R. v. Fung, 2014 ONCJ 492

Citation: R. v. Fung , 2014 ONCJ 492 ONTARIO COURT OF JUSTICE BETWEEN: ) ) HER MAJESTY THE QUEEN ) Mr. S. Rothman ) for the Crown ) — AND — ) ) Mee-hung fung ) Mr. P. Metzler ) for the defendant ) ) ) ) lipson J.: REASONS FOR SENTENCE [ 1 ] Mee Hung (Margaret) Fung pleaded guilty to two counts of fraud over $5000. She was employed as a senior manager at the Toronto Dominion Bank with authority over internal accounts containing millions of dollars. Ms. Fung admits that over a period of approximately 14 years she defrauded her employer of $1,778,543.57. Since the time of her arrest, Ms.

Fung has made full restitution to the bank. There is evidence that Ms. Fung suffers from a major depressive illness that played a role in the commission of the offences. The Crown seeks a three year penitentiary sentence. Counsel for Ms. Fung submits that a lengthy conditional sentence with probation is appropriate Circumstances of the offences [ 2 ] Counsel for the Crown and accused submitted the following agreed statement of facts: “Background 1. Ms. Fung is a former employee of the Toronto-Dominion Bank. She worked at TD for forty years. 2. From October 30, 2006 until her retirement on May 23, 2013, Ms.

Fung was a Manager of Customer Service with the TD Bank branch located at King Street and Bay Street, in the City of Toronto. 3. Prior to her role as Manager of Customer Service, Ms. Fung was the Operations Service Administrator at the TD Centre Business Office. Ms. Fung was responsible for managing the back office employees who process transactions on behalf of TD branches. 4. In both of those roles, Ms. Fung managed TD account number 631650 (the “650 account”).

The 650 account is an internal TD account in the name of TD Wealth Services, typically used to process transactions for or on behalf of TD Wealth Service’s clients. Ms. Fung also managed an internal TD account number 920555 (the “555 account”). The “555 account” is a cash voucher account at the Street Level Branch, typically used to process transaction costs between TD’s internal cost centres. 5. As a senior manager at TD with authority and control over TD accounts containing millions of dollars, Ms. Fung owed a fiduciary duty to ensure that the accounts were handled properly and for the benefit of TD.

The Fraud 6. Between February 9, 1999 and March 22, 2013, Ms. Fung improperly withdrew funds from TD’s internal accounts. In total, Ms. Fung improperly withdrew $1,778,543.57 . Most of these funds came directly from the 650 account, although some funds originated from TD’s internal account number 629540 (the “540 account”) and account number 500576 (the “576 account”). None of these withdrawals had any legitimate purpose for TD or any of its customers, nor were they authorized by Ms. Fung’s superiors.

7. Ms. Fung would take out several cash advances per week on her MBNA MasterCard and would transfer outstanding balances from other credit cards to her MBNA card. She would then pay the balances with the stolen funds. She had several credit cards including American Express, Royal Bank Visa, Sears MasterCard, BMO MasterCard, Walmart MasterCard, Capitol One MasterCard, and lines of credit. An Equifax report dated August 8, 2013 showed that she had a $587,300 credit limit combined on several accounts and owed $33,529.

She would pay minimal balances and would accumulate interest fees, transaction fees, insufficient fund fees and overdraft fees. Ms. Fung withdrew funds directly from TD internal accounts and deposited them into her MBNA MasterCard credit account. Most of the funds deposited into the MBNA account were subsequently withdrawn in cash from ATMs. The remaining fraud funds were withdrawn by Ms. Fung in cash directly, or paid by bank drafts to her husband, and to her parents, among other payees. 8.

The breakdown of the fraudulent transactions is as follows: a. 47 withdrawals from the 650 account where funds were deposited into Ms. Fung’s MBNA account ($1,273,206.86) b. 6 withdrawals from the 540 account where the funds were deposited into Ms. Fung’s MBNA account ($206,499.49) c. 1 withdrawal from the 576 account where funds were deposited into Ms. Fung’s MBNA account ($33,389.45) d. 1 withdrawal from the 650 Account in the form of a bank draft payable to TD Waterhouse ($54,554.22). That bank draft was deposited into a bank account in the names of Ms. Fung’s parents. Ms.

