R. v. Global Tesol College, 2011 ABQB 165

Court of Queen ’ s Bench of Alberta Citation: R. v. Global Tesol College, 2011 ABQB 165 Date: 20110315 Docket: 101140929X1 Registry: Edmonton Between: Global Tesol College Corporation, Lorne Yaremchuk and Silvia Yaremchuk Applicants - and - Her Majesty the Queen Respondent _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice A.M.

Lutz _______________________________________________________ Introduction [ 1 ] In November 2005, the Canada Revenue Agency (CRA) began an investigation into the business activities of Global Tesol College Corporation, Loren Yaremchuk and Silvia Yaremchuk (the Applicants). Four warrants were issued by Judge Valgardson on March 21, 2010 based on the ITO of Bruce Breitkreuz, and a fifth search warrant was granted by Judge Caffaro on March 24, 2010 based on the ITO of Lynda Dombroski.

The Applicants apply for an order in the nature of certiorari to quash the five search warrants, and for a direction that certain seized articles be returned. [ 2 ] In a previous decision ( 2011 ABQB 56 ), the Court dismissed the Applicants’ preliminary ground that Crown’s adherence to the Protocol for Warrant Applications of the Provincial Court Criminal Division, Edmonton undermined the validity of the warrants.

Jurisdiction [3] On a certiorari application to quash a search warrant, a court has discretion to dismiss the application and defer the matter tothe eventual trial judge to resolve the issue of the admissibility at trial of the evidence seized: R. v. Zevallos (1987), (ON CA), 37 C.C.C. (3d) 79 (Ont.C.A.). However, the court may exercise its supervisory function in the case of clear jurisdictional errorwhere the interests of justice require, for example where a trial has not been set and it is not unlawful per se to possess the materialsseized: R. v. Branton (2001), (ON CA), 53 O.R. (3d) 737 (C.A.).

Given that no charges have been laid in this matterand the materials seized are not per se unlawful to possess, I have exercised my discretion to deal with this application. Applicants’ Position [4] The Applicants submit that there were no reasonable grounds upon which the authorizing judges could have issued the fivewarrants in question.

The evidence of alleged tax non-reporting, combined with the proffered evidence of misreporting was not sufficientto reach the threshold of reasonable grounds to believe that offences had been committed, nor was the information contained in the ITOscapable of sustaining reasonable grounds that there was evidence relating to the alleged offences to be found at the places to be searched.The warrants gave to those executing them carte blanche to open and read the Applicants’ private papers and business records.

Inessence, they permitted a fishing expedition. [5] The Applicants submit that there is no support for the conclusory statement in the Breitkreuz ITO that invoices werefabricated, which is necessary to establish that the Applicants had the required mens rea, and thus had committed

an act contrary to s.239 or a fraud. There is reference to the RCMP investigating Newport and that it was involved in offshore trusts, but there is no furtherinformation in that regard. The ITO does not give specifics of the relationship between Yaremchuk and Newport, and it does not statehow the outcome of the RCMP’s Newport investigation involved the Applicants. Reference is made to invoices issued to Parnell. Theinformation supports a belief that Yaremchuk failed to report income. This does not meet the standard required for a criminal offence, butrather supports civil liability or a reassessment.

The Applicants submit they were cooperative in the audit stage, and the investigatorcould have asked for further documentation, and therefore seeking a warrant was improper in the circumstances. [6] The Applicants also argue that the ITOs did not properly identify where the targets possibly resided or where mail wasdelivered, nor did they establish that the items sought would be found at the particular locations listed. Although on one occasion Mr.Yaremchuk told the CRA that he had an office in his house, there is no concrete information to support the conclusion that records wouldbe found at that residence.

The searching of all of the particular locations would suggest that the same documents were expected to befound at three or four different locations. There is no evidence to suggest that the items sought would be located at the office of theaccountant, Mr. Park. Storage locations are identified, but there is no explanation to substantiate that the things sought would be foundthere.

Crown’s Position [7] The Crown submits that unless there is prima facie proof in admissible form supporting specific allegations of deliberatefalsehood or reckless disregard for the truth in respect of specific aspects of the supportive ITOs, the information in the ITOs must beconsidered to be truthful: R. v. Garofoli, (SCC), [1990] 2 S.C.R. 1421. The Breitkreuz ITO sets out in great detail alengthy, thorough investigation of a matter that had gone through a several year audit stage. As an investigator, Mr.

Breitkreuz wasentitled to rely on information obtained by CRA auditors, and by those people the auditors had spoken to as long as the source ofinformation was set out in the ITO, which was done. None of the issues raised by the Applicants warrants excision of any paragraphs andtherefore the ITO must be read in its entirety. [8] The Crown argues that the Breitkreuz and Dombroski ITOs provided a sufficient evidentiary basis to support the issuance ofthe warrants. The question therefore is not whether charges can be sustained at the end of the day. Nor is it whether the judges should

have issued the warrants in question, but rather whether they could have issued them, i.e. whether the ITO(

s) provided some evidence supporting reasonable and probable grounds to believe that an offence had been or was being committed, and that the authorization sought would afford evidence of that offence. [ 9 ] With respect to the suggestion that the CRA should have relied on the targets’ cooperation, the Crown notes that taxpayer cooperation is expected during the audit stage pursuant to statute. However, once the CRA decides that it is moving from an audit to an investigation, the statutory inspection and requirement powers are unavailable for the purpose of its prosecutorial investigation: R. v.

