Court File and Parties

COURT FILE NO.: CR-22-00000042 DATE: 20230427 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: HIS MAJESTY THE KING – and – TERRY CROTEAU Defendant

Counsel: Ms. L. Di Giulio and Mr. B. Lerer, for the Crown Ms. D. Landry and Ms. A. Murdoch-Fyke, for the Defendant

HEARD: October 25, 2022, and February 1 and March 10, 2023

Reasons for Sentence

M.K. FUERST J.:

Introduction

[1] While he was still under sentence imposed in the United States for fraudulent commercial activity, Terry Croteau returned to Canada and launched intertwined direct mail and telemarketing schemes that he knew were fundamentally deceptive and dishonest.

[2] Over a period of years, he defrauded more than two thousand victims of approximately $1.3 million.

[3] Mr. Croteau pleaded guilty to one count of fraud over $5000; one count of making materially false or misleading representations while engaged in telemarketing, contrary to the Competition Act; and one count of using a forged document.

[4] Crown and defence counsel agree that a substantial jail sentence must be imposed.

[5] Even though this is a sentencing based on a joint submission, I have issued my reasons in writing, so that there is clarity about the nature and scope of the criminal activity for which Mr. Croteau is sentenced.

Overview

[6] Between 2012 and 2019, Mr. Croteau operated online directory businesses from the Barrie, Ontario area. Through these businesses, he maintained several directory websites where he or his staff posted the contact information of his clients, primarily small businesses across Canada and the United States, as an advertising service.

[7] Mr. Croteau, either personally or by those he employed and supervised, solicited clients for his online business directories in one of two ways. The first way was by mailing fillable forms called “Final Notices” to targeted businesses. The forms asked recipients to fill out or correct their business information to be listed in the directory. The second way was by telemarketing calls to targeted businesses. The caller asked recipients to confirm their business information for a new listing in the directory.

[8] Both the Final Notices and telemarketing calls were materially misleading. In combination they caused financial loss to 2,345 businesses, in a global amount just under $1.3 million.

[9] The facts that follow were admitted by Mr. Croteau in an Agreed Statement of Facts that was filed on his guilty pleas.

The Final Notice Scheme (Count 2)

[10] Between November 23, 2012, and January 25, 2018, Mr. Croteau sent thousands of unsolicited Final Notices by post to targeted businesses. This was done through his companies Online Services, SWM, and IBD International Business Directory.

[11] The Notices were designed to encourage the targeted businesses to sign up for a listing on a website directory, at a significant cost. The Notices were in the format of a fillable form and included:

a. A logo very similar to that of the Yellow Pages; b. The targeted business’s name, address, and telephone number as it might appear in the directory; c. A request that customers “make additions & corrections on the lower portion” of the form to the address and information already included on it; d. References to it being a “FREE” listing; e. A statement that “THIS IS NOT A BILL”; and f. Red text stating that this was a “FINAL NOTICE”, and “this is the first and only notice you will receive”.

[12] Neither the price, the fact that the subscription auto-renewed, or the fact that the business was unaffiliated with the Yellow Pages was mentioned on the portions of the form that the businesses were asked to fill out. However, these details were included in fine print at the bottom or on the back of the Notices. Under a line that asked the business to “print authorized name” was a disclaimer saying “I agree to the Terms and Conditions on back”. There was also a disclaimer included in the fine print at the bottom or on the back of the Notices that the company was not affiliated with the Yellow Pages and was an independent online directory.

[13] Targeted businesses that completed and returned the Final Notices were invoiced by Mr. Croteau at a cost ranging from between $299.99 and $499.99 plus tax for a six month listing. Further, the listings renewed automatically following the six month period, until the targeted businesses opted to cancel.

[14] The Final Notices sent by Mr. Croteau were false and misleading, in that:

a. They created the general impression that targeted businesses were responding to a request from the Yellow Pages, when in fact Mr. Croteau’s businesses were unrelated to it; b. They conveyed the general impression that targeted businesses would not be charged money for completing and returning the form; c. They conveyed the general impression that by responding to the Final Notice, targeted businesses were simply updating, verifying, or correcting their contact information for an existing service, rather than subscribing to a new one; and d. They failed to clearly draw customers’ attention to the fact that the listing would automatically renew every six months, leading to additional subscription fees.

