R. v. Cheung, 2011 ABQB 225

Court of Queen ’ s Bench of Alberta Citation: R. v. Cheung, 2011 ABQB 225 Date: 20110407 Docket: 060772282Q1 Registry: Calgary Between: Her Majesty the Queen Crown - and - Garther Cheung, Sukhraj Singh Chana, Ranjit Singh Sangha, Pritpal Chana, Andrea Kyweriga Accused _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice A.D. Macleod _______________________________________________________ [ 1 ] The Accused are indicted on seven counts. They are charged with fraud on members of the public contrary to s. 380 of the Criminal Code, R.S.C. 1985, c. C-46 .

They are also charged with six counts of deceptive telemarketing practices under s. 52 and s. 52.1 of the Competition Act , R.S.C. 1985, c. C-34. The charges span the period from June 8, 2000 to June 18, 2003. The first is the date of incorporation of Ambus Registry Inc. (Ambus), the vehicle through which the offences were allegedly committed, and the last is the date on which the Calgary premises of Ambus were the subject of a properly authorized search by Competition officers. [ 2 ] Garther Cheung (Mr. Cheung) and Sukraj Singh Chana (Mr. S.

Chana) are the principals who caused Ambus to be incorporated and each held 50% of the shares. Mr. Cheung is listed in the corporate documents as President and a Director and Mr. S. Chana is listed as Secretary Treasurer and a Director. Ranjit Singh Sangha (Mr. Sangha), Pritpal Chana (Mr. P. Chana) and Andrea Kyweriga (Ms. Kyweriga) were, respectively, throughout the period in question, managers of sales, verification of sales, and collections for Ambus. Background

[ 3 ] Ambus was engaged in the start up of a business following its incorporation and certainly by sometime in the year 2001 it was extensively involved in telemarketing an American business registry. It operated a call centre at its premises on Macleod Trail and targeted only American businesses and institutions. [ 4 ] Ambus became a member of the Better Business Bureau (the “BBB”) of Southern Alberta in January, 2001. Almost immediately, the BBB began receiving some complaints about Ambus’ business practices.

On May 2, 2001 Ambus resigned from the BBB when faced with a suspension and a threat that its membership would be terminated. [ 5 ] A consumer protection organization known as Phonebusters operating out of North Bay, Ontario was also chronicling complaints about Ambus. Complaints were received by the Fair Trade Commission (FTC) in the United States and BBBs in the U.S. Ultimately, the activities of Ambus attracted the attention of the Commissioner of Competition and in January, 2003 the file was assigned to one of its officers, Carey Daoust. Mr. Daoust is based in Calgary and he became the primary investigator.

He gathered the complaints from the BBB, the Fair Trade Commission and Phonebusters. He reviewed the complaint files from those organizations and conducted interviews of many complainants as well as employees and former employees of Ambus. [ 6 ] The results of these investigations ultimately led to a search warrant and the search was carried out by the Competition officers assisted by the Calgary Police in the latter half of June and the first half of July, 2003. Thousands of pages of records were seized including a number of CD-ROMs.

In addition, telephone records and banking records relating to Ambus were lawfully seized from Telus and HSBC Bank Canada respectively. The Trial [ 7 ] The trial in this matter was heard between November 2 and December 9, 2009 with some interruptions due to illness and other valid reasons. After the Crown closed its case the Accused elected to call no evidence. The argument took place during the week of September 20, 2010.

Business Records Evidence [ 8 ] Many of the seized records were put into evidence along with the evidence as to how documents were seized, coded and otherwise dealt with between the time of seizure and the trial. Records included leads which were documents containing contact information utilized by the telemarketers to place their calls throughout the United States. Some of the documents were in the form of scripts which were utilized to train sales personnel and were often affixed to cubicle walls where telemarketers could access them readily.

There were also customer files and correspondence between customers and Ambus related to complaints. Thousands of documents were entered into evidence. I am satisfied that the seized documents were in the possession of Ambus. [ 9 ] Prior to the search, the competition officers, under the supervision of Mr. Daoust, collected customer complaints about Ambus from PhoneBusters, the US Federal Trade Commission and the Better Business Bureau. They collected some 158 complaints. They received many documents and complaint letters from those organizations. They then interviewed some of the complainants, Mr.

Brock Ketchum from the BBB in Calgary and a number of former employees. As a result of this information, they established a list of things to look for and this was used to establish the scope of the search warrant and to instruct the seizing officers on what to select. [ 10 ] The officers were briefed on the kinds of complaints that had been received and the theory of the competition bureau as to the nature of the fraud.

They were told to search for documents related to certain topics but to be mindful that the purpose of the search was to determine the facts and to get documents whether they tended to incriminate or exonerate anyone. [ 11 ] There was an extensive list of key information which the officers were instructed to look for that can be found in the evidence of Mr. Daoust (pages 1059-1062 of the transcript). It included the identity of all the telemarketers and employees, the scope of the activities of the company, evidence of scripts or telemarketers’ notes which would indicate what was being said to the public.

It included records relating to customer lists and their preparation and records relating to the development of the directory. It included records related to the identity and responsibilities of present and former officers, shareholders, directors, servants, employees, representatives, etc. of Ambus and the payment of salaries, commissions and bonuses. They were to look for records relating to customer service,

customer complaints and customer files. Specifically, they were to look for any files related to the complaints they had been made aware of from the organizations I have noted above. All computer records, disks, etc. were seized. From these preselected documents, the final selection was made. In addition, the rest of the file material was selected on a random basis. Because of the number of documents, random seizure went from 1 in 20 to 1 in 50 and perhaps as few as 1 in 75 files. The process went on for a number of days.

Thus, there was an attempt to capture all documents related to certain specific topics located on the Ambus premises and an adjacent office. Beyond that, there was a random search of customer files generally. All of the banking records related to Ambus were seized. Viva Voce Evidence [ 12 ] We heard from twenty-six witnesses which included the evidence of one American which was read into the record by agreement pursuant to

Section 718 of the Criminal Code . Witnesses consisted of seven competition officers, nine former employees, nine U.S. complainants, and Mr. Brock Ketchum of the BBB. The evidence spanned the time period from early 2001 to June 2003. Also in the evidence was a floor plan of the office showing the location of desks, filing cabinets, offices, computers, etc. There was evidence as to where each of the accused worked and the areas frequented by them.

A video of the premises at the time of seizure was also entered into evidence. [ 13 ] The evidence is consistent and I am satisfied that in total it is an accurate picture of the activities of Ambus. Product Description [ 14 ] The subject matter of the alleged deceptive marketing practices is described in various documents including Exhibit 37 which was found at one of the telemarketer’s workstations. It was an American Business registry in a digital CD-ROM format and it is described as containing over 900,000 business listings.

It was advertised as very user friendly with a built-in search engine and the software was self installing. It was described as a directory of a large range of businesses in the U.S., very useful for target marketing, research and sales prospects. Each company and institution listed was broken down into categories and using the built-in search engine, one could search by company name, state, city and S.I.C. which stands for Standard Industrial Code. According to Exhibit 37, the cost of a single copy of the registry on CD-ROM and to be listed for one year in the registry was $379.00 US.

However, it is clear from the other evidence, that amount included a two year listing for most of the relevant period. The listing alone sold for $289.00 US for 2 years and additional CD-ROMs could be purchased for $90.00 US each, which included a 30-day satisfaction guarantee.

Customers could thus purchase a listing in the registry or the listing together with the desired number of CDs. [ 15 ] Curiously, while the product is described in the sales pitches and the literature as user friendly and technologically superior to their competitors’ products, none of the sales staff were trained on the use of the product. For example, Shaun Miles who was there for about 18 months beginning in February 2002, never used the product. Neila Goulden/Maddock was employed there for about 3 months and was never shown the product in training and was not even sure that there was a product.