Fung later took $5,000 from her parents’ account and purchased a draft which was applied to her MBNA account. e. 1 withdrawal from the 650 account by way of 3 bank drafts payable to Homelife Leader Inc. Brokerage, Ms. Fung’s father, and Canadian Springs (total of $5000). The bank draft to Homelife was used pay Ms. Fung’s first and last month’s rent for an apartment she rented with her husband. f. 1 withdrawal from the 650 account by way of bank draft payable to Ms. Fung’s husband.

This bank draft was deposited the same day into their joint TD bank account ($6362.02) g. 22 cash withdrawals from the 650 Account ($199,531.54). That includes 5 cash withdrawals totalling $52,794.21 which occurred in December 2012 and March 2013. Discovery of The Fraud 9. In July 2013, TD Wealth Services discovered that the 650 Account was not balanced, and was in a negative position. 10. Following an investigation, TD discovered that since at least 2006, Ms. Fung had been transferring a negative balance between the 650 Account and the 555 Account.

As of July 2013, that negative balance was more than a million dollars. 11. To conceal her fraud, several times per month, Ms. Fung (or at her direction, an employee under her supervision), would transfer all or part of the negative balance either to or from the 650 account and the 555 account. These transfers made it appear that each account had a zero balance from time to time, thereby concealing the fraud. 12. Before retiring, Ms. Fung left written instructions post-dated for May 30, 2013 to her staff to make entries to balance the two internal accounts. 13. TD was only able to discover Ms.

Fung’s actions after she retired, when she could no longer perform the transfers herself, or instruct a subordinate to do so. Civil Suit and Arrest 14. On September 3, 2013 TD Bank reported the fraud to the Toronto Police Service. 15. On September 16, 2013 a Statement of Claim was issued in the Superior Court of Justice by TD against Ms. Fung and her husband, Daniel Pui Chak Yan.

16. On September 19, 2013 TD was granted an Order by the Superior Court of Justice freezing all assets of Ms. Fung and her husband. 17. On September 21, 2013 Toronto Police Service contacted Ms. Fung to make arrangements for her surrender. 18. In the morning of September 23, 2013 Ms. Fung surrendered herself to the Toronto Police service and was arrested and charged, and held for a show cause hearing. Ms. Fung was released from custody later that day on a $300,000 surety recognizance with a number of conditions, including restrictions on financial transactions and travel. Restitution 19.

As of November 13, 2013, full restitution had been made to the TD in the amount of $1,850,000.00. Payment was made a little over two months after the initial fraud had been reported by TD to the Toronto Police Service. The restitution included interest accrued on the outstanding funds as well as legal costs incurred by TD. This restitution amount was based on the documented loss to the TD at that time of $1,788,805.25, plus interest charges of $61,194.75. 20. The documented loss included losses that dated back to February 9, 1999. These losses were only included in the total as a result of Ms.

Fung’s own admissions. The records of the TD could only support losses from April 19, 2002 onwards. Since the restitution was paid, it has become apparent that $10,261.77 was mistakenly included twice in the original calculations of the documented loss. The actual amount withdrawn by Ms. Fung was $ 1,778,543.57 , as noted previously.” Circumstances of the Offender [ 3 ] Ms. Fung is a 62 year-old first offender. She moved to Canada from Hong Kong in 1967. She started working for TD Bank in 1973 and eventually became a senior manager with responsibilities over internal TD accounts containing millions of dollars.

After 40 years with the bank she retired in May, 2013. Ms. Fung married Daniel Yan in 1977, with whom she has two children. Her daughter is now 34 years old and her son is 33. Mr. Yan found employment as a financial advisor in Hong Kong and would travel back and forth between Toronto and Hong Kong. In 1999 she learned that her husband was having an affair with a woman in Hong Kong. He and his lover were involved in an accident in where both suffered serious burns. He survived but his mistress died from her injuries. This event received widespread publicity in Hong Kong and in the Toronto Chinese community.

In his report (exhibit 2, tab 10), forensic psychiatrist Dr. J. Gojer states that as a result of these events, Ms. Fung went into a deep depression but did not seek help. Her husband returned to Toronto and he and Ms. Fung continued to live under the same roof for the sake of the children. She continued to take care of the financial needs of her children. Ms. Fung advised Dr. Gojer that she committed this fraud in order to protect her children from any potential financial difficulties. In his report, Dr. Gojer states the following: “When I first saw Ms.

