R. v. Drabinsky (G.) et al.,

• Jurisdiction: Ontario
• Judge: Doherty, Goudge and Armstrong, JJ.A.
• Neutral Citation: 2011 ONCA 582
• Citation: (2011), 284 O.A.C. 222 (CA),2011 ONCA 582,107 OR (3d) 595,274 CCC (3d) 289,[2011] OJ No 4022 (QL),284 OAC 222,(2011), 284 OAC 222 (CA),284 O.A.C. 222,[2011] O.J. No 4022 (QL),107 O.R. (3d) 595
• Date: 13 September 2011
• Court: Court of Appeal (Ontario)

R. v. Drabinsky (G.) (2011), 284 O.A.C. 222 (CA)

MLB headnote and full text

Temp. Cite: [2011] O.A.C. TBEd. SE.014

Her Majesty the Queen (respondent) v. Garth Howard Drabinsky and Myron Irwin Gottlieb (appellants)

(C50830; C50831; 2011 ONCA 582)

Indexed As: R. v. Drabinsky (G.) et al.

Ontario Court of Appeal

Doherty, Goudge and Armstrong, JJ.A.

September 13, 2011.

Summary:

The accused (Drabinsky and Gottlieb) were charged with two counts of fraud and one count of forgery. They were tried by a judge alone at a trial lasting 65 days. They called no evidence. On March 25, 2009, they were convicted on all counts. The forgery count was subsequently stayed pursuant to R. v. Kienapple. On August 5, 2009, the trial judge sentenced Drabinsky to seven years' imprisonment and Gottlieb to six years. The accused appealed both their convictions and sentences.

The Ontario Court of Appeal dismissed the conviction appeals and affirmed the convictions. The court allowed the sentence appeals, holding that the trial judge erred in principle in failing to take into account the absence of any evidence of the actual financial loss occasioned by the frauds. The court reduced Drabinski's sentence to five years' imprisonment and Gottlieb's to four.

Courts - Topic 583

Judges - Duties - Re reasons for decisions - The accused were convicted of two counts of fraud - On appeal, they submitted, inter alia, that the trial judge's reasons were inadequate - The Ontario Court of Appeal disagreed - The trial judge's reasons plainly showed that she understood the evidence and the defence position - Her reasons reflected the nature of the case presented and argued before her - They canvassed the evidence thoroughly and provided reasons for the credibility findings that were the foundation on which she made her central fact findings - The reasons addressed all of the significant factual disputes and arguments made - Whatever shortcomings had been uncovered, they did not impair the court's ability to fully review the verdicts - See paragraphs 48 to 54.

Criminal Law - Topic 2001

Fraudulent transactions - Fraud - What constitutes fraud - [See first Criminal Law - Topic 2121 ].

Criminal Law - Topic 2121

Fraudulent transactions - Evidence and proof - General - The accused (Drabinsky and Gottlieb) were convicted of two counts of fraud respecting their companies MyGar and Livent (MyGar had become Livent after an IPO) - Count one alleged that the financial statements of MyGar, relied on to promote the IPO in 1993, were fraudulent in that they deliberately overstated the value of MyGar's assets by about $6 million - On appeal, the accused submitted that even assuming that the Crown had proved the accused had knowledge of the misrepresentation in the financial statements, the trial judge erred in finding that it was material to the investors' decisions to invest - The Ontario Court of Appeal disagreed - Proof of actual loss was irrelevant - Proof of risk to the economic interest of the victim was sufficient - Materiality was a fair inference from the nature of the misrepresentations, the documents in which they appeared, and the context in which the documents were used - It was significant that the accused, probably the most knowledgeable people about matters that were material to the success of the IPO, obviously regarded the overstatement of assets as material in that they declined to write down the inflated value of the assets for fear that doing so would have a negative impact on the IPO - The trial judge made no error in determining that the misrepresentations in the financial statements, relied on in support of the IPO, were material to the decision to purchase Livent shares through the IPO - See paragraphs 78 to 84.

Criminal Law - Topic 2121

Fraudulent transactions - Evidence and proof - General - The accused (Drabinsky and Gottlieb) were convicted of two counts of fraud respecting their companies MyGar and Livent (MyGar had become Livent after an IPO) - Gottlieb submitted that the trial judge failed to consider Gottlieb's liability separately and instead treated Drabinsky and Gottlieb as a single entity - The Ontario Court of Appeal rejected the submission - The trial judge's findings against Gottlieb were firmly planted in the findings that she made against him - Further, the court also accepted the Crown's submission that the trial judge could have approached the allegation as one involving a common design as between Gottlieb and Drabinsky (and others) to commit fraud - The court stated that "The existence of the fraud was conceded. If Gottlieb's involvement was established by evidence directly admissible against him on the balance of probabilities, the acts in furtherance of the conspiracy by others, particularly Drabinsky, who was clearly a prima facie participant in the fraud, became admissible against Gottlieb. On this approach, many of the acts and declarations of Drabinsky were admissible against Gottlieb to prove his involvement in the fraud beyond a reasonable doubt" - See paragraphs 148 to 152.