Jarvis , 2002 SCC 73 , [2002] 3 S.C.R. 757. [ 10 ] The offences in question are set out in the ITOs, as they would be on an Information. The specific sections of the relevant statutes are referenced and itemized in relation to each potential accused, the potential accused in their capacity as directors of the target corporation, and the target corporation. The CRA theory was that the Global business was complicated and had international ties, and that tax evasion was occurring through use of international businesses and accounts.

The Breitkreuz ITO sets out in detail the records sought and which locations would contain the information. Those locations were determined based on the taxpayer’s personal tax returns, the corporation’s tax returns, and results of CRA investigations over the course of the audit/investigation. The ITOs set out the reasons why the affiants thought those locations would garner the information sought and there is no evidence to the contrary.

The inclusionary description of a storage premise when a specific address is identified avoids ambiguity when the actual search is undertaken by the investigators. [ 11 ] The Crown submits that the information detailed in the ITOs provided a sufficient basis for the issuing judges to form the requisite reasonable and probable belief. Without conflicting affidavit evidence, there is no support for the Applicants’ position.

Analysis [ 12 ] The Applicants’ counsel conceded that in the absence of any evidence whatsoever supporting specific allegations of deliberate falsehood or reckless disregard for the truth in respect of specific aspects of the ITOs, the Court on this application must consider them in their entirety, and must consider the information in the ITOs to be truthful. [ 13 ] Although the description of “things to be searched for” in the Breitkreuz ITO is broad, it is qualified by the phrase “relating to or necessary for the determination of taxable income and tax payable required to be reported and paid by [the Applicants] for the taxation years 2003 to 2006 inclusive”.

Paragraph 69 of the Breitkreuz ITO sets out the reasoning behind the items listed in the ITO being sought, and the proposed restrictions and controls on any items seized. Paragraph 82 sets out the purposes for which the items are sought. [ 14 ] The places to be searched could logically be expected to contain the information sought. They include the Applicants’ personal residences, business premises and storage locations, and business premises and storage facilities of Mr. Park, their accountant. Mr.

Breitkreuz sets out information flowing from a GST audit and an earlier tax audit which supports the conclusion that relevant financial records would be found in the possession of the Applicants, in both the residential and business premises, and at their accountant’s premises. He also sets out steps he took to verify that the addresses to be searched were the Applicants’ business and residential premises, and the accountant’s business location. [ 15 ] The suspected offences are particularized: false or deceptive statements in a return (s. 239(1)(

a) Income Tax Act ), tax evasion (s. 239(1)(

d) Income Tax Act ) and fraud ( s. 380(1) Criminal Code ). The Applicants assert that the Breitkreuz ITO supports a reasonable and probable belief in non-reporting or misreporting, but nothing more. They attempt to put a benign complexion on the results of numerous audit and investigatory steps. [ 16 ] The Breitkreuz ITO documents opportunities the Applicants had during the course of the audit to meet with CRA personnel and to provide further explanations and documentary support for invoices from offshore entities.

Despite extensive inquiries by CRA personnel, a number of those entities appear to have little substance, and/or to be unlikely to have provided the type of services for which invoices were rendered, or in some cases any service at all.

[ 17 ] Mr. Breitkreuz cites instances where Mr. Yaremchuk provided inconsistent or confusing information. For example, when he met with Auditor Yu in 2006, he stated that his company and Global Telsol, a company incorporated in Delaware, were partners but were not affiliated, and the relationship between the two corporations had been terminated. His accountant in a letter in 2006 stated that Global Telsol has never been active and that Mr. Yaremchuk attempted to do business with it but it never worked out. However, during a prior audit he had informed the auditor that he owned Global Telsol.

As well, three invoices in support of advertising expenses were issued in 2002 by “Global Telsol Institute Inc.” located in Wilmington, Delaware to Canadian Global Tesol Training Institute of Edmonton for establishment of a Tesol training program in the U.S. The 2001 and 2002 T1 Returns of Mr.

Yaremchuk were reassessed in 2004 on the basis that the transactions appeared to be between related companies dealing at non arms length and the amounts charged for the type of work done were unreasonable. [ 18 ] In 2008, Global Tesol College’s brochure referred to the company as “Global TESOL College International Worldwide Headquarters” and stated that it has offices worldwide in 14 countries, yet Mr. Yaremchuk told Auditor Yu in 2006 that overseas offices were not part of his business and that course materials were shared with other offices with no money exchange. Mr.

