Court File and Parties
COURT FILE NO.: 17-0152 DATE: 201905 07 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: R. v. Floriano Daponte and Vivian Lee Hamilton
BEFORE: McArthur M.D., J
COUNSEL: K. Johnson and M. Smith, for the Federal Crown L. Sela, Counsel for the defendant, Vivian Lee Hamilton E. Battigaglia, Counsel for the defendant, Floriano Daponte
HEARD: April 29, 2019
Ruling on Admissibility of Expert Evidence
Introduction
[1] This ruling involves the Crown’s request to call at the trial, Jeffrey J. Good, to provide expert evidence of a forensic accounting analysis from financial records involving the defendants obtained by the police.
[2] A number of controlled substances and approximately $49,500.00 in combined Canadian and American currency were seized as a result of a search on December 2, 2016 pursuant to a search warrant by police officers at a specific rural property and residence owned by Ms. Hamilton and where Mr. Daponte also lived. The case will proceed on a judge alone basis.
[3] These are my reasons for concluding the expert evidence shall not be admitted in this case.
Overview
[4] The defendants are charged jointly with seven counts of possession of various prohibited substances for the purposes of trafficking and a single count of possessing Canadian and America currency knowing that the moneys had been obtained by the commission of an offence punishable by indictment. The Crown alleges the funds were the result of drug trafficking activity by the defendants.
[5] The specific substances seized included 30-100 microgram fentanyl patches, 3/4 of a 100 microgram fentanyl patch, 1/3 of a fentanyl patch, 10 bags of cannabis marijuana with a total weight of 3228 grams, 678 Hydromorphone pills, 120.5 Morphine pills, 1315 Oxycodone pills, 241 Methylphenidate tablets and 20 Suboxone tablets.
[6] On December 2, 2016, police arrested the defendants and executed a search warrant at the property owned by Ms. Hamilton. Police seized the various prohibited substances as noted along with cash of $49,330.00 Canadian and $250.00 American, packaging materials, a digital electronic scale and other items.
[7] The Crown proposes to call Mr. Good to provide expert evidence respecting the net worth of both defendants through a forensic accounting analysis and its associated conclusions.
The Crown’s Position
[8] The Crown submits that this expert evidence is relevant and necessary to assist the court particularly on the currency proceeds charge. The Crown submits Mr. Good is properly qualified as a forensic accountant and there are no other exclusionary rules prohibit such evidence.
[9] The Crown states a key issue in relation to the proceeds charge is whether the moneys seized are from the defendants’ drug trafficking activities.
Defendant, Ms. Hamilton’s Position
[10] Counsel for the defendant, Ms. Hamilton, submits that the proposed expert evidence ought not to be admitted, the evidence is not relevant, its probative value is exceeded by its prejudicial effects and it is problematic in its scope.
[11] Mr. Daponte’s counsel did not participate in this application. I will expand on the position of the parties later in these reasons.
The Proposed Evidence
[12] Mr. Good testified on the voir dire. He is a senior forensic accountant who has been employed for 17 years by the Government of Canada with what is now called Public Services and Procurement Canada and is part of the Forensic Accounting Management Group. His main duties involve the financial analysis of cases primarily for the RCMP and other police forces.
[13] He is a Chartered Professional Accountant, Certified in Financial Forensics by the American Institute of Certified Public Accountants and a Certified Fraud Examiner by the Association of Certified Fraud Examiners. He also completed a Bachelor of Arts in Honours Chartered Accountancy Studies, a Master of Accounting and a diploma in Investigative and Forensic Accounting. There is no doubt that Mr. Good possesses the education, training and experience of a forensic accountant.
[14] Mr. Good testified that since 2001, he has been involved in 60 to 100 cases. He has been qualified as a forensic expert in two court proceedings that both involved self-represented individuals in fraud cases.
[15] In early 2017, Mr. Good was assigned to this case. The RCMP requested a forensic accounting analysis be conducted of the financial activities of Ms. Hamilton. The police provided information that included various and substantial bank and other financial information obtained a result of production orders, items seized while executing search warrants, income tax records obtained from Canada Revenue Agency and publicly available documents and information. He also had reviewed the ITO in relation to the search warrant. Mr. Good had some further conversations with the investigating officers before he provided a 13 page report dated July 25, 2017 along with approximately 400 pages of attached schedules.
[16] Mr. Good performed a net worth analysis based on the information that encompassed a period of seven years leading up to and including December 2, 2016. This analysis involved both defendants.
