R v Macleod, 2017 ABQB 722

Court of Queen’s Bench of Alberta Citation: R v Macleod, 2017 ABQB 722 Date: 20171127 Docket: 150145290Q1 Registry: Calgary Between: Her Majesty the Queen Crown - and - James Farquharson Macleod Accused _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice C. Dario _______________________________________________________ I. Overview [ 1 ] This matter was heard before me on September 11 through September 18, 2017. Mr. Macleod was charged with two counts: Count one being that he did by deceit, falsehood or other fraudulent means, defraud members of the public of an amount in excess of

$5000 contrary to section 380(1)(

a) of the Criminal Code, and count two being that he did steal money from members of the public in an amount exceeding $5000 contrary to

section 334(

a) of theCriminal Code, in each case occurring on or between February 1, 2009 and June 30, 2011, at or near the town of High River, in Alberta. [2] Mr. Macleod was formally arraigned on this charge on September 11, 2017 and pled "not guilty". In a decision published onOctober 11, 2017, I found Mr. Macleod was guilty of count one - Fraud; and stayed the charges of count two - Theft on the Kienappleprinciple: R v Kienapple, (SCC), [1975] 1 SCR 729. [3] This is the sentencing decision for the conviction on the charge of fraud. [4] The relevant provision of the Criminal Code, RSC 1985, c C-46, s 380 (the “CCC”), at the time of the offence read: 380

(1) Everyone who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of thisAct, 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 theoffence is a testamentary instrument or the value of the subject-matter of the offence exceeds five thousand dollars; .... A. The Facts 1. Circumstances of the Offence [5] A full overview of the facts of this case is set out in the decision found at R v Macleod, 2017 ABQB 604. By way of generaloverview, Mr.

Macleod operated a mortgage brokerage since 2006 as an independent contractor under the franchise or banner of TheMortgage Group (“TMG”), and was a licensed broker. [6] Sometime later, he started a private investment fund business (the "Private Fund"), and approached investors that he hadmet through clubs such as Elks and the Rotary club, and that he knew socially. [7] Mr. Macleod became a well-known, engaged and respected member of the community, and he relied on his reputation inattracting initial and additional investors.

Several of these investors were acquaintances or friends. [8] By word of mouth, other investors approached him to invest in the private investment business. In face-to-face meetings withindividual investors, Mr. Macleod represented that the short-term investments would be used for mortgage or bridge financing securedby land and paid out at a rate of about 15%. This was documented in a one-page agreement between the investor and Mr.

Macleod'sPrivate Fund entity. [9] Some investors were enticed to participate by the success other investors believed they had achieved through this investmentfund. [10] In reality, from at least as early as February 2009 until June 2011, no investments were made at all. Instead, the accounts andfinances of the Private Fund and TMG were comingled.

If there were legitimate investments made prior to February 2009 through thePrivate Fund, the Accused provided no evidence of that to the Court. [11] This scheme put more than fourteen individuals' funds at risk, at least ten of whom lost all or a portion of their investment. Anumber of these individuals were seniors who were retired at the time of investing with Mr. Macleod. [12] The amount put at risk by Mr. Macleod was in excess of $1.68 million with over $1 million in principal payments lost.

Thisamount is calculated looking only at the principal invested, and not the interest promised (whether or not paid). [13] The commission of the offence occurred over a more than two-year period and required some level of planning and repeateddeception to the investors. [14] By the summer of 2011, Mr. Macleod ran out of credit on his operating line and was unable to cover his obligations to eitherTMG or the Private Fund. [15] In the summer of 2011, when Mr. Macleod and his businesses became financially distressed, he initially told some of theinvestors that he was just having CRA and GST issues.

Some days after borrowing more money for operating expenses from oneinvestor, who was also a friend, Mr. Macleod admitted to him that he was in financial distress and there was no money left from theinvestments. This investor/friend organized a meeting of investors to try to find a way for Mr. Macleod to repay what was owed. [16] There was some confusion as to how this deal would work. I acknowledge that Mr. Macleod stated at the time that he waswilling to continue working the TMG business and make some form of payments to the investors. I also note however that the plan washis friend's and not Mr.

Macleod's; it is unknown whether and how much restitution would actually have occurred. In any event, the nextday, the investors decided against this form of repayment, some due to concerns around the legality of it, and others due to the realizationof the extent of debt in which the business was. [17] I have found that Mr. Macleod's reasons for committing the fraud included to bolster his reputation in the community, as wellas for profit, as the funds were also comingled with and used to cover expenses for his other business, TMG. [18] Mr.

