mentioned only a single financial account – without particulars - valued at $500. These five bank accounts were not dormant accounts. They were active accounts actively used to fund a variety of things. Non-disclosure of them was not due to oversight but was calculated.

[60] The plaintiff obtained the banking records for the Wells Fargo account maintained by Centurion mentioned above. An examination of those records establishes beyond doubt that this account is simply an alter ego of Mr. Duscio. Mr. Duscio’s sister-in-law appears as the President and Mr. Duscio appears as Director on the account opening documents. Virtually all of the transactions in the account between June and October 2018 were to or from Mr. Duscio personally or electronic transfers to or from one of the Wells Fargo accounts in his name.

[61] Mr. Duscio was required to list the Centurion account by my order of May 23, 2018 but failed to do so.

[62] The plaintiff identified a further financial account in the name of Mr. Duscio’s daughter Catina at Meridian Credit Union that is clearly being held – in whole or substantial part – on behalf of Mr. Duscio as well. The account was opened on June 5, 2018 by Catina Duscio. That same day, Mr. Duscio instructed his employer temp agency employer to begin remitting his wages to that account, the first such payment being transferred to the account on June 8, 2018 and regularly thereafter.

[63] Apart from a handful of unexplained transfers, Mr Duscio’s payroll accounts for almost all of the deposit activity into this account between June and November 1, 2018. The spending pattern from this account also appears to suggest the normal household expenditures of Mr. Duscio and Mr. Duscio has admitted that a large number of transactions in this account are his own. It is clear that all or substantially all of the activity in this account was his. His daughter was simply lending her name to assist him.

[64] I hasten to add that Mr. Duscio’s access to his wages to pay his ordinary living expenses was never frozen by my order, although he was ordered to make complete financial disclosure of all of his accounts of which this account was clearly one.

[65] As with the Centurion account, it is clear that the Meridian account – opened the day prior to Mr. Duscio’s affidavit of June 6, 2018 was an account under his control and held for him. He failed to disclose it contrary to my order. The timing of the opening of this account and its use indicates a clear intent on Mr. Duscio’s part to attempt to operate an “off-line” or invisible to the court and the plaintiff account.

[66] In addition to these assets and accounts, the plaintiff uncovered at least two corporations where Mr. Duscio has an undisclosed interest. A Georgia company known as “Life Capital, LLC” made a 2017 SEC filing listing Mr. Duscio (at his Homestead Florida address) as an executive. Another Georgia company, “Biocan Pharma LLC” was incorporated that same year listing Mr. Duscio as “organizer” and disclosed his Homestead Florida residence as its head office. The business of Biocan was described in an offering document as offering “specific beneficial percentage interest in death benefits pursuant to life insurance policies”. Neither of these companies were mentioned in Mr. Duscio’s June 6, 2018 affidavit. Whether or not they have any material value cannot be said at this point. Mr. Duscio had interests in them and he failed to disclose them. They are only just over a year old – the omission was not accidental or due to oversight.

Mr Duscio’s possible interest in life insurance policies

[67] The plaintiff also obtained an email sent to Mr. Duscio dated May 29, 2018 providing particulars of “the two policies we discussed” that proceeded to list a policy on one person with a value of $1,000,000 and a life expectancy of seven years and another with a policy of $85,000 on an individual with a life expectancy under one year. There is no indication of whether he pursued those particular viatical purchase transactions. However, the evidence that Mr. Duscio has been actively engaging in purchasing or arranging to purchase interests in life insurance policies is overwhelming.

[68] On June 21, 2018, a premium payment to American General Insurance was made from one of the Wells Fargo accounts in the amount of $11,078.99 and a further premium payment to the same insurer on September 18, 2018 in the amount of US$13,428.19 while numerous cheques drawn on the same account show further premium payments being made by Mr. Duscio between 2014 and 2018 in respect of other life policies.

