R. v. Cheryl MacLeod 2018 ONSC 7807

Court File No. 16-5866

Date: 2018-04-03

SUPERIOR COURT OF JUSTICE

HER MAJESTY THE QUEEN

v.

CHERYL MACLEOD

R E A S O N S F O R S E N T E N C E

BEFORE THE HONOURABLE JUSTICE C. BRAID

on April 3, 2018 at HAMILTON, Ontario.

APPEARANCES:

W. Milko Counsel for the Crown

D. Bailey Counsel for Cheryl MacLeod

TUESDAY APRIL 3, 2018

R E A S O N S F O R S E N T E N C E

BRAID J. (Orally):

I-OVERVIEW

On October 30, 2017, Cheryl MacLeod was found guilty of 10 charges after a trial before me without a jury. Pursuant to R. v. Kienapple, conditional stays have been entered on three counts. Ms. MacLeod is now before me for sentencing on the following charges:

a) four counts of fraud over $5000, contrary to S. 380(1)(a) of the Criminal Code of Canada;

b) two counts of fraud under $5000, contrary to S. 380(1)(b) of the Criminal Code of Canada;

c) one count of using forged documents as if they were genuine, contrary S. 368(1)(a) of the Criminal Code of Canada.

II-FACTS

A) Circumstances of the offences

The offences were committed by Cheryl MacLeod in her role as owner and director of CTC Payroll Services Inc. CTC Payroll was created by Ms. MacLeod as her own payroll company in 1990. By 2009, CTC Payroll was closed.

Ms. MacLeod took more money from CTC's clients than was required to be remitted to the Minister of Finance for employer health tax. She remitted the proper amount to the government and kept the excess funds. Ms. MacLeod also withdrew money from client accounts and then failed to remit the money to the Canada Revenue Agency. Finally, Ms. MacLeod sent forged bank documents to a client in an attempt to conceal the failure to remit funds to CRA. The total loss to six clients is $366,056.21.

B) Circumstances of the offender

Ms. MacLeod is currently 60 years old. She is married and has one son. She does not currently have a relationship with her son.

Ms. MacLeod reports that she had an unhappy, unstable home life as a child. She moved out to live on her own at age 18. Her relationship with her parents and siblings have been strained since that time. However, she has a supportive extended family.

Ms. MacLeod reports a positive academic history, although she did not obtain her high school diploma. Upon leaving high school she held a number of long-term positions over the years including bank teller, staff accountant, payroll and human resources. In 1990, she started CTC

Payroll. She also owned and operated other businesses over the years, including a maid service and a spa.

Since closing CTC Payroll in 2009, Ms. MacLeod has been unemployed. She has been supported by her husband, who works as a welder. She also received disability benefits. She reports that she and her spouse are financially exhausted and living in "poverty". They have re-mortgaged their home and have significant debts to creditors and family. While unemployed, Ms. MacLeod has engaged in online training and has authored a book regarding financial and ethical issues in business.

Ms. MacLeod has been happily married for the last 33 years and enjoys a stable and supportive marriage. She has a son who is in his early 30s from whom she is estranged due to his involvement with street drugs and crime.

Ms. MacLeod has been described as a "strong businesswoman", who is intelligent, hard working, giving, caring, honest and trusting. Her family reports that she has been especially kind to her loved ones and was known to provide for and support her family members.

Ms. MacLeod has no criminal record.

Ms. MacLeod continues to profess her innocence. She believes that former employees conspired against her and sabotaged her company.

Ms. MacLeod states that she started having anxiety and agoraphobia, including fear of bridges and riding on a bus, since she was in her 20s. She was treated by a psychiatrist for over 22 years and received medication.

In 2009, Ms. MacLeod was hospitalized for a lumpectomy.

Ms. MacLeod states that she was diagnosed with severe depression, anxiety and possible post-traumatic stress disorder in 2010. It is not clear whether this diagnosis was made by her family doctor or by a psychiatrist. Although she may have suffered from mental health issues, the reference letters filed by friends and family describe Ms. MacLeod, prior to her arrest, as an extremely busy and vibrant woman who loved to travel and who showed tremendous amount of joy in living life.

