R. v. Fast (R.J.) et al., 2014 SKQB 84

• Judge: Danyliuk, J.
• Court: Court of Queen's Bench of Saskatchewan (Canada)
• Case Date: March 24, 2014
• Jurisdiction: Saskatchewan
• Citations: 2014 SKQB 84;(2014), 441 Sask.R. 23 (QB)

R. v. Fast (R.J.) (2014), 441 Sask.R. 23 (QB)

MLB headnote and full text

Temp. Cite: [2014] Sask.R. TBEd. AP.037

Her Majesty The Queen v. Ronald Jerry Fast and Danielle Fast-Carlson

(2012 Q.B.N.J. No. 27; 2014 SKQB 84)

Indexed As: R. v. Fast (R.J.) et al.

Saskatchewan Court of Queen's Bench

Judicial Centre of Saskatoon

Danyliuk, J.

March 24, 2014.

Summary:

The accused father and daughter were involved with a company owned by the father (Marathon) that allegedly defrauded investors by operating as a Ponzi scheme. Investors were given promissory notes with high interest rates. As revenues were insufficient to pay interest, initial investors were paid from monies provided by subsequent investors. As a result, Marathon's deficit increased over the relevant years (2005 to 2008) until it went bankrupt because it could no longer access investor monies. Almost $17 Million was owed to the unsecured investors. Investors were denied access to financial statements. The limited financial information provided was misleading and hid actual financial performance. When the Saskatchewan Securities Commission ordered that Marathon cease receiving monies from investors, related companies (including one co-owned by the daughter) acted as conduits to funnel needed investor funds to Marathon. Investors were not told of the securities investigation or Marathon's insolvency. The accused were charged with fraud (Criminal Code, s. 380(1)(a)), making false statements respecting Marathon's financial status with intent to enter a security for Marathon's benefit (s. 400(1)(c)(ii)) and possession of the proceeds of crime (ss. 354(1)(a) and 355(a)). The father pleaded guilty to all three counts. The daughter pleaded not guilty.

The Saskatchewan Court of Queen's Bench found the daughter guilty of fraud and making false statements. She was acquitted on the charge of possession of the proceeds of crime.

Criminal Law - Topic 1981.1

Offences against property - Possession or laundering of proceeds of crime - Actus reus - The accused father and daughter were involved with a company owned by the father (Marathon) that allegedly defrauded investors by operating as a Ponzi scheme - Investors were given promissory notes with high interest rates - As revenues were insufficient to pay interest, initial investors were paid from monies provided by subsequent investors - As a result, Marathon's deficit increased over the relevant years (2005 to 2008) until it went bankrupt because it could no longer access investor monies - Almost $17 Million was owed to the unsecured investors - Investors were denied access to financial statements - The limited financial information provided was misleading and hid actual financial performance - When the Saskatchewan Securities Commission ordered that Marathon cease receiving monies from investors, related companies (including one co-owned by the daughter) acted as conduits to funnel needed investor funds to Marathon - The daughter was convicted of fraud and false statements - The Saskatchewan Court of Queen's Bench found the daughter not guilty of possession of the proceeds of crime - One of the essential elements of the offence was possession of the monies - There was no direct, constructive or joint possession of the monies by the daughter - Monies were paid directly to Marathon or funnelled to Marathon through a related company - Any personal possession of the monies by the daughter was as an employee in a representative capacity - Her possession was transitory - There could be no constructive or joint possession where the daughter had no control over the monies - See paragraphs 322 to 335.

Criminal Law - Topic 2001

Fraudulent transactions - Fraud - What constitutes fraud - The accused father and daughter were involved with a company owned by the father (Marathon) that allegedly defrauded investors by operating as a Ponzi scheme - Investors were given promissory notes with high interest rates - As revenues were insufficient to pay interest, initial investors were paid from monies provided by subsequent investors - As a result, Marathon's deficit increased over the relevant years (2005 to 2008) until it went bankrupt because it could no longer access investor monies - Almost $17 Million was owed to the unsecured investors - Investors were denied access to financial statements - The limited financial information provided was misleading and hid actual financial performance - When the Saskatchewan Securities Commission ordered that Marathon cease receiving monies from investors, related companies (including one co-owned by the daughter) acted as conduits to funnel needed investor funds to Marathon - Investors were not told of the securities investigation or Marathon's insolvency - The accused were charged with, inter alia, fraud - The father pleaded guilty - The Saskatchewan Court of Queen's Bench found the daughter guilty of fraud - The daughter possessed first-hand knowledge of the ongoing losses and rising deficit - She knew securities authorities prohibited Marathon from taking new money, yet she saw and participated directly in Marathon receiving further funds through related companies - The daughter knew that investors' monies were at risk - If she lacked actual knowledge, she clearly was wilfully blind and reckless as to what was going on - Alternatively, the daughter was guilty as a party under s. 21(1) of the Criminal Code for aiding and abetting her father in a fraudulent scheme of which she had knowledge or was wilfully blind or reckless - See paragraphs 194 to 313.