[17] Upon completion of the analysis, Mr. Good opined that during the seven year period, the total spending by the defendants exceeded their funds from known sources by $770,771. He concluded the defendants must have had additional funds from unknown sources during this time.
[18] On cross-examination, it was established that Mr. Good conducted his analysis principally upon information provided by the police investigators. He did not conduct his own independent investigation. He acknowledged that, as disclosed in his report, there could be information missing that would affect his opinion. He testified that there was not a lot that was missing, for example a few deposits, some cheques and the more current income tax returns. He did acknowledge a $250,000 wire transfer could be not classified and could lead to a significant increase or reduction in the unknown additional fund amount as determined.
[19] The Crown submits that the funds that were seized on arrest and during the search of the residence were from the defendants’ drug trafficking. They must have been the source of the funds used by the defendants to fuel their spending habits.
The Legal Principles
[20] The decision of the Supreme Court of Canada in White Burgess Langille Inman v. Abbott and Haliburton Co., 2015 SCC 23, directed how trial judges should address the dangers of expert evidence:
19 To address these dangers, Mohan established a basic structure for the law relating to the admissibility of expert opinion evidence. That structure has two main components. First, there are four threshold requirements that the proponent of the evidence must establish in order for proposed expert opinion evidence to be admissible: (1) relevance; (2) necessity in assisting the trier of fact; (3) absence of an exclusionary rule; and (4) a properly qualified expert (Mohan, at pp. 20-25; see also Sekhon, at para. 43). Mohan also underlined the important role of trial judges in assessing whether otherwise admissible expert evidence should be excluded because its probative value was overborne by its prejudicial effect — a residual discretion to exclude evidence based on a cost-benefit analysis: p. 21. This is the second component, which the subsequent jurisprudence has further emphasized: Lederman, Bryant and Fuerst, at pp. 789-90; J. (J.-L.), at para. 28.
Later at paragraphs 23 and 24, the court directed a two-step approach as follows:
23 At the first step, the proponent of the evidence must establish the threshold requirements of admissibility. These are the four Mohan factors (relevance, necessity, absence of an exclusionary rule and a properly qualified expert) and in addition, in the case of an opinion based on novel or contested science or science used for a novel purpose, the reliability of the underlying science for that purpose: J. (J.-L.), at paras. 33, 35-36 and 47; Trochym, at para. 27; Lederman, Bryant and Fuerst, at pp. 788-89 and 800-801. Relevance at this threshold stage refers to logical relevance: Abbey (ONCA), at para. 82; J. (J.-L.), at para. 47. Evidence that does not meet these threshold requirements should be excluded. Note that I would retain necessity as a threshold requirement: D. (D.), at para. 57; see D. M. Paciocco and L. Stuesser, The Law of Evidence (7th ed. 2015), at pp. 209-10; R. v. Boswell, 2011 ONCA 283, 85 C.R. (6th) 290 (Ont. C.A.), at para. 13; R. v. C. (M.), 2014 ONCA 611, 13 C.R. (7th) 396 (Ont. C.A.), at para. 72.
24 At the second discretionary gatekeeping step, the judge balances the potential risks and benefits of admitting the evidence in order to decide whether the potential benefits justify the risks. The required balancing exercise has been described in various ways. In Mohan, Sopinka J. spoke of the "reliability versus effect factor" (p. 21), while in J. (J.-L.), Binnie J. spoke about "relevance, reliability and necessity" being "measured against the counterweights of consumption of time, prejudice and confusion": para 47. Doherty J.A. summed it up well in Abbey, stating that the "trial judge must decide whether expert evidence that meets the preconditions to admissibility is sufficiently beneficial to the trial process to warrant its admission despite the potential harm to the trial process that may flow from the admission of the expert evidence": para. 76.
Analysis
The Issues
[21] The Crown submits a key issue is whether the cash seized was the product of drug trafficking activity by the defendants. The proposed expert evidence relates to one of the eight counts in the indictment. Count one involves the proceeds charge and the remaining seven counts involve the charges of possession of substances for the purposes of trafficking.
Properly Qualified Expert
[22] I find Mr. Good is a properly qualified expert.
[23] He has unique academic qualifications, training and experience in forensic accounting. Defence counsel submitted that Mr. Good was biased since he is employed by the government and does analysis principally for police services.
[24] I find that Mr. Good is objective and understands his role as an expert before the court notwithstanding that the agency where he is employed has a mandate in relation to the government and police authorities. He testified that he has examined cases from the police that he found had no merit. He is aware that his analysis generally involves linking identified persons to criminal activity. He also testified that he does not owe the police a specific opinion, acknowledged he has not represented defendants and cannot be retained by the defence but he testified he was open to take into account other sources of information.