Pamela Masson worked at Ambus from June 2001 to April 2002. She saw one CD in a case but never viewed it and knew virtually nothing about the product. [ 16 ] Jessica Taylor was the receptionist and her job included shipping invoices and product. On a daily basis she received information from Mr. Sangha which included what was sold and the shipping information. Jessica would send out an invoice and if there was a CD to go to the customer she would package that as well. Approximately one half of the orders included a CD.

The return address on the FedEx shipping label was the Calgary address but the invoice contained a Salt Lake address. If she received a call inquiring as to where Ambus was located she would respond either Nevada or Utah depending upon the time of day. She would ship anywhere from 20 to 60 CDs a week and she would produce between 10 and 30 invoices per day. [ 17 ] Some employees were told that the CDs were frequently updated off site but there is no evidence that this occurred. There was no evidence of companies being added daily as listings were sold.

Moreover, there is no evidence that updated information was sent to 900,000 (or any number for that matter) businesses in any format on a regular or irregular basis. It would appear that Ambus contracted with Ironstone Technologies, a company in Winnipeg, Manitoba to produce the CDs and there are invoices for over 4,000 copies between December 2000 and October 2002. There was also evidence that in the year 2000 Ambus received 200,000 company names from a company identified as Acxiom Corporation with which Ambus signed an agreement on October 16, 2000.

That agreement would not have permitted Ambus to publish the data in a business directory electronic or otherwise but it would appear that Mr. Cheung was seeking legal advice so that he could do just that in December 2000.

[ 18 ] Of the four CD-ROMs which were found on the premises in June 2003 one was last updated on July 26, 2000, another on July 11, 2001 and another on June 11, 2002. The fourth was last updated on September 12, 2002. The evidence did not disclose very much about what was contained on the CD-ROMs. Business Structure of Ambus [ 19 ] As indicated above, Messrs. Cheung and S. Chana were the owners and creators of the business. They had offices on the Macleod Trail premises. In Ambus’ application to the BBB of Southern Alberta, Mr. Cheung is shown as president while Mr. S. Chana is shown as “CEO”.

The other three accused were more hands-on managers of the marketing effort. Messrs. Sangha and P. Chana were involved in the telemarketing and sales verification functions, more on which will be said later. Ms. Kyweriga was in charge of collections and it was primarily her department that pursued payment and responded to complaints. [ 20 ] The sales force consisted of telemarketers hired through newspaper ads or word of mouth. They took direction primarily from Mr. Sangha, Mr. P. Chana and Ms. Kyweriga. Janene Cheung, Mr. Cheung’s wife, was involved in administration.

Jessica Taylor was involved in reception, answering the telephone, shipping product and invoices to U.S. customers by FedEx and receiving mail twice a week from Salt Lake consisting of primarily cheques sent to the Salt Lake address. [ 21 ] There were many others involved from time to time due to a large turnover in the sales staff. Evidence of Former Employees [ 22 ] Nine former employees testified. Shelly Tremblett worked in sales for about one year between June 2001 and July 2002. Shaun Miles worked there for about 18 months commencing in February 2002.

Neila Goulden (now Maddock) was employed as a telemarketer for about 3 months commencing October 2001. Shane Harrop worked 2 or 3 months in sales commencing in March 2002 and left for a month and came back for a short period of time in collections. Chad Williamson worked in sales and verification commencing in February 2002 and was there through June 2003. Keri Mogtey worked in sales for about 4 or 5 months and in collections about 2 months in 2002. Pamela Masson worked in sales from June 2001 to April 2002. Lindsay LaRose worked in customer service from August 2001 to June 2002.

Customer service was frequently referred to as collections. Jessica Taylor was the receptionist, shipper and Girl Friday of the office. She worked there from August 2001 to June 2003. Ms. Tremblett [ 23 ] Ms. Tremblett answered a job ad in the newspaper for telemarketing sales. She underwent training which consisted of viewing and practising on certain scripts which contained pitches they were to read to customers over the telephone. She confirmed that she was trained on a script which involved a delay in shipping. She also used a script about a 30 day money back guarantee.

She does not recall seeing or using the CD which contained the registry she was marketing. [ 24 ] She received leads or contact information from either Mr. Sangha or Mr. P. Chana and she was encouraged to use an alias (Christine Paige). She was paid $10.00 per hour and also earned a commission based upon the number of sales she made. They were told to indicate they were calling from Salt Lake City which is where the head office of the company was supposed to be. On the delay of shipping script they were taught to say “you would have ordered this” as opposed to “you did order it”.

She put scripts and rebuttal scripts on the wall of her telemarketing cubicle so they would be readily available to her. Mr. Miles [ 25 ] Mr. Miles was eighteen when he started with Ambus and he worked there for about eighteen months starting in February 2002. He was interviewed by Mr. Sangha and was trained for two or three days. Mr. P. Chana did most of the teaching and he and the others were given sample sales pitches in the form of scripts. They would read scripts over the telephone to each other.

The actual telemarketing involved taking leads or contact information from Ambus and making a certain number of calls per day. He was given the leads by Mr. Sangha or Mr. P. Chana and they were in the form of a single page with a phone number, contact name and an address. Many examples were admitted into evidence. When he was finished with them he gave them back. While he was told about the CD

which he understood allowed one to search businesses by type, etc., he never used the product and knew almost nothing about it. He also used the shipping delay script, although he never believed there was a shipping delay and indeed he was not even aware of the place from where the product was shipped. He was told it was Salt Lake City. He also recalled using the 30 day money back guarantee script. He would inform the customer that if the product was sent back they would have to pay the shipping. [ 26 ] He was encouraged to use an alias and he eventually did adopt the name of Jon Irving.

He was also encouraged to say that he was calling from the head office at Salt Lake City because American businesses preferred to deal with Americans. He became pretty proficient at telemarketing and while he stuck pretty close to the script at first he was encouraged to use “whatever works”. Employees were not allowed to take documents or company material away from the premises. [ 27 ] He confirmed that once the sale was written up it would go to quality control or verification and this department would verify the information as to the name of the business, the address and phone number and the contact name.

It had to be accurate so that it could be put on the shipping label and so that the billing would be to the right business and person. Calls in verification were recorded and he would advise customers that verification would have no dealings with them other than getting the correct mailing address and other contact information. All questions were to be directed to the sales people. The idea was to keep the recordings as simple and straightforward as they could be so they could be used to demonstrate to clients that they had committed to buy the product. [ 28 ] He dealt with a lot of gold leads.

The leads were divided into “cold” and “gold” leads. The first was precisely what it indicates and “gold” leads were customers that had been sold before. He enjoyed working on gold files because it was “easy money”. He was uncomfortable with some of the things that occurred and among the sales staff at Ambus the firm was known as “Scambus”. Ms. Maddock [ 29 ] Ms. Maddock was nineteen years of age and she was employed for three months from October 2001 to January 2002. She confirmed using the delay in shipping script. On one occasion, at the request of a customer, she asked Mr.

Chana to send them a copy of the purchase order because a customer was indicating that they had not ordered it. Customers would often respond to her assertion that there had been a delay in shipping by saying they did not know what she was talking about and she considered her job to be to convince them that the company had indeed ordered it. Another pitch she recalls was to say that the target had ordered last year and there was a new edition coming out. She was terminated because of her frequent absences from work which she said was due to the fact that her mother was sick.

