His Majesty the King v. Michael Cady
COURT FILE NO.: CR-21-1210
DATE: 2022-10-03
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
HIS MAJESTY THE KING
– and –
Michael Cady
Accused
COUNSEL:
Carolyn Hackett, for the Crown
Glenn Sandberg, for the Accused
HEARD orally: October 3, 2022
REASONS FOR DECISION ON SENTENCE
CULLIN, J. (orally)
Factual Background to Conviction
[1] On July 25, 2022, I convicted Michael Cady of the offences of: (i) possession of property over $5,000 knowing it was obtained by the commission of an indictable offence; and (ii) using or transferring proceeds that he knew or believed were obtained directly or indirectly as a result of a designated criminal offence (also known as money laundering). This conviction followed a four-day trial in which I heard evidence from witnesses on behalf of the company that was the victim of Mr. Cady’s offences, from the police, and from the offender, Mr. Cady.
[2] The charges against Mr. Cady arose from a series of fraudulent transactions that occurred between July 31, 2015 and June 24, 2019. During that time, Mr. Cady’s spouse, Karen Cady, defrauded her employer, Henninger’s Diesel Ltd., of the total sum of $1,008,432.58. The fraudulently obtained funds were deposited to an account at the Northern Credit Union that was initially registered to Karen Cady; Michael Cady was added as a registrant to the account on February 10, 2016. The funds were subsequently used to make purchases of real and personal property, much of which was registered in Mr. Cady’s name, and to fund home renovations, vacations, concerts and other lifestyle indulgences.
[3] In convicting Mr. Cady, I found that his knowledge of his wife’s fraud was the pivotal issue to be determined by the court. Although I found Mr. Cady to be a likeable witness, and I accepted his evidence that he deferred to his wife’s financial management and did not question the underpinnings of the family finances, I concluded that he had turned a blind eye to extremely unusual and large disbursements of cash and cumulative spending in the absence of a plausible, legal source of income to support them. Mr. Cady was aware that his wife had been convicted of defrauding a prior employer, and he was also aware that Diana Fuller, the principal of Henninger’s Diesel, was operating under a misapprehension that he had received a large inheritance from his father.
[4] After considering the totality of the evidence, I found that Mr. Cady either knew that the funds were obtained illegally by Karen Cady or that Mr. Cady was wilfully blind to their origin. On this basis, I convicted Mr. Cady.
Principles of Sentencing
[5] Section 718 of the Criminal Code identifies principles which the court is to apply when imposing a sentence following a criminal conviction. Those principles include: the denunciation of unlawful conduct; the deterrence of the offender and other potential future offenders; the separation of offenders from society; the rehabilitation of offenders; the provision of reparations for harm done to victims; and the acknowledgment of the harm done to victims.
[6] Proportionality is a guiding principle for sentencing. Section 718.1 of the Criminal Code notes that a sentence must be proportionate to the gravity of the offence. This requires that the court have regard to the particular facts of the case - the narrow focus of the sentencing process must be the imposition of a sentence that reflects the circumstances of the specific offence and the attributes of the specific offender.
[7] Parity is another guiding principle for sentencing. It requires that a sentence be similar to sentences imposed on similar offenders for similar offences committed under similar circumstances.
[8] The imposition of a custodial sentence is a punishment of last resort. Section 718.2 of the Criminal Code directs that:
718.2 A court that imposes a sentence shall also take into consideration the following principles:
(d) an offender should not be deprived of liberty, if less restrictive sanctions may be appropriate in the circumstances; and
(e) all available sanctions, other than imprisonment, that are reasonable in the circumstances and consistent with the harm done to victims or to the community should be considered for all offenders, with particular attention to the circumstances of Aboriginal offenders.