Logical Relevance
[25] The Crown submits Mr. Good’s opinion the defendants had additional funds from unknown sources over the seven year period prior to December 2016, is relevant because it proves the funds seized were from their drug trafficking activity. In other words, the Crown submits the cash seized was part of the defendants’ additional unknown source of funds.
[26] Counsel for Ms. Hamilton submits that Mr. Good’s evidence is not opinion evidence but rather, essentially a financial summary based on incomplete evidence. Counsel also submits Mr. Good was not involved in the investigative efforts required of a forensic accountant in accordance with Standard Practices for Investigative and Forensic Accounting Engagements made Exhibit 4. In addition, counsel cited the finding at paragraph 6.1.4 in relation to the cash seized, which stated as follows:
The police seized $49,330 of Canadian currency and $250.00 of American currency during the arrest of Floriano Daponte and Vivian Lee Hamilton, and search of their home on December 2, 2016.
It is assumed that the cash was accumulated during the period under analysis. In the absence of knowing when the banknotes (currency) were printed, it is not possible to accurately determine the earliest point in time when Floriano Daponte and Vivian Lee Hamilton could have acquired this currency. Additionally, the accumulation of this cash may be explained by the $195,722 of cash withdrawn from Vivian Lee Hamilton’s bank accounts, line of credit, and credit cards during the period under analysis
[27] Counsel submits that the expert report and evidence is not relevant and that any connection between the funds seized and the additional unknown source of funds over the prior seven year period is at best tenuous and problematic.
Necessity in Assisting the Trier of Fact
[28] The Crown also submits the subject matter of a forensic financial analysis is complex and outside of the knowledge of the average person. The Crown maintains the analysis and conclusions must be explained by the expert; otherwise it would be impossible to determine the defendants’ net worth and provide context to understanding the characterization and conclusion that the seized funds derive from the defendants’ drug trafficking.
[29] The Crown also submits that the attached schedules are needed because they provide the underlying support for the opinion and, since they are mainly banking records of the defendants, they can be more expeditiously presented to the court at trial by the expert.
[30] Counsel for Ms. Hamilton submitted that the evidence of the expert is not necessary and that there are gaps in the information on which Mr. Good relied.
Absence of an Exclusionary Rule
[31] There is no exclusionary rule.
Discussion
[32] As stated in The Law of Evidence, 7th Edition, by David Paciocco and Lee Stuesser at page 30,
There is no legal test for identifying legal relevance. Relevance is a matter of logic. To identify logically relevant evidence, ask “Does the evidence assist in proving the fact that my opponent is trying to prove?”
[33] In this case, the test can be formulated as follows: does the evidence that the defendants had an additional source of funds over the seven year period assist to prove that the funds seized on the search in December 2016 were from drug trafficking by the defendants?
[34] In this case, the evidence may have some relevance to support an inference the funds seized might be part of the additional source of funds between the defendants. However, the fact of an identified additional source of funds over the seven year period does not itself logically lead to the inference that the funds seized were more likely from drug trafficking by the defendants. This is erroneous a priori reasoning. Mr. Good himself acknowledges that the accumulation of cash may be explained by a host of other reasons, perhaps by other illegitimate means, none that might be attributed to drug trafficking by the defendants.
[35] As to necessity to assist the trier of fact, it is well-known that gains from drug trafficking are seldom reported and are additional source of funds. Employing a net worth analysis and deductively working backward from the present circumstances, known events and financial information to determine whether an unknown the source of funds may have existed, is laborious, technical and detailed.
[36] As is well-recognized and articulated by Justice Code in R. v. Khan, 2014 ONSC 5664, opinion evidence from a qualified forensic accountant is commonplace in large complex fraud transactions. As he observes, it is simply impractical to expect a trier of fact to engage in the time-consuming analysis of each underlying document making the assistance of the expert necessary.
Nature and Scope of Expert Evidence
[37] The Supreme Court of Canada in R. v. Sekhon, 2014 SCC 15 directs trial judges to be mindful of the nature and the scope of the proposed expert evidence. In doing so, the court approved of Justice Doherty’s direction in R. v. Abbey, 2009 ONCA 624, para. 62 as follows:
62 The admissibility inquiry is not conducted in a vacuum. Before deciding admissibility, a trial judge must determine the nature and scope of the proposed expert evidence. In doing so, the trial judge sets not only the boundaries of the proposed expert evidence but also, if necessary, the language in which the expert’s opinion may be proffered so as to minimize any potential harm to the trial process. A cautious delineation of the scope of the proposed expert evidence and strict adherence to those boundaries, if the evidence is admitted, are essential. The case law demonstrates that overreaching by expert witnesses is probably the most common fault leading to reversals on appeal.