Macleod argues that he did not start the Private Fund out with the intention to defraud the investors. Instead, the fraud

was a result of the market circumstances that overwhelmed his ability to manage the business. [19] His statements now are inconsistent with the statements made in his admission to police that he knew from the start that thePrivate Fund was a "scam", and other statements he made in the wiretap. They are also inconsistent with my findings in the decisionresulting from the trial that Mr. Macleod acknowledged that the Private Fund placed no mortgages at any time during the indictmentperiod, nor was there evidence presented that Mr. Macleod invested in any other type of project through the Private Fund.

Other thansome vague statements of Mr. Macleod, there was also no evidence of any investments made by the Private Fund prior to the indictmentperiod. 2. Breach of Trust [20] The parties do not dispute that Mr. Macleod was in a position of trust and breached that trust. While Mr. Macleod was not in aformal trust or fiduciary relationship with the investors, such as with a lawyer, trustee, doctor or spiritual advisor, that is not required forthe purpose of sentencing: R v Iyer, 2016 ABQB 680 at para 249.

The Supreme Court of Canada has directed that the proper approach isto consider whether, given all the surrounding circumstances, a party could reasonably have expected the other party would act in thefirst party's best interests with respect to the subject matter at issue: Hodgkinson v Simms, (SCC), [1994] 3 SCR 377 at409. In the present case, I find that he was in a position of trust with the investors for the purpose of sentencing. 3. Circumstances of the Offender [21] Mr.

Macleod had prior experience in the mortgage brokerage business and had also worked for banking institutions as amortgage broker in the past. Prior to these roles, his work history was comprised of a variety of jobs, ranging from lawn mowing, andselling cars, to some work related to oil and gas leasing. [22] Mr. Macleod testified that he had difficulty in school, due in part to dyslexia and issues with his vision. He graduated highschool but was unable to complete his first year of university. [23] At trial, Mr. Macleod stated that the TMG business was very successful and sufficient to fund his living expenses.

I notehowever that the proceeds of the Private Fund were at times used to pay TMG expenses and vice versa, as well as to cover his personalcosts. [24] I do note that there is no evidence in this case of Mr. Macleod taking expensive trips or having multiple houses, althoughthere was some limited testimony from a few investors at trial regarding the expensive lifestyle in which Mr. Macleod lived. A centralbenefit to Mr. Macleod from his fraudulent activity was to bolster his reputation in the community - to make him seem more successfulthan he was.

Through covering TMG expenses and his personal expense, however, there were also personal financial benefits to thefraudulent activity. [25] Mr. Macleod is married without children or other dependants. 4. Impact on the Victim and/or Community [26] Often in the cases of fraud, the victims suffer more than financial loss. There is often a "domino effect" in that the lossoccasioned by the fraud triggers other effects on the victim, including emotional, relationship and health effects: Iyer at para 197. [27] This is the nature of the loss described by the one victim who provided a victim impact statement, Mr.

McLauglin, the personwho believed Mr. Macleod was his best friend at the time. This victim noted to the Court his consequent inability to trust others, andother community members’ suggestions that he knew about the fraud early on, both resulting in damaging his personal relationships withmembers of the community and clubs, and even to his business (which in a small town is linked to personal relationships). This was anembarrassing ordeal that continues to affect him even now. [28] Often times, victims of fraud end up doubting their judgement.

Several of the witnesses who testified at trial felt that theywere foolish in investing with Mr. Macleod, or at least in the level of diligence they conducted (or failed to conduct) prior to investing. Afew victims suggested the fraudulent activity resulted in some level of marital stress over decision making. 5. Letters of Reference [29] Mr. Macleod provided 16 letters of reference and his own statement of contrition to the Court for consideration. Some of theseletters describe Mr.

Macleod as having turned over a new leaf - so to speak; and of being trustworthy notwithstanding the events thatoccurred in the past. Some suggest that they do not believe Mr. Macleod capable of intentionally harming others financially. Letters fromhis current employer indicate he will continue to be employed at the car dealership if he is not incarcerated. B. Legislative Regime [30] Mr. Macleod was found guilty of violating s 380(1)(

a) of the CCC. Subsequent to the offence, s 380 (1.1) of the CCC wasamended and now requires that the court impose a minimum punishment of two years imprisonment in circumstances where the totalvalue of the subject matter of the offences exceeds one million dollars. This minimum punishment of two years imprisonment means thatunder the current statute, a conditional sentence is not currently available for this offence as it is unavailable where the enactmentprescribes a minimum term of imprisonment, or where the sentence is for a period of two years or more: s 742.1(

b) CCC. This limitationdid not exist at the time of the commission of the offence. [31] A conditional sentence is also not currently available for an offence for which the maximum term is 14 years or longer. At thetime of the offence, this constraint to the granting of a conditional sentence also did not exist.