In December of 2014, Ms. MacLeod was diagnosed with severe diverticulosis. She has regular endoscopies and colonoscopies every three years. She controls the symptoms with diet, but may require surgery if it is not controlled.

In 2015, Ms. MacLeod made a disability claim to CRA.

Ms. MacLeod's mental health issues worsened after her arrest in October of 2013. Dr. Nadeem Akhtar, a psychiatrist, diagnosed Ms. MacLeod with post-traumatic stress disorder in February of 2015, following her arrest and charges. She has been described as emotionally exhausted and frail. She reports issues of depression and anxiety. Dr. Akhtar identified Ms. MacLeod's arrest and charges as a catalyst and singular cause of Ms. MacLeod's post-traumatic stress disorder. He also confirms that he has prescribed medication for depression and anxiety, which are the symptoms of the post-traumatic stress disorder. Dr. Akhtar commented that Ms. MacLeod's form of PTSD is unusual and difficult to treat at this time, in that there is a "continual threat" in the form outstanding charges and sentencing. He believes that, once Ms. MacLeod's legal matters are resolved, she will be in a better position to address the disorder.

Defence counsel argues that the diagnosis of PTSD goes back to 2007, 2008 and 2009. It is argued that the information in the pre-sentence report is not inaccurate given the sources. However, there are other medical records demonstrating a history of mental health issues.

Ms. MacLeod has been attending trauma therapy with a mental health counsellor. She has been engaged and receptive to therapeutic advice and recommendations. She has been involved in

volunteer work at a local medical facility since 2015, which was one of the recommendations of counsellor. This volunteer work has allowed her to engage in the community in a meaningful way as part of her treatment.

When Ms. MacLeod was interviewed for the preparation of the pre-sentence report, she repeatedly professed her innocence.

Ms. MacLeod has provided letters of support from community members. These letters demonstrate that Ms. MacLeod has a wonderful support network. They also speak of an individual who is considered to be an ethical and competent professional who is respected by the community.

Many of these letters support Ms. MacLeod's professed innocence and her side of the story, which story I have found to be not credible.

Ms. MacLeod was trusted by many, and so was able to perpetrate the fraud and kept it undetected for months.

Ms. MacLeod did not spend any time in pre-sentence custody.

III-CROWN AND DEFENCE POSITIONS

The Crown seeks a sentence of three years in jail. He also seeks the following orders:

1. a restitution order in respect of each complainant;

2. fine in lieu of forfeiture with three years to pay following the expiry of the custodial sentence. The Crown is content with three years in jail upon default of that order;

3. DNA order as this is a secondary designated offence; and

4. Victim fine surcharge.

The defence seeks two years less a day conditional sentence. In order to address denunciation and deterrence, defence counsel submits that a conditional sentence would have to be relatively strict. Counsel suggests that the first year include house arrest except for medical emergencies and three hours on a Sunday for necessities. It is suggested that the next 12 months would include a curfew. With respect to the additional orders sought:

1. defence counsel consents to the restitution

order;

2. defence counsel consents to a fine in lieu of forfeiture and agrees that it is mandatory. Defence counsel seeks five years after the completion of the custodial sentence to pay the fine;

3. defence counsel takes no issue with the DNA order;

4. defence counsel agrees that the victim fine surcharge is applicable. Counsel asks for a year to pay the victim fine surcharge after the completion of any sentence.

5. In addition if a conditional sentence is imposed, defence counsel seeks three years probation.

Defence counsel suggests that any conditional sentence and probation should include terms not to work in any capacity where Ms. MacLeod has the authority over the property of any person. Such a term would reflect the language of S. 380.2(1) of the Criminal Code, which came into force after these offences were committed and is therefore not mandatory in this case.

An electronic monitoring report has been ordered. If a conditional sentence is ordered, Ms. MacLeod is a suitable candidate for electronic monitoring.

