Court File and Parties
COURT FILE NO.: CR-19-1000030-0000 DATE: 20190719
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
HER MAJESTY THE QUEEN and MINISTRY OF THE ATTORNEY GENERAL AND MINISTRY OF THE SOLICITOR GENERAL – and – SHAUN ROOTENBERG Applicant
Counsel: Mitchell A. Flagg, for the Crown Claudia Brabazon, Counsel for Non-Party, Ministry of the Attorney General representing Ministry of the Solicitor B. Badali, for the Applicant
HEARD: May 6, 7, 8, 13, 14 and 16, 2019
B.A. Allen J.
REASONS FOR JUDGMENT
THE CHARGES
[1] Shaun Rootenberg stands charged with one count of fraud over $5,000.00 pursuant to s. 380 of the Criminal Code. This section provides that “everyone who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security or any service. The charge came in relation to allegations that Mr. Rootenberg defrauded the complainant Victoria Smith of $595,000.00 through two transactions that took place in September and October 2013.
DEFENCE APPLICATION
STAY OF PROCEEDINGS
The Law
[2] Section 7 of the Charter provides that “everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.” Protections under the Charter of Rights are engaged whenever state conduct rises to the level of violation of a person’s rights. State conduct comes under scrutiny with an application for a stay of proceedings under s. 24(1).
[3] Section 24(1) provides that a person whose Charter rights have been violated may apply to “a court of competent jurisdiction to obtain such remedy as the court considers appropriate and just in the circumstances”. The concern is that if a person is put on trial in the face of rights violations what would result is an “abuse of process” and the violation of the “principles of fundamental justice” in violation of s. 7 of the Charter.
[4] Where the right to a fair trial is not implicated resort may be had to a residual category of abuse of process that encompasses the particular circumstances. The residual category is applicable to situations where the state conduct is such that it risks impugning the integrity of the judicial process: R. v. O’Connor, [1995] 4 S.C.R. 411, at para. 63 and R. v. Regan, [2002] 1 S.C.R. 297, at paras. 48 and 49.
[5] Irrespective of whether prejudice is caused by abuse because of an unfair trial or because of risk to the integrity of the justice system three criteria must be satisfied:
a) the prejudice caused by the abuse in question will be manifested, perpetuated or aggravated through the conduct of the trial, or by its outcome; b) no other remedy is reasonably capable of removing that prejudice; c) where there is still uncertainty over whether a stay is warranted after steps (1) and (2), the court is required to balance the interests in favour of granting a stay against the interest that society has in having a final decision on the merits.
[6] The balancing at the third stage need only be undertaken where uncertainty remains as to whether a stay is appropriate after consideration of the first two stages.
[7] The applicant, Mr. Rootenberg, applies for a stay of proceedings under s. 24(1) of the Charter. He advances this application on two bases.
[8] First, there was a disclosure issue. Mr. Rootenberg applied for an adjournment of the first trial date that was scheduled in July 2018 to allow the Crown to deliver outstanding disclosure. The applicant claims abuse by the Crown under s. 7 of the Charter due to late disclosure of emails and certain police notes.
[9] Second, Mr. Rootenberg claims abuse by the correctional officers during his period of pre-trial custody.
Disclosure
[10] The applicant’s adjournment request was granted by Justice Hood in April 2018. The Crown provided the requested disclosure before the return date of this trial. The applicant does not dispute this. The court provided the remedy that resolved the applicant’s disclosure issue.
[11] The applicant acknowledges that he suffered no prejudice from the late disclosure. A stay is a rare and permanent remedy aimed at addressing prejudice that is manifested, perpetuated or aggravated through the conduct of the trial, or by its outcome. It looks to the future. This is clearly not the circumstance in this case. I dismiss the application for a stay on this basis.
Strip Searches during Pre-trial Custody
[12] The applicant was arrested on June 6, 2017 and was detained in custody on June 8, 2017. He was released on January 18, 2018. His evidence is that he was strip searched regularly, before and after court appearances, before professional visits and after work shifts in the facility. The applicant claims when he was strip searched he was required to remove all of his clothes at once.
[13] The applicant seeks a stay of proceedings based on the abuse he sustained through the strip search practices while detained at Toronto South Detention Centre (“the TSDC”) and at the Central East Correctional Centre (“the CECC”). The Ministry of the Solicitor General of Ontario (“the Ministry”) has purview over the correctional facilities in Ontario so Mr. Rootenberg’s claim about treatment while in pre-trial detention rests against that Ministry. The Ministry and the Attorney General, as representatives of the Ministry, received notice of the application although they were both short served.
[14] The Ministry responded to the application seeking a dismissal on several grounds, the primary ground being that the complaints against correctional services have been brought in the wrong forum. The Ministry points out that Charter violations in the criminal context lie against the police and the Crown in the criminal proceeding (“the Crown”) and the applicant has made no such claim.
[15] I agree with the Ministry’s position that the applicant’s complaint that the correctional facilities failed to comply with governing policy and legislation lies more properly in a human rights complaint under the Ontario Human Rights Code or in civil litigation for damages under s. 24(1) of the Charter. On that basis I would dismiss the application.
[16] The Crown makes an argument similar to that made by the Ministry. The Crown differentiates strip search policies at correctional facilities from strip search policies conducted upon arrest and detention at a police station where the law protects against arbitrary and improper practices in conducting strip searches. It is well established that the safety of officers, the accused and other inmates, and concerns about secreted contraband underlie the law in this area: R. v. Golden, [2001] 3 S.C.R. 679, at paras. 28-29. Policies on strip searches at a police station are distinct from the post-arrest strip searches mandated by the Ministry of Correctional Services Act where correctional officers are required to search every inmate according to policies set by the Ministry.
[17] In spite of the differing authority as between the police power to conduct strip searches and that of correctional officers, the case authorities relied upon by the applicant all involve scrutiny of the police power not the power of correctional officers.
[18] The Crown points out that much of the evidence needed to inquire into the applicant’s claims would reside with the Ontario Ministry of the Correctional Services which body has jurisdiction over the administration and practices at provincial correctional facilities. There are no records available to the court from the Ministry of Correctional Services on the TSDC or the CECC. The only evidence before the court is the affidavit evidence of the applicant.
[19] Again, a stay is a rare remedy and the party seeking such relief has a heavy burden to satisfy. Leaving aside for the moment that the Ministry is the repository of policy and information relevant to the applicant’s claims, I make the observation that I cannot see how trial fairness has been affected by his treatment in the correctional facilities. Considering the residual category, it is evident that the orientation of the applicant’s claim is to address past wrongs whereas a stay has its focus on preventing future prejudice to an accused.
[20] I dismiss the application. I deny a stay of proceedings based on the conduct of strip searches.