She reported the business to the BBB and said it was a scam as far as she was concerned. She thought she was selling a product that did not exist. She never did see the CD and did not believe that there was one. [ 30 ] After she wrote up a sale it would go to verification and if the customer had more questions she would get the lead back. She found it strange that she was selling a product which she had no knowledge about. She also recalled using the 30 day guarantee approach. Mr. Harrop [ 31 ] Mr. Harrop went through the same sort of training period as the others and he used primarily the shipping delay pitch.

He often worked on leads that had already been sold (gold leads). He would use the second or third edition pitch although he never saw them. He worked in sales for a few months and then returned later to work in collections for two or three weeks. He confirmed that the nickname for the company was “Scambus”. When he came back to work in collections he gathered information for Crime Stoppers. His alias in sales was Steve Cross. In collections, it was Jack Mantz. Mr. Williamson [ 32 ] Mr. Williamson was hired by Ambus before his eighteenth birthday. He worked in sales first and then in verification.

His alias was Chad McVries. He confirmed that in verification the calls were taped and if questions were raised during the taped call the matter would be returned to the telemarketer. The idea in verification was to confirm the sale, the price and the name and address and contact person to whom the invoice was to be sent. It was important that the customer knew what they were buying and how much it was going to cost. If customers indicated they did not want it they were returned to sales.

Ms. Mogtey [ 33 ] Ms. Mogtey worked in sales and collections primarily in 2002. She identified a number of scripts that she utilized. In sales, she used the alias Karen Kelso. In collections she used the name Vicky Andrews. In collections she would use verification tapes and would type up a transcript of the call if she was asked to do so by a customer. Ms. Masson [ 34 ] Ms. Masson worked with Ambus from June 2001 to April 2002. Her evidence was generally confirmatory of all of the other evidence. She went through the same training period and used the same general approaches to sales.

She knew almost nothing about the product. Her alias was Anna Wilson. [ 35 ] She testified that telemarketers were instructed to make the target companies believe they had already purchased the product because if they would buy into that the sales would be much easier. Ms Masson recalled specifically discussing this on one occasion with Mr. Sangha when the BBB came to remove their plaque. This caused quite a stir among the staff. Mr.

Sangha said that the sales method used, that is the assumptive method, did create a lot of complaints but it was effective because once people thought their company had purchased the registry it was much easier to close the deal. [ 36 ] She told her customers that the people involved in the verification call were not allowed to answer questions and if they had any questions they were to deal with the telemarketers. She also confirmed, as did other employees, that “slamming” was not allowed. Essentially, this described a practice of forcing people to buy the product.

Clearly, the idea was to get people to voluntarily buy the product and this was what was recorded in the verification conversation. Ms. LaRose [ 37 ] Ms. LaRose who was employed by Ambus at age eighteen from August 2001 to June 2002 worked in collections. While the department was also referred to as customer service it turned out to be more about collections. She was trained by Ms. Kyweriga and someone named Sarah. Kyweriga was also her supervisor. If people wanted to return the CD she would generally permit that and deduct $90.00 from the invoice but customers were told that the listing could not be undone.

There was also a miscellaneous charge of $10.00 or $20.00 which she would attribute to a shipping charge. [ 38 ] If the customer complained she would listen to the verification tape and if it revealed a problem she would go to Ms. Kyweriga and attempt to get instructions to resolve the matter. She used the alias Hannah Battle. During her time there she recalls getting repeat customers and while she told people that the CDs were updated every three months she had no way of knowing if that really occurred. She had a quota of ten calls per hour so that she would make about seventy calls per day.

They would rotate the collection files once a week. Customers with unpaid bills would be called every other day and they would receive faxes every 30, 60 and 90 days. Ms. Taylor [ 39 ] Ms. Taylor was the receptionist from August 2001 to June 2003. Her responsibilities included looking after invoicing and shipping of CDs. Her alias was Marina Black. There were a large number of CDs on the premises and she would ship them along with invoices by FedEx. Approximately half or slightly less than half of the customers ordered CDs along with the registry listing. She has no recollection of any shipping delay.

Sales Strategy [ 40 ] Found in Mr. Chana’s office which was kept locked and among the seized documents, is a document entitled Customer Service Collections Training Guide. It can be found at Tab 175 of Exhibit 3. It is an Ambus document and based upon the evidence before me the sales strategy outlined in it represents the basic strategy utilized by Ambus staff during the period under review. The

document is undated but it does contain letters which appear to have been created in the fall of 2000. While my search was not exhaustive, I did not find this document in the same form elsewhere. However, its sales strategy can be found in many of the other manuals dealing with sales, verification and collections found on the premises. It can also be found in various scripts found throughout the office and the sales cubicles and in various training manuals. The manipulation of targeted customers can be found throughout the documents and in the viva voce testimony of the employees and the U.S. customers.

I believe that it is the document which best describes the Ambus approach. Its contents are consistent with the evidence of the employees, the complainants and many of the other documents I have reviewed. [ 41 ] The following are excerpts from the document: INTRODUCTION The sales strategy ARI uses to market its product is concentrated around approaching the customer in an assumptive manner. Sales representatives use different PITCHES to enhance the probability of success.

The pitches that ARI uses are: - BACKORDER PITCH - UPDATE PITCH - CANCEL PITCH - COLD CALL PITCH ARI targets customers whose mindset is as (sic) such as they remember speaking with a company regarding some type of business directory in the past. The customer remembers either ordering a product, canceling a product, or simply discussing about a product. At this point sales reps can make the customer think he or she has ordered our product by assuming that they have. After this stage, the order is finalized by having it forwarded to the Quality Control Department. In the QC department, the sale is verified.

Once the sale has been completed, the customer is sent the product with an invoice, or is sent just an invoice for the listing within the CD directory. From that point on every contact the customer has with ARI is handled by the Customer Service Department, or the Collections Department. State of Mind Assume : To take for granted as, to assume something is true. To pretend or put on. Confuse : To bewilder; perplex; embarrass. To mistake for another. Throughout the customers entire business relationship with ARI they are in a constant state of confusion. They were confused when the sale took place.

They were confused when the product and invoice arrived. They were confused when they contacted ARI. A successful way of handling this situation is by convincing the customer that they are the ones who are confused. We do so by putting the idea in their heads that they have mixed us up with another company (NIC, IBO, IBD, NIB). Or maybe a past employee of theirs may have ordered the product originally. [ 42 ] Under the heading “Customer Service Techniques” is included the following: By being selectively honest with a customer, Customer Service representatives can get the desired response they want. ...

Another technique to achieve the desired response you want is to ask questions you already know the answer to. By doing this, the customer ends up knowingly giving you and them a reason the product was ordered in the first place. (Emphasis in the original text) ... Much of the rest of the document deals with aggressively pursuing collections, returns over 30 days, addressing threats and most common customer service issues.

While the document purports to be for customer service and/collections it is basically all about collections and very little about customer service or ensuring that the product is in accord with customers’ reasonable expectations. The manual is not about making the customer happy or addressing product concerns or defects in a meaningful way. The material clearly foresees returns, customer complaints, threats, etc. Specific instructions are given to staff when a customer threatens to report Ambus to the BBB or to their Attorney General. The material sets out the most common customer service issues.

They are the kind of complaints one would envision given the assumptive sales pitch as described above. They include the following: 1. The person who ordered the product was not authorized to do so. 2. The person who ordered the product no longer works for the company. 3. The customer was told that the product could be returned for full credit. 4. The customer is refusing to pay the invoice because no PO number was given. 5. The customer was told the product was something they have ordered in the past. 6. The customer returned the product. 7. The listing information is incorrect. 8.