[9] A sentence may be increased or reduced having regard to any relevant aggravating or mitigating circumstances related to the offence or the offender. The Criminal Code contains a non-exhaustive list of examples of aggravating and mitigating factors to consider. In R. v. Fletcher, 2015 ONSC 4800 at para. 20, Campbell J. summarized the aggravating and mitigating factors to be considered in sentencing an offender convicted of fraud-based offences as follows:
More specifically, s. 380.1(1) of the Criminal Code provides that, without limiting the generality of section 718.2, a court sentencing an offender for fraud must consider the following as aggravating circumstances: (a) the magnitude, complexity, duration or degree of planning of the fraud committed was significant; (b) the offence adversely affected, or had the potential to adversely affect, the stability of the Canadian economy or financial system or any financial market in Canada or investor confidence in such a financial market; (c) the offence involved a large number of victims; (c.1) the offence had a significant impact on the victims given their personal circumstances including their age, health and financial situation; (d) in committing the offence, the offender took advantage of the high regard in which the offender was held in the community; (e) the offender did not comply with a licensing requirement, or professional standard, that is normally applicable to the activity or conduct that forms the subject-matter of the offence; and (f) the offender concealed or destroyed records related to the fraud or to the disbursement of the proceeds of the fraud. Further, s. 380.1(2) of the Code provides that, in such cases, the sentencing court shall not consider as mitigating circumstances the offender’s employment, employment skills or status or reputation in the community if those circumstances were relevant to, contributed to, or were used in the commission of the offence. Finally, according to s. 380(3) of the Code, the sentencing court “shall cause to be stated in the record the aggravating and mitigating circumstances it took into account when determining the sentence.”
Case Law
[10] The primary sentencing objectives for the offences of possession of property obtained by crime and money laundering are deterrence and denunciation (R. v. Zirkind, 2019 ONCA 401, para. 32). Denunciation is expressed in the length of the sentence (R. v. Drabinsky, 2011 ONCA 582, para. 160).
[11] In Sheck v. Canada (Minister of Justice), 2019 BCCA 364 at para. 62, the British Columbia Court of Appeal noted that cases involving charges of money laundering attract sentences ranging from a conditional sentence of less than two years to a custodial sentence of eighteen months to five years. Having said that, courts in Ontario have found in similar cases that conditional sentences do not adequately address the sentencing principles of denunciation and deterrence (R. v. Abdel, 2019 ONSC 690, para. 28; R. v. Scholz, [2021] O.J. No. 3790, para. 18), and that eighteen-month sentences are, “at the extreme low end of the range” (R. v. Henderson, 2007 ONCA 174, para. 19).
[12] Cases in which a sentence on the lower end of the range have been imposed most often cite mitigating factors including challenging personal or family circumstances, the absence of a prior criminal record, and a small number of fraudulent transactions as a rationale for a lower sentence (R. v. Soon, 2017 ONSC 2037; R. v. Abdel, 2019 ONSC 690; R. v. Bhatti, 2013 ONCA 20; and, R. v. Abdi, 2011 ONCA 446, [2011] O.J. No. 2639, aff’d 2011 ONCA 446). The presence of a significant restitution order has also served to justify a sentence at the lower end of the range (R. v. Wa, 2015 ONCA 117).
[13] Restitution orders are not a foregone conclusion in issuing a sentence, but rather must be ordered with, “restraint and caution”. The offender’s ability to make restitution is an important factor which must be considered, although it is not a precondition to making the order. The impact of the order on the offender’s prospects of rehabilitation must be weighed and considered. (R. v. Robertson, 2020 ONCA 367, paras. 6-8)
[14] In cases involving a breach of trust, the offender’s ability to pay a restitution order is not a paramount consideration. As noted by Weiler J.A. in R. v. Castro, 2010 ONCA 718, paras. 27-28:
[27] Reviewing courts have, however, consistently held that no single factor is itself determinative of whether a compensation order should be granted and that the weight to be given to individual considerations will depend on the circumstances of each case. Those circumstances include two considerations I wish to emphasize: the nature of the offence and, when money has been taken, what has happened to the money.
[28] Insofar as the nature of the offence is concerned, in cases involving breach of trust, the paramount consideration is the claims of the victims: Fitzgibbon, at pp. 1014-15 S.C.R. Ability to pay is not the predominant factor. Indeed, where the circumstances of the offence are particularly egregious, such as where a breach of trust is involved, a restitution order may be made even where there does not appear to be any likelihood of repayment: R. v. Yates, 2002 BCCA 583, [2002] B.C.J. No. 2415, 169 C.C.C. (3d) 506 (C.A.), at paras. 12 and 17.
[15] The recovery of some of the proceeds of crime through forfeiture is not a consideration that inures to the benefit of the offender (R. v. Cady, Sudbury Court File No. CR-20-1738, September 3, 2021, para. 50). As noted by Carnegie, J. in sentencing Karen Cady (para. 50):
…It has been represented that Ms. Cady has done all that can be expected of her by pleading guilty and conceding forfeiture of the remaining offence related proceeds seized. The rest of the loss has been consumed. There is nothing left available to take or use as compensation. That some of the property is available for forfeiture as proceeds of crime is not a mitigating circumstance - that would be like rewarding her for spending the victims’ money in a partially recoverable fashion although she could not realize when or if her scheme would fail, or when or if she would be arrested. If the remaining proceeds are relevant to anything, it would be relevant to the quantum of restitution that may be ordered which will later be discussed.
