Court File and Parties
COURT FILE NO.: CR-21-50000659-0000 DATE: 20231115 SUPERIOR COURT OF JUSTICE – ONTARIO
RE: His Majesty the King, Applicant AND: David Phillip Webb, Respondent
BEFORE: S.F. Dunphy J.
COUNSEL: Anjali Rajan, for the Crown David Holmes, for the Respondent
HEARD at Toronto: November 7, 2023
Reasons for Decision
[1] The Crown brings this application to admit evidence of similar facts at the trial of Mr. Webb. Mr. Webb is charged with one count of fraud over $5,000 (s. 380(1)(a) Criminal Code), one count of stealing money of a value exceeding $5,000 (s. 334(a)(i) Criminal Code), in both cases involving Advanced GS Limited as the victim; and two counts of obtaining an account by false pretences of a value exceeding $5,000 (s. 362(2)(a)(i) Criminal Code) – the latter two counts involving payment processing companies Greenbox and Stripe respectively.
[2] It is necessary to state in summary fashion the nature of the Crown’s allegations in order to place this application in context.
[3] Mr. Webb is alleged to have caused a company controlled by him to enter into a contract with Advanced GS that contained, among other things, the following representations that are alleged to have been false and known to be false when made:
a. “PPay is an approved High-Risk Payment Processor”;
b. “All of our accounts have been established through reputable sources and all have been told exactly what is going on and the “who, what, where, and how” of our services to our clients”;
c. “in simple terms, that’s exactly what PPay is: your link to the bank”.
[4] In fact, it is alleged that Mr. Webb’s controlled business PPay was none of those things. It was not a “High-Risk Payment Processor”, its accounts with reputable sources were established based on knowingly false statements and Mr. Webb’s business was not purporting to act as “your link to the bank” since the underlying payment processors – Greenbox and Stripe – were both allegedly told that their client was in an entirely different business, were not told that Mr. Webb’s business was in fact an aggregator and were not told of Mr. Webb’s involvement in the business. It is alleged that absent these material false statements and omissions, Greenbox and Stripe would not have opened accounts with Mr. Webb’s business.
[5] As a result of the alleged fraudulent misrepresentations made to Advanced GS on the one hand and to Greenbox and Stripe on the other, Advanced GS forwarded a number of credit card charges arising from its own business to PPay and PPay was able to forward those charges for processing and payment through Greenbox and Stripe who would not otherwise have processed those charges had the true state of affairs been disclosed. The theft is alleged to have arisen when Mr. Webb caused PPay to steal payments it received from the processing of Advanced GS credit card payments with those processing firms.
[6] The issue on this application concerns similar fact evidence that Crown seeks to lead of a guilty plea of Mr. Webb [1] to a count of bank fraud [2] in the United States. In summary, the guilty plea arose from fraudulent actions taken by Mr. Webb to gain access to credit card processing services for his Canadian telemarketing business after he and his telemarketing business and been cut off from credit card processing with processing banks due to high chargebacks. Working through a third person acting as an undisclosed agent of Mr. Webb’s business, he managed to get an account opened with a US Bank who was not advised of the true client Mr. Webb (under his former name) and the associated high risk of chargebacks that had led to his being cut off. The bank in question suffered significant losses from this scheme.
[7] The Crown intends to rely on the evidence of this conviction to establish both the actus reus of the false pretences charge in relation to Greenbox (whose account application process required disclosure of prior felony convictions) and to negative potential defences in relation to the mens rea on the theft and fraud charges.
[8] There is agreement between the parties as to the general background facts for the purpose of the application and as to the elements of the legal test to be applied. The onus is on the prosecution to satisfy me on a balance of probabilities that, in the context of this particular case, the probative value of the evidence in relation to a particular issue outweighs its potential prejudice and thus justifies its reception: R. v. Handy, [2002] 2 S.C.R. 908, 2002 SCC 56 at para. 55.
[9] In R. v. L.B., 116 CCC (3d) 481, Charron J.A. approached balancing required to assess the similar fact question through an inquiry into four consecutive issues (at para. 10):
i. Is the conduct in question that of the accused? ii. If so, is the proposed evidence relevant and material? iii. If so, is the proposed evidence discreditable to the accused? iv. If discreditable, does its probative value outweigh its prejudicial effect?