IV-APPLICABLE SENTENCE AUTHORITIES

Defence counsel argues that there is authority for the imposition for a conditional sentence, and relies on the following cases:

1. In R. v. Bortolussi, [1997] O.J. No. 3679, the accused pled guilty to defrauding the Canada Revenue Agency to keep a business solvent. He did not personally gain from the fraud. The Crown and defence jointly submitted that the sentence should not exceed two years less a day, although they disagreed about how the sentence should be served. The Ontario Court General Division imposed a conditional sentence of 15 months. In that decision, the Court cited the Ontario Court of Appeal in R. v. W.(J.) 1997 CanLII 3294 (ON CA), [1997] 5 C.R. (5th) 248, which held that general deterrence can be achieved through a conditional sentence of imprisonment.

2. In R. v. Robinson, [2003] O.J. No. 4722, an accused was a manager who stole from her employer. She suffered from debilitating lupus. The Court found a sentence of less than two years was appropriate. In light of the unique and exceptional circumstances of that case, the Court imposed a twenty month conditional sentence.

3. In R. v. Campbell [2005} O.J. No. 4696, the accused was a lawyer who misappropriated funds from clients. He pled guilty in the Ontario Court of Justice. The Court found that there was profound remorse and mental health issues, including a note from a psychiatrist who stated that the accused's mental illness resulted in poor judgment being used. The accused had recently undergone triple bypass surgery. In light of the special circumstances, the Court imposed a conditional sentence of two years less a day.

4. In R. v. Umenwoke 2013 ONSC 4496, [2013] O.J. No. 3131, the Court held that the appropriate sentence

was in the range of two years less a day.

The Court stated that the accused's medical condition cannot result in a sentence that is otherwise not appropriate, if the sentence in not in the range. The accused's significant health issues were a consideration in imposing a twenty month

conditional sentence

V-AGGRAVATING AND MITIGATING FACTORS

Ms. MacLeod pled not guilty to the charges, as she has the right to do. I will not treat the absence of a guilty plea as an aggravating factor. However, there is no credit to be given for a guilty plea and no expression of remorse. This is a neutral factor.

The following is a list of the aggravating factors in this case:

1. The scale of the fraud was substantial, involving the theft of $366,053.21 in trust monies from six different clients. Ms. MacLeod kept that money for her own benefit.

2. This was a serious and significant breach of trust. Ms. MacLeod took advantage of her role as the owner of CTC to intentionally defraud clients of funds that were provided to CTC in trust.

3. Client money was deposited into CTC's trust

account, and was to be held in trust until paid out to employees or to the government, on behalf of the clients. However, Cheryl MacLeod made several withdrawals from CTC's trust account between January to July 2009, for her own benefit and for the benefit of her company CTC. These withdrawals from the trust account included paying off her mortgage on the business property; paying property taxes for the business; paying to purchase Ms. MacLeod's personal vehicle;

and payment to Alexandria Brown International for Ms. MacLeod to attend a seminar in Los Angeles. Ms. MacLeod paid off her own debts, traveled to L.A. and bought a new car with the money gained from the fraud.

4. There was planning and deliberation in the offences. Ms. MacLeod deliberately

overdeducted EHT and/or deliberately withheld the overdeducted amounts once it was brought to her attention. She took advantage of the opportunity provided by the close of her business to shield the fraud from detection.

5. There was prolonged conduct by Ms. MacLeod over many months.

6. Ms. MacLeod took steps to conceal the fraud and theft of the client funds. When clients encountered discrepancies between 2008 and 2010, Ms. MacLeod was not

responsive to their numerous phone calls, voicemail messages, e-mail messages and faxed letters. Ms. MacLeod deliberately avoided answering inquiries from clients regarding missing funds in order to conceal the fraud.