[69] The plaintiff’s examination of the activity in the Meridian account revealed one large deposit on August 20, 2018 of a cheque from Mr. Derek O’Brien in the amount of $45,842.50. The cheque was payable to Ms. Catina Duscio. The circumstances surrounding this cheque strongly suggest the cheque in fact belonged to Mr. Duscio and represented yet another undisclosed asset arising from an interest in an assigned life insurance policy.

[70] Mrs. Duscio gave evidence that Mr. O’Brien is a former business partner of Mr. Duscio in his viatical business and is someone with whom Mr. Duscio continues to have “some business”. Mrs. Duscio was aware of no reason why Mr. O’Brien would have been making such a substantial payment to her daughter.

[71] Mr. Duscio’s December 18, 2018 affidavit averred that the funds from Mr. O’Brien “were addressed to and belongs to my daughter” and, in support of such statement attached certain documents. To put it mildly, the attached documents raise more questions than they answer and strongly suggest that Mr. Duscio’s evidence is not to be accepted.

[72] The first document attached was a copy of the cheque from Mr. O’Brien of Jacksonville, Florida addressed to Catina Duscio dated August 9, 2018. The cheque was drawn on a Waterloo branch of TD Canada Trust. It bears a handwritten signature that looks like a person’s signature – less than straight and somewhat scrawled. Being drawn on a bank account that would be expected to have signatures on file to compare it to, I infer that this signature is very likely the authentic signature of Mr. O’Brien.

[73] The second appended exhibit was a series of documents purporting to explain the origin of the cheque. These documents include the following:

a. A “Claimant’s Statement” from Mr. O’Brien addressed to Manulife making a claim on a “first to die” policy on the life of Mr. John H. Rudiger of Alberta and attaching a void cheque drawn on the same TD Canada Trust account to which payment was requested to be made. The claim form is signed by “Derek O’Brien” with a signature that bears no resemblance whatsoever to the signature from Mr. O’Brien on the cheque to Catina Duscio. Instead, the signature purporting to be that of the claimant Mr. Derek O’Brien is neat, perfectly straight and regular and if not actually generated by a word processor looks very suspiciously like one that was. In fact, the signature looks remarkably like the following “signature” produced with standard Microsoft Word fonts: “Derek O’Brien”;

b. A letter or memorandum purporting to be from Mr. Derek O’Brien and signed in the same “hand” (bearing no resemblance to Mr. O’Brien’s signature on the cheque) addressed to Ms. Catina Duscio advising that “since October 1998, you have owned 16.67% of the death benefit” on the policy which amounted to $45,842.50. Catina Duscio was approximately 7 years of age when she allegedly acquired this interest in a life insurance policy for an undisclosed amount. No documents contemporary to the alleged investment mentioning Ms. Duscio’s interest have been produced. The letter contained no address for Ms. Duscio nor indication of the means if any by which it was delivered;

c. An October 23, 1998 receipt from Manulife addressed to Mr. O’Brien that evidences receipt of $13,740 from him (also without reference to Ms. Duscio); and

d. A Manulife “Client Illustration” referring to the same policy dated September 24, 1997 referring to Mr. O’Brien (alone – without reference to Ms. Duscio) as the “owner” of the policy whose annual premiums were $13,739.51.

[74] I have no hesitation in concluding that the claim statement and letter or memorandum to Ms. Duscio do not bear genuine signatures of Mr. O’Brien. Both signatures appear to be mechanically produced and, more importantly, bear no resemblance whatsoever to the apparently genuine signature of Mr. O’Brien on the cheque that was actually deposited in Ms. Duscio’s account and honoured by the bank on which it was drawn.

[75] Mr. Duscio was no stranger to forged documents at the trial before me. I found that the signatures on the Columbus Notes were either forged by him or with his knowledge and at his direction. The evidentiary record regarding the origin of this policy and the circumstances by which a seven-year-old girl allegedly acquired a one-sixth interest in the “first to die” policy owned by a business associate of her father resident in Florida upon the lives of a couple resident in Alberta are far from clear. Also far from clear is how and from what source premiums of $2,300 were paid for the next 20 years. I can attach no credibility whatsoever to Mr. Duscio’s suggestion that Ms., Catina Duscio owned the policy and the funds deposited to the account in her name in August 2018.