The customer threatens to report ARI to the BBB. 9. The customer threatens to report ARI to their Attorney General. This document also includes a sample pitch in which the sales person explains to the potential customer that Ambus had spoken with them several months ago in regard to the business listing that “we hold for you.” The script goes on to say that the customer was scheduled to receive their business registry late last month but there has been a delay in their shipping department. Thus, Ambus was calling to apologize but to let them know that the directory should be out to you in the next 2 to 3 weeks.

It goes on to say that in the past the directory has simply been sent along with an invoice without the necessity of a purchase order and could it be sent to their attention again this year. It concludes by saying that the Quality Control Department is going to give them a quick call later on to go over the shipping coordinates. The following page is what is called “A Pitch Breakdown” and number 3 in that breakdown reads as follows: 3.) We spoke with your company several months ago in regards to your business listing that we hold for you.

You were actually scheduled to receive your American Business Registry on CD late last month, however there has been a delay in our shipping department, so I was just giving you a quick call to apologize, but to also let you know that your companies (sic) business directory should be out to you in the next....two to three weeks. This is the core of your pitch. If you cannot say this part flawlessly forget about going forward. [Emphasis in original] Paragraph 5 explains that the target will receive a call from “quality control”. It contains the following explanation:

Very straightforward. The customer understands that they will be receiving one more call to go over their shipping label. It’s also the first time you as a sales rep mentions the price of the product, three seventy-nine, so make it clear when you say the price. The document also contains three sample conversations between a sales rep and a customer and the samples are labelled EASY, MEDIUM and HARD. The pitches are designed to manipulate the customer into believing that s/he or someone in their company had previously ordered the registry and to accept the late shipment together with the invoice.

As an alternative, if the customer gives the sales rep a hard time they could inform the customer that whoever had ordered the listing wanted it to be the final listing for “your company.” Of course this means that there would be no further billing, i.e. somebody with the customer has previously committed it to a listing but this will be the final one and no further phone calls like this one will occur. [ 43 ] Once customers were sold the listing with or without the accompanying CD, they were turned over to quality control or verification.

This was the second phase and involved somebody from quality control telephoning the customer to get shipping coordinates and the name to whose attention the product should be sent and to confirm the price of the listing with or without the CD. This conversation was taped. Many taped verification calls were admitted into evidence. [ 44 ] Typically, the quality control call is pitched to the customer as a brief 20 second phone call at which time the quality control personnel want to make sure that the listing contains the correct address and that the invoice is addressed properly, etc.

Once the address and the person to whom it is to be shipped are finalized and the price is communicated the call is at an end. If the customer resists and says that the product was never ordered the person doing the verification may suggest that there has been some mistake and Ambus will look into it. In that case, the target is recontacted by the salesperson. Another alternative is to suggest that this would be the final listing and if the customer is satisfied with a final invoice, that will end the matter.

Sometimes the customer will say that they do not want the CD and the person doing the verification will suggest that their account could be credited for the CD but there would still be an invoice for the listing. If the customer is satisfied with that then the transaction will be concluded. Customers are told that this conversation is being taped to avoid any error. [ 45 ] Once the sale goes through verification it is turned over to collections, also known as customer service.

If the collections department meets any resistance they say that they do have a taped conversation during which the customer has obligated itself to purchase the listing and/or the CD. They will fax a transcript of the telephone call to the customer. The training instructions to collections staff are very specific. If the customer is very difficult they may offer the customer a chance to return the CD but still pay for the listing. They may offer the customer the option of black listing which meant that in exchange for a payment for the listing they will not be bothered in the future.

Summary [ 46 ] Between the testimony of these former employees and the documentary evidence there emerges a relatively clear picture of the marketing mechanics and its execution by the sales force and those involved in verification and collections. The evidence contained numerous scripts and rebuttals used to train the sales staff for a number of days before they began their jobs as telemarketers. A number of observations include: 1. All of the actors or nearly all of the actors on behalf of Ambus were located in Calgary at the Macleod Trail offices.

Sales were made exclusively by telemarketers and were verified and confirmed over the telephone. The product was shipped from Calgary by FedEx and while the information would reveal that it was shipped from Calgary, the invoice contained an address in Salt Lake City and a toll free telephone and fax number. That toll free number was to the Calgary office. The sales staff was instructed to tell their targets or potential customers that they were calling from the U.S. (usually Salt Lake City) and they were encouraged to use aliases. Indeed, the staff all had aliases although their use was not uniform. 2.

All of the marketing efforts were directed towards U.S. businesses or institutions. The “leads” were organized by time zone and the sales staff was instructed to target leads in whatever time zone was the most appropriate given the time of day in Calgary of the marketing call. The clocks on the wall indicated the various time zones in the U.S. 3. The sales staff were young (ages 18 - 22) and there was a high turnover. While they were given a few days’ training it was primarily directed towards the various pitches, scripts and rebuttals written for them by Ambus management. They practised making

telephone calls to each other and listening in on marketing calls of more experienced members of the sales team. While some of the scripts touched on the favourable aspects of the CD-ROM registry, there was virtually no training on the use of the product. Indeed, most of the sales staff never saw the product and never used it. 4. There is almost no evidence about how the registry was developed, that it was maintained or that any employees were engaged in doing either of these things. 5. There were three distinct departments within Ambus.

Sales, verification (often referred to as Quality Control) and collections (Customer Service). Those working in sales did not work in verification or collections at the same time. The sales force was paid on the basis of $10.00/hr. plus a commission which increased with the number of sales. The commission was paid once the sale went “through verification.” 6. After the targeted client agreed to purchase either the listing or the CD-ROM or both, the customer was told they would be receiving a follow-up call from Quality Control. That was the verification.

The purpose of that call was to confirm the order and the contact information and the shipping address. The customers were told that the people in customer service did not know anything about the sale and if any difficulties were encountered with the transaction the customers would be referred back to the sales force. The object clearly was to have the customer confirm to the verification team that the order had been made at a certain price and that it should be shipped to a certain individual at a specific address with the correct name of the customer.

The customers were told that the conversation was being taped. It was this tape that was utilized down the road if there was any dispute over the order. 7. The predominant marketing strategy was to convince the target that the call was a follow up to some previous dealing which the target’s company had with Ambus. Previous dealings had occurred with respect to all “gold” leads obviously because they had been targeted already. With respect to all first time or “cold” leads no history of dealings existed. Of that I am completely satisfied. Evidence of U.S. Witnesses Patricia Butler [ 47 ] Ms.

Patricia Butler is from Montana and she works with the Department of National Resources and Forestry. It would have had no use for the directory which is the subject matter of these proceedings. She had no authority to purchase; that authority lay with the director Mr. Don Artley and one other supervisor. Her job description was administrative assistant. [ 48 ] On January 23, 2002 Ms. Butler received a telephone call from “Mr. Moore” from Ambus. He told her that Mr. Artley had ordered the registry but there had been a delay in shipping. He asked to confirm her address. She said that she was suspicious because Mr.

Moore was “pushy” without really saying very much. She wondered why her department would be buying a business registry because they were involved in conservation and did not have any need for the product being described by Mr. Moore. It was her view that they had no use for it. On the other hand, if Mr. Artley had ordered it (he was away on vacation), she certainly did not want to be the one responsible for it not arriving. She persisted that she had no authority to purchase anything.

He kept reassuring her that all he wanted was confirmation of the address and that quality control would be calling to confirm that. She was confused. She believes she was transferred to quality control and was asked to confirm the address at which time she recalls repeating that she had no authority to make the purchase. [ 49 ] Quality control said that was a problem and they were going to have Mr. Moore call her again, which he did. He told her that she had to speak to quality control and give yes or no answers and that all they wanted was her to confirm her coordinates.