7. The facts regarding the substantial non- remittance to CRA on behalf of Voith Paper are troubling. One of Ms. MacLeod's employees at CTC discovered the non- remittance and attempted to rectify it. However, Ms. MacLeod then adjusted the paperwork and did not make the remittance. Ms. MacLeod deliberately failed to remit $264,000 to CRA on Voith's behalf.

8. The facts regarding the forged bank stamps are also particularly troubling. Ms. MacLeod deliberately failed to remit funds to CRA on behalf of Midtown and retained the money for herself. She then forged bank stamps and sent those forged documents to Ms. Killinger in an attempt to conceal those non-remittances.

9. The parties agree that general deterrence and denunciation are of primary importance.

The following is a list of the mitigating factors in this case:

1. This was Ms. MacLeod's first offence.

2. Ms. MacLeod suffers from health issues and is currently on disability benefits.

3. Ms. MacLeod suffers from mental health issues, as I have explained earlier in this decision.

4. Ms. MacLeod has excellent support from her husband, extended family and friends. She is a devoted aunt to her young niece. This support network will help in her rehabilitation.

5. While on bail, Ms. MacLeod has been volunteering at the St. Joseph's Health Care in a post-op surgery unit. She is a dedicated and valued volunteer.

VI-SUMMARY OF CONCLUSIONS RE: KIND OF SENTENCE THAT NEEDS TO BE IMPOSED

Because of the offence date, Ms. MacLeod is eligible for a conditional sentence. Even when a conditional sentence was available, a custodial sentence was typical for this type of offence. A conditional sentence was generally only available in exceptional circumstances. Of course, a conditional sentence will only be available if the appropriate sentence is one of less than two years.

The law is clear that each case must turn on its own specific facts. The Court of Appeal has also stated that sentencing judges have wide discretion when imposing sentences (See R. v. Kerr 2001 CanLII 21142 (ON CA), [2001] O.J. No. 5085 (CA)).

I have reviewed all of the cases provided by the parties. Sentencing is an individualized process. The cases provided by the parties provide helpful guidance to the Court. I find that those decisions where conditional sentences were imposed are all distinguishable from the case before the Court.

General deterrence and denunciation are a primary importance in this case. This is amply supported by appellate authority. General deterrence is the most important sentencing principle in major frauds. When general deterrence is particularly pressing, the preferable sanction is incarceration. Most major frauds are committed, as this one was, by well-educated persons of previous good character. The sentences in such cases are not really concerned with rehabilitation. Instead, they are concerned with general deterrence and with warning such persons that substantial penitentiary sentences will follow this type of crime, to say nothing of the serious disgrace to them and everyone connected with them and their probable financial ruin. (See R. v. Bogart) 2002 CanLII 41073 (ON CA), [2002] O.J. No. 3039 (C.A.)).

Sentences in these types of cases are not concerned with rehabilitation, but rather to administer a warning that substantial penitentiary sentences will follow this type of crime. (See R. v. Bertram [1990] 40 O.A.C. 317 (C.A.)).

In many ways, the decision of Justice Koke in R. v. Snow [2015] ONSC 498 is similar to the case before the Court. In that case, the accused was convicted of numerous counts of fraud with the total loss of over $400,000. That case involved a breach of trust. The accused did not have a criminal record and was convicted after trial. The accused remains defiant and did not accept any blame, which made it difficult to find that he was a suitable candidate for rehabilitation. In that case, the Court imposed a sentence of four years, concurrent on all charges.

This case also involves a breach of trust.

Similar to the decision in Snow, Ms. MacLeod continues to assert her innocence, which makes it difficult to find that she would be a suitable candidate for rehabilitation.

Ms. MacLeod suffers from mental health issues. However, the mental health issues did not appear to impact her ability to work. When Ms. MacLeod testified, she boasted about her expertise in the payroll industry; her excellent reputation with the CRA; and her dedication to her clients. Although there is some evidence that she suffered from anxiety and agoraphobia that pre-dated these offences, there is no evidence to suggest that Ms. MacLeod's mental illness contributed to the offences or resulted in poor judgment being used.