[76] The inference that the cheque in question represented undisclosed funds due to Mr. Duscio and held for him by a former business partner appears to be the most consistent with the facts currently before me. The account into which the cheque was deposited, while nominally in Ms. Duscio’s name, was opened and has been operated either exclusively by and for Mr. Duscio or substantially so and was intended to avoid my order of May 23, 2018. Mr. Duscio has been living in bankruptcy for most of the past ten years but has continued to maintain a life style of multiple homes, business dealings, foreign travel, and luxury cars far beyond his very modest disclosed means or those of his wife.

[77] Mr. Duscio’s evidence at trial and under cross-examination reveals someone who routinely held assets for others under secret arrangements and, since his bankruptcy, has clearly found the means to have others do so for him with at least two bank accounts in the name of third parties operated by him and not disclosed.

[78] While I reject entirely Mr. Duscio’s highly doubtful evidence of his daughter’s alleged bona fide ownership of the $45,842.50 deposited into the account bearing her name, there is simply not enough evidence yet assembled to conclude beyond reasonable doubt that Mr. Duscio was in fact the beneficial owner of the policy interest giving rise to the payment. Neither Ms. Duscio nor Mr. O’Brien have been heard from. It would be premature to reach firm conclusions in advance of hearing all of the evidence, no matter how suspicious the circumstances. I cannot conclude – yet - that Mr. Duscio is in contempt of court for having failed to disclose an interest in this life insurance policy.

Dissipation of Assets

[79] In addition to failing to disclose his assets as required, Mr. Duscio also actively set about disposing of almost all of the assets that the plaintiff’s investigations have uncovered in the weeks following my order.

[80] On June 4, 2018, Mr. Duscio sold a property in his name at 2240 NE 37 Road, Homestead, Florida. On May 28, 2018 he signed wire transfer directions causing the net proceeds of this sale – US$191,446.95 – to be wired to one of the undisclosed Wells Fargo accounts referenced above. Following additional transfers of other of the undisclosed Wells Fargo accounts, Mr. Duscio transferred US$175,000 of such proceeds to an account of Neue Bank A.G. in Lichtenstein on June 8, 2018 and $25,000 to the Centurion account controlled by him on June 5, 2018.

[81] Mr. Duscio was cross-examined about this transaction on November 22, 2018 as directed by me.

[82] During the course of that examination, he alleged that the property had in some fashion been financed by Mr. Hanemaayer, an allegation repeated in his affidavit of December 18, 2018. He has thus far produced no documents to corroborate this alleged financing. The property was acquired by Mr. Duscio in February 2015 for $96,500. There is no evidence of a mortgage of any kind being registered in Mr. Hanemaayer’s favour.

[83] This is not the first time Mr. Duscio’s relationship with Mr. Hanemaayer has come before me. Mr. Duscio made a similar allegation in relation to a significant receipt of funds arising from an interest in a life insurance policy during the trial. At that time, he testified that Mr. Hanemaayer was an elderly gentleman living in Toronto with whom he had unwritten arrangement. In effect, Mr. Duscio claimed that he held the policy interest and thus its proceeds in a secret, undocumented trust for Mr. Hanemaayer. The fate of that money remains an open issue with the plaintiff who alleged – and continues to allege – that the funds were actually proceeds of the fraud. I did not accept Mr. Duscio’s evidence on that or any other matter but have not made any findings in relation to Mr. Hanemaayer who has not provided any sworn evidence to date.

[84] Mr. Duscio has not alleged that the property was actually held for Mr. Hanemaayer in any kind of trust and provided no details of the alleged financing.