The Parties’ Positions
Crown
[16] The Crown is seeking a sentence of three years in the penitentiary, a free-standing restitution order (joint and several to the restitution order imposed upon Karen Cady when she was previously sentenced), an order that funds seized from Mr. Cady at the time of his arrest be applied to the restitution order, and a non-communication order prohibiting Mr. Cady from communicating with Diana Fuller and Ralph Waschulzik while he is serving his custodial sentence. The court was advised that the non-communication order was specifically requested by Ms. Fuller and Mr. Waschulzik.
[17] It is the Crown’s position that, in imposing sentence, the court ought to consider the following aggravating factors:
a. The offences were perpetrated through multiple transactions which occurred over several years.
b. The amount of the proceeds possessed and laundered by Mr. Cady was substantial.
c. Mr. Cady’s crime was motivated by greed.
d. The proceeds were used quickly and spent primarily on consumable goods, placing them out of the reach of the victim company.
e. The impact of the offences on Henninger’s, its employees, and its principals was substantial.
f. Mr. Cady has a criminal record, including prior convictions for property offences.
Defence
[18] Counsel for the defence confirmed that Mr. Cady was consenting to the following orders:
a. A restitution order in the amount of $800,000, which shall be joint and several to Karen Cady’s existing restitution order.
b. An order that the $1,400 found in the possession of Mr. Cady at the time of his arrest shall be applied to pay part of his restitution order.
c. An order prohibiting Mr. Cady from communicating with Diana Fuller and Ralph Waschulzik while he is serving his custodial sentence.
[19] Counsel for the defence also conceded in advance of today’s hearing that this was not a case in which a conditional sentence would be appropriate, and further conceded that this would be a case in which a penitentiary sentence would be appropriate. I find that these were reasonable concessions which reflected the sentencing principles applicable to Mr. Cady’s case, as well as prior sentencing decisions in the case law before the court at this hearing.
[20] In submissions, counsel for the defence submitted that a sentence in the range of two years in the penitentiary was appropriate having regard to all of the circumstances. Specifically, counsel noted the significant restitution order that was being imposed on consent. It was submitted that Mr. Cady would be unable to begin repaying this debt until he was released from custody and returned to the workforce.
Analysis
Circumstances of the Offence
[21] The court received a written Victim Impact Statement from Diana Fuller, the principal of Henninger’s Diesel Limited. She noted that Mr. Cady’s offences, and the manner in which they were conducted, had a significant impact upon the company and its employees. She also addressed the personal toll that these crimes have inflicted upon her.
[22] Ms. Fuller noted that Henninger’s is a family-owned local company which was built over of a period of more than 50 years. Many of the company’s employees have worked there for decades. During the time that funds were being fraudulently siphoned away, wages were reduced or frozen, bonuses were not paid, and employees were compelled to participate in job-sharing. This resulted financial hardship and had the inevitable effect of undermining employee morale. It also adversely impacted the financial security of Ms. Fuller and her family as the owners of the company.
[23] Ms. Fuller also noted the loss of confidence and the loss of privacy that she had suffered as a result of Mr. Cady’s offences. She advised the court that she had suffered from anxiety, self-doubt, and sleeplessness. She felt that she had failed to protect her late husband’s business and its employees. In the aftermath, she has lost faith in the fundamental decency of humanity.
[24] In contrast to the losses and hardships sustained by Henninger’s, its employees, and its principals, the court notes that Mr. Cady enjoyed an extravagant lifestyle throughout the duration of his offences. He purchased and renovated a home, he enjoyed tropical vacations, and he purchased vehicles and luxury recreational goods. His use of the fraudulently obtained funds to subsidize lifestyle and consumer purchases have effectively prevented Henninger’s from recovering the majority of its losses. To date, only $216,000.00 of the funds have been recovered.
Circumstances of the Accused
[25] The defence did not rely upon a pre-sentence report in making its submissions.
[26] Mr. Cady is 45 years of age. He is separated from his wife, Karen Cady; they have been separated since April 2020. Theirs was his first marriage. The court was advised in submissions from defence counsel that a divorce is imminent.