THE TRIAL
SOCIAL MEDIA CONTACT
[21] Mr. Rootenberg and Ms. Smith met through the social media dating site e-Harmony. On this site individuals are matched for potential dating or friendship experiences based on biographical and other information provided to e-Harmony. The clients post their interests, likes and dislikes and life experiences. The two were first matched on July 6, 2013. Ms. Smith and Mr. Rootenberg apparently had many common interests and characteristics that resulted in them pursuing a relationship.
[22] They had their first in-person meeting in July or August 2013. It is Ms. Smith’s view that the relationship progressed quickly. She believed she was in an exclusive relationship with Mr. Rootenberg soon after the first date. Ms. Smith found him attentive and loving. She met his ex-wife and two sons within a short time of meeting him. She testified that as time went on she found Mr. Rootenberg to be an intelligent, upstanding man from a good family, safe to be around. She thought they had a future together. Her relationship with him lasted about a year-and-a-half. It was in November 2014 that she received information that made her change her mind about him.
[23] Mr. Rootenberg told Ms. Smith he was involved in some way with finances. She did not know the details of his business involvement besides his mention of projects he was working on. Ms. Smith is a sole-support mother with two children. When she met Mr. Rootenberg she was receiving child support from her ex-spouse and had some financial assets. She owned her home, an investment condo property and stock market investments.
THE SOCIAL TRIVIA PROJECT
The Early Plan
Myron Gottlieb’s Evidence
[24] Myron Gottlieb met Mr. Rootenberg in 2011 at the Beaver Creek federal penitentiary where they were both serving time for fraud. Mr. Gottlieb had been a business consultant for many years before he was incarcerated. While in prison Mr. Rootenberg spoke to Mr. Gottlieb about a plan for a social medial business.
[25] At the relevant time of this matter Mr. Gottlieb and his wife, Bonnie Gottlieb, owned a company called B-G Enterprises Inc. (“B-G”) which they had established in 2008. His wife was the sole director and shareholder and Mr. Gottlieb was president, secretary and business manager. Both had signing authority. The company had an account with the TD Bank. On average $5,000.00 to $10,000.00 per month was deposited into that account. Mr. Gottlieb was doing consulting work with a technological company. The plan was that B-G would get equity in Mr, Rootenberg’s business venture once it got off the ground.
[26] Once Mr. Gottlieb and Mr. Rootenberg were both released from prison they met in September 2012 to talk business. This is when Mr. Rootenberg expanded on his business idea, about a social media gaming concept. He asked Mr. Gottlieb if he would assist with business and marketing plans to which Mr. Gottlieb agreed. Mr. Rootenberg undertook to pay Mr. Gottlieb $70,000.00 for his work. On about six occasions until late 2013, Mr. Gottlieb met with Mr. Rootenberg and Mr. Rootenberg’s friend, Ron Hulse, to discuss business and marketing plans as well as a financing for the venture. They discussed a plan to attract sponsors and investors who would acquire equity in the business. Mr. Gottlieb was asked to draw up a business plan.
[27] Mr. Rootenberg was the driving force behind the venture. The idea for the venture was to set up a computer App that would attract users to watch advertisements for products being marketed by companies. Users could become contestants by answering skill testing questions. There would be monetary prizes for the contestant who answered the questions the quickest and most accurately. A portion of the funds would go to the contestant and the other portion to a charity of the contestant’s choice.
[28] In September 2013, Mr. Rootenberg asked Mr. Gottlieb if he could use B-G’s TD Bank account to facilitate him in advancing some funds that he proposed be deposited into the account. He asked if Mr. Gottlieb would disburse the funds as he directed. Mr. Gottlieb agreed to do this. Funds were deposited and distributed by Mr. Gottlieb. Mr. Gottlieb believed based on what Mr. Rootenberg told him that the funds were Mr. Rootenberg’s from off-shore capital assets. He did not question him about this trusting that he was acting with integrity. Mr. Rootenberg never mentioned anything specific about the source of the funds to be deposited. He never mentioned Social Trivia in relation to those funds. B-G bank records were filed in which copies of several bank drafts dated in September and October 2013 provided by Mr. Rootenberg were deposited by Mr. Gottlieb into the B-G account and then disbursed as instructed.
[29] A draft for $160,000.00 was deposited on September 18, 2013 and a draft for $435,000.00 on October 22, 2013. These are the amounts of funds Ms. Smith invested with Mr. Rootenberg, as we will see, $160,000.00 on September 17, 2013 and $435,000.00 on October 22, 2013. Mr. Rootenberg told Mr. Gottlieb he received this money from friends.
[30] Mr. Gottlieb testified B-G was never involved in real estate, mortgages or investments. Mr. Gottlieb was not aware of a company called “B-G Enterprises Real Estate Corp. Inc.” or Victoria Smith until the police interviewed him in 2017 in relation to the fraud investigation in this case. As will be seen, B-G Enterprises Real Estate Corp. Inc. is the trustee named on a trust deed related to one of the investments Ms. Smith made towards Mr. Rootenberg’s Social Trivia scheme. Mr. Gottlieb stated he had never heard of Social Media Group, a party named on the trust deeds. Mr, Gottlieb testified he had nothing to do with the copies of the trust deeds and trust dissolution documents in evidence. He saw them for the first time during the police visit.
[31] The Crown filed admissions pursuant to s. 655 of the Criminal Code. Among the admissions, the parties agree on the particulars of the disbursements drawn on the B-G account from the funds Mr. Rootenberg directed Mr. Gottlieb to distribute. These disbursements were made in September 18, 2013 (the day after the $160,000.00 investment) and on dates in October 2013 and March and April 2014.
[32] Disbursements from the draft amounts deposited into the B-G account were made to Mr. Gottlieb for Mr. Gottlieb’s services and for his litigation legal expenses, to Mr. Rootenberg’s sister, to Mr. Rootenberg, to Henry Cole and to several other individuals unknown to Mr. Gottlieb and for purposes unknown to him.
[33] On October 22, 2013, the same day one of Ms. Smith’s drafts were deposited, Mr. Gottlieb was directed by Mr. Rootenberg to disburse $50,438.61 to Parkview BMW for a new vehicle for Mr. Rootenberg. The parties concede the funds for the BMW were derived from the $435,000.00 investment.
[34] Mr. Gottlieb testified he became concerned after the police visit and sought assurances from Mr. Rootenberg that their dealings had nothing to do with Victoria Smith’s police complaint. At Mr. Gottlieb’s request Mr. Rootenberg sent him an email confirming this.