[85] During his cross-examination, Mr. Duscio alleged that the transfer of US$175,000 to a Lichtenstein bank was in fact a repayment of an outstanding debt due to Prof. Jorg Finsinger. He claimed not to have any details of the debt – his business dealings allegedly relying upon his word alone – but claimed that Prof. Finsinger had provided him directions for the payment via fax. A January 2008 memorandum of a call between Mr. Duscio and Prof. Finsinger contains allegations of secret arrangements between Mr. Duscio and Prof. Finsinger. Mr. Duscio also alleged that Prof. Finsinger had no email address and always communicated via fax.

[86] The plaintiff’s subsequent investigations have revealed that Mr. Duscio’s answers on cross-examination were untrue. Mr. Duscio in fact communicated via telephone and email with Prof. Finsinger in 2007 and 2008. Prof. Finsinger emailed the plaintiff’s lawyers denying having had any dealings with Mr. Duscio in about ten years (an allegation that the emails of Mr. Duscio found would appear to corroborate). Furthermore, the plaintiff was able to obtain the Wells Fargo transaction report on the wire transfer that listed the beneficiary of the transfer as being Mr. Duscio himself.

[87] I find that the US$175,000 was wired by Mr. Duscio to an account controlled by him and it was done for the purpose of attempting to hide it from the plaintiff. No other explanation is consistent with the facts. Mr. Duscio’s explanations to the contrary – all given under oath – are incredible and false. Mr. Duscio has not previously shown himself reluctant to resort to deliberate fabrications in testifying before me. The December 18, 2018 affidavit and November 22, 2018 cross-examination testimony, unfortunately, both mark a continuation of that sorry record.

[88] On August 17, 2018, Mr. Duscio sold another property in Florida at 11021 S. Lakeview Drive, Pembroke Pines, Florida. US$212,476.99 in net proceeds from this sale were deposited into one of his Wells Fargo accounts and subsequently transferred to other Wells Fargo accounts.

[89] The plaintiff continues to attempt to track down the proceeds of that sale. US$100,000 was transferred by way of a cheque Mr. Duscio wrote to himself and deposited into yet another newly-opened account at Chase Bank.

[90] Significant funds were transferred from the Wells Fargo accounts which remain unexplained or where the explanations are uncorroborated, whether from the funds on hand prior to his June 6, 2018 affidavit or from the proceeds of the two real property sales:

a. $11,078 and $13,428.19 to American General Insurance[^1];

b. Eight cheques in various amounts to “Seawolf Properties LLC” after May 23, 2018 totaling $18,910[^2];

c. Two withdrawals of $20,000[^3]; and

d. Numerous transfers to and from Centurion’s Wells Fargo account.

[91] Mr. Duscio explained all of these payments as being payments of debts due to various creditors but was unable to provide any documentation to back up those claims. Needless to say, Mr. Duscio’s explanation of paying off other creditors with funds ordered frozen by court order does not improve his situation materially, particularly given his status as an undischarged bankrupt. His credibility absent corroborating documentation is also not high.

[92] The only material defence offered by Mr. Duscio was his claim that none of the listed breaches of my May 23 order discussed were intentional because he did not understand them and had no lawyer at the time to explain them to him. Mr. Duscio’s claim to have lacked the intent necessary to be in contempt of court is utterly incredible and I reject it entirely.

[93] The orders were clear and unambiguous. Mr. Duscio suggested to the court that he thought he was only required to freeze assets that he himself viewed as being traceable to the plaintiff’s funds. That explanation can in no way be justified by the words of my May 23 order which clearly applied to all assets, “including, but not limited to” Cajubi’s assets. He sought to argue that somehow the May 23 order was less comprehensive than what I explained to him on May 14. That argument holds no water. The May 23 order was no more than a refinement – and not a large one at that – of the draft order that he had before him on May 14.