[32] Despite these subsequent legislative changes, the case law indicates that custodial sentences of over two years was the normfor the commission of fraud involving breach of trust with the amount subject to risk of over a million dollars in Alberta during theperiod of the commission of the offence. C. Positions of Crown and Defence [33] The Crown seeks a sentence of five years. The Crown also seeks a restitution order in favor of the victims, pursuant to s 738CCC. The Crown requests a prohibition order pursuant to s 380.2 CCC.

Finally, the court is required to consider a DNA order as this is asecondary DNA offence, however, the Crown takes no position on this. [34] The Defence does not oppose the restitution order or the prohibition order. The Defence states an appropriate sentence in thiscase is two years less a day served conditionally in the community followed by three years' probation and 100 hours of communityservice. It suggests that fraud cases in which significant jail time is ordered share the common feature of pre-meditation, with theobjective of personal benefit.

While not confirming that those are requirements prior to directing a longer jail term, even if they are, thoseconditions are sufficiently met by the facts the offence committed by Mr. Macleod. I point to the cases of Iyer and R v Donszelmann,2014 CarswellAlta 1161, [2014] A.J. No 734, as cases in which premeditation may not have initially existed, however, at some point theaccused was well aware of the likely outcome of his fraudulent venture and continued to solicit investments (Iyer) or sales(Donszelmann) anyway. In Mr. Macleod's case, this behaviour continued for over two years.

I have already stated that there was personalbenefit to the accused in this case. Personal benefit need not always take the form of lavish trips, expensive cars and multiple residences,although those cases do seem to be particularly egregious. D. Case Law [35] The court must consider the range of sentences imposed for a crime of a similar nature in the jurisdiction of Alberta, as well asacross Canada. [36] While the principle of parity exists in decisions amongst the various provinces, there may be some variations from province toprovince.

As was noted by the Supreme Court of Canada, this regional variation is acceptable: R v M (CA), (SCC),[1996] 1 SCR 500 at 567. While decisions from other jurisdictions are noteworthy, I am bound by the decisions of the Court of Appealin Alberta, and not of the courts in other jurisdictions. Further, I consider that our Court of Appeal would have in making its variousdeterminations considered the parity amongst provinces in coming to the decisions that it has in the past. [37] Many of the cases provided to the Court by defence from other jurisdictions are materially distinguishable from the presentcase.

I will highlight some of the differences below but will not address every case raised by the Defence. E. Conditional Sentence [38] Defence is seeking a conditional sentence.

The Crown states that notwithstanding the subsequent changes in legislation, thisoption is not available to the accused. [39] The framework to assess when a conditional sentence is appropriate is set out in R v Proulx, [2000] 1SCR 61, 2000 SCC 5.The fact situation in Proulx is dissimilar to this case but the analysis on a conditional sentence is relevant. [40] The analysis pursuant to s 742.1 CCC is outlined in Proulx at paras 46 and 47: This provision lists four criteria that a court must consider before deciding to impose a conditional sentence: (1) the offender must be convicted of an offence that is not punishable by a minimum term of imprisonment; (2) the court must impose a term of imprisonment of less than two years; (3) the safety of the community would not be endangered by the offender serving the sentence in the community; and (4) a conditional sentence would be consistent with the fundamental purpose and principles of sentencing set out in ss. 718 to 718.2.

The first three criteria are prerequisites to any conditional sentence. These prerequisites answer the question of whether or not aconditional sentence is possible in the circumstances. Once they are met, the next question is whether a conditional sentence isappropriate. This decision turns upon a consideration of the fundamental purpose and principles of sentencing set out in ss 718 to 718.2. Iwill discuss each of these elements in turn. [41] The Supreme Court in Proulx, at para 15, noted Parliament's dual intention in enacting the conditional sentence regime: (

a) toremedy the problem of over-incarceration, and (

b) to expand the use of, and put new emphasis on restorative justice principles insentencing. This is of assistance in addressing the fourth criteria above. At para 107, the Court noted that judges should be wary ofplacing too much weight on deterrence and noted that the empirical evidence suggest that the deterrent effect of incarceration isuncertain. Furthermore, a conditional sentence can provide significant denunciation and deterrence through the imposition of punitiveconditions.

However, the Court also noted that there may be circumstances in “which the need for deterrence will warrantincarceration:” at para 107. [42] It is with the above criteria in mind, that I assess the appropriateness of a conditional sentence in this case. At the time of theoffence, the Criminal Code did not mandate a minimum period of incarceration. I am also satisfied that that the safety of the communitywould not be endangered by Mr. Macleod serving his sentence in the community. The further precondition, however, is for the court toimpose a term of imprisonment of less than two years.

Based on the analysis of case law that follows, I find a sentence of less than two

years would not be appropriate. Further, I do not reject a penitentiary term and probationary measures as inappropriate. Based on failing to satisfy this pre-condition, this present case fails at this preliminary step of the analysis to permit a conditional sentence. [ 43 ] In addition to failing to meet the pre-conditions, in this case, I find a conditional sentence would be inconsistent with the fundamental purpose and principles of sentencing, in particular, the principles of denunciation and deterrence.