[27] A copy of Mr. Cady’s criminal record was filed with the court. He was convicted of three charges of arson in August 2005, for which he received a 12-month conditional sentence followed by 12 months of probation. In October 2008, he was convicted of impaired driving, for which he received a fine and a driving prohibition. In December 2008, he was convicted of multiple property offences, firearms offences, breaches, and criminal negligence, for which he was sentenced to 48 months in custody. It was his evidence at trial that he was released to a halfway house in June 2011, but that he was returned to custody to complete the last 45 days of his sentence. While this is not specifically a related record, the court does take note of Mr. Cady’s prior convictions for offences involving property.
[28] The court also takes note of Mr. Cady’s difficult journey through life which has no doubt contributed to his past and present circumstances. During his trial testimony, Mr. Cady noted that he was adopted at the age of two and was moved from his family home in North Bay to Manitoulin Island. He left high school in Grade 10. For many years, he struggled to find his place in society and in the workforce, and this eventually brought him on a collision course with the criminal justice system.
[29] To his credit, during his last stint in custody, Mr. Cady completed his high school diploma. After being released from custody, he was able to draw upon his prior work experience to secure employment first as a laborer and later as a heavy equipment operator. He was terminated after he was charged with the offences presently before the court. The court was advised in submissions today that Mr. Cady did secure alternate employment following his termination. The fact that he has been able to secure alternate employment speaks, in my view, to his work ethic. Being able to convince an employer to take a chance on him in the face of his criminal record and his outstanding charges suggests to me that his employer saw redeeming qualities in him that made it worth taking that chance.
Observations and Conclusions
[30] In my view, the principles of denunciation and deterrence must be paramount in imposing sentence in this case. Not only did the offences which bring Mr. Cady before the court arise from the fraud of a local small business, but they had a significant impact on every single person involved in that business. While Mr. Cady was enjoying the spoils of his wife’s ill-gotten gains, by travelling abroad, attending concerts, renovating his home, and buying recreational toys and vehicles, every single one of the employees of Henninger’s were missing raises, losing bonuses, and reducing their work hours to keep the company afloat. Those losses also would have trickled down to their families. They will never recover the time that they lost during those years, and they will likely never recover that money.
[31] In imposing sentence, it is my view that I ought also to consider the fact that Michael Cady was in the best position to intervene and to prevent his wife’s fraud of her employer. As I noted in my reasons for decision following the trial, he either knew that the funds were obtained illegally by Karen Cady, or he was wilfully blind to their origin. Either way, he chose not to act because he was enjoying the lifestyle that was being funded by his wife’s fraud. The Crown has described this as greed, and I have difficulty disagreeing with that assessment.
[32] In imposing sentence, I have considered the propriety of including a restitution order as a component of Mr. Cady’s sentence. I have also considered the amount of the restitution order as a component of his total sentence. The amount of the restitution order is significant – although on the evidence before me it is my view that Mr. Cady will have an ability to make some payment toward such an order, it is an order which will likely never be totally repaid and will follow Mr. Cady for the balance of his life. This is, in and of itself, a form of sentence which will never end for him. In my view, it is a just and appropriate component of his sentence, having regard to the nature and the scope of his offences, but in my view the amount of the restitution order is a factor which I must consider in determining an appropriate custodial sentence for Mr. Cady.
Sentence
[33] I hereby sentence Michael Cady to 30 months’ incarceration for the count of money laundering and 30 months’ incarceration for the count of possession of property obtained by crime. The sentence with respect to the possession count shall run concurrently to the sentence with respect to the money laundering.
[34] In addition, there shall be the following ancillary orders and orders of prohibition:
a. I hereby order, pursuant to s.738(1)(a) of the Criminal Code, that Michael Cady shall make restitution to the victim, Henninger’s Diesel Ltd., in the amount of $800,000. This is a free-standing restitution order, which is joint and several to the order for restitution made by Carnegie, J. and dated September 3, 2021, with respect to Karen Cady.
b. I hereby order, pursuant to s.741(2) of the Criminal Code, that the money in the amount of $1,400 found in the possession of Michael Cady at the time of his arrest shall be paid to Henninger’s Diesel Ltd. to satisfy part of the restitution ordered pursuant to s.738(1)(a) of the Criminal Code.
c. I hereby order, pursuant to s.743.21 of the Criminal Code Michael Cady shall not communicate with Diana Fuller and Ralph Waschulzik for the duration of the custodial period of his sentence.
The Honourable Madam Justice K.E. Cullin
Released (orally): October 3, 2022
COURT FILE NO.: CR-21-1210
DATE: 2022-10-03
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
HIS MAJESTY THE KING
– and –
Michael Cady
Accused
REASONS FOR DECISION ON SENTENCE
Cullin J.
Released (orally): October 3, 2022