Park in a 2006 letter responding to the query whether Global Tesol has any offices worldwide stated “none exist”. Auditor Yu determined that Mr. Yaremchuk owned the worldwide trademarks for Global Tesol, and it appeared that Global Tesol operated on a large scale in the United States, with twelve to fifteen locations, but in Auditor Yu’s review of reported income, he did not note any monies being reported from the United States, other than from students taking online courses. In 2008, Mr.

Yaremchuk told Auditor Yu that Global Tesol offices outside of Canada referred to on the internet were not operated by him, nor was any revenue generated. [ 19 ] Further, a cheque to J & M Publishing c/o Dynamix International of St. Sampson, Guernsey which had issued an invoice for printing promotional flyers and envelopes appears to have been negotiated by J & M Coin & Jewellery Ltd. of Vancouver, a business which purports to provide foreign exchange services.

The Guernsey address on the invoice is linked to Claridge Trust, an independent trust company involved in offshore services with the same telephone number as that appearing on the two invoices from J & M Publishing. Mr. Breitkreuz was unable to locate a telephone number for J & M Publishing in Guernsey, nor for Dynamix International. In response to a query regarding payments to J & M, and for supporting documentation regarding promotional flyers and envelopes, such as shipping invoices, Mr.

Park’s 2006 letter stated that printing materials must be sent to Asia, and the Applicants could not find the shipping document. [ 20 ] Distinct businesses (Global Tesol Institute Inc. and Platinum Trust) which rendered invoices for advertising were located at the identical Belize address, which was determined to be the address of a Belize law firm, Young Law firm. In 2006, Mr.

Park stated in a letter that the payments to Platinum were for international development, but no agreement existed as it was all done verbally. [ 21 ] A number of payments to another entity, Abraham University of London, England, were claimed as insurance licenses and dues expenses. In 2006, Mr. Park advised in a letter that Abraham University was no longer in business to his client’s knowledge. He also provided two invoices issued by “Platinum (Reg. Agent for Abraham University Corporation”).

Inquiries by CRA personnel revealed that the address on the Abraham invoices was that of a company named Monomarks, a mail forwarding and telephone answering services company. Despite further inquiries and the assistance of agencies in the United Kingdon, no trace was found of Abraham University, and Monomarks confirmed that they could find no trace of Abraham University in their old or current records. The United Kingdom tax authorities were also unable to trace an individual named Voit who was purportedly the contact person for Abraham. Mr. Park advised in 2006 that Mr.

Yaremchuk’s intent in relation to expenses claimed for Abraham and Platinum was to expand Global Tesol’s business outside of Canada. Eventually his plans did not work, and he was not paying those companies anymore, and had hired a lawyer to recover monies paid to Abraham, although he was unable to give any specifics with respect to this process. [ 22 ] Auditor Yu also received evidence of numerous deposits made by Mr. Yaremchuk and the various entities he controlled to Newport Financial, and Mr. Park explained that the intent of those payments was to expand the business of Global Tesol overseas.

CRA had information that Newport was involved in setting up offshore bank accounts for clients, and its principal Mr. Ritter was detained by the RCMP in relation to those activities. [ 23 ] Auditor Yu also obtained information that Mr. Yaremchuk was one of a number of Canadian investors who had invested in a company named Prosper International League Limited, the owners of which had been barred by the U.S. Justice Department from selling offshore tax fraud schemes.

The company purportedly helped customers set up offshore trusts and corporations to conceal their income and assets from the IRS while using offshore debit or credit cards to repatriate the funds. [ 24 ] Significant Global Tesol sums appear to have found their way through circuitous routes into particular Belize bank accounts. Undeclared revenue paid by Parnell in Australia to Global Tesol College also found its way into a Belize bank account. Breitkreuz sets out information indicating that Mr. Yaremchuk gave instructions to Parnell to wire transfer funds to a Florida bank for further credit to

the Provident Bank for further credit to Abraham University to a U.S. account. A further note explains that funds could be wired to a German account for credit to Provident Bank to a U.S. account for further credit to Platinum Trust Corporation as Global Tesol Institute account, with final credit to Global Tesol Institute of 28 Regent Street, Belize City, Belize, the address of Young Law firm. [ 25 ] The standard for issuance of a search warrant is reasonable grounds to believe that the things to be seized will afford evidence with respect to the commission of an offence.

In this case, the mens rea of the offences if proven would likely be established by way of inference drawn from circumstantial evidence. While this Court is not as well positioned as an auditor to draw inferences from the material contained in the Breitkreuz ITO, in my view that information, taken in its entirety and assuming it to be true, is more than sufficient to support issuance of the first four warrants. [ 26 ] Dombroski’s ITO relies on information obtained when the first four warrants were executed to the effect that Park & Company was in the process of moving.

Paragraphs 6 and 7 of her ITO detail that the fifth warrant was required for that reason. Conclusion [ 27 ] The Applicants’ application for an order in the nature of certiorari is dismissed. Heard on the 5 th day of February, 2011. Dated at the City of Edmonton, Alberta this 15 th day of March, 2011. A.M. Lutz J.C.Q.B.A. Appearances: Sid M. Tarrabain, Q.C. Adam Y. Karbani for the Applicants Donna Spaner for the Respondent