[15] Representatives of targeted business reported not knowing that they were signing up for a service at cost, and believing they were dealing with the Yellow Pages. Many were also under the impression that they were simply updating their information and were not signing up for a service. Some did not know that they had been signed up until Mr. Croteau or his staff contacted them for payment.

[16] Throughout the operation, Mr. Croteau managed and supervised the operation of the Final Notice scheme, including the drafting, printing, and distribution of the Final Notices, the invoicing and collection efforts, and the employees who assisted him. To attempt to frustrate the ability of consumers and the Better Business Bureau to investigate him and his businesses, Mr. Croteau assumed aliases while managing these companies, including “Markus Pierson”, “David Johnson”, and “Jason Rowe”.

[17] Mr. Croteau knew that these Final Notices were deceitful. He was repeatedly informed about their misleading aspects by his customers and also the Better Business Bureau, throughout the operation of the scheme. While Mr. Croteau did make changes to the forms over time to respond to some of the complaints (such as moving the terms and conditions to small font near the signature line), the updated forms continued to be purposely misleading to customers.

The Telemarketing Scheme (Count 4)

[18] Between February 4, 2016, and April 8, 2019, Mr. Croteau also promoted his services by way of telemarketing sales calls. Thousands of these calls were made through his companies Online Services, Your Local 411, and 411 Information Online.

[19] The calls were made by Mr. Croteau’s employees using “scripts” that he prepared and distributed to them. Like the Final Notices, they were designed to encourage targeted businesses to sign up for a listing on his website, again at a significant cost.

[20] The telemarketing calls were quick in pace and short in duration. They contained misleading representations about the identity of the caller, the purpose of the call, the price of the services offered, and the existence (or lack thereof) of additional terms and conditions. This included:

a. Callers introducing themselves as “from Your Local 411” or “from 411 Information Online.” While these were in fact the names of Mr. Croteau’s businesses, it left targeted businesses with the false impression that they were speaking to someone associated with Canada411 (a division of the Yellow Pages) or a free, “411” directory, rather than a private company; b. Callers telling targeted businesses that they were calling in regard to a new online listing for their business, without asking whether they wanted to subscribe to the service for a fee, leaving targeted businesses with the impression that the purpose of the call was to update or verify their information, rather than sign up for a service at a cost; c. Callers referring to pricing only at the end of the call, quickly, and using phrases such as “three ninety-nine”, “four ninety-nine”, and “five ninety-nine,” leaving targeted businesses with the impression that the price was $3.99, $4.99, or $5.99, rather than $399, $499, or $599 for a six month listing; and d. Callers failing to inform targeted businesses that their listing would renew automatically every six months until the targeted businesses took active steps to cancel the services.

[21] Following the successful completion of sales calls, targeted businesses were invoiced for an amount ranging between $299 and $599 every six months.

[22] Representatives of targeted businesses reported feeling misled by the sales calls, not realizing they were signing up for services. Many thought they were simply updating or verifying information and that they were dealing with a free 411 service. Many also believed that there was no cost associated, or that the cost for services was four or five dollars as opposed to four or five hundred dollars.

[23] Mr. Croteau knew that these telemarketing calls were misleading. He was repeatedly informed about their misleading aspects by his customers and the Better Business Bureau throughout the operation of the telemarketing scheme. He was also informed by police officers on five occasions about customers who felt misled by his solicitations and who had complained to the police. While Mr. Croteau did make changes to the telemarketing scripts over time to respond to some of the complaints, the updated scripts continued to be purposely misleading to customers. At one point, Mr. Croteau changed the call script to say “four hundred ninety nine” or “five hundred ninety nine”, but reverted to the previous language of “four ninety nine” or “five ninety nine” after only a few days.

[24] Throughout the telemarketing operation, Mr. Croteau managed and supervised the operation of the telemarketing scheme, including making calls, supervising employees, drafting the telemarketing scripts, and invoicing and collection efforts.

[25] Again, to frustrate the ability of consumers and the Better Business Bureau to investigate him and his businesses, Mr. Croteau assumed aliases and changed the names of his businesses while managing the telemarketing scheme. He assumed the names of David Johnson, Jason Rowe, and Sam Kent. Further, in May 2018, after receiving complaints about “Your Local 411,” he changed the business’s name to “411 Information Online”.