She was extremely uncomfortable but she was concerned that if her superior had ordered it she did not want to interfere and she gave the correct answers to quality control. [ 50 ] Days later Ms. Butler was called in to Mr. Artley’s office and he showed her the invoice and the CD. It was not addressed to Mr. Artley; it was addressed to Ms. Butler. Mr. Artley insisted that he had not ordered it and had no recollection of speaking with anyone at Ambus. No one at the department had any knowledge about the CD or the listing or the registry except Ms. Butler. He told her to send it back.

She called the toll free number on the invoice and left a message. She called the number several times but always got voice mail. She faxed a message to the toll free number and it can be found in Exhibit 1 at Tab 9.

[ 51 ] Ultimately, Ms. Butler received a phone call from Hanna at Ambus. Ambus’ investigation revealed that Mr. Artley had not ordered the product after all; it was Ms. Butler and they had, Hanna said, a taped conversation in which Ms. Butler had ordered it. Ms. Butler assured her that she did not have the authority and that is what she had said to anyone who called her. [ 52 ] She continued to receive several reminders and at one point she was told they wanted her to pay a restocking fee. She insisted however she was not paying anything and she contacted the department’s lawyer, Mr.

Ferris, who told her to document everything. They filled out a complaint form to the relevant authority in Montana. Ambus dropped its’ claim. The documentation surrounding this incident can be found at Tab 9 of Exhibit 1. [ 53 ] I believe Ms. Butler’s testimony and that the Montana Department of Forestry did not place an order for the business registry sent to it by Ambus. Ambus staff deliberately misrepresented to Ms. Butler that Mr. Artley had placed the order. They then used the taped verification conversation with Ms. Butler to allege it was she who placed the order.

This is consistent with both the testimony of the strategies used by the former Ambus employees and the training materials developed and used by Ambus. Myra Beth Staggs [ 54 ] In 2002 Ms. Staggs worked with a company called Private Business Inc. as corporate counsel. The company provided software to banks who advanced financing to small businesses. Using the software the banks could track recovery of accounts receivable for these firms. They had a very focussed clientele and, in her opinion, they had no use for the kind of business registry offered by Ambus. [ 55 ] Sometime in 2002 Ms.

Valerie Shead, a marketing manager, brought an invoice to Ms. Staggs and told her that she had not ordered the subject matter of the invoice. They had no use for it. Ms. Staggs wrote a letter on behalf of Ms. Shead. In the meantime their company was receiving daily phone calls from Ambus demanding payment. [ 56 ] After a conversation with somebody at Ambus, Ms. Staggs was given a copy of a transcript allegedly reflecting a conversation between someone at Ambus and Ms. Shead. When Ms. Staggs first spoke with somebody at Ambus about who had ordered it she was told that it had been ordered by Mr. Jerry Cover. Mr.

Cover had not been there for over a year. Subsequently, they indicated that the order was placed by Valerie Shead and Ambus sent a transcript of the verification tape in which (it appeared) that Ms. Shead did order the listing, as these tapes are created to suggest. [ 57 ] The documents surrounding this incident can be found at Exhibit 1 Tab 8. Ms. Staggs wrote to Ambus saying that Ms. Shead’s version of what occurred was quite different from the transcript she had received. She enclosed a copy of a

summary of events from Ms. Shead the gist of which was that in December of 2001 an Ambus sales rep had phoned her and told her that Mr. Jerry Cover, an executive who left the company several months before, had ordered a two year listing with Ambus. The caller told her that her company had paid for the first year but payment was due on the second year’s listing to which Mr. Cover had already committed. Ms. Shead told the caller that she was not prepared to authorize anything until she could see some type of documentation that he had committed to the order.

She was told that it was a verbal agreement and that he would ship a copy of last year’s registry to her at no cost, so that she could verify that the company had indeed been listed. She was then told that a quality control person would call to verify her coordinates. [ 58 ] Private Business Inc. filed a complaint with the FTC and Ambus did not pursue the matter further. [ 59 ] I find that Ms. Shead did not order the listing from Ambus. Nor did Mr. Cover. Private Business Inc. was targeted by Ambus in an attempt to convince its employees that it had previously ordered the listing.

Tom Trohaugh and Gordon Giffin [ 60 ] The firm of Giffin Interior and Fixture Inc. is a custom cabinet and casework shop. It has about 100 employees. Gordon Giffin is the owner and from the evidence it would appear that he is very much a hands-on owner. Mr. Trohaugh was a long term employee but

had been in the position of materials purchasing for about 6 months prior to receiving a telephone call from Ambus. Both witnesses were highly credible. [ 61 ] In February 2002 Mr. Trohaugh received a telephone call from somebody who identified himself as Kris Masters from Ambus. The caller told Mr. Trohaugh that his firm had been in the Ambus registry for a number of years. Mr. Trohaugh recalled the number of years being 10 but, in any event, it was a long period of time. It will be remembered that Ambus was incorporated less than two years previously.

Ambus was calling to get an update on the information, company name, address, phone number, etc. Mr. Trohaugh assumed that since they had been in the book for some time, Mr. Giffin had arranged it and so he gave him the information which was requested. Mr. Giffin was the one with the authority to subscribe to registries and things like that. Mr. Trohaugh’s authority went only to purchasing materials. Mr. Trohaugh was aware that the company did use registries and that was part of the reason that he assumed that Mr. Giffin had already authorized this one. [ 62 ] Mr.

Trohaugh then received a call from somebody called Mr. Jesse Kane who was updating the previous conversation wanting coordinate information. He also asked about billing and Mr. Trohaugh said to forward it to him directly. [ 63 ] Mr. Giffin also gave evidence. Mr. Giffin became involved when Mr. Trohaugh received the invoice which he brought to Mr. Giffin’s attention. Mr. Giffin forwarded it on to his lawyer, David Klett, as he knew nothing about the listing or Ambus. He had no dealings with Ambus and he was very clear about that. I have absolutely no doubt that Mr.

Giffin’s firm was the target of the predominant strategy of Ambus and that Mr. Trohaugh was mislead into believing that Giffin had a history of dealings with Ambus when it did not. If there had been any such history, Mr. Giffin would have been aware of it. [ 64 ] Giffin was the target of many phone calls and correspondence about payment of their overdue account. Ambus’ collection process was, to say the least, aggressive but Mr. Giffin was more than up to the challenge and eventually they stopped receiving calls and faxes from Ambus. The documentation around this incident can be found in Exhibit 1 Tab 12.

Cynthia Stokes [ 65 ] Ms. Stokes is employed by Royal Cake Company Inc. in Winston-Salem, North Carolina. She testified that in 2002 she received a telephone call from an employee at Ambus who identified himself as Shaun West. He told her that he needed to confirm their address so he could ship the business directory to them. This is the first she had ever heard of Ambus. She was puzzled. If Royal Cake was already in the directory why was Ambus seeking the correct address? She requested that Ambus remove the name from the directory.

He told her that the directory was already published and was ready to come out to them. This came as a surprise to her because she had never heard of Ambus or its directory. [ 66 ] The conversation went around in a circle for a while and eventually he talked about a money back guarantee at which time she thought she will get it and send it back. She then received a call from customer service which she had been advised would be forthcoming. When she received that call she told the caller that if they sent the package to her she would send it back.

They wanted her to go back and talk with the sales representative again. [ 67 ] After a few days she received another call from Mr. West and in her words “we did the same song and dance”. Our address needed to be confirmed so that they could ship it out to us but we had a guarantee. She asked why they wanted to confirm the address if it is already in the book. Again, she resolved to receive the product and send it back. She received a fourth call from customer service and subsequently she received a package and an invoice. Ms. Stokes reported to Mr.