Criminal Law - Topic 2003

Fraudulent transactions - Fraud - Intent to defraud - The Saskatchewan Court of Queen's Bench stated that to prove that an accused intended to defraud, the Crown must prove: "first, that the accused intentionally (that is, deliberately) carried out the acts or business transactions alleged, with knowledge (or recklessness, or wilful blindness) of the facts and circumstances that make this conduct dishonest in the eyes of reasonable persons; and second, that the accused intentionally (that is, deliberately) carried out the acts or business transactions alleged, knowing (or being reckless, or wilfully blind) that they would create prejudice (or a risk of prejudice) to the economic interests of one or more of the investors. The mere fact that the accused did not believe her conduct was dishonest, or did not know that reasonable people would view her conduct as dishonest, does not establish a defence. ... the subjective belief of this accused is not determinative of intention." - See paragraphs 205 to 206.

Criminal Law - Topic 2005

Fraudulent transactions - Fraud - Elements of - Fraud required proof of dishonesty and deprivation - The Saskatchewan Court of Queen's Bench stated that "In criminal law, 'deprivation' is a term of art. 'Deprivation' means to place another person's economic interests at risk. A victim does not actually have to lose any money or property; deprivation is shown if there was a risk to his economic interests" - "Deprivation" was established where "the complainant suffered a 'detriment', which can be described as actual economic loss; the complainant suffered 'prejudice' to his economic interests, which can be defined as a risk of economic loss; or the complainant suffered 'risk of prejudice' to his economic interests, which can be defined as the complainant being induced, by the accused's dishonesty, to undertake some economic action even when that action does not involve actual economic loss or carry with it risk of loss" - See paragraphs 204, 225.

Criminal Law - Topic 2010

Fraudulent transactions - Fraud - Other fraudulent means - Fraud as defined under s. 380(1) of the Criminal Code required proof that the accused used deceit, falsehood or "other fraudulent means" - The Saskatchewan Court of Queen's Bench stated that "The phrase 'other fraudulent means' is used to cover all other means, apart from deceit and falsehood, that can be objectively considered dishonest. In a general way, dishonest conduct refers to conduct that ordinary decent people would feel is discreditable because it is at variance with straightforward or honourable dealings. In deciding whether the conduct of the accused is dishonest conduct, the trier of fact must apply an objective test. ... One does not have to decide whether the accused subjectively intended to be dishonest." - See paragraph 201.

Criminal Law - Topic 2085

Fraudulent transactions - Falsification - Making false prospectus, statement or account - The accused father and daughter were involved with a company owned by the father (Marathon) that allegedly defrauded investors by operating as a Ponzi scheme - Investors were given promissory notes with high interest rates - As revenues were insufficient to pay interest, initial investors were paid from monies provided by subsequent investors - As a result, Marathon's deficit increased over the relevant years (2005 to 2008) until it went bankrupt because it could no longer access investor monies - Almost $17 Million was owed to the unsecured investors - Investors were denied access to financial statements - The limited financial information provided was misleading and hid actual financial performance - The Saskatchewan Court of Queen's Bench found the daughter guilty of making a materially false statement to induce investors to enter into a security for the benefit of Marathon - The specific statements were pro-formas to investors, the daughter's statements to investors that Marathon was in sound financial shape and the business oriented greeting cards sent to investors touting how well Marathon was doing - Further, the daughter, as a certified general accountant with intimate knowledge of what was going on at Marathon, omitted to disclose financial information to investors in breach of her governing body's ethical code - See paragraphs 314 to 321.

Criminal Law - Topic 2742

Attempts, conspiracies, accessories and parties - Parties to offences - Necessary intention or knowledge - [See Criminal Law - Topic 2001 ].

Criminal Law - Topic 2744

Attempts, conspiracies, accessories and parties - Parties to offences - What constitutes aiding and abetting - [See Criminal Law - Topic 2001 ].

Cases Noticed:

R. v. D.W., [1991] 1 S.C.R. 742; 122 N.R. 277; 46 O.A.C. 352; 63 C.C.C.(3d) 397, refd to. [para. 195].

R. v. McKenzie (P.N.) (1996), 141 Sask.R. 221; 114 W.A.C. 221; 106 C.C.C.(3d) 1 (C.A.), refd to. [para. 195].

R. v. Starr (R.D.), [2000] 2 S.C.R. 144; 258 N.R. 250; 148 Man.R.(2d) 161; 224 W.A.C. 161; 2000 SCC 40, refd to. [para. 197].