[35] Mr. Gottlieb testified that Mr. Rootenberg indicated that he had obtained a $3 million commitment from an investor in Vancouver and that the investor had advanced $350,000.00 to fund two $100,000.00 contests. There were delays in receiving the funds and Mr. Gottlieb felt the venture would not get off the ground. He testified he personally was not successful from October 2012 to November 2013 in attracting any investors. Mr. Gottlieb testified that the plan was resurrected around June 2015. But this did not involve Ms. Smith.
Ron Hulse’s Evidence
[36] Ron Hulse had known Mr. Rootenberg since 1999 because they had worked together, Mr. Rootenberg in financial services and Mr. Hulse in marketing. Many years later in December 2012 Mr. Hulse encountered Mr. Rootenberg and they planned to go to lunch. At that time Mr. Hulse ran his own business as an executive recruiter. He learned Mr. Rootenberg was in a desperate life situation. He had been incarcerated, had been divorced and was trying to reconcile with his ex-wife. He had two disabled children and was struggling to get a job.
[37] Mr. Rootenberg convinced Mr. Hulse that he had some business successes. He told him he was responsible for a lucrative business transaction he facilitated between a bus company in the United States and Britain. He earned a $6 million commission on that deal. Mr. Hulse and Mr. Rootenberg remained in touch. Mr. Hulse helped him clean up his resume.
[38] In 2013 Mr. Rootenberg raised Social Trivia describing to Mr. Hulse the details of the internet gaming idea. Mr. Hulse was intrigued by the idea. Mr. Rootenberg invited him to Mr. Gottlieb’s office for discussions. Mr. Hulse said Mr. Rootenberg asked him if he could be the “front person” for the venture so they could present to equity investors. Mr. Rootenberg was aiming to raise $5 million dollars. Mr. Hulse agreed to participate though he did not abandon his recruiting business. Mr. Hulse had been involved in two previous start-ups so he felt he had experience. He realized the problem with optics given Mr. Rootenberg’s criminal past and accepted the job of making efforts to raise funds.
[39] Mr. Hulse also undertook to prepare a Powerpoint presentation as a tool to be used to motivate investment. He agreed to go to business meetings and encouraged Mr. Gottlieb not to attend because of his “toxic past”. He acquired a $1 million commitment from Gerry Feldman, a corporate executive at Pinetree Capital Ltd., a venture capital firm owned by Sheldon Inwentash.
[40] Mr. Hulse testified he continued to be involved for about four months. The idea was unfulfilled by late July/early August 2013. Mr. Hulse testified there was no registered company, no employees, no expenses, no company Mr. Rootenberg could say he held himself or with others. There was only a Powerpoint presentation. Mr. Hulse confirmed Mr. Gottlieb’s evidence that the idea stayed dormant for about two years and was resurrected in May 2015. The resurrection of the venture is not relevant to these proceedings. It did not involve Ms. Smith.
Victoria Smith’s Evidence
Introduction to Social Trivia
[41] One of the projects Mr. Rootenberg spoke of with Ms. Smith in their initial conversations was the Social Trivia idea. Ms. Smith testified that shortly after they met, Mr. Rootenberg spoke a great deal about negotiations he was involved in about online networking with a company called Keek Inc. He mentioned business associates Gerry Feldman, Ron Hulse and Henry Cole as people he was involved with. What she understood of the Social Trivia project was that it was an online form of gaming. Ms. Smith said she did not inquire into details about this. Mr. Rootenberg volunteered the information.
[42] On cross-examination Ms. Smith acknowledged that Social Trivia as it stood when Mr. Rootenberg introduced it was that it was a platform that required development. It was at the level of “taking an idea and making it better”, “an idea he had he was trying to get off the ground.” She stated that she understood that Social Trivia was not at the stage of an operating concern. It was not, on her understanding, a company making an income. On cross-examination Ms. Smith also indicated she likely did not ask many questions or Google the names of persons whose names she heard. Ms. Smith admitted “that is not how she operates” and that she “probably did mostly listening.”
[43] Ms. Smith testified she told Mr. Rootenberg about her assets. So he knew she had money to invest. She told him that in 2013 she had been looking to purchase properties. She testified she did not attend any business meetings about Social Trivia. Ms. Smith did not know the details of the business in which Mr. Rootenberg was involved with others. She indicated she met Mr. Feldman only once at a Raptors basketball game and was once invited with Mr. Rootenberg by Mr. Hulse and his wife for dinner at a restaurant. Ms. Smith and Mr. Rootenberg also went out once socially with Henry Cole and his wife.
[44] Ms. Smith testified about the course of conversations that led to her investing in Social Trivia. Ms. Smith testified it was not her who introduced the idea of her making investments. She stated that when Mr. Rootenberg spoke about Social Trivia, he told her there were opportunities to invest. She then asked if it would be appropriate for her to invest. Ms. Smith stated that Mr. Rootenberg told her there would be a place for her to invest.
[45] On cross-examination defence counsel suggested it was Ms. Smith’s idea to invest in Social Trivia; that Mr. Rootenberg did not solicit her investment. Ms. Smith acknowledged that she asked Mr. Rootenberg whether there was an opportunity for her to invest. She further stated that Mr. Rootenberg told her “if she is interested he’ll make a place for her.” She testified she invested money because she was impressed by Mr. Rootenberg’s ideas. She said however that they together decided it would be a good investment opportunity for her. Ms. Smith admitted she did not recall any specific representations Mr. Rootenberg made to her except to say it was a great opportunity.
[46] Ms. Smith also admitted under cross-examination that she did not do her due diligence before investing in Social Trivia. She did not ask to speak to the persons Mr. Rootenberg mentioned he was meeting with even though Mr. Rootenberg did not refuse to let her contact them. She did not search Social Trivia on the internet, request to examine corporate documents to determine whether it was incorporated or asked to see a business plan before she invested. Ms. Smith also admitted she never asked how her funds would be used to get Social Trivia into operation. She never asked for any documentation before she invested.
The First Investment
[47] As noted earlier, Ms. Smith first invested $160,000.00 which she passed to Mr. Rootenberg on September 17, 2013 by a draft. Ms. Smith admitted on cross-examination that the relationship progressed quickly to the point when she made her first investment. She acknowledged that she was dating him about one month when she made that investment. Ms. Smith testified that Mr. Rootenberg suggested she invest that particular amount because that was the amount of shares that were available in Social Trivia.
[48] As noted above, various amounts of funds that Mr. Rootenberg acquired, including the $160,000.00, were deposited into B-G’s TD Bank account. Ms. Smith indicated that Mr. Rootenberg did not give her any B-G documents. But she recalled Mr. Rootenberg mentioning that company in association with the men he was doing business with. She was not aware of what connection Mr. Rootenberg had with B-G. She only met Mr. Gottlieb once when she and Mr. Rootenberg delivered documents to him. On cross-examination she testified she was told to make the draft out to B-G and she did as Mr. Rootenberg requested without question.