Fung she presented as quiet, severely depressed and unable to talk about what happened without crying. She did not have any delusions but tried to justify what she did but saying that she felt that she had to protect her children from any potential financial disaster. More recently when interviewed she was able to recognize that her thinking earlier was flawed and that she had been irrational for many years with respect to believing that the future was fraught with disaster. There were no perceptual or cognitive disturbances. She was very remorseful for her actions.” [ 4 ] With respect to Ms.

Fung’s motive to commit the offence, Dr. Gojer offered the following: “Ms. Fung has suffered from a Major Depressive illness following the discovery of her husband’s affair and the accident that he had. She appears to have developed irrational thoughts that allowed her to justify taking money from the bank. Her irrational belief that her children would be at danger from financial collapse appears to be more of a distorted thought rather than a delusion. Her offending appears to have had a compulsive component driven by anxiety and depression. Ms.

Fung appears to have reacted to her husband’s affair with shock and adopted socially inappropriate methods of dealing with her feelings. Her personality style is not one of antisocial behaviours but of fear and anxiety that she had for the safety of her children. Her offending can be understood as an abnormal response to stress and fueled by a chronic Major Depressive illness. While a Section 16(1) defence is not available to her, the presence of a chronic Major Depressive illness certainly had a significant impact on her behaviour during the offending.” [ 5 ] Since her arrest Ms.

Fung has completed 33 psychotherapy sessions with Dr. T. K. Quek. Dr. Quek reports that through counselling, Ms. Fung has been able to deal with her depression and to accept responsibility for her actions. Her progress has been “very positive” and “she has been cooperative and eager to engage meaningfully in counselling and has been determined to make the changes necessary to correct herself.” She is not prescribed anti-depressants but does take anti-anxiety medication to manager her poor sleep patterns. Aggravating factors

[6] Ms. Fung used her senior management position at TD to commit a large scale breach of trust fraud.

Section 718.2provides that a breach of trust is deemed to be an aggravating circumstance warranting an increase in sentence. The amount of the fraudwas just under $1.8 million. The agreed statement of fact indicates that the offence was committed over 14 years involving some 79unauthorized withdrawals of funds which were deposited into Ms. Fung’s personal account or into accounts in the names of familymembers. She employed a good deal of deceit and sophistication to commit these offences.

Either she or employees at her directionwould several times a month transfer all or part of the negative balance either to or from the internal accounts. These transfers wouldmake it appear that each account had a zero balance from time to time, thereby concealing the fraud. It is an aggravating factor that justprior to her retirement, Ms. Fung left written instruction with her staff to make entries to balance the two internal accounts. Sheintentionally ran the risk that these subordinates, who were innocently following her directions, would fall under suspicion. Her formeremployer was only able to discover Ms.

Fung’s actions after she retired, when she could no longer perform the transfers herself, orinstruct a subordinate to do so. The funds that she took were used to provide herself and her children with an extremely comfortablelifestyle. In the defence materials (exhibit 2, tab 1) Ms. Fung indicates that her spending included $300,000 on home renovations,$26,000 on life insurance, $200,000 on her son’s wedding, $100,000 on her daughter’s dowries and an average of $15,000 per year onflights by her husband to and from Hong Kong and other family trips.

Other monies were used for mortgage payments, householdutilities and maintaining two vehicles, credit card payments, housecleaning, gifts and church donations. Mitigating factors [7] Ms. Fung’s guilty plea is a significant mitigating factor. She fully acknowledges her responsibility and is extremelyremorseful for her conduct and the effect it has had on her former employer and her own family. She has waived her right to apreliminary inquiry and trial and thereby saved great cost to the administration of justice and the community. Full restitution has beenmade to TD. There is also psychiatric evidence that Ms.

Fung was suffering from a major depressive illness following the humiliatingdiscovery of her husband’s affair and the accident which resulted in serious injury to him and his lover’s death. According to Dr. Gojer,her offending can be understood as an abnormal response to stress and anxiety. She stole from her employer to ensure that her childrenwould enjoy financial security. It should also be noted that Ms. Fung was cooperative with investigators. The documented loss includeslosses that dated back to February 9. 1999.