In cases of fraud, deterrence is particularly important given fraud is typically not a crime of impulse or passing opportunity, rather it is planned and deliberate. [ 44 ] The following case authority has led me to the above conclusions. [ 45 ] The decision of the Supreme Court of Canada in R v Bunn , [2000] 1 SCR 183, 2000 SCC 9 , on appeal from the Manitoba Court of Appeal, granted a conditional sentence where a significant fraud was committed involving a high degree of breach of trust. Defence relies on Bunn as authority for this Court to order a conditional sentence in the present case.

The fraud in the case of Bunn however involved a total amount of $86,000 (over 145 different transactions), and the Supreme Court of Canada took note of the specific circumstances of the accused who was the sole provider for his disabled wife and daughter. I find these factors material distinctions from the present case. [ 46 ] Defence identifies several Alberta decisions in which a conditional sentence was ordered. These cases have noteworthy factual distinctions. [ 47 ] In R v Hartz , 2002 ABCA 108 , Ms.

Hartz received a sentence of incarceration for fraud in the amount of $123,860, which was defrauded from her corporate employer. The Alberta Court of Appeal rejected her appeal for a conditional sentence stating the sentence was appropriate given the nature of the offence (and I note notwithstanding the much lower amount of the funds she converted). That she was not a danger to society was appropriately factored in by the trial judge.

The Court also confirmed that its earlier decision of R v Watkinson, 2001 ABCA 83 , does not stand for the proposition that a conditional sentence is to be expected in circumstances of significant breaches of trust: at para 5. Watkinson dealt with a guilty plea to insurance fraud of under $200K involving her employer, only a fraction of which she received (approximately $16,000). A conditional sentence was ordered in that case. [ 48 ] In R v Cremer , 2007 ABQB 544 , the accused plead guilty to fraud in excess of one million dollars committed against the Worker's Compensation Board.

Similar to Hartz , the victim was a corporation rather than individual victims. The Court granted a conditional sentence to Mr. Cremer, although, in addition to the guilty plea, it clearly took into account his exceptional health circumstances resulting from strokes he subsequently suffered: at paras 36 and 39.

I note that this decision may not be consistent with the subsequent decision in Fulcher (described below). [ 49 ] Regarding the other Alberta cases cited by defence as granting conditional sentences, the amount involved in the fraud was materially less than in the present case, the victim was often a corporate entity rather than personal victims, and many of these cases involved guilty pleas. [ 50 ] For example, in R v Grundy , 2002 ABCA 4 , the accused plead guilty, there was a loss to his corporate employer of under $218,000, less than $100,000 of which was actually transferred to him.

The Court of Appeal stated that a fit sentence would have been, and it would have imposed , a period of incarceration, however since she was well into serving her conditional sentence, it allowed a conditional sentence (of 2 years less a day) to stand, but imposed more stringent conditions: at paras 13 and 14. [ 51 ] In R v Peterson, 2000 ABQB 163 , the Court imposed a conditional sentence to an accused who plead guilty to defrauding the Federal and Provincial governments of roughly $1.4 million in tax revenues through illegal distribution of alcohol.

This case appears to be an outlier case, not in alignment with the other Alberta cases. The Crown suggests this may be due to the identity of the victim. If true, that would be an unfortunate basis for a deviation in sentencing to this degree, as all citizens are negatively impacted by the loss in revenue defrauded from the government.

As no finding of a breach of trust was made in that case, it may have been a factor in arriving at the sentence granted. [ 52 ] The Defence also notes some provincial court decisions, which similarly involve a much smaller amount, and often guilty pleas and corporations (rather than individuals) as victims. For example, in R v Turner, 2006 ABPC 189 , Ms. Turner plead guilty of defrauding her employer of just under $200K.

The judge undertook an extensive case law analysis and she was given a conditional sentence. [ 53 ] Similarly, conditional sentences were ordered in: R v Weerasooriya , [2006] AJ No 1070 (PC) (the accused plead guilty to defrauding his employer of just under $80,000); R v Barber, 2005 ABPC 229 (the accused plead guilty to defrauding her employer of just over $31,000); R v Bordeleau , 2001 ABPC 179 (the accused plead guilty to defrauding her employer of just under $34,000), and R v Mitchell , [1996] AJ No 1176 (PC) , (the accused plead guilty to defrauding her employer of approximately $55,000).