Ms. MacLeod does not acknowledge responsibility for the offences and is not remorseful. In fact, Ms. MacLeod denies culpability and cited a conspiracy against her.

I have also considered Ms. MacLeod's physical health issues. I have no reasons to believe that these concerns could not be adequately addressed in a custodial setting. The correctional authorities are obliged inmates with essential health care.

I find that there are no unique and exceptional circumstances that would take this case outside the normal sentencing range. In my view, a sentence of two years less a day is insufficient to meet the principles of denunciation and deterrence. A conditional sentence is therefore unavailable.

VII-ACTUAL SENTENCE

Ms. MacLeod, would you please stand.

Ms. MacLeod, I sentence you to a total of three years in custody. The sentence shall be apportioned as follows:

i) On count one, fraud over $5000: three years in custody.

ii) On count two, fraud over $5000: three years concurrent.

iii) On count three, fraud over $5000: three years concurrent.

iv) On count five, fraud over $5000: three years concurrent.

v) On count six, used forged document as if it were genuine: three years concurrent.

iv) On count seven, fraud under $5000: two years concurrent.

vii) On count nine, fraud under $5000: two years concurrent.

You may have a seat.

The warrant of remand shall contain the following direction: "Ms. MacLeod shall be immediately assessed and appropriate steps shall be taken to provide her with appropriate medical care while in custody".

VIII-ANCILLARY ORDERS

1. Restitution order

I am satisfied that an order for restitution is appropriate in this case. There shall be an order pursuant to S. 738(1) that Cheryl MacLeod pay restitution of in the amount of $366,056.21 to be apportioned as follows:

i. A. J. Clarke & Associates: $60,360.72.

ii. Ruetgers Canada Inc.: $15,163.37

iii. Voith Paper Fabric and Roll Systems Canada Inc.: $263,300....

THE COURT: I am just going to pause for a moment. Mr. Milko, when I reviewed my findings of fact from the trial, I thought that the amount for Voith Paper was $263,674.23. On the order that you've drafted for the fine in lieu of forfeiture you have a different number.

MR. MILKO: Yes, that is - I'm just looking at my notes. I don't know I have that number. I don't know where that came from. I do have in my note when you gave judgment, you found 263,674.23.

THE COURT: Right.

MR. MILKO: And for some reason I have a slightly different number.

THE COURT: Okay. Do you know why?

MR. MILKO: I don't. To be honest I - I imagine there was some reason at some point, but I don't have any idea. I'm - unless my friend has any insight on where that number came from I would think that the number that Your Honour found was - would be the appropriate number.

MS. BAILEY: I don't have any insight of where my friend's number came from. I do have the Reasons for Judgment, Your Honour and in that - in the Reasons for Judgment you gave the same dollar amount has you just did, $263,674.23.

THE COURT: Yes. Okay.

MR. MILKO: So, Your Honour perhaps if you could just amend those - that figure on the restitution order. The other numbers I just re-double checked and they all accord with the findings that you made.

THE COURT: I know when I drafted my reasons I checked and double checked and triple checked the numbers based on the evidence that was called at trial. I'm just a little confused as to where you might have got that number from.

MR. MILKO: I - I don't know. I've - I would think it's just a typographical error. I don't - I don't know what the reason was for that.

THE COURT: Okay.

MR. MILKO: And obviously we're only talking about a difference of $300. It's not of great concern.

THE COURT: Okay. All right, I'm going to amend it to reflect my reasons. All right, so just returning to my reasons with respect to the restitution order and I'll just repeat item number three.

iii. Voith Paper Fabric and Roll Systems Canada Inc.: $263,674.23.

iv. Ms. Cathy Killinger, TCM Investments Limited: $25,357.69.

v. John Brown: $758.04.

vi. John Cardillo: $742.16.

2. Fine in lieu of forfeiture

Ms. MacLeod fraudulently obtained $366,056.21 in funds that she was holding in trust for her clients. I am satisfied that this money is proceeds of crime and that the funds are no longer in Ms. MacLeod's possession. It is therefore appropriate that a fine in lieu of forfeiture be imposed, pursuant to S. 462.37(1).