James Whitney, President and Chief Executive Officer and on May 9, 2002 he wrote a letter to Ambus as follows: When your account representative, Shawn West, called my Executive Assistant, Cindi Stokes, to confirm the address for shipping of the American Business Registry on CD-ROM, the call was suspicious in nature. Royal Cake Company, as a whole, does not take these telephone solicitations lightly. Cindi inquired as to why an address would need to be confirmed for shipment, wouldn’t it be better to confirm addresses before issuing the publication, to have the correct address?

Shawn could not answer her questions, he seemed to switch from “it has been published to it

hasn’t been published.” Cindi told Shawn that we did not want to be included in the directory, but he said it’s already been published; he’s just confirming the shipping address. When the standard confirmation call was made by customer service a few minutes later, she explained that we did not appreciate the vague and confusing answers given by the account representative. When they could not get a confirmation from us, they said Shawn would call us again to clear up any questions. Shawn did call again and, ultimately, Cindi was told that we could take a look at the directory and return it if we wished.

She said we would return it. We were never told that there was a large fee for being included in the publication and a small fee for the publication itself. Cindi and I have heard the recorded confirmation call made by customer service. It does not show the initial portion of the call. At the beginning of the call, she said, “if you send it, we will return it.” Customer service said, “So you are saying you would like to receive a copy,” implying that you cannot return something you do not have. Cindi agreed that would be true and the conversation continued.

The key words slipped so quickly and easily from the mouth of the customer service representative, “...one copy of the American Business Registry on CD-ROM and your listing , together, invoiced for $379...” We were never told the listing itself costs $299. We have been offered a 25% discount by the collections department, but this is unacceptable. Ambus Registry was told that if the publication were sent, we would return it. Ambus never told Royal that $299 would be charged regardless of return. This is a dirty business practice and one that is not appreciated by my company.

I understand that we can be “black listed” with Ambus, removing our name from the mailing/call lists, upon completion of a form supplied by Ambus. Please send this form right away. Let me state our position clearly for you. Royal Cake Company will not pay any amount for the listing in the American Business Registry on CD-ROM. [ 68 ] It is clear from the evidence of Ms. Stokes and the documentation which can be found at Tab 1 of Exhibit 1 that Royal Cake Company received many calls. They offered to reduce the invoice of $389.00 by $90.00, representing the returned CD. They were offered a discount of 25%.

Eventually when it became clear that the company was adamantly refusing to pay anything and had reported Ambus to various agencies Ambus’ claim was dropped. [ 69 ] I accept the evidence of Ms. Stokes. Like many others she was lead to believe that her firm had dealt with Ambus before and the product had already been ordered. On top of that, she was also told that there was a money back guarantee. However, she was not told that it constituted a return of only $90.00 of the $389.00 invoice. Ginny Olson Gardea [ 70 ] Ms. Gardea worked with the Mallory Hotel in Portland, Oregon in 2002 and 2003.

She had been there less than a month in December 2002 when she received a telephone call from a person who identified herself as Sandra White from Ambus. Ms. Gardea was the director of sales. Ms. White said she was calling to confirm information and to let her know that a person from their billing department would be following up with another phone call. Mr.

Bert Johanson did make a follow up call also wanting to confirm basic information spelling of the name and address, etc. [ 71 ] When she interrupted him and asked him what this was all about he told her that the Mallory Hotel was listed in a business registry to which she replied she had no knowledge of it and wanted to know if they were obligated to participate.

The response was that somebody else had already made that decision although he did not tell her who had obligated the Mallory Hotel. [ 72 ] She thought the phone calls were rather strange and after some investigation she could determine no previous dealings with Ambus and she could not locate anybody who had ever heard of them. [ 73 ] She then looked them up on-line at the Better Business Bureau web site and a couple of other web sites and uncovered a number of complaints about Ambus and their business practices.

In February 2003 she received a package together with an invoice and she returned the product having determined in her own mind that this was a fraud. The documentation and the correspondence between Ms. Gardea and Ambus can be found in Exhibit 1 under Tab 3. I believe Ms. Gardea is a truthful witness. It may be that she confused the two phone calls somewhat but I accept that she did not order a registry from Ambus. I also accept that she was told that somebody had earlier committed the Mallory Hotel to the purchase. That was not true.

She was a victim of the predominant strategy of Ambus to deceive targets into believing their company had previous dealings with Ambus.

Kati Venturato [ 74 ] Ms. Venturato worked with Danzas AEI Intercontinental during 2001 and 2002 and she was a marketing director. During January of that year she received a call from a Nick Richards from Ambus who told her that her company owed $289.00 for a business listing in one of its directories. She responded that they had not received any invoice and she was not aware they owed any money. His reply was that her predecessor had submitted the listing and that money was owed.

She asked for documentation to show that money was owed and that they had subscribed to this directory. [ 75 ] She received information from Ambus which showed a March 2001 invoice for $199.00 for a 2-year listing and this had been paid. He called her back. Ms. Venturato pointed out that they had paid for a 2-year listing and they were still within that 2-year period. He replied that the money paid was only for the first year which was false on its face. He said that their rates had gone up. She did not pay the bill and she complained to the BBB. [ 76 ] Ambus’ response to the BBB was that Mr.

Richards was only soliciting Ms. Venturato for further business and was not demanding any payment. I accept the evidence of Ms. Venturato. Even by Ambus standards, this was a sleazy attempt to extract money for nothing and based upon false information. Jennifer Unsworth [ 77 ] The preliminary inquiry transcript for Ms. Unsworth was admitted by agreement into evidence pursuant to

section 718 of the Criminal Code . [ 78 ] Ms. Unsworth was employed with Medical Risk Managers in South Windsor, Connecticut in 2001 as an Assistant Vice President. As an underwriter, that company was interested in the SIC classification of companies as they used that classification for pricing purposes. When she received a call from a Shaun West at Ambus she was interested in trying out the CD-ROM because the listing included the SIC code for each of the businesses listed. She was told that there was a 30 day trial period and she was interested in pursuing that.

She had absolutely no interest in listing her company; her sole interest was the potential use they had for the directory and specifically the SIC code. She agreed to try out the CD and there was a follow up call which was conducted by a person called Rick who spoke very quickly. [ 79 ] After she received the CD she reviewed the feasability of using it with other people in the company. It was not useable and accordingly she returned it during the 30 day trial period. She was then sent the transcript of the telephone call which referred to the listing separately and many phone calls followed.

The document trail can be found at Exhibit 1 Tab 4. [ 80 ] The transcript of the verification call does refer to a listing but does not separate the listing cost from the CD cost. Ms. Unsworth responded in writing and said that the main focus of her agreement to take the product was that she wanted the CD-ROM for a 30 day trial period to determine whether it was something that her company would want to purchase. She had no interest in any listing and indeed she thought the listing was a clarification of the address of her company to insure they were sending the CD-ROM to the correct address.

She thought the $379.00 was for the registry listings which were on CD-ROM. It was not useable by her company and therefore she was returning it and was not interested in paying any part of the invoice. [ 81 ] I find that Ms. Unsworth reasonably believed that she could try out the product and return it for a full refund within 30 days which is what she did. Neither Mr. West nor Rick were interested in disabusing her of that understanding; given the marketing strategy of Ambus, their focus was to close the deal. Rachel Stanley [ 82 ] From June 2001 to March 2005 Ms.

Stanley worked as the marketing coordinator for the Los Angeles division of Swinerton Builders. Swinerton is a general contractor with many divisions west of the Mississippi in the United States. They manage construction of very large buildings.

[ 83 ] In October 2001 she received a phone call in her office. There were other people there at the time and the man was speaking very quickly with an accent. She was able to discern only that he wanted to be able to send her something and she said sure. They then said that they would be receiving another call from their “quality control department” to verify the shipping address etc. At that point she said “whoa, I don’t want your product, I am not interested” and she hung up.