As already stated, these cases are not sufficiently similar to the present case to be relied upon by the Court in coming to a conclusion that a conditional sentence is appropriate in the circumstances. [ 54 ] The Defence also submits cases from other jurisdictions. Some do not assist the Accused's position. For example, a conditional sentence was rejected by the Yukon Territory Court of Appeal in the case of R v Reid , 2004 YKCA 4 , where the amount of the fraud totaled $212,000. [ 55 ] Others involve an amount at risk or loss that is materially less than in the present circumstances.

The accused in those cases received a conditional sentence order: R v Adams , 2009 ONCJ 383 (a bookkeeper plead guilty to defrauding her employer, who was a sole proprietor, of $145,000); and R v Robinson , 2003 CarswellOnt 3119 (convicted of defrauding her employer of about $200,000). [ 56 ] One case involved a unique consideration: in R v Massoudinia [2002] OJ No 5504 , the Court granted a conditional sentence order to an individual who through the façade of a modelling agency defrauded numerous individual victims of an aggregate of over $2 million.

In granting a conditional sentence order, the Court noted that the fact that the Crown had already agreed to a conditional sentence order for another defendant who was more culpable that the accused in the commission of that offence, the principle of

avoiding a disparity in sentences was a significant factor: at para 21.

The Court also considered the nature of the breach of trust, whichwas not as significant as is found in other cases: at para 15. [57] Two cases are sufficiently similar in fact pattern to note: R v Loewen, (MB PC) (accused plead guilty todefrauding the Bank of Montreal of over $1.3 million and another company of over $200,000 through cheque kiting and received aconditional sentence) and R v Berenbaum, 1997 CarswellOnt 5284 (chartered accountants and partners in an accounting firm which theydefrauded of over $1 million were given a conditional sentence order, however, the Court noted significant mitigating factors includingan immediate guilty plea, full participation in correcting their actions, and full restitution which had occurred prior to sentencing). [58] In light of the Alberta case authorities on this issue, however, I find these two sentencing decisions are not consistent with theposition of the courts in Alberta.

Notably, many of these cases would be inconsistent with the direction of the Alberta Court of Appeal inFulcher as discussed next, and many do not consider Alberta case law. Furthermore, I am not bound by these decisions. [59] Just months after the Cremer case, noted above, the Alberta Court of Appeal clarified the law on this issue in Alberta inreasons for judgement reserved of the Court in R v Fulcher, 2007 ABCA 381.

The Court held at para 30 that: The sentencing reasons here underemphasized the respondent's high moral culpability and the particular vulnerability of the victims inthis type of financial crime by one in a position of trust. Moved by the possibility of rehabilitation in the type of offender not regularlyseen by a sentencing court (no prior criminal record, strong commitment to family and a good work record), these Reasons did not noteappellate judgments.

Those direct that, absent truly exceptional circumstances, the sentencing goals of deterrence and denunciationdemand a sentence of imprisonment rather than the imposition of a conditional sentence for crimes of embezzlement or theft byan employee. [Emphasis added] [60] In Fulcher, the amount embezzled from the employer was less than $270K plus $30K from the accused's mother and anotherclient. Despite these amounts, which are much lower than in the present case, the Court of Appeal reversed the conditional sentence andimposed a two-year jail sentence.

This case involved a guilty plea. [61] The Alberta Court of Appeal reinforced its findings in Fulcher in R v Miles, 2011 ABCA 133. Between 2006 and 2008, anemployee embezzled over $203,000.00 from her employer, an electrical contracting company. In that case, the Court reversed aconditional sentence and imposed imprisonment for a period of two-years less a day despite a guilty plea. [62] The Crown suggests that subsequent cases have come to apply this principle - that frauds involving breaches of trust require asentence of imprisonment - to contexts beyond crimes of embezzlement or theft by an employee.

I note a similar argument was made bythe Crown in Iyer at para 287, that large scale frauds or frauds involving breaches of trust require a sentence of imprisonment. [63] I note that Fulcher speaks specifically to circumstances of employee-employer relationships, and the economic and socialimpact if sufficient deterrence is not engaged to prevent fraudulent activity in this context. As noted by the ABCA in Fulcher, in theemployee-employer context, such a breach is extremely problematic: para 44.

Other breaches of trust may also be equally alarming (suchas a lawyer with his or her own client, or breaches involving a trustee). Such breaches of trust may necessitate incarceration even wherethe scale of the fraud or quantum involved is relatively low compared to other fraud prosecutions. Not all breaches of trust are identicalin their severity.

An alternative view to the Crown’s is that as the severity of the breach of trust lessens, other factors, such as the scaleof the fraud / quantum of funds involved become more material considerations in assessing the need for incarceration to achievedeterrence and denunciation. [64] Whether or not all breaches of trust necessitate a period of incarceration, it is necessary in the present case.