[49] Ms. Smith had to repeatedly ask Mr. Rootenberg for documentation evidencing her $160,000.00 investment. She was concerned because he travelled a lot and if something happened to him she did not want proof of the investment to be only her word. There was a gap in time after she invested before Mr. Rootenberg sent her an email dated October 23, 2013 attaching a document.
[50] Ms. Smith identified a document in evidence entitled “Trust Deed”, dated September 20, 2013 as the document she received. The trustee is “B-G Enterprises Inc.” and the beneficiary, Victoria Smith. It was unsigned when she received it but asked him to sign it, which he later did. She did not sign nor was there a witness signature.
[51] On cross-examination defence counsel put to Ms. Smith and she agreed that the Trust Deed only indicated that shares, not money, are held in trust for her and does not guarantee a return on investment. Ms. Smith admitted she did not understand that if a company dissolves that its shares are valueless if they are not paid out. She admitted she did not ask about this.
[52] In answer to the question in-chief as to whether Ms. Smith knew where the money she invested would go she responded that she was not entirely clear about that. She said because she did not have a business background, “a lot of the detail would be lost on me.” She thought Mr. Rootenberg was a trustworthy and knowledgeable business person. Ms. Smith figured her investment would go toward building the Social Media platform in North America.
[53] In answer to the question in-chief as to what she believed she would receive as a return she responded that she thought that once the company was built in North America she would be able to access the funds she invested. She explained that Mr. Rootenberg had assured her that she would be able to take her funds out after one year if she was not satisfied. Ms. Smith did not have a financial advisor at the time although she had experience using an advisor in relation to her stock investments.
[54] On cross-examination defence counsel questioned how naïve and uninformed Ms. Smith was about business. He pointed to her substantial assets; that she owns her own home; that she holds an investment property from which she receives rental income; that she had investments in the stock market. Ms. Smith indicated she had a financial advisor managing her portfolio. She testified she made the decision to remove her stock investment because she wanted to invest in real estate where there would be more stable returns. Ms. Smith testified the reason she invested in Social Trivia is because of Mr. Rootenberg’s enthusiasm for the idea and her trust in him.
[55] Defence counsel also put to Ms. Smith that she was sophisticated enough to know that big ideas can bring with them risky business and the possibility of failure. Ms. Smith acknowledged that big ideas have the potential to succeed or fail. But she said she did not feel she was taking a significant risk based on recommendations from Mr. Rootenberg.
[56] Defence counsel put to Ms. Smith that one month of dating is a short time to put such trust in a person. Ms. Smith agreed with that suggestion. But she believed they were in a committed monogamous relationship at this time.
The Second Investment
[57] As noted earlier, Ms. Smith wanted to invest in second mortgages. Ms. Smith testified that Mr. Rootenberg brought up the topic. Mr. Rootenberg encouraged her to do this on the view that this investment would ensure a certain amount of interest each month. Ms. Smith testified Mr. Rootenberg provided her with no information about the investment opportunity. He did not advise her of the name of the company she would be investing in. He gave her no documentation until she requested it.
[58] On November 7, 2013 she received another unsigned Trust Deed dated October 15, 2013, which Mr. Rootenberg signed later. The trustee was B-G Enterprises Inc. and the beneficiary Victoria Smith. Again, Ms. Smith did not sign the document nor was there a witness signature. Ms. Smith said she did not ask questions ahead of time because she trusted Mr. Rootenberg. She skimmed the document but did not understand what it meant. Ms. Smith thought her investment was “in Shaun’s good hands.” On the question on cross-examination about Ms. Smith not signing the Trust Deed herself Ms. Smith responded that she did not think she had to sign it.
[59] On cross-examination defence counsel challenged the wisdom of Ms. Smith investing such a large amount of money, not asking to review the documentation, not consulting a lawyer or a financial advisor and not signing the Trust Deed related to the second investment. Ms. Smith agreed with the defence’s contention.
[60] Ms. Smith testified she believed it was her who decided the amount of the investment. On October 22, 2013 she provided Mr. Rootenberg a bank draft payable to B-G in the amount of $435,000.00 that was deposited into B-G’s TD Bank account. Ms. Smith said she did not know anything about Mr. Rootenberg’s involvement with B-G. He just said her investment would be under the umbrella of B-G. In spite of the large amount of the draft she did not get clarity about this.
[61] On cross-examination, defence counsel further put to Ms. Smith and she agreed that: she did not ask details about the name of the mortgage company; never asked for documentation before she invested; never asked to meet with anyone from B-G; never asked what type of company she was investing in. She did not know whether the mortgages were Canadian or not.
[62] Mr. Rootenberg said she would receive six percent or more in interest income each month. She would receive about $6,000.00 every three months. Ms. Smith received four cheques in amounts that were just under and just over $6,000.00: for $6,325.00 dated in May 2014; for $6,350.00 dated in September 2014; for $6,145.00 dated in December 2014; and for $5,926.00 dated in and June 2015. None of the cheques were drawn on B-G’s bank account. They were written on Tangerine Bank or DUCA Financial Services cheques. Ms. Smith indicated this did not concern her. She testified in-chief that the June 2015 payment was the final payment she received. She did not receive tax returns and she accepted Mr. Rootenberg’s questionable reason for not providing them.
[63] On cross-examination defence counsel showed Ms. Smith a further cheque dated in February 2015 for $6,115.00 drawn on DUCA Financial Services and one also drawn on DUCA Financial Services dated in September 2015 for $5,683.00. She stated when pulling documents together for trial she must have overlooked those cheques. She did not deny receiving those cheques. Ms. Smith received a total of $36,544.00 in what she believed were dividend cheques on her $435,000.00 investment.
[64] Ms. Smith was shown an unsigned, unwitnessed document entitled Trust Deed and Request for Dissolution (“the Dissolution Document”) dated December 9, 2015. The trustee is “BG Enterprises Inc.” and the beneficiary, Victoria Smith. Again, she did not sign that document. She acknowledged she received the document by courier. She thought the document signified that her investment funds would be forthcoming. Mr. Rootenberg never explained the document to her. She did not ask.
Ms. Smith’s Discoveries about Mr. Rootenberg
[65] As noted above Ms. Smith’s relationship with Mr. Rootenberg lasted about one-and-a-half years. The relationship ended when she found out he was not who she thought he was. In November 2014 a friend of her son, Haroun Roble, was staying at her home. Haroun went to a Bar Mitzvah for Mr. Rootenberg’s son and afterwards Haroun brought some desserts from the event to his girlfriend’s home. The girlfriend’s father inquired about where the dessert was from.