She received a second phone call from quality control at Ambus and they asked her to verify the company name etc. and she said “No, I don’t want the product and do not ship it to me. I am not interested.” He told her that it has already been shipped and there is nothing that can be done about it. She responded that she was going to refuse the shipment and she hung up the phone. [ 84 ] Sometime later she came in to the office and there was a CD sitting on her chair with an invoice and a note from the accounting manager Mr. Bill Blair of Swinerton.

He said that it had been sent to him but he knew it was for her so he was leaving it at her desk. She went down to him and asked why he had received it and he told her that he received a call with the information that Ms. Stanley had ordered the product. This evidence was objected to as hearsay. [ 85 ] Ms. Stanley said that Mr. Blair was an accounting person with no authority to order any service or product whatsoever. She formed the view that she had been duped. Mr. Blair had been told that she, Rachel Stanley, had ordered the product and Mr.

Blair was asked to verify the shipping address, company name and other coordinate information so they could send the product and the invoice. He went ahead and verified the information. [ 86 ] There seems little doubt that from Ambus’ letter to the BBB dated May 16, 2002 which can be found amongst the documentation at Tab 10 of Exhibit 1 that Ms. Printmann took the position on behalf of Ambus that in October 2001 Ambus contacted Mr. Blair with Swinerton Builders. The letter does not deny the conversation with Ms. Stanley. [ 87 ] I accept Ms. Stanley’s evidence. I accept that she did not order anything from Ambus.

I accept that Mr. Blair did not have authority to purchase anything and that he understood that. I draw the inference that Ambus contacted Mr. Blair and told him that Ms. Stanley had ordered the product on behalf of Swinerton. That is why he gave the information requested. The Law and Analysis Section 380(1) (

a) of the Criminal Code [ 88 ] This

section reads as follows: 380.

(1) Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security or any service, (

a) is guilty of an indictable offence and liable to a term of imprisonment not exceeding fourteen years, where the subject-matter of the offence is a testamentary instrument or the value of the subject-matter of the offence exceeds five thousand dollars; The Relevant Sections of the Competition Act [ 89 ] The relevant parts of

section 52 read as follows: 52(1) False or misleading representations No person shall, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever, knowingly or recklessly make a representation to the public that is false or misleading in a material respect.

52(1.1) Proof of certain matters not required For greater certainty, in establishing that subsection (1) was contravened, it is not necessary to prove that (

a) any person was deceived or misled; (

b) any member of the public to whom the representation was made was within Canada; or (

c) the representation was made in a place to which the public had access. 52(1.2) Permitted representations For greater certainty, a reference to the making of a representation, in this

section or in

section 52.1 , 74.01 or 74.02, includes permitting a representation to be made. 52(2) Representations accompanying products For the purposes of this section, a representation that is (

a) expressed on an

article offered or displayed for sale or its wrapper or container, (b)expressed on anything attached to, inserted in or accompanying an

article offered or displayed for sale, its wrapper or container, or anything on which the

article is mounted for display or sale, (

c) expressed on an in-store or other point-of-purchase display, (d)made in the course of in-store, door-to-door or telephone selling to a person as ultimate user, or (

e) contained in or on anything that is sold, sent, delivered, transmitted or made available in any other manner to a member of the public, is deemed to be made to the public by and only by the person who causes the representation to be so expressed, made or contained, subject to subsection (2.1). 52(4) General impression to be considered In a prosecution for a contravention of this section, the general impression conveyed by a representation as well as its literal meaning shall be taken into account in determining whether or not the representation is false or misleading in a material respect. [ 90 ] The relevant parts of

section 52.1 read as follows: 52.1(1) Definition of “telemarketing” In this section, “telemarketing” means the practice of using interactive telephone communications for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest. 52.1(2) Required disclosures No person shall engage in telemarketing unless (

a) disclosure is made, in a fair and reasonable manner at the beginning of each telephone communication, of the identity of the person on behalf of whom the communication is made, the nature of the product or business interest being promoted and the purposes of the communication; (

b) disclosure is made, in a fair, reasonable and timely manner, of the price of any product whose supply or use is being promoted and any material restrictions, terms or conditions applicable to its delivery; and (

c) disclosure is made, in a fair, reasonable and timely manner, of such other information in relation to the product as may be prescribed by the regulations.

52.1(3) Deceptive telemarketing No person who engages in telemarketing shall (

a) make a representation that is false or misleading in a material respect; (

b) conduct or purport to conduct a contest, lottery or game of chance, skill or mixed chance and skill, where (

I) the delivery of a prize or other benefit to a participant in the contest, lottery or game is, or is represented to be, conditional on the prior payment of any amount by the participant, or (ii) adequate and fair disclosure is not made of the number and approximate value of the prizes, of the area or areas to which they relate and of any fact within the person’s knowledge, that affects materially the chances of winning; (

c) offer a product at no cost, or at a price less than the fair market value of the product, in consideration of the supply or use of another product, unless fair, reasonable and timely disclosure is made of the fair market value of the first product and of any restrictions, terms or conditions applicable to its supply to the purchaser; or (

d) offer a product for sale at a price grossly in excess of its fair market value, where delivery of the product is, or is represented to be, conditional on prior payment by the purchaser. 52.1(4) General impression to be considered In a prosecution for a contravention of paragraph (3)(a), the general impression conveyed by a representation as well as its literal meaning shall be taken into account in determining whether or not the representation is false or misleading in a material respect. 52.1(6) Due Diligence No person shall be convicted of an offence under this

section who establishes that the person exercised due diligence to prevent the commission of the offence. 52.1(8) Liability of officers and directors Where a corporation commits an offence under this section, any officer or director of the corporation who is in a position to direct or influence the policies of the corporation in respect of conduct prohibited by this

section is a party to and guilty of the offence and is liable to the punishment provided for the offence, whether or not the corporation has been prosecuted or convicted, unless the officer or director establishes that the officer or director exercised due diligence to prevent the commission of the offence. [ 91 ] It is up to the Crown to prove each of the charges against each of the Accused beyond a reasonable doubt. Ambus is not named in the indictment.

The Accused are the individuals outlined at the beginning of these reasons. [ 92 ] From the facts as set out above it will be obvious that the individuals accused in this case were not the people who made the alleged representations to the members of the public. Nevertheless, that does not mean they cannot be parties to the offence.

Section 21. (1) of the Criminal Code states: Every one is a party to an offence who (

a) actually commits it; (

b) does or omits to do anything for the purpose of aiding any person to commit it; or (

c) abets any person in committing it. This provision applies to all offences under every federal enactment. Ambus was the vehicle used to carry out the alleged acts. If the five

Accused were participating as members of the Ambus management team and did so for the purpose of facilitating the commission of thealleged offence, they are parties to the offence. [93] I am satisfied that Messrs. Cheung and S. Chana were in a position to influence the telemarketing policies of Ambus. Sections 52 and 52.1. of the Competition Act [94] Counts 4 and 5 deal with charges under

section 52.1. Although counts 2 and 3 deal with identical conduct, they are chargesunder

section

Section 52.1 applies to “telemarketing” which is defined as “the practice of using interactive telephone communicationsfor the purpose of promoting ...the supply or use of a product...”.