In light of all ofthe factors in this case, including the nature of the breach of trust and quantum of funds involved (i.e. the magnitude of the offence), Ifind this case unquestionably necessitates a period of incarceration to achieve the sentencing objectives of denunciation and deterrence. [65] Consequently, the case at hand does not satisfy the conditions set out in Proulx to establish a conditional sentence is available.In particular, the appropriate period of the sentence is not less than two years, thus the pre-condition is not satisfied. Additional casesestablishing the appropriate sentence range follow.

Further, the sentencing objectives of deterrence and denunciation are not achieved inthis case with a conditional sentence order. [66] Cases more comparable to the case at bar were provided by the Crown, although I note that some of the cases tended to be onthe higher side of funds placed at risk or lost through the fraudulent activity. [67] Several aspects of the case of Iyer are similar to the present case. That case involved a development project that never got offthe ground.

The Court found the accused either knew his actions were fraudulent or in the alternative was reckless in misleadinginvestors without revealing that the development was unlikely. The accused stated that he believed he could turn the investments aroundright to the end. Distinguishing features of that case includes evidence of the accused’s reckless personal spending using these funds; theamount put at risk (in excess of $2.4 million lost or at risk) and the number of victims (54).

The Court in that case reviewed and citednumerous cases (several from the Alberta Court of Appeal) in which a period of incarceration was determined to be necessary to meet theobjectives of general deterrence and denunciation for large-scale fraud: at para 287 (see also para 302). The accused was sentenced toseven years' incarceration and ordered to pay restitution. [68] In R v Davis, 2014 ABCA 115, the Alberta Court of Appeal increased a sentence from 18 months and probation to 4 years'incarceration. The restitution order was not varied.

The facts of that case were more egregious as the accused, a lawyer, had defraudedalmost $3 million from multiple victims. There was a guilty plea in this case. Further, it is noted that the Crown did not ask for a highersentence in the lower court, possibly creating an upper limit to what the Court of Appeal was willing to impose as a sentence. [69] In R v Bailey, 2014 ABPC 223, the Court sentenced the accused to eight years' incarceration for the fraud charges (andadditional time for other charges such as money laundering) for a fraud involving large amounts of money and numerous victims.

Therewas no guilty plea in that case. In R v Thomas, 2014 ABPC 280, an employee who embezzled $1.8 million received a six year sentence;the Court gave her full credit for her early guilty plea and cooperation with the authorities.

[ 70 ] The Crown also notes the case of R v Seremet, 2013 ABQB 291 . In that case, the accused plead guilty to fraud against 11 financial institutions in the amount of $3.6 million, however the amount lost was actually closer to $515,000. He was sentenced to four years imprisonment, reduced to three years and three months for an early guilty plea. [ 71 ] The defence suggests that cases relied upon by the Crown and decided after 2011 must be approached with caution, as they are sentencing decisions that post-date the significant changes to s 380 of the CCC : citing R v Elander , 2015 ABQB 299 .

Yet many of those decisions, like the case at bar, relate to offences that predate the change to the legislation and those courts similarly took into account the legislation that was in place at the time of the commission of the offence: see Elander at para 41 . For example, the offences in Iyer occurred from 2007-2009; in Davis from 2005 - 2009; and in Bailey from 2001-2004.

The court in Iyer goes through an extensive analysis in considering whether a conditional sentence is appropriate in view of the prior wording of the statute. [ 72 ] As noted earlier in this decision, the accused maintains that his intent was legitimate initially, and the fraud only occurred due to poor market conditions and his own mismanagement of the investment fund. To address this suggestion, I consider the case of Donszelmann, in which the accused committed a fraud involving over $2.3 million.

The Court found that it was possible that the accused engaged in legitimate business, which through bad management or lack of insight got into financial trouble that he tried to dig himself out of, hoping not to shortchange anyone. The scheme was held as not fraudulent from the outset; not a Ponzi scheme. [ 73 ] The Court in Donszelmann found that the initial intent does not negate the ultimate reality of the fraud that was knowingly committed by the accused.

In both that case, as well as in Iyer , the Court held that a period of incarceration was appropriate even though the intent of the accused may have not been fraudulent from the outset. In those cases, the amount of funds at risk or lost was greater than in the present case, and the sentence was set at seven years in each, plus a restitution order. Similarly, even had I found that Mr. Macleod’s intent in the present case was initially genuine, the initial intent of the accused is not in any event determinative of the nature or duration of sentencing. [ 74 ] Finally, to address Mr.

Macleod’s suggestion that there have been some exceptional circumstances or consequences in his case, I consider the findings of the Court in R v Zenari, 2012 ABCA 279 . In that decision, the Court of Appeal reversed a conditional sentence order in a case where a police constable conveyed $225,000 from his employer, Edmonton Police Service, through the use of false overtime charges. In reversing the decision, the Court noted at para 8 the wrong application of the concept "exceptional circumstances" in that case: While the sentencing judge correctly stated the principle, she misapplied it.