[38] In this case, no issue is taken with the nature of the report. The analysis employed the net worth method that is well-recognized and accepted. However, concerns arise in relation to the terms of engagement and scope of parties and the period of time considered.
[39] The letter of engagement dated March 29, 2017 as Exhibit 1 indicates that the RCMP made an initial request for a forensic accounting analysis of the financial activities of Vivian Lee Hamilton. The letter goes on to provide that “Upon completion of the detailed review of the documents we will begin Phase 1 of our analysis, which will include summarizing the bank and other information of Vivian Lee Hamilton.” The letter indicates that the forensic accounting engagement would be performed in accordance with the Standard Practices for Investigative and Forensic Accounting Engagements. There is no reference to Mr. Daponte in the letter of engagement.
[40] Mr. Good testified that he received the documentation from the police, had some brief communications with officers and completed his report, which is at Tab 4 of Exhibit 3.
[41] In the introduction, the report references being retained by the RCMP “in the context of the criminal investigation of Floriano Daponte and Vivian Lee Hamilton…” and under the main heading of “Scope of Work” and sub-heading “Mandate” states “This Report was prepared at the request of the RCMP to provide a forensic accounting analysis of the financial activities of Floriano Daponte and Vivian Lee Hamilton for the period under analysis of January 1, 2010 to December 2, 2016 (the “Period”)”. The main objective of the analysis was stated “to determine if Floriano Daponte and Vivian Lee Hamilton had sufficient funds available from known sources to pay for their personal expenditures and account for the increase in their net worth during the period under analysis”.
[42] First, no explanation is given how the matter progressed in scope from a forensic accounting analysis of the financial activities of Vivian Lee Hamilton to a determination if Floriano Daponte and Vivian Lee Hamilton had sufficient funds from known sources to pay for their personal expenditures and account for the increase in their net worth during the period under analysis.
[43] Second, why a seven year period was chosen is unexplained.
[44] Without knowing the scope of the analysis, why Mr. Daponte was subsequently included, why seven years was chosen for the relevant period and how these rationally relate to the case, this court is simply unable to embark on a cautious delineation of the scope of the proposed expert evidence or police those boundaries.
[45] I acknowledge that this is a judge alone trial. However, whether a judge alone or a jury trial, any proposed report or evidence that does not address the nature and scope of the proposed evidence to permit an adequate assessment and consideration by the court, risks inadmissibility. Any expectation that expert evidence may be admitted by the judge who will then assess its weight without the proponent addressing the nature and scope, is ill-advised and rarely, if ever, will be entertained by the court.
Potential Risks and Benefits
[46] Defence counsel submitted that the proposed expert evidence lacks probative value, invites impermissible speculation and is based largely on incomplete information.
[47] If the information is incomplete, speculation becomes a danger. A report that might otherwise be admissible becomes suspect.
[48] Notwithstanding relevance, R. v. Mohan, [1994] 2 S.C.R. 9 directs that the trial judge must conduct a cost-benefit analysis to determine whether its value is worth what it costs. This requires the judge to balance the probative value against its prejudicial effects.
[49] The report’s scope covers a period of seven years immediately before the date of the alleged offences and concludes that both defendants acquired income and assets greater than their known abilities over this time period. However, the drug trafficking investigation that led to the charges occurred over approximately one year before the search and seizures. The Crown urges that the amount of cash seized bears some relationship to the unknown additional funds.
[50] The Crown is effectively asking the court to draw the inference that the funds seized were related to drug trafficking activity and that this is consistent with years of illegal conduct by the defendants. This is problematic when the initial scope of the engagement only involved Ms. Hamilton. Of greater concern is that this case devolves into an inquiry into the defendants’ circumstances for the preceding seven years, the assumption being that the funds are derived from some illegitimate activity. The probative value of this evidence is slight. Overall, this evidence lacks the logical inferences sought by the Crown.
[51] If this evidence is permitted, the implications and prejudicial effects become obvious. In a case where funds seized are alleged to be from drug trafficking by the defendants, whatever happened many years earlier otherwise become a remote, tangential and time-consuming inquiry with few, if any, benefits to the court. The prejudicial effects outweigh the probative value of this evidence.
Conclusion
[52] For these reasons, the potential harm to the trial process outweighs any benefit offered by the admission of the evidence. For these reasons, the evidence of Mr. Good shall not be permitted to be admitted.