Credifax Letters (Count 6)

[26] Mr. Croteau oversaw and engaged in billing and settlement of accounts for both the Final Notice and the telemarketing schemes. If and when targeted businesses did not pay their invoices, Mr. Croteau called them, using his assumed aliases, and asserted a right to payment.

[27] Beginning in April 2018, Mr. Croteau and his companies sent targeted businesses collection notices that appeared to be from “Credifax”, which was a collection agency based in London, Ontario. The Credifax letters were made to appear as if they were coming from this third party collection agency, rather than Mr. Croteau or his businesses.

[28] The Credifax letters listed Your Local 411 as the creditor, and attached the targeted business’s invoice. The letters also stated in bold font that “Your account has been reported to Credifax”, and demanded that the recipients settle their overdue accounts within five days to avoid impacting their credit rating. At least 100 of these letters were sent out by Mr. Croteau.

[29] The Credifax letters were forged by Mr. Croteau, in that:

a. They were prepared and sent by Mr. Croteau, not Credifax; b. They were purported to be made by Credifax; c. The targeted business’s accounts had not “been reported to Credifax”; d. Mr. Croteau knew that Credifax had never been in a business relationship with his companies; and e. Mr. Croteau used these forged letters in an attempt to cause the targeted businesses to act on them as if they were genuine, by paying their outstanding accounts.

[30] Some businesses that received these letters were under the impression the letters were genuine, were concerned about their credit rating, and reported the letters to Credifax or the Canadian Competition Bureau.

[31] In May 2018, lawyers for Credifax sent a cease and desist letter to Your Local 411, with which Mr. Croteau (again using an alias) complied. He agreed not to continue using the Credifax name, and issued retraction letters to some of the recipient businesses. However, he continued to demand payment of their outstanding invoices.

Victim Impact Information

[32] Crown counsel provided approximately 70 Victim Impact Statements from business owners and professionals including doctors, dentists, and veterinarians who were duped by Mr. Croteau. Their losses ranged from a few hundred dollars, to over $10,000, with the average loss being about $550. In several instances the loss was borne by individual employees, rather than by the business itself.

[33] The victims described experiencing anger, embarrassment, and shame when they realized that they had been taken in by Mr. Croteau. Additionally, the assertions their credit ratings would be impacted in the event of non-payment of the amounts he claimed they owed caused them stress, anxiety, and fear. Many now distrust telephone solicitations altogether. Some will not deal even with the real Yellow Pages.

The Circumstances of Mr. Croteau

[34] Mr. Croteau is now 48 years old. He apparently holds dual Canadian and American citizenship. He was raised initially by his mother after his parents separated, but she was either unwilling or unable to care for him properly. Ultimately, he became a ward of the state and was placed in a youth facility in Montreal when he was 12 years old. The conditions there were difficult. He became a drug user and a high school drop-out. He started working in telemarketing as a teenager.

[35] Mr. Croteau has a Canadian criminal record for uttering threats and assault, for which he was sentenced in Montreal in February 1998 to a six month conditional sentence of imprisonment followed by three years of probation. While still on probation, in 2000 he launched a fraudulent telemarketing scheme. He carried it on from the provinces of Quebec and Ontario, targeting United States residents, until June 2004. Criminal proceedings were instituted against him in Illinois, culminating in his guilty pleas in November 2006 to 25 counts of conspiracy to defraud the United States in connection with telemarketing, mail fraud in connection with telemarketing, and wire fraud in connection with telemarketing.

[36] The facts agreed to in support of the pleas were that Mr. Croteau and his employees made unsolicited telephone calls to businesses, falsely representing that they were calling from a legitimate company that published business directories including on-line business directories on the World Wide Web. They used deceptive tactics to dupe representatives of the victim businesses into thinking they were simply renewing or continuing supposed pre-existing listings that the particular business had with the caller’s company. In each instance, Mr. Croteau or his employees recorded affirmative responses from the representative of the victim business, which was used as supposed evidence of an “oral contract” entered into by the business. The victim business was then invoiced for the listing. When it did not pay, Mr. Croteau’s collections staff followed up with abusive telephone calls threatening to ruin the victim’s credit rating. Some victims who did pay were sent an unsolicited CD-ROM version of the business directory with an additional invoice, and were pursued by Mr. Croteau’s collections staff for payment of it as well. In all, 250 victims lost approximately $2.9 million US.