Many of the factors she found to be exceptional are merely the normal consequences of this type of crime. The consequences of a fraud conviction for a person of previous apparently good character are often the same: loss of reputation; loss of job; shame; financial ruin; loss of house; negative repercussions for the family; letters of surprise but continuing support from friends and family; concerns about who will support the family while the accused is in jail, etc. These are common features of many of the other reported decisions, and cannot be considered to be exceptional.

If these are exceptional, then virtually every case like this is exceptional. It was an error of principle for the sentencing judge to categorize the ordinary as exceptional. [ 75 ] The accused in Zenari was sentenced to 18 months incarceration with credit for time served. F. Principles of Sentencing [ 76 ] The sentencing objectives are set out in s 718 of the CCC .

In cases of fraud, and in particular, where there is a breach of trust, the primary objectives are: specific deterrence, general deterrence and denunciation. [ 77 ] As noted above, deterrence is particularly important in circumstances of fraud as it is not typically a crime of impulse or passing opportunity; rather they are planned and deliberate. Even where there is little need for individual deterrence, this in no way detracts from the need for general deterrence: Fulcher at para 29 .

Jail is an appropriate sentence for fraud to provide a warning to other people who may be tempted to view it as an attractive business proposition: R v McKinnon , 2005 ABCA 8 at para 61 ; R v John, 1995 ABCA 82 at para 9 .

This assists in understanding why sentences for large frauds tend to be high even though the offender is commonly without a prior record, is previously of good character, even in circumstances of a guilty plea: Iyer at para 288 . [ 78 ] Another consideration is the principle of proportionality: similar crimes should receive similar sentences (subject of course to the factual distinctions that require variation from case to case).

Proportionality also requires that the sentence be proportionate in its severity to the seriousness of the crime committed and is measured by the gravity of the offence and the offender’s degree of responsibility: R v El-Sayed , 2013 ABQB 504 , at para 21 . In this case, Mr.

Macleod’s degree of responsibility is fairly high as a consequence of his planning and the representations he made to the individuals who invested with him. [ 79 ] As previously stated, based on the sentencing principles and the case law, including Fulcher , to which I am bound, I find that a conditional sentence is not appropriate in this case given the statutory preconditions and case law. G. Mitigating and Aggravating Factors [ 80 ] Pursuant to s 718.2 CCC , the court considers aggravating and mitigating factors. 1.

Aggravating [ 81 ] In this case, the aggravating factors include: • the size of the fraud, being approximately $1 million lost and $1.6 placed at risk; • that there was a breach of trust, Mr. Macleod relied on his reputation in the community to attract further investment, and he took

advantage of individuals in a small, close-knit community, some of whom thought he was their friend; • the number of transactions and affected victims (over 10), all of whom who were individuals (rather than corporate entities); • that the fraud involved some amount of planning and deliberation; although it was not a highly complex deception, it still had some complexity and certainly premeditation to it; • the duration of fraud (over 2 years); and • that Mr. Macleod appears to have been motivated by the prospect of some personal gain including personal financial gain. 2.

Mitigating [ 82 ] The mitigating factors include: • no prior (or subsequent) criminal record (which, as noted, is common in fraud cases); • Mr. Macleod has indicated remorse for his actions, although the Crown states that there remains a question of whether Mr.

Macleod even now understands the error of his actions and his intentions, given his ongoing position that his intentions were initially appropriate; and • the letters of reference indicating support from, and ties to, the community. [ 83 ] Regarding the accused's good character, I note the comment of the Court of Appeal in Fulcher at para 35 : Good character is far from a distinguishing factor in embezzlement cases. That the embezzler is otherwise a solid hard-working member of the middle classes, is almost always true. That is how he got employed in a position of trust: see R. v.

McKinnon , supra (paras. 60-63 ). Therefore the presence of good character has less of a mitigating effect in crimes of this sort than it would otherwise. [ 84 ] Mr. Macleod did not enter a guilty plea, however, he did admit most elements of the offence, with the main points of dispute being whether he had the requisite intent and whether his acts were dishonest. This may have shortened the trial, although it is not the same as a guilty plea. [ 85 ] I find the following factors are neither aggravating nor mitigating in this case:

a) There was a somewhat unclear plan for repayment discussed with the investors just prior to them deciding to pursue criminal prosecution. Mr. Macleod was amenable to this idea, although it is unknown whether he would have complied with this plan going forward.

b) Mr. Macleod is employed and his current income is approximately $120,000 per annum. His employer is willing to continue to employ him. Mr. Macleod asks that I consider that he has now the best employment position that he likely will ever get in sales, and if he is incarcerated, he will likely lose this position and along with it, his ability to pay restitution.

c) Mr. Macleod's offers of restitution made at various times that were not followed up with any payments whatsoever, and the offer to consent to a civil claim was offered after he was discharged as a bankrupt, likely rendering it meaningless. [ 86 ] Consequences of the fraud, such as the loss of Mr. Macleod's brokerage license, marital problems, loss of friends, loss of reputation, and bankruptcy are not mitigating factors.