[66] Haroun told his girlfriend’s father that the desserts were from Ms. Smith’s boyfriend, Shaun Rootenberg’s, son’s Bar Mitzvah. The father recalled seeing that name in the news and searched him on the internet. Haroun testified at trial. He stated that when the father showed him an image of a person that came up on the search, Haroun confirmed that the image was Ms. Smith’s boyfriend. The internet revealed that Mr. Rootenberg had a criminal record for fraud. Haroun relayed this information to Ms. Smith.
[67] Ms. Smith testified she knew Mr. Rootenberg as Shaun Rothberg. This is what Mr. Rootenberg had told her from the start. Haroun told her his real surname was Rootenberg according the internet. She called Mr. Rootenberg and confronted him in person. Mr. Rootenberg explained that he had served his prison time and he had changed. She said he gave her a brief explanation of what he had done in his past.
[68] Ms. Smith testified she went into shock and developed mental health issues after that discovery. She explained that she did not end the relationship in November 2014 because she was so distressed about the money she had invested. So Ms. Smith decided to stay in the relationship in hopes of getting her money back. Mr. Rootenberg promised she would get her money back. Eventually she lost confidence she would get her money back and the relationship gradually faded out.
[69] Defence counsel challenged Ms. Smith that she knew well before November 2014 that Shaun’s real surname was Rootenberg, which she denied. The defence reminded her that she had met his parents at their home before 2014. He pointed out that she must have greeted them as Mr. and Mrs. Rootenberg. She denied greeting them at all.
[70] Defence counsel put to Ms. Smith that she had met Mr. Rootenberg’s children before 2014 and had grown quite fond of them. She admitted the children even stayed at her home and that their last names were “Rootenberg.” She testified she never really paid attention because Mr. Rootenberg had told her the children are named after their mothers. She explained that he probably told her that when the Bar Mitzvah invitations were sent out.
[71] Defence counsel showed Ms. Smith the Bar Mizvah invitation which contains the name of the son’s parents, the father’s name being “Shaun Rootenberg”. But it did not contain the son’s last name. Defence counsel put to Ms. Smith that it makes no sense that Mr. Rootenberg would raise the question of the children’s names being the same as the mothers in relation to the invitation when their last names are not on the invitation. Ms. Smith insisted that what she said about the sons’ last name is true. She resisted the defence’s suggestion that she knew about Mr. Rootenberg’s real last name before November 2014 because Mr. Rootenberg had told her he changed his name in an attempt to move beyond his past troubles. Ms. Smith denied this.
Communications with Mr. Rootenberg after Disclosure on His Background
[72] When Ms. Smith did not receive her funds back as she expected she went to the police. She permitted the police to take screen shots of text messages between herself and Mr. Rootenberg for the period from November 24, 2015 to January 13, 2017. The texts show attempts by Ms. Smith to make arrangements for Mr. Rootenberg to return her funds.
[73] The defence raised questions on Ms. Smith’s credibility about the text messages she supplied to the police.
[74] The defence put to Ms. Smith that she did not begin to ask for her money back in 2014. He pointed out that her last interest cheque was September 2015. It was when she did not receive her next interest cheque in November 2015 that she began to ask for her money back. The defence put to her that is why the texts she provided the police began on November 25, 2015. Based on her evidence this would mean that one year of texts asking for her money back is missing.
[75] Ms. Smith denied the defence suggestions. She asserted there were earlier texts asking for her money back on an old cellphone. The messages she gave to the police were from her new cellphone. She said she did not think to provide the old phone to the police because she thought the evidence she supplied was strong enough. She denied the defence suggestion that earlier texts asking for her money do not exist.
[76] Ms. Smith’s statements through the text messages are prior consistent statements accepted merely to consider Ms. Smith’s state of mind and to frame the narrative of Mr. Rootenberg’s statements. They are not accepted for the truth of their contents. Mr. Rootenberg’s statements are admissible hearsay as being made by the accused and are accepted for their truth.
[77] In her texts Ms. Smith made repeated requests for documentation confirming and verifying what she was promised. Mr. Rootenberg promised the documentation would soon be forthcoming. Many texts involved setting a time when Ms. Smith would be available to receive the documents. There were what Ms. Smith called stalls and delays in delivering the documentation and her money which she blames on tricks and games Mr. Rootenberg was playing to avoid her demands.
[78] The texts confirm other evidence and show that on December 11, 2015 Mr. Rootenberg delivered the Dissolution Document which when signed by Ms. Smith would purportedly evidence her agreement with dissolution.
[79] The texts next show Ms. Smith was seeking to deliver the signed document to Mr. Rootenberg. There were discussions about where and when to pick the document up from Ms. Smith. Ultimately, the document was never picked up. Ms. Smith blames Mr. Rootenberg for stalling and in the end failing to do what he undertook to do. She testified she became quite distressed and panic-ridden at being deceived by Mr. Rootenberg.
[80] The defence posed to Ms. Smith that she was receiving her dividend cheques as expected until September 2015 and received the Dissolution Document on December 11. Ms. Smith agreed saying her understanding was that she would receive her money when the dissolution was complete.
[81] Ms. Smith testified texts show that she continued to demand the delivery of her money. In her view, Mr. Rootenberg was making excuses about meetings with people to sort out the circumstances with the money. She stated that she always held out hope she would receive her money.
[82] According to Ms. Smith, Mr. Rootenberg made repeated broken promises to meet to go through the documents and deliver her money throughout June 2016 and thereafter. The last messages were on January 13, 2017. Ms. Smith said she had given up. She testified Mr. Rootenberg continued to offer that she meet the B-G trustees, to have third parties involved, and to speak to her lawyer. She acknowledged he did speak to her lawyer. In the end, Ms. Smith never received the remainder of her dividend payments. She received nothing on her second mortgage investment and never met with the B-G trustees.
[83] The defence challenged Ms. Smith’s credibility about the reasons for delays and her view of Mr. Rootenberg’s conduct that she says is expressed through the texts. The defence’s goal was to show a different depiction of the nature of the communications.
[84] The defence pointed out, and Ms. Smith agreed, there was a point in the text messages in November 2015 where she did not respond to his texts for ten days. Defence counsel also put to Ms. Smith that in late December 2015/early January 2016 he was attempting to set up a time to have a courier pick up the Dissolution Document at her home. She was supposed to sign it. Ms. Smith agreed that a time was scheduled and she was not home when the courier arrived and that she did not sign the documents. She testified she believed according to what a lawyer told her that the documents were “bogus” and “dangerous” to sign.
[85] The defence also referred to points in the texts in January 2016 where Mr. Rootenberg is trying to set up a time to meet Ms. Smith. He expresses in several texts frustration that she kept changing the time and would not give him a convenient time to meet. Ms. Smith agreed but stated that she was feeling very sick at that time.