[37] Mr. Croteau was sentenced to a total of 151 months in jail, followed by supervised release for five years, and ordered to pay restitution of over $2.9 million US. A condition of the supervised release was that he not leave the judicial district without the permission of the court or the probation officer.

[38] Mr. Croteau was released from jail in February 2012 after serving about five years and three months of the custodial term. I was advised that he applied to transfer his supervised release to Canada, but the application was denied. He returned to Canada nonetheless. I also was told that he paid no more than a few hundred dollars of the restitution ordered.

[39] Mr. Croteau has been out of custody on an undertaking since his arrest in June 2021.

[40] Mr. Croteau is married and has a teenaged daughter. He has a positive relationship with both his spouse and his daughter, to whom he is described as a good husband and father. He and his wife have a small cleaning business in the Tobermory area. She and their daughter remain supportive of him.

[41] I was provided with a number of character letters on behalf of Mr. Croteau. I have ignored those from some of his former employees, because their comments are contradicted by the Agreed Statement of Facts. Other letters describe him as a supportive friend and caring member of the community. He and his wife have provided shelter to a number of individuals, including abused women, struggling to find a place to live.

[42] At the conclusion of the sentencing hearing, Mr. Croteau apologized to his victims. He said that he accepts responsibility for his actions.

The Positions of the Parties

[43] Crown and defence counsel jointly submit that Mr. Croteau should be sentenced to 30 months in jail, and ordered to pay restitution totalling the amount of $1,287,015.82, in favour of the named victims. They agree that there should be a fine in lieu of forfeiture in the amount of $12,466, payable within three years of Mr. Croteau’s release from jail. In addition, Mr. Croteau should be prohibited under s. 34(1) of the Competition Act from being involved directly or indirectly in telemarketing and from being involved directly or indirectly in making or sending promotional representations to the public, for a period of 10 years.

[44] Counsel also agree there should be a DNA order, and the requisite victim fine surcharge.

The Principles of Sentencing

[45] The objectives of sentencing are set out in s. 718 of the Criminal Code. They are: the denunciation of unlawful conduct and the harm done to victims or the community, deterrence both general and specific, the separation of the offender from society where necessary, rehabilitation, reparation for harm done to victims or the community, and promotion of a sense of responsibility in offenders and acknowledgement of the harm done to victims or the community.

[46] Section 718.1 provides that a sentence must be proportionate to the gravity of the offence and the degree of responsibility of the offender. The Supreme Court of Canada has indicated that proportionality is the chief organizing principle in determining a fit sentence. See, for example, R. v. Parranto, 2021 SCC 46, at para. 10.

[47] Section 718.2 provides that a sentence should be increased or decreased to account for any aggravating and mitigating circumstances. It sets out various aggravating factors, one of which is that the offence had a significant impact on the victim, considering their personal circumstances including their financial situation. It also requires that a sentence be similar to those imposed on similar offenders in similar circumstances, that the combined duration of consecutive sentences not be unduly long, that an offender not be deprived of liberty if less restrictive sanctions may be appropriate, and that all available sanctions other than imprisonment that are reasonable in the circumstances and consistent with the harm done to victims or the community be considered.

[48] There are additional aggravating circumstances that apply in cases of fraud. They are set out in s. 380.1(1). They include that the magnitude, complexity, duration or degree of planning of the fraud was significant; that the offence involved a large number of victims; and that the offence had a significant impact on the victims given their personal circumstances including their financial situation.

Sentences for Large-Scale Fraud

[49] The offences to which Mr. Croteau pleaded guilty all carry significant maximum jail terms. The maximum period of incarceration for fraud over $5000, as well as for deceptive telemarketing, is 14 years in jail, and for using a forged document is 10 years in jail.

[50] I have reviewed the decisions provided by Crown counsel. They reflect that in cases of large-scale fraud, substantial jail sentences are generally imposed. In, for example, R. v. Scholz, 2021 ONCA 506, at para. 18, the Court identified a range of three to five years as the sentence for “major” frauds.