Criminal Law - Topic 4353

Procedure - Charge or directions - Jury or judge alone - Directions regarding corroboration - [See Criminal Law - Topic 4865 and Criminal Law - Topic 5515 ].

Criminal Law - Topic 4377

Procedure - Charge or directions - Jury or judge alone - Directions regarding credibility of witnesses - [See Criminal Law - Topic 4865 ].

Criminal Law - Topic 4684

Procedure - Judgments and reasons for judgment - Reasons for judgment - Sufficiency of - [See Courts - Topic 583 ].

Criminal Law - Topic 4865

Appeals - Indictable offences - Grounds of appeal - Verdict unreasonable or unsupported by evidence - The accused (Drabinsky and Gottlieb) were convicted of two counts of fraud respecting their companies MyGar and Livent (MyGar had become Livent after an IPO) - The Crown relied heavily on the evidence of Livent employees, particularly Eckstein and Messina - All of the employees were implicated to some degree in the frauds - Eckstein and Messina were heavily involved - Eckstein had pleaded guilty in exchange for a non-custodial sentence and Messina had avoided prosecution altogether - On appeal, the accused submitted that the trial judge made three material errors in her assessment of the evidence of Messina and Eckstein - They contended that the evidence of both was so tainted by lies, inconsistencies and obvious bias that it was unreasonable to accept that testimony - Second, the trial judge failed to give proper effect to her finding that Messina and another employee had colluded to give false testimony concerning a meeting in April 1988 - Finally, the trial judge erred in law in using Eckstein's evidence to confirm Messina's and vice versa - The Ontario Court of Appeal rejected the submissions - The trial judge knew how important Eckstein's and Messina's evidence was to the Crown's case - She was fully aware of many reasons to question their credibility - After a detailed review of the evidence and a determination that their testimony was supported by significant confirmatory evidence from several sources, the trial judge chose to accept significant parts of their evidence - She did not act unreasonably in doing so - The trial judge's finding that parts of Messina's evidence were untrue but other parts were reliable, far from reflecting any legal error, demonstrated her careful and discerning examination of the entirety of Messina's evidence in the context of the rest of the evidence - Further, there was no prohibition against the evidence of one Vetrovec witness confirming the evidence of another Vetrovec witness - The rule against so-called mutual corroboration had long passed - The question was whether the evidence of each witness was sufficiently independent of the evidence of the other to provide confirmation - There was no evidence of collusion between Eckstein and Messina - Further, tainting could not have infected the process - See paragraphs 121 to 147.

Criminal Law - Topic 5404

Evidence and witnesses - Witnesses - Credibility - [See Criminal Law - Topic 4865 ].

Criminal Law - Topic 5515

Evidence and witnesses - Evidence of accomplices, co-defendants, informants, etc. - Corroboration - The accused (Drabinsky and Gottlieb) were convicted of two counts of fraud respecting their companies MyGar and Livent (MyGar had become Livent after an IPO) - The Crown relied heavily on the evidence of Livent employees, particularly Eckstein and Messina - All of the employees were implicated to some degree in the frauds - Eckstein and Messina were heavily involved - Eckstein had pleaded guilty in exchange for a non-custodial sentence and Messina had avoided prosecution altogether - The Ontario Court of Appeal rejected the submission that the trial judge was not alive to the many credibility problems associated with Eckstein's evidence in general and, in particular, as it related to the MyGar fraud - The trial judge identified Eckstein as an unsavoury witness and cautioned herself in accord with the principles enunciated in R. v. Vetrovec (1982 SCC) - She detailed many of the problems associated with Eckstein's testimony and rejected parts of it as unworthy of belief - Specifically in respect of count one, the trial judge found confirmation of Eckstein's evidence in the central role played by Drabinsky and Gottlieb in all of MyGar's affairs and in that they were the ones who created the kickback scheme in the first place - The evidence identified by the trial judge was capable of confirming Eckstein's evidence on the MyGar fraud count - The accused's submission that confirmatory evidence had to speak directly to the parts of Eckstein's evidence that the defence chose to put in issue (e.g., Eckstein's assertion that his suggestion of a write-down was rejected by Drabinsky and Gottlieb) was not consistent with the contemporary view of confirmatory evidence and harkened back to the extreme technicalities of the pre-Vetrovec era - See paragraphs 61 and 62.