R. v. Lifchus (W.), [1997] 3 S.C.R. 320; 216 N.R. 215; 118 Man.R.(2d) 218; 149 W.A.C. 218; 150 D.L.R.(4th) 733, refd to. [para. 197].

R. v. D.O.L., [1993] 4 S.C.R. 419; 161 N.R. 1; 88 Man.R.(2d) 241; 51 W.A.C. 241; 85 C.C.C.(3d) 289, refd to. [para. 197].

R. v. Théroux (R.), [1993] 2 S.C.R. 5; 151 N.R. 104; 54 Q.A.C. 184; 100 D.L.R.(4th) 624, refd to. [para. 211].

R. v. Zlatic (Z.), [1993] 2 S.C.R. 29; 151 N.R. 81; 54 Q.A.C. 161; 100 D.L.R.(4th) 642, refd to. [para. 211].

R. v. Briltz (1983), 24 Sask.R. 120 (Q.B.), refd to. [para. 212].

R. v. Olan, Hudson and Hartnett, [1978] 2 S.C.R. 1175; 21 N.R. 50, refd to. [para. 225].

R. v. Knowles (1979), 51 C.C.C.(2d) 237 (Ont. C.A.), refd to. [para. 230].

R. v. Abramson, [1983] B.C.J. No. 1305 (C.A.), refd to. [para. 232].

R. v. Bast et al. (1989), 79 Sask.R. 141 (Q.B.), affd. (1990), 84 Sask.R. 222 (C.A.), refd to. [para. 244].

R. v. Briscoe (M.E.) et al., [2010] 1 S.C.R. 411; 400 N.R. 216; 477 A.R. 86; 483 W.A.C. 86; 2010 SCC 13, refd to. [para. 253].

R. v. Leary, [1978] 1 S.C.R. 29; 13 N.R. 592, refd to. [para. 254].

R. v. Sansregret, [1985] 1 S.C.R. 570; 58 N.R. 123; 35 Man.R.(2d) 1; 17 D.L.R.(4th) 577, refd to. [para. 255].

R. v. Canning (J.) (2004), 243 Sask.R. 213; 2004 SKPC 13, refd to. [para. 256].

R. v. Parkes (D.L.) (2012), 396 Sask.R. 201; 2012 SKQB 164, refd to. [para. 260].

R. v. Pchajek (S.A.), [2010] 5 W.W.R. 341; 254 Man.R.(2d) 10; 2009 MBQB 265, refd to. [para. 261].

R. v. Hucal (S.) (2001), 291 A.R. 1; 2001 ABQB 606, refd to. [para. 264].

R. v. Poonai (V.R.), [2006] O.T.C. 1520; 175 C.C.C.(3d) 8 (Sup. Ct.), refd to. [para. 264].

R. v. Ellis (T.L.) (2007), 426 A.R. 1; 2007 ABQB 722, refd to. [para. 264].

R. v. Link (K.) (2013), 418 Sask.R. 242; 2013 SKQB 138, refd to. [para. 277].

R. v. Cruz, 2010 ONCJ 640, refd to. [para. 277].

R. v. Hernandez (J.) et al., [2012] 2 S.C.R. 411; 433 N.R. 77; 324 B.C.A.C. 40; 551 W.A.C. 40; 2012 SCC 40, refd to. [para. 305].

R. v. Vu - see R. v. Hernandez (J.) et al.

R. v. Schafer (R.C.), [2001] 4 W.W.R. 303; 195 Sask.R. 161; 2000 SKQB 177, refd to. [para. 317].

R. v. Cox, [1963] S.C.R. 500, refd to. [para. 318].

R. v. Colucci, [1965] 2 O.R. 665; [1965] 4 C.C.C. 56 (C.A.), refd to. [para. 318].

R. v. Kienapple, [1975] 1 S.C.R. 729; 1 N.R. 322, refd to. [para. 341].

Authors and Works Noticed:

Nightingale, Brenda L., and Sennek, Mina D., The Law of Fraud and Related Offences (2013 Looseleaf), pp. 4-22, 4-23 [para. 228]; 4-24 [paras. 228, 231]; 11-8.6 to 11-9 [para. 259].

Wells, Joseph T., Encyclopedia of Fraud (3rd Ed. 2007), generally [para. 22].

Counsel:

Robin D. Ritter, for the Crown;

Michael D. Nolin, for the accused, Ronald Jerry Fast;

Mark R. Vanstone, for the accused, Danielle Fast-Carlson.

This matter was heard before Danyliuk, J., of the Saskatchewan Court of Queen's Bench, Judicial Centre of Saskatoon, who delivered the following judgment on March 24, 2014.