[86] The texts also show that later in January 2016, Mr. Rootenberg states that he offered over and over to meet with Ms. Smith and her lawyer to go through the documents, but she refused. Ms. Smith agreed this was the case. She agreed there are a series of emails where Mr. Rootenberg asks to meet her and she cancels the meetings. Ms. Smith agreed she refused to move the process along but she said this was because she did not want to sign the Dissolution Document for fear she could lose everything.
[87] Ms. Smith accepted the defence suggestion that texts toward the end of January 2016 show that Mr. Rootenberg agreed to meet with Ms. Smith’s brother who Ms. Smith said had more business knowledge than she had. She gave him her brother’s contact information. Mr. Rootenberg left the brother a voicemail but the brother never returned the call. Ms. Smith’s texts indicate she told Mr. Rootenberg that the brother did not want to meet with him.
[88] Ms. Smith got more intense with her demands. Ms. Smith testified she did not know how signing the Dissolution Document would allow her to get her money. So she threatened to sue Mr. Rootenberg’s family for not disclosing his past to her if he did not deliver the money. She threatened to speak to Gerry Feldman.
[89] The defence pointed to texts in August 2016 which indicate Ms. Smith had a lawyer and Mr. Rootenberg was attempting to have the signed Dissolution Documents sent by courier to her lawyer for her lawyer’s review. According to Mr. Rootenberg’s texts, the documents were delivered to the lawyer. Mr. Rootenberg advised Ms. Smith by text that once the documents are approved by the lawyer and signed by her the funds will be released. Ms. Smith refused to sign the Dissolution Document. She went to the police in September 2016. She brought a lawsuit against Mr. Rootenberg.
[90] Defence counsel showed Ms. Smith two letters from her litigation lawyer from Baker Mackenzie LLP dated March 14 and 15, 2017. The latter letter recommends that the Dissolution Document be signed and held in escrow pending the release of the funds. Ms. Smith testified she did not recognize the letter. Ms. Smith was reluctant to admit that from December 2015 when Mr. Rootenberg provided the Dissolution Document to her, she never signed it.
THE LAW OF FRAUD
[91] To establish a crime the mens rea and actus reus of the offence must be established beyond a reasonable doubt.
[92] The actus reus of fraud is determined based on the following principles:
(a) the offence has two elements: a dishonest act and deprivation; (b) the dishonest act is established by proof of deceit, falsehood or “other fraudulent means”; (c) the element of deprivation is established by proof of detriment, prejudice, or risk of prejudice to the economic interests of the victim, caused by the dishonest act.
R. c. Théroux, [1993] 2 S.C.R. 5, at para.16, as cited from R. v. Olan, [1978] 2 S.C.R. 1175; see also R. v. Riesberry, [2015] 3 S.C.R. 805
[93] The deprivation may consist of an actual loss or the placing of the victim's pecuniary interests at risk — it is not essential that an actual economic loss result from the fraud.
If the deceit which is employed imperils the economic interest of the person deceived, this is sufficient to constitute fraud even though in the event no actual loss is suffered and notwithstanding that the deceiver did not desire to bring about an actual loss.
We see nothing in Lord Diplock's speech [in Scott, supra] to suggest a different view. 'Economic loss' may be ephemeral and not lasting, or potential and not actual; but even a threat of financial prejudice while it exists it may be measured in terms of money.
R. c. Théroux, at para. 14 and R. v. Olan, at para. 13
[94] The words “other fraudulent means” have been interpreted by subsequent courts. The words have been held to include activities such as the use of corporate funds for personal purposes, non-disclosure of important facts, exploiting the weakness of another, unauthorized diversion of funds, and unauthorized arrogation of funds or property. The mental element of the actus reus is that the act must be voluntary: R. c. Théroux, at paras. 18 and 19.
[95] The Supreme Court of Canada citing earlier Ontario Court of Appeal decisions held there need not be any misrepresentations or question of what an accused was authorized to do with the funds. The fact that the accused used the funds in a manner which was not authorized is sufficient grounds for finding the accused acted dishonestly: R. v. Zlatic, [1993] 2 S.C.R. 29, at para. 35.
[96] The mens rea of fraud is based on the subjective test of whether the accused subjectively appreciated the consequences of the prohibited act as at least a possibility and not on the objective test of whether a reasonable person would have foreseen those consequences. The subjective test looks to the accused’s intention and the facts as the accused believed them to be: R. c. Théroux, at para. 21.
[97] A person is not saved from conviction because they believe there is nothing wrong with what they are doing. The question is whether the accused subjectively appreciated that certain consequences would follow from their acts and not whether the accused believed the acts or their consequences to be moral. The Crown is not required in every case to show precisely what was in the accused’s mind at the time of the criminal act. Subjective awareness of the consequences can be inferred in some cases from the act itself absent an explanation that creates doubt about the inference: R. c. Théroux, at paras. 22 and 23.
[98] In the case at hand the accused did not testify. There were no witnesses with direct observation of the alleged fraudulent activity. Courts have addressed how to determine the subjective intent necessary to support the mens rea in these circumstances.
[99] In cases where there is no direct evidence of an accused’s intentions in relation to the events that gave rise to the alleged fraud the Crown is permitted to rely on inferences drawn from a body of circumstantial evidence on the evidential record to establish the accused’s intention. There must be sufficient circumstantial evidence to establish the accused had the necessary mens rea to ground the accused’s culpability: R. v. Hong, 2015 ONSC 7000, at para. 38; see also R. v. Holmes, 2008 ONCA 604, at para. 2; R. v. DeGoey, 2005 ONCA 370, at para. 44; and R. v. Milec, at para. 14.
[100] Hence, proof of fraud requires proof that the accused is subjectively aware they are undertaking the prohibited act of deceit, falsehood or dishonesty which could deprive another of their property or put their property at risk. “[T]he proper focus for determining the mens rea of fraud is to ask whether the accused intentionally committed the prohibited acts (deceit, falsehood, or other dishonest act) knowing or desiring the consequences proscribed by the offence (deprivation, including the risk of deprivation)”: R. c. Théroux, at para. 24.
ANALYSIS
The Actus Reus
[101] The Crown is required to prove beyond a reasonable doubt both a dishonest act and deprivation. The dishonest act is proven by establishing deceit, falsehood or other fraudulent means. The defence does not dispute deprivation is established, that Ms. Smith was deprived of the $595,000.00 she invested. The defence argues the Crown has failed to prove deceit or a dishonest act or that other fraudulent means were used by Mr. Rootenberg that resulted in the impairment or loss of Ms. Smith’s investment.
[102] The offence has two elements: (a) a dishonest act and deprivation; (b) the dishonest act is established by proof of deceit, falsehood or “other fraudulent means”.