Section 52 deals with false or misleading representations to the publicgenerally. It is common ground that Ambus was engaged in “telemarketing” and that this was its only method of sales. Its seems equallyclear that Parliament intended to deal in a discreet way with telemarketing as defined. It is worth noting that both sections 52 and 52.1provide for the same maximum penalties for a breach. It is also worthy of note that while breaches of

section 52 can be dealt with eitherby prosecution or by administrative review, conduct contrary to

section 52.1 is not subject to administrative review. (section 74.07(2)). [95] The question arises whether or not those involved in telemarketing activities should be charged both under that

section andsection 52 for the same conduct. This was not raised during argument and accordingly I raised it with counsel by correspondence. TheCrown has said that the accused here can be found guilty under both sections 52.1 and 52 as the Crown concedes there are differences inthe two sections. If one is found guilty under

section 52 of making false or misleading representations then it follows that they would beguilty under

section 52.1. The reverse however is not true. This is in part because under

section 52 the representation must be made to thepublic. [96] It is true that the Federal Court of Appeal in Canada (Commissioner of Competition) v. Premier Career Management GroupCorp. (2009), 2009 FCA 295 , 312 D.L.R. (4th) 41, ruled that representations made in private can still be considered to be made“to the public” if the communications reach a significant portion of the public or a subset of the public. Under

section 52.1 that issue isnot before me. It certainly can be argued in this case that the representations made to targeted customers were not representations to thepublic. In my view I need not decide that issue here. [97]

Section 52.1 was added by Parliament subsequent to s. 52. Hansard discloses that on March 16, 1998 the then Minister ofIndustry stated as follows: At present the Competition Act prohibits the use of materially false or misleading representations to promote the supply or use of aproduct or the promotion of any business interest. The act also contains provisions relating to promotional contests. However it does notspecifically forbid certain practices associated with deceptive telemarketing.

The current law is also not specific enough to nail con artistswho do not actually make any representations over the telephone. These inadequacies needed to be addressed. The amendments to the Competition Act will create a specific new criminal offence for deceptive telemarketing. It will apply to the useof interactive telephone communications for the purpose of promoting the supply of a product or a business interest. Similarly, in the

preamble to the amending Act,

An Act to amend the Competition Act and to make consequential and relatedamendments to other acts, S.C. 1999, c. 2, it is stated: This enactment modernizes the Competition Act to respond to a changing business and enforcement environment, by increasingflexibility in the administration of the Act and efficiency in its enforcement. The enactment (

a) enacts new provisions to strengthen theenforcement action that can be taken against deceptive telemarketing solicitations... I do not think that Parliament intended that telemarketers, as defined in s. 52.1, be dealt with under the Competition Act except asprovided for in that section.

[ 98 ] I am reinforced in this conclusion by Sullivan on the Construction of Statutes , 5 th ed (Markham, Ontario: LexisNexis, 2008) where the author states at p. 343: When two provisions are in conflict and one of them deals specifically with the matter in question while the other has a more general application, the conflict may be avoided by applying the specific provision to the exclusion of the more general one. The specific prevails over the general; it does not matter which was enacted first. In conclusion on this point, I find each of the accused not guilty of counts 2 and 3. [ 99 ] Furthermore counts 6 and 7 under

section 52.1 include the words “to the public”. That does not form part of

section 52.1. As I have indicated before if the accused fall within the defined activity of telemarketing, it is sufficient if the representation is false or misleading in a material way and it is not necessary that it be made to the public. Obviously, this was a mistake in the drafting of the indictment and it was not picked up by counsel or the Court during the course of the trial. Accordingly I am treating the words as surplusage and am not considering them for the purpose of considering whether the accused are guilty or not guilty under counts 6 and 7. [ 100 ] I will deal with the remaining counts other than counts 2 and 3 in the following order;

a) count 6

b) count 4

c) count 7

d) count 5

e) count 1 Count 6 [ 101 ] Under this Count, the accused stand charged that they engaged in telemarketing for the purpose of selling the listing and/or directory and made a representation that was false or misleading in a material respect, i.e., by employing a sales approach that was false or misleading with respect to whether an order had previously been made. [ 102 ] It will be recalled that the document at Tab 175 of Exhibit 3 was prepared in or subsequent to the fall of 2000. It was found in Mr. S. Chana’s office which was kept locked.

From all of the evidence I am satisfied that it reflects the strategy utilized by the sales, verification and collections staff of Ambus over the relevant period. This strategy was to make the target believe that someone from their company had ordered the product. The target was being called because, for whatever reason (usually a delay in shipping), the product was now coming to them as earlier promised or as a second edition. That strategy was still being utilized in June 2003 as evidenced by a script found together with hand written notes of Shaun Miles and a lead which was contacted by Mr.

Miles in June 2003. (Exhibit 8, Tab E). Indeed, Mr. Miles testified that this particular script which was coded NDLH23572 was the script that he was trained on and it was essentially the same script he used throughout. Any shipping delay was imaginary. [ 103 ] Defence argues that Mr. Miles’ credibility is questionable or that he was a “rogue” salesperson. He candidly admitted repeatedly lying to targets over the phone and would say whatever was necessary to conclude a transaction. Mr. Miles said that he was encouraged to do this by Mr. Sangha and Mr. P. Chana. I believe that Mr.

Miles became quite cynical over the 18 months and felt uncomfortable because he knew he was scamming the targets who bought from him. But I believe that he was testifying as he saw it and understood it. His testimony had the ring of truth. I find that throughout his time at Ambus that particular script, with slight variations, was the principal strategy with respect to the calls that he made. His evidence is consistent with all the other former employees, the materials regarding the pitches, and the American witnesses’ experiences with Ambus.

The script that he read during his evidence went like this: Hi, calling from your American Business Registry, how are you doing? Great. We spoke with you a few months back regarding the business listing we hold for your company. Just a quick call, you were scheduled to receive your second edition of the American

Business Registry on CD-ROM last week. Unfortunately, we had some problems in our shipping department so nothing got sent out to you. I am calling to let you know that your office copy will be coming out to you in the next 5 to 10 business days. Now, there is no PO number issued and I have this coming out directly to your attention. Tom Johnston, is that still correct? Our Quality Control will call you back to verify your shipping label for Fed-Ex and following your directory will be the company closing invoice for $379.00. Is there anything else I could help you with before I let you go?

Please keep in mind Quality Control does not have access to your file so if you have any questions in the future, my information will be included with the package. Please feel free to call me back. Thanks for listing with ARI, have a great day. [ 104 ] Notwithstanding that this referred to the second edition Mr. Miles confirmed that he would often say it was your second edition: just to kind of give them that feeling like - we are your partners. We have done business with you before in the past, any questions that you received. We have a list of rebuttals.

Our method instead of just maybe not being honest with them is to say, “you would have spoken with one of our account representatives a few months ago. You must have ordered this a few months back, when you spoke with one of our account representatives. You would have, you would have.” We used that a lot. [ 105 ] Mr. Miles was there for 18 months and was a successful salesperson. He was given a lot of gold leads to sell because they were repeat customers and they were reserved for the better sales people. Even with gold leads, Mr.

Miles testified that he would try to get the contact to think that the company had already committed to further editions or years of listings. He used codes and NWC meant no longer with the company. If the sales staff knew the name of a former marketing manager they would say that the person who left had already committed the company for further listings or editions. This would be something made up; it would not reflect any basis in fact. [ 106 ] Ms. Masson who was also a very credible witness confirmed that the strategy employed was to make the target think that s/he had dealt with Ambus before.

She said that they were instructed to say that the company would have ordered it or could have ordered it as opposed to “you did order this”. She said they had no way of knowing if anybody in the company had ordered or not. Her main strategy was to create the impression with the person on the other end of the line that the listing had already been purchased by the company and to “basically let them know that they don’t really have a choice. That it has already been ordered or it would have already been ordered and that either way they would be receiving a bill.” She recalled talking about this to Mr.

Sangha and he told her that style was called “an assumptive sale.” The explanation was that it was easier to get a sale if the cust

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