Ms. MacLeod shall have five years after her release from custody to pay this fine. Any funds paid toward the restitution order shall be credited toward this order.

Pursuant to S. 462.37(4), in default of payment of the fine, Ms. MacLeod shall serve three years in jail consecutive to the sentence previously imposed on the substantive offences.

3. DNA testing

The offences of S. 368(1)(a) using forged documents and S. 380(1)(a) fraud over $5000 are "secondary designated offences". I am satisfied that it is in the best interests of the Administration of Justice to obtain DNA samples from Ms. MacLeod. There will be an order pursuant to S. 487.051 of the Criminal Code authorizing the taking from Ms. MacLeod for the purpose of forensic DNA analysis, any number of samples of one or more bodily substances that is reasonably required for that purpose.

THE COURT: And again, Mr. Milko, I'm just going to pause and ask you - I don't believe 380(1)(b) is designated offence. Do you agree?

MR. MILKO: I do, yes, thank you.

THE COURT: Okay. So, the DNA orders will only be made in relation to counts one, two, three, five and six. Not count seven and not count nine.

4. VICTIM FINE SURCHARGE

There will be an order pursuant to S. 737(2) of the Criminal Code that Cheryl MacLeod pay a victim surcharge of $200 per each indictable offence. The order shall state the Cheryl MacLeod shall pay the victim fine surcharge within one year following her release from custody.

THE COURT: I have signed the order for a fine in lieu of forfeiture. Mr. Milko, where does it say on this fine in lieu of forfeiture that you've drafted the total amount of the fine or should it? Oh, I see "It is hereby ordered". Yes. So the amount - the total amount is correct...

MR. MILKO: Correct.

THE COURT: ...in the order.

MR. MILKO: Ms. Bailey helped me with that in fact, thank you.

THE COURT: Thank you. All right, so Mr. Milko and Ms. Bailey, I just need your help with the DNA order. I think that the DNA order is made pursuant to 487.04(1) because these are offences under the Criminal Code for which the maximum punishment is imprisonment for five years or more and that was prosecuted by indictment.

MR. MILKO: Yes, I agree.

THE COURT: Right.

MS. BAILEY: Yes.

THE COURT: Okay. Those sections, 380(1)(a) and 368(1)(a) are not specifically enumerated anywhere within the DNA provisions?

MR. MILKO: No.

THE COURT: Okay. So, I'll just check this other box. So, I'm going to read the endorsement. Mr. Milko appearing for the Crown, Ms. Bailey appearing for the defence. For oral reasons given Ms. MacLeod is sentenced as follows:

1. Count one, fraud over $5000: three years in custody.

2. Count two, fraud over $5000: three years concurrent.

3. Count three, fraud over $5000: three years concurrent.

4. Count five, fraud over $5000: three years concurrent.

5. Count six, use forged document as if it were genuine: three years concurrent.

6. Count seven, fraud under $5000: two years concurrent.

7. Count nine, fraud under $5000: two years concurrent.

The Court also makes the following orders:

1. Restitution order.

2. Fine in lieu of forfeiture. Five years to pay following release from custody and three years jail consecutive in default of payment of fine.

3. DNA order.

4. Victim fine surcharge is applicable. One year to pay following release from custody.

I have signed the DNA order. I have also signed the fine in lieu of forfeiture order. I have only signed one copy even though Crown handed me multiple copies.

MR. MILKO: Thank you.

THE COURT: You can have the others if you like.

MS. BAILEY: Thank you.

THE COURT: The restitution order is going to take some time to fill out as well as a victim fine surcharge order, so I will sign those in my chambers. The charges have already been stayed, the extra charges, is that right?

MR. MILKO: Yes.

THE COURT: Okay, so is there anything else that I need to do?

MR. MILKO: Not for the Crown, thank you.

THE COURT: Okay, thank you.