Dishonest Act - Deceit or Falsehood
[103] It is the Crown’s burden to prove beyond a reasonable doubt the element of deceit or falsehood in relation to acquiring the two amounts of investment funds Ms. Smith provided to Mr. Rootenberg in September and October 2013.
[104] For reasons that follow, I do not find the Crown was successful in proving this element beyond a reasonable doubt in relation to either investment.
[105] Ms. Smith is the only source of evidence of the conversations she had with Mr. Rootenberg during the month of their acquaintance before she made her first investment and during the several weeks later when she made her second investment.
[106] Regarding the $160,000.00 investment which she believed she was making in the Social Trivia venture, I see no direct or inferential evidence of trickery or deceit on Mr. Rootenberg’s part.
[107] The emphasis throughout Ms. Smith’s testimony was on Mr. Rootenberg’s passion for the project. She testified he was very excited about the prospects of success. He began speaking about the idea within a short period of connecting with her through e-Harmony. Ms. Smith was aware that the venture was not a going concern; that at the time Mr. Rootenberg introduced the project, it was at the stage of an idea. On her evidence, Mr. Rootenberg did not attempt to give the impression Social Trivia was an operating business.
[108] Ms. Smith testified about what she believed she was investing in. Her evidence is that Social Trivia was at the stage of “a platform that required development”; at the level of “taking an idea and making it better”; “an idea he had he was trying to get off the ground.” She said Mr. Rootenberg did not give her the impression that Social Trivia was a company making an income.
[109] Ms. Smith’s view of Social Trivia as represented by Mr. Rootenberg does not stand alone.
[110] Ms. Smith’s evidence is supported by that of Mr. Gottlieb and Mr. Hulse. Both witnesses were involved until toward the end of 2013 with trying to support and develop the idea. Mr. Gottlieb began speaking about the idea while in prison with Mr. Rootenberg and continued those discussions in 2012 following their releases from prison. Mr. Hulse’s evidence was that in 2013, Mr. Rootenberg introduced the idea of an internet gaming application.
[111] Both men were impressed with the idea and were involved for about four months when it failed for lack of sufficient financial backing. Mr. Hulse described Social Media as having no corporate registration, no employees, no expenses and no company. There was only a Powerpoint presentation. Ms. Smith was aware she was investing to support developing an idea.
[112] Ms. Smith’s evidence is that she inquired with Mr. Rootenberg whether there was an opportunity for her to invest. She testified that Mr. Rootenberg responded that “if she is interested he’ll make a place for her.” Ms. Smith’s clear evidence was that she invested her funds because she was moved by Mr. Rootenberg’s enthusiasm for his idea. Her evidence was that they together decided it would be a good investment opportunity for her. In answer to a direct question by defence counsel about any other representations Mr. Rootenberg might have made, Ms. Smith stated that she did not recall any specific representations Mr. Rootenberg made except to say it was a great opportunity.
[113] I took into account that Ms. Smith was not inexperienced in matters of business assets and investments. She owns her own home and an investment property from which she receives rental income and held investments in the stock market. She previously retained a financial advisor to assist with managing her assets. Ms. Smith made the decision to withdraw the stock investment to make another type of investment with higher returns. She presented as a rather intelligent and articulate witness.
[114] Ms. Smith was fully aware of the risk going into the investment in Social Trivia. Her words were that she knew that big ideas have the risk to succeed or fail. Based on her trust in Mr. Rootenberg she simply did not feel she was taking a big risk.
[115] It was clearly improvident for her to invest under the circumstances. She only knew Mr. Rootenberg for about a month when she advanced her funds. She asked no questions about just what her funds would be used for. She showed no interest in meeting and discussing the business idea with Mr. Rootenberg’s associates. Ms. Smith did not look into the backgrounds of Mr. Rootenberg or any of his associates. She did not do a corporate profile search on B-G, the company her bank drafts were payable to.
[116] Before Ms. Smith advanced funds she asked for no documentation on Social Media. She subsequently requested documentation and Mr. Rootenberg sent an unsigned, unwitnessed Trust Deed, which he later signed. She never signed the document nor was the signature witnessed. Without clear documentation or inquiries Ms. Smith just handed over her money on pure trust in a man she scarcely knew.
[117] Ms. Smith surely failed at due diligence. She failed to protect herself. But this does not mean Mr. Rootenberg is guilty of deceit or falsehood in leading her into an investment. There is no evidence that he tricked her into investing her money in Social Media.
[118] Regarding her second investment in second mortgages many of the observations I made about the first investment apply.
[119] Ms. Smith told Mr. Rootenberg she wanted to invest in second mortgages. She testified that Mr. Rootenberg encouraged her in this investment because of the stable return she could receive. Again, Ms. Smith did not request, and did not receive, any information about the investment opportunity. Mr. Rootenberg did not advise, nor did she inquire, about the name of the company she would be investing in. She said she believed she invested in a company that fell under the “umbrella of B-G.”
[120] Again, Ms. Smith did not request or receive any documentation before she advanced the large sum of $435,000.00 on October 22, 2013, about two months after she met Mr. Rootenberg. Mr. Rootenberg provided an unsigned, unwitnessed Trust Deed and only signed it later on her request. Once again, the signature on the document was never witnessed; nor did she sign it. Ms. Smith said she did not ask questions ahead of time because she trusted Mr. Rootenberg.
[121] Ms. Smith did receive some returns on her second investment on the terms Mr. Rootenberg promised. She was paid in the form of six quarterly cheques, each in the approximate amount of $6,000.00, more or less. Ms. Smith raised no questions about the fact the cheques were drawn on two financial institutions neither of which were B-G’s TD Bank account.
[122] Ms. Smith ceased receiving payments in September 2015. After not delivering the December 2015 payment, on December 11 Mr. Rootenberg delivered the Dissolution Document. Ms. Smith said her understanding was that she would receive her money when the dissolution was complete. The chain of text messages reveal Mr. Rootenberg made continued efforts to have Ms. Smith sign the document.
[123] Mr. Rootenberg told her she had to sign the document to receive a return of her funds. He sent a courier to pick up the signed document at a pre-arranged time and Ms. Smith was not at home. He made efforts to arrange meetings to go over the documentation with her, and her lawyer and her brother. Ms. Smith did not facilitate those efforts. She never signed the Dissolution Document in the end asserting that she thought it was “bogus”, although subsequently her litigation lawyer asked her to sign it and that it be placed in escrow pending the release of the funds. There is no evidence whether the Dissolution Document is valid or not. That will likely be decided in a civil action.
[124] I see no evidence of deceit or falsehood by Mr. Rootenberg in his dealings with Ms. Smith on the second mortgage investment. Ms. Smith again made the decision to invest without knowing Mr. Rootenberg and without knowledge of where and how she was investing her money.