Other features that are common to fraud cases should also not be considered exceptional: such as being a person of prior good character, and letters expressing surprise but continuing support from family and friends - or in this case, co-workers: Zenari at para 8 . [ 87 ] Although Mr. Macleod points to issues with his eyesight and his suggested learning disability, these do not come close to approaching exceptional circumstances of which the court should take note. II.

Reasons [ 88 ] In light of the sentencing principles and the aggravating and mitigating factors present in this case, as well as the other unique features of this case, I find an appropriate sentence in this case is a global/total sentence of 4.5 years given the facts of this case and the nature of this particular fraud. This sentence reflects the gravity of the offence and the role and responsibility of Mr.

Macleod in the commission of the offence. [ 89 ] As already noted, given that the appropriate sentence is more than two years, the option of a conditional sentence (which was available under the legislation at the time of the commission of the offence) is not available to Mr. Macleod. Further, given the importance of denunciation and deterrence for this type of offence, a conditional sentence would not meet the sentencing objectives in this case in any event. [ 90 ] I grant the restitution order per s 738 CCC in the amount of $1,029,000, being the amount lost by the victims of this offence.

Restitution is a stated sentencing objective per s 718(

e) and is a valid sentencing objective: R v Ghislieri , 1980 CarswellAlta 295 at para 20 (CA) . Restitution is to be restorative, not punitive: Iyer at para 307 . While the court may take into consideration the accused's ability to pay, this is not determinative as to whether such order is permitted. Mr. Macleod’s future ability to pay is unknown at this time. In light of all the circumstances, I find a restitution order appropriate.

[91] I note that restitution made in part or whole prior to sentencing is a mitigating factor. (That did not occur in the present case.)A restitution order, however, with speculative prospect of being satisfied does not justify a reduction in the custodial portion of thesentence: R v Chamczuk, 2010 ABCA 380 at paras 12, 15; Iyer at para 307. III. Ancillary Orders [92] The Crown requested a prohibition order pursuant to s 380.2 of the CCC. The Crown made no submissions in support of theorder.

The Accused did not oppose this order. [93] In R v Hooyer, 2016 ONCA 44, the Court held that prohibition "could well significantly negatively affect the appellant'sability to find and maintain employment and fully participate within his community". Therefore, the presumption against retrospectivitylikely applies in interpreting this section: Hooyer at para 47; see also Iyer at para 326. In light of the absence of submissions from theparties and presentation of other case law which may be applicable, I am not granting the prohibition order in this case. [94] Mr.

Macleod's conviction is a secondary designated offence pursuant to s 487.04 of the CCC. The Crown has applied for aDNA order pursuant to s 487.051(3) of the CCC .

In deciding whether to grant the order, the court is to consider, among other factors,the person's criminal record, the nature of the offence, the circumstances surrounding its commission and the impact such an order wouldhave on the person's privacy and security of the person. [95] The societal interest in such an order is not simply detection and sufficient investigation of crime, but also the deterrent effectit can have on potential repeat offenders: R v El-Sayed at para 54. [96] Given an adult offender’s diminished expectation of privacy following conviction, the minimal intrusion into the security ofthe person in the ordinary case and the important interests served by the DNA Databank, it is usually in the best interests of theadministration of justice to make such an order: R v Hendry (2001), S7 OR (3d) 47S (ONCA); See also R v Jordan, 2002 NSCA 11; 2002 NSR (2d) 371, 1 Crown (6th) 141. [97] In light of the nature and the circumstances surrounding the commission of the offence, despite the absence of a prior criminalrecord, I find it appropriate to grant the DNA order in this case.

IV. Conclusion [98] Mr. Macleod is sentenced to 4.5 years to be served in a penitentiary. My understanding is that it will be more convenient forthe Accused's family to visit him if he is located at the Williamhead penitentiary on Vancouver Island, B.C. I therefore make thatrecommendation. [99] Mr. Macleod is ordered to pay restitution in the amount of $1,029,000. Such restitution will be in the amounts and payable tothe victims of the offence as set out in Exhibit S2: the Valuation Schedule. [100] The DNA order is granted; the prohibition order is not. Heard on the 16th day of November, 2017.

Dated at the City of Calgary, Alberta this 27th day of November, 2017. C. Dario J.C.Q.B.A. Appearances: Steven Johnston for the Crown Albert E. King, Q.C./Mark C. Canofari

for the Accused