[94] Mr. Duscio understood full well what was required of him. He got hard to work to liquidate his assets after the trial and that he did so was no coincidence. Mr. Duscio’s actions reflect a calculated and deliberate process of liquidating any assets the plaintiff might have found and moving the proceeds of liquidation to places where he hoped they might not be found – offshore or in safe third party hands. He was caught and his explanations are utterly insincere. Mr. Duscio’s willingness to lie and to do so brazenly has been demonstrated before me.

[95] I found Mr. Duscio guilty of contempt both for failing to disclose the assets he was required to disclose and for transferring and disposing of them in a clear attempt to shield them from the court. The contempt was as flagrant, calculated and deliberate as can be imagined. The proof of it has been made beyond reasonable doubt.

(b) What is the appropriate penalty to be imposed?

[96] Mr. Duscio has not yet purged his contempt. Hundreds of thousands of dollars have been transferred away. Thousands more have been spent maintaining a life style far beyond his very meagre earnings. Some of the harm cannot be undone. Some may yet be undone if Mr. Duscio applies himself to it.

[97] I can scarce imagine a more deliberate and brazen campaign of contempt of court nor one so self-interested. The plaintiff has been put to tens of thousands of dollars in expenses in investigating and pursuing Mr. Duscio.

[98] I am not YET convinced that Mr. Duscio cannot purge in whole or in substantial part the contempt he has shown. I imposed what can only be viewed as in interim penalty. My intention in doing so was to reflect the severity of the offence and entire lack of contrition of the contemnor. He has continued to lie to this court and to do so in the most transparent of ways. This has got to stop. It was a penalty designed to deter others from following in his footsteps while also seeking to coerce Mr. Duscio into changing his mind about compliance.

[99] He thought he could outsmart the court and the plaintiff. A period of incarceration will – I hope – succeed in demonstrating to him that he was wrong in that assumption.

[100] The definitive penalty to be meted out for this contempt can only be finalized when it has become clear that Mr. Duscio cannot be induced to roll up his sleeves and undo the harm he has done and when the full extent of the harm he has irreparably inflicted can be accurately assessed. At this point, there is still hope that much of the proceeds of the two house sales can be recovered and put into one of the accounts frozen by my order.

[101] When Mr. Duscio returns before me in February 2019, I am expecting to have a much changed situation before me. Exactly what the signs of that change will be I cannot now say, but some of the indicia will include the following:

a. I expect to hear from him a detailed and honest explanation of all of the viatical life insurance policies he has held for others or others have held for him, copies of the documents underlying these and including a full account of his dealings in this regard with Mr. Hanemaayer and Mr. O’Brien;

b. I expect to see full disclosure and accounting of all of the bank accounts he has been using to carry on business and evade detection for all of these years, including Centurion;

c. I am expecting to see full disclosure of the Lichtenstein bank account to which he transferred US$175,000;

d. I am expecting a full accounting of the Chase account into which Mr. Duscio transferred US$100,000 of the August sale proceeds;

e. I am expecting all of the funds from the sale of the two Florida houses to have been recovered and to be in one of the frozen bank accounts;

f. I am expecting an honest and frank start to a comprehensive review of all of the assets he has been disposing of these past years.

[102] It is beyond incredible that this gentleman has managed to maintain what can only be described as a lavish life style with effectively no visible income while being an undischarged bankrupt. He has clearly grown used to the idea that rules are for chumps and he is not one to be bound by them. He brushed aside my orders with the same alacrity he has ignored his bankruptcy obligations all of these years. If there is not a radical change in direction shown by Mr. Duscio, a far, far more severe sentence lies in his future.

S.F. Dunphy J.

Date: December 31, 2018

[^1]: Mr. Duscio alleges that these payments were for policies owned by Mr. Hanemaayer but has produced no corroborating documents.

[^2]: Mr. Duscio alleges that these payments were repaying a loan for which he had no documentation;

[^3]: Mr. Duscio similarly alleges that these funds were used to pay other creditors or to repair his Mercedes