Criminal Law - Topic 5859

Sentence - Fraud - The accused (Drabinsky and Gottlieb) were convicted of two counts of fraud respecting their companies MyGar and Livent (MyGar had become Livent after an IPO) - After reviewing several authorities, the trial judge fixed the appropriate sentencing range for large scale, premeditated frauds involving public companies at between five and eight years - The Ontario Court of Appeal stated that while one might quibble about both ends of that spectrum, the trial judge correctly determined that crimes like those committed by the accused must normally attract significant penitentiary terms well beyond the two-year limit applicable to conditional sentences - It was impossible to catalogue the factors that in combination could justify a sentence below the usually applicable range - The court made the following two observations: "First, the investigation and prosecution of crimes like these is difficult and expensive. It places significant stress on the limited resources available to the police and the prosecution. An early guilty plea coupled with full cooperation with the police and regulators and bona fide efforts to compensate those harmed by the frauds has considerable value to the administration of justice. The presence of those factors, depending of course on the other circumstances, may merit sentences outside of the range. Second, individuals who perpetrate frauds like these are usually seen in the community as solid, responsible and law-abiding citizens. Often, they suffer personal and financial ruin as a result of the exposure of their frauds. Those factors cannot, however, alone justify any departure from the range. The offender's prior good character and standing in the community are to some extent the tools by which they commit and sustain frauds over lengthy time periods. Considerable personal hardship, if not ruin, is virtually inevitable upon exposure of one's involvement in these kinds of frauds. It cannot be regarded as the kind of unusual circumstance meriting departure from the range." - See paragraphs 164, 166 and 167.

Criminal Law - Topic 5859

Sentence - Fraud - The accused (Drabinsky and Gottlieb) were charged with two counts of fraud and one count of forgery respecting their companies MyGar and Livent (MyGar had become Livent after an IPO) - They were tried by a judge alone at a trial lasting 65 days - They called no evidence - They were convicted on all counts - The forgery count was subsequently stayed pursuant to R. v. Kienapple - The trial judge sentenced Drabinsky to seven years' imprisonment and Gottlieb to six years - The accused appealed both their convictions and sentences - The Ontario Court of Appeal dismissed the conviction appeals and affirmed the convictions - The court allowed the sentence appeals, holding that the trial judge erred in principle in failing to take into account the absence of any evidence of the actual financial loss occasioned by the frauds (although the court did not mean to suggest that it was not a large scale and significant fraud) - The court reduced Drabinski's sentence to five years' imprisonment and Gottlieb's to four - See paragraphs 154 to 189.

Evidence - Topic 4045

Witnesses - Interference with - Tainted evidence - [See Criminal Law - Topic 4865 ].

Cases Noticed:

R. v. Kienapple, [1975] 1 S.C.R. 729; 1 N.R. 322, refd to. [para. 1].

R. v. R.W., [1992] 2 S.C.R. 122; 137 N.R. 214; 54 O.A.C. 164, refd to. [para. 39].

R. v. Beaudry (A.), [2007] 1 S.C.R. 190; 356 N.R. 323; 2007 SCC 5, refd to. [para. 39].

R. v. Sheppard (C.), [2002] 1 S.C.R. 869; 284 N.R. 342; 211 Nfld. & P.E.I.R. 50; 633 A.P.R. 50, refd to. [para. 48].

R. v. Dinardo (J.), [2008] 1 S.C.R. 788; 374 N.R. 198; 2008 SCC 24, refd to. [para. 48].

Law Society of Upper Canada v. Neinstein (2010), 259 O.A.C. 313; 99 O.R.(3d) 1 (C.A.), refd to. [para. 48].

R. v. Vetrovec; R. v. Gaja, [1982] 1 S.C.R. 811; 41 N.R. 606, refd to. [para. 61].

R. v. Khela (G.S.), [2009] 1 S.C.R. 104; 383 N.R. 279; 265 B.C.A.C. 31; 446 W.A.C. 31, refd to. [para. 62].

R. v. Théroux (R.), [1993] 2 S.C.R. 5; 151 N.R. 104; 54 Q.A.C. 184, refd to. [para. 82].

R. v. Linklater (R.) (2009), 246 O.A.C. 303 (C.A.), refd to. [para. 140].

R. v. Naicker (R.N.) et al. (2007), 249 B.C.A.C. 145; 414 W.A.C. 145; 229 C.C.C.(3d) 187, leave to appeal denied (2008), 386 N.R. 399; 271 B.C.A.C. 319; 458 W.A.C. 319 (S.C.C.), refd to. [para. 140].

R. v. Carter, [1982] 1 S.C.R. 937; 47 N.R. 288, refd to. [para. 152].

R. v. Gray (L.V.) et al. (1995), 76 O.A.C. 387 (C.A.), leave to appeal denied (1995), 193 N.R. 239; 89 O.A.C. 79 (S.C.C.), refd to. [para. 159].

R. v. Nasogaluak (L.M.), [2010] 1 S.C.R. 206; 398 N.R. 107; 474 A.R. 88; 479 W.A.C. 88, refd to. [para. 165].

Counsel:

Edward L. Greenspan, Q.C., and Michael W. Lacy, for Garth Howard Drabinsky;

Brian H. Greenspan, for Myron Irwin Gottlieb;

Paul Lindsay, Alexander Hrybinsky and Amanda Rubaszek, for the respondent.

This appeal was heard on May 2-4, 2011, by Doherty, Goudge and Armstrong, JJ.A., of the Ontario Court of Appeal, who delivered the following reasons for judgment on September 13, 2011.