[10] Of these four analytical criteria, only the second and fourth are the subject of disagreement between the parties. There is no issue of identification in this case – Mr. Webb before this court is the same person convicted under his prior name in the United States and is the same person admitted having incorporated the various entities alleged to be involved in the transactions under consideration in this case. There can be no doubt that evidence of a prior criminal conviction for fraud would be considered discreditable conduct.
(a) Is the proposed evidence relevant and material?
[11] The defence concedes that the proposed evidence is of some relevance to the present case. However, the defence disputes that the evidence is of more than slight relevance by reason of the different circumstances present here as contrasted with the earlier conviction and also by reason of the considerable gap of time.
[12] Relevance is not a high hurdle providing that the logical path of relevance is not a prohibited one. I am satisfied that the potential relevance and materiality of the proposed evidence does not engage prohibited grounds of reasoning such as bad character or propensity even if there is a risk of the evidence being misused in that fashion. In the present case, fraudulent or dishonest intent is an essential element that the Crown must prove beyond reasonable doubt. The similar fact evidence proposed to be introduced would present the jury with a prior instance of the accused participating in a fraudulent scheme to circumvent credit card processor rules and policies regarding high risk businesses. The industry-specific knowledge gained by Mr. Webb from such prior experience coupled with the particular nature of the prior scheme would tend to render the hypothesis of an innocent explanation for the conduct at issue in this case less reasonable. His credit card industry knowledge and experience would also tend to negative any suggestion that he was ignorant of the risk of harm flowing from his actions and would thus tend to support the existence of a dishonest or fraudulent intent underlying the various misrepresentations allegedly made. In other words, it is probative evidence.
[13] I am satisfied that the proposed evidence satisfies the relevance hurdle. How relevant and how material is the object of the last step in the analysis – the balancing of the probative value of the proposed evidence against the prejudicial impact of it.
(b) Weighing of probative value and prejudicial impact
[14] The Supreme Court decision in R. v. Handy, 2002 SCC 56 enumerated a non-exhaustive list of criteria to consider in assessing the probative value of similar fact evidence and degree of prejudice associated that might arise from the admission of the evidence (at paras. 82-84).
[15] The listed criteria to assess the cogency of connection between the proposed evidence and the offences alleged include:
i. Proximity in time of the similar acts ii. Extent to which the acts are similar; iii. Number of occurrences of the similar acts: iv. Surrounding circumstances of the similar acts; v. Any distinctive features unifying the incidents; vi. Intervening events; any other factor tending to support or rebut the underlying unity of the similar acts.
[16] The similar fact evidence in this case appears to relate to a significant number of incidents, but incidents that all appear to arise from a single enterprise or business – in that case a Canadian telemarketing business conducted making sales into the United States – and ending approximately 14 years prior to the incidents giving rise to the current charges. While a fourteen year gap in time appears to be a long one, the materiality of that time gap is tempered to some degree by the lengthy (ten year) prison sentence served by Mr. Webb in the United States prior to his deportation to Canada in 2011 (the current charges relate to actions between 2018 and 2019). The relevant time gap is thus between six and seven years – a significant time gap still.
[17] There are significant elements of both similarity and dissimilarity that arise from an examination of the proposed similar fact evidence in the context of the charges presently before the court.
[18] The dissimilarities between the conduct in the present case and in the similar fact evidence proposed include the following:
a. The scheme underlying the similar fact evidence appears to have involved a significant number of transactions and losses in excess of $4 million – the present charges have been greatly reduced in scope as a result of amendments to the indictment and now involve a much smaller amount of money; b. The similar fact scheme involved an insider in the victim bank who was also part of the scheme and integral to its operation while there is no such insider involved in the present allegations; and c. The victim in the similar fact scheme who suffered the financial losses was the processing bank who received the credit card charges put forward by Mr. Webb as (undisclosed) merchant whereas the two processing companies in the present case suffered no identified loss arising from the use of their facilities while the alleged victim in this case is the underlying merchant whose credit card receipts were allegedly stolen by Mr. Webb under fabricated excuses.