[125] I see no fraud in relation to Ms. Smith’s investments on the basis of falsehood or deceit. This does not mean Mr. Rootenberg did not commit a fraud by other means.
Other Fraudulent Means
[126] The Crown has alleged in the alternative that Mr. Rootenberg committed fraud “by other fraudulent means”. The evidence must establish beyond a reasonable doubt that Mr. Rootenberg’s conduct is captured by this category of fraud.
[127] “Other fraudulent means” is a more expansive term than both deceit and falsehood. The term includes any other means that do not amount to deceit or falsehood, and that, according to the standards of reasonable people, would properly be regarded as dishonest and any other means that can be stigmatized as dishonest. As observed in R. v. Zlatic: “[T]he dishonesty of ‘other fraudulent means’ has, at its heart, the wrongful use of something in which another person has an interest, in such a manner that this other’s interest is extinguished or put at risk.” It is a question of fact whether conduct falls under the element of “other fraudulent means”.
[128] The broad spectrum of conduct which has been regarded by courts as “other fraudulent means” includes, as noted earlier: the use of corporate funds for personal purposes, non‑disclosure of important facts, exploiting the weakness of another, unauthorized diversion of funds, and unauthorized arrogation of funds or property: R. v. Zlatic, and R. c. Théroux.
[129] Other courts have considered as “other fraudulent means”: the use of an investor’s funds for a purpose that the investor was not informed of or did not agree to; misappropriation of funds for personal use and dishonesty even when investors accepted the high risk of an investment: R. v. Van Bodegom, 2016 ONSC 68, at paras. 133-134, 137 and R. v. Cameron, 2017 ABQB 10, at paras. 58-59. Another case found that improvident or sharp conduct with funds of a lender do not amount to fraud when there was not a dishonest purpose, but rather an intended benefit behind the use of the funds: R. v. Long, at paras. 8, 42 and 88.
[130] There is agreement between the parties as to various uses Mr. Rootenberg put to Ms. Smith’s investments. The following details some of the disbursements of Ms. Smith’s investments:
- a $50,438.16 amount Mr. Rootenberg spent on a BMW, on October 22, 2013, the same day Ms. Smith invested the $435,000.00, was derived from that investment;
- the $50,000.00 draft from a bank account he opened on October 22, 2013 and paid to Henry Cole to be paid to the director of Iron Capital Corporation, Greg Smith, was derived from the $435,000.00 investment;
- a $50,000.00 draft drawn from a bank account of Mr. Rootenberg was received by Greg Smith in March 2014;
- a $7,500.00 draft he gave to his sister on September 18, 2013 was derived from Ms. Smith’s September 17, 2013 $160,000.00 investment;
- a $20,000.00 draft taken out by Mr. Rootenberg on September 18, 2013, with which he was to reimburse an associate for gambling proceeds and which Mr. Rootenberg had taken receipt of, was derived from Ms. Smith’s $160,000.00 investment; and
- a $50,000.00 draft drawn on October 22, 2013 payable to Jeff Watts was derived from Ms. Smith’s $435,000.00 investment.
[131] It is indisputable that Mr. Rootenberg’s disbursements from Ms. Smith’s two investment funds is conduct that, according to the standards of reasonable people, would properly be regarded as dishonest.
[132] Mr. Rootenberg diverted funds for his own personal use and disbursed them to third parties for their use. Ms. Smith did not agree to this use of her funds. She agreed to the funds being used to support the development of Social Trivia and to earn returns from an investment in second mortgages. Ms. Smith was unaware of what Mr. Rootenberg had done with her money. She did not know the BMW she saw him driving around in was purchased with her $435,000.00.
[133] Mr. Rootenberg, as part of his scheme, used questionable business practices. He used a variety of bank accounts to disburse funds apart from the B-G TD Bank account. He used variations of the company name B-G Enterprises Inc. as trustees on the Trust Deed documentation and delivered the documentation unsigned and unwitnessed. Mr. Gottlieb, an owner of B-G Enterprises Inc., had never heard of the variation on his company’s name. Mr. Rootenberg was scarce with details about the use of Ms. Smith’s investments and about the nature of his business involvement and his business associates involved in Social Trivia.
[134] The facts illustrate beyond a reasonable doubt the wrongful use of funds in which Ms. Smith has an interest in such a manner that Ms. Smith’s interest was extinguished or put at risk. The actus reus of fraud has been established.
The Mens Rea
[135] The Crown must also prove the mental element of fraud beyond a reasonable doubt. As discussed earlier, the test for mens rea is subjective. The test is not whether a reasonable person would have foreseen the consequences of the prohibited act. It is rather whether the accused subjectively appreciated the consequences as at least a possibility. R. c. Théroux reminds us, however, that a person is not saved from conviction because he or she believes there is nothing wrong with what he or she is doing. The question is whether the accused “subjectively appreciated that certain consequences would follow from his or her acts, not whether the accused believed the acts or their consequences to be moral.”
[136] There were no witnesses to provide direct evidence of the facts of the fraudulent conduct. Mr. Rootenberg did not testify as is his constitutional right. To establish the accused’s intention in these circumstances, the court can draw inferences from circumstantial evidence to establish the accused’s intention. To establish guilt there must be sufficient circumstantial evidence to establish the accused had the necessary mens rea.
[137] I find the necessary mens rea is present in this case.
[138] I conclude on the totality of the circumstantial evidence that Mr. Rootenberg subjectively appreciated that by receiving Ms. Smith’s funds for one purpose, and almost immediately disbursing portions of those funds to his own personal use and to the use of other third parties for purposes unrelated to what he and Ms. Smith agreed to, he knew he was subjecting Ms. Smith’s interests to the risk of deprivation or extinction. The natural inference that can reasonably be drawn when a person consciously and purposely misdirects the property of another person, contrary to a mutual agreement as to its use, is that they have knowingly committed a dishonest act and their culpability is thereby established.
[139] I find it is no answer to the allegation of fraud that Mr. Rootenberg paid some amount to Ms. Smith through the quarterly dividend payments. It remains a fact that he wrongfully diverted her funds. For all the court knows, Mr. Rootenberg may well have used Ms. Smith’s own funds to pay her the dividends. Mr. Rootenberg is also not relieved of culpability because he pursued Ms. Smith to sign the Dissolution Document ostensibly to facilitate returning her money. Again, it is still a fact that he intentionally and wrongfully distributed her money without her knowledge or agreement.
CONCLUSION
[140] The Crown has proven the actus reus and mens rea of fraud beyond a reasonable doubt. I find Shaun Rootenberg guilty of fraud over $5,000.00 contrary to s. 380(1) of the Criminal Code.
VERDICT
[141] I find Shaun Rootenberg guilty on the one count on the indictment and a conviction shall be registered accordingly.
B.A. ALLEN J. Released: July 19, 2019