Analysis

[51] This case features a significant number of aggravating factors. They include the following:

1. Mr. Croteau’s deceitful activity was well-planned, organized, and deliberate. He prepared and mailed out professional looking documents that included logos designed to lend an air of legitimacy to them. In the case of the invoices, the logo contained a reference to “411”, and in the case of the Final Notices, the logo contained “walking fingers” reminiscent of the Yellow Pages. The wording of the Final Notices created the false impression that the unsolicited listing in the directory was free. The telemarketing calls scripted by him used language that was purposely misleading, including as to the cost of the listing. The collection notices that were sent out used the name of a legitimate collection agency that had no connection whatsoever to Mr. Croteau and his schemes. Additionally, Mr. Croteau adopted aliases and changed the names of his businesses in order to frustrate attempts by consumers and investigators to identify him.
2. His conduct included abusive collection practices, that might be considered threatening and harassing of the targets.
3. Mr. Croteau’s illegitimate activity spanned a period of years. Thousands of Final Notices were sent out to targeted businesses. Over two thousand businesses and professionals, both in and outside of Canada, were actually victimized.
4. He carried on his activity even after being told repeatedly by customers, the Better Business Bureau, and the police that it was misleading.
5. In total, the schemes grossed almost $1.3 million. No restitution has been made.
6. Mr. Croteau caused not only financial, but also emotional harm to his victims.
7. Additionally, he created a risk of harm to the reputations and legitimate business of Credifax and the Yellow Pages by his efforts to associate his illegitimate activity to them.
8. Mr. Croteau is not a first offender. He has a criminal record in Canada, albeit a dated one. Of greater significance is that he was convicted in the United States of very serious offences arising from deceptive telemarketing, and received a substantial jail sentence that was intended to be followed on his release by community supervision. That sentence did not deter him from returning to Canada and quickly launching a fresh round of dishonest business activity that ultimately incorporated a deceptive telemarketing component. He was wholly undeterred by his conviction and sentence in the United States, notwithstanding his assertions to the sentencing judge that he was sorry for and ashamed of his conduct and wanted to spare others from being victimized in the future.

[52] In mitigation, Mr. Croteau pleaded guilty, which is a sign of remorse and acceptance of responsibility for his offences. His pleas saved potentially months of valuable court time. In addition, he expressed remorse at the conclusion of the sentencing hearing. I also take into account that he has the support of family and some members of the community, which will assist him in reintegrating into society on his release from jail. He abided by his undertaking while out of custody awaiting disposition of the charges.

[53] There is no question that the governing principles of sentencing in this case are denunciation and deterrence, both general and specific. The prolonged time period during which Mr. Croteau preyed on others for his own economic advancement, the multiple forms of deliberate deception in which he engaged, and his previous convictions and sentence in the United States speak to the need for a global sentence that makes society’s condemnation of his conduct very clear. It is also critical that the sentence sends a strong message to Mr. Croteau and to other like-minded persons that such conduct will attract significant periods of imprisonment in the penitentiary. Indeed, were it not for the guilty pleas, a sentence greater than 30 months in jail would be entirely reasonable given Mr. Croteau’s high moral blameworthiness and the seriousness of his offences.

[54] I am satisfied that the joint submission of Crown and defence counsel appropriately balances the aggravating and mitigating circumstances in this case, while paying heed to the relevant principles of sentencing.

Conclusion

[55] Mr. Croteau, please stand.

[56] I sentence you on count 2 to 30 months in jail, on count 4 to 30 months in jail concurrent, and on count 6 to 30 months in jail concurrent.

[57] There is a DNA order on counts 2 and 6.

[58] I order restitution to the victims named and in the amounts specified in the Appendix to the restitution order, totalling $1,287,015.82. The Appendix is to be sealed and opened only as necessary by court or other Ministry staff to facilitate compliance.

[59] I order you to pay a fine in lieu of forfeiture, in the amount of $12,466. The fine is to be paid in full within three years of the date of your release from jail. In default, there is a term of imprisonment of six months, consecutive to any other term of imprisonment.

[60] I make a prohibition order for 10 years under s. 34(1) of the Competition Act.

[61] You are required to pay a victim fine surcharge of $200 on each of counts 2 and 6.

[62] As requested by your lawyer, I make a recommendation that you be considered for incarceration at the Beaver Creek institution, to facilitate contact with your family.

Justice M.K. Fuerst

Released: April 27, 2023

NOTE: As noted in court, on the record, this written decision is to be considered the official version of the Reasons for Sentence and takes precedence over the oral Reasons read into the record in the event of any discrepancies between the oral and written versions.

ONTARIO SUPERIOR COURT OF JUSTICE HIS MAJESTY THE KING – and – TERRY CROTEAU Defendant REASONS FOR SENTENCE Justice M.K. Fuerst Released: April 27, 2023