[19] The similarities between the similar fact scheme and the present case include the following:
a. Both schemes entailed fraudulently misrepresenting the “high risk” origin of the credit card receipts put through credit card processing companies and resulted in these companies processing charges emanating from businesses with whom they would not otherwise have dealt; b. Credit card chargebacks formed an integral part of the schemes; and c. Knowingly false misrepresentations were made to induce the credit card processors to do business with Mr. Webb.
[20] In terms of “other factors” supporting a connection, the Crown points to the overall nature of the schemes. Both schemes were premised on circumventing by dishonest means the barriers credit card processors have sought to erect between themselves and various “high risk” businesses whose operations carry higher levels of reputational, legal or business risk. In both schemes, Mr. Webb took steps to hide his own connection to the businesses from the credit card processors. While it is true that the prior scheme directly defrauded the processing institution while the alleged scheme considered in this case presents the factoring merchant as the victim, the difference is more superficial that substantive. The common theme running through both schemes involves the use of inside credit card industry experience to devise a means of circumventing the safeguards built into the credit card industry to limit reputational, legal and business risk associated with certain categories of activity. The processing firms were allegedly tricked into providing their services and the merchant was tricked into transferring its receipts enabling the middleman to be enriched by the proceeds.
[21] In my view, there is a strong nexus between the proposed evidence and the case before me. The charged scheme involves representations made in black and white agreements entered into by entities alleged to be controlled by Mr. Webb. The intention of a party to a written agreement is generally something to be inferred by the words used and the surrounding circumstances. The Crown cannot know with certainty what defences will be raised at trial but must have sufficient evidence of mens rea to negative possible innocent inferences that may be suggested.
[22] The proposed evidence tends to establish Mr. Webb’s general experience with the subject-matter of high risk merchants attempting to access the services of processors in the credit card marketplace and his specific experience of how to navigate through the system arising from the fraudulent scheme that he became involved in. These facts may assist a jury in inferring intent from the universe of facts and information known to this defendant that might not as reasonably be ascribed to another and thus may negative any suggestion that this defendant with this experience may have been innocently unaware of the risk of harm arising from the actions allegedly taken by him in this case.
[23] I would therefore assess the probative value of this evidence in relation to mens rea as being potentially significant and conversely not the sort of evidence that can readily be generated from other less prejudicial sources.
[24] Turning to the degree of prejudicial impact of the proposed evidence, I find myself in agreement with both parties to some degree. Mr. Holmes asserts – with justification – that no matter how many redactions are made to the evidence arising from the prior conviction, the jury will be left to consider the fact that Mr. Webb has a history of credit card fraud which in turn raises the serious risk of a jury being tempted to follow inadmissible lines of reasoning such as that Mr. Webb is of a criminal disposition and for that reason likely to have committed the charged offence.
[25] On the other hand, it must be borne in mind that the jury will already necessarily be aware of the existence of a criminal record attaching to Mr. Webb since that is an essential element of one of the fraud charges (failure to disclose his record) even if the specifics of the previous conviction would not otherwise be before the jury. As well, the discreditable nature of the proposed evidence can be lessened by a thorough scrubbing from the proposed evidence of any references to extraneous circumstances not relevant to the permissible line of reasoning the jury may follow including evidence of bribery and other similar aspects of the prior case.
[26] The potential prejudice to be considered is not the permissible weight that a jury might ascribe to the evidence but the risk of an impermissible use of the evidence. The permissible weight of this proposed evidence is potentially quite significant and is not readily substituted for by some other avenue of proof. The impermissible weight that a jury might be tempted to ascribe to this evidence can be inoculated against by the use of a carefully drafted caution to be read to the jury before they receive the evidence and by the repetition of that caution in my final directions to the jury. Those written directions will remain with the jury in the jury room and I am well satisfied that written jury charges are very carefully and methodically reviewed by juries as I am sure the jury soon to be selected shall do.
[27] I allowed the Crown’s application after deliberation on November 7 with reasons to follow. These are those reasons.
S.F. Dunphy J. Date: November 15, 2023
[1] Mr. Webb was then known as Philip Joseph Arcand. He subsequently changed his name. [2] The guilty plea was to a count of bank fraud and bribery. The Crown proposes to redact from the offence summary references to bribery or the facts sustaining that aspect of the plea as well as other prejudicial but not relevant (to this proceeding) matters. This application was argued on the basis of such redactions being made prior to presentation of the evidence to a jury.