The agreed statement of facts indicates that these losses were included in the total as a resultof Ms. Fung’s own admissions. The records from TD could only support losses from April 19, 2002 onwards. What is a fit sentence? [8] Ms. Fung pleaded guilty to two counts of fraud. During the time frame when this fraud was committed, the sentencingregime found in the Criminal Code changed twice. [9] On November 1, 2011, a mandatory minimum sentence of two years for Fraud over $5000 “if the total value of thesubject matter of the offences exceeds one million dollars” came into force. While the quantum of Ms.

Fung’s fraud exceeded onemillion dollars, it is also true that after November 1, 2011 the quantum defrauded was far less. The Crown and defence correctly take theposition that the mandatory minimum sentence does not apply to this case. [10] On November 20, 2012 the new conditional sentence regime came into force. The offence of Fraud Over $5000 becameineligible for a conditional sentence because the maximum penalty is 14 years. Ms. Fung’s fraudulent acts continued after that date.

TheCrown decided to put two different counts on the information to avoid ambiguity about which sentencing provisions apply to whichconduct. Ms. Fung pleaded guilty to both counts. The first alleges fraud between April 19, 2002 and November 19, 2012 and the secondalleges fraud between November 20,2012 and May 30, 2013. Ms. Fung is eligible for a conditional sentence on the first count but not onthe second count. During the time period for the second count, Ms.

Fung made cash withdrawals totalling $52,794.21 and continued toactively conceal the fraud throughout late 2012 and early 2013 and left written instructions post dated May 30, 2013 to conceal her fraud. [11] Counsel for the accused seeks a lengthy reformatory range sentence to be served in the community on count 1 and asuspended sentence with probation on count 2. The Crown is opposed to a conditional sentence and submits that the appropriate sentenceshould be a penitentiary term of three years. [12] Appended to these reasons are tables of sentencing cases prepared by Crown and defence counsel.

Even before the removalof conditional sentences for fraud over $5000, the case law has shown a trend toward longer sentences for large frauds. This isparticularly the case when, as here, there has been a breach of trust. The Court of Appeal has repeatedly emphasized that the primarysentencing objective in such cases is general deterrence; see R. v. Bogart, (ON CA), [2002] O.J. No. 3039; R. v.Dobis [2002]).OJ. 646; R. v. Woldegrabriel, [2005] O.J. 4937; R. v. Clarke, (ON CA), [2004] O.J. 3438.

Large scalebreach of trust fraud cases will almost always attract a penitentiary sentence in the 3-5 year range or more depending on the amount ofthe loss and the impact of the fraud on the victims.

In Dobis at para 37, the court also points out that reformatory sentences have beenupheld where important mitigating or differentiating factors are present. [13] On the issue of whether these sentences should be served in the community or in custody, the Court of Appeal hasconsistently rejected conditional sentences in well planned large scale frauds involving a breach of trust on the basis that this type offraud is one of those offences where the need for general deterrence is particularly pressing. The court has also recognized that “specialcircumstances” might justify a conditional sentence.

For example, in Bogart the court stated that in an OHIP fraud, a conditional sentencemight be imposed where the “amount of the fraud is relatively small, the doctor has made full restitution before sentencing or the doctorcan point to exceptional circumstances such as ill health or advanced age.” [14] The law in this regard is well summarized by Hill J. in R. v. Williams (ON SC), [2007] O.J. 1604 atparas 26-28 as follows: The sentencing option of a conditional sentence is not excluded from consideration in breach of trust fraud cases: R. v. Dobis, at 273 andsee for example, R. v.

Bunn (2000), 2000 SCC 9 , 140 C.C.C. (3d) 505 (S.C.C.); R. v. Burkart (2006), 2006 BCCA 446, 214 C.C.C. (3d) 226 (B.C.C.A.); R. v. Gauthier; R. v. Steeves and Connors; R. v. Robinson, [2003] O.J. No. 4722 (S.C.J.); R. v.

Tulloch, [2002] O.J. No. 5446 (S.C.J.). Many of these cases include exceptional mitigating circumstances. A conditional sentence, withproperly tailored punitive conditions, can effect a measure of general deterrence and denunciation. That said, large-scale frauds by persons in positions of trust will almost inevitably attract a significant custodial sentence. In R. v.

Dobis,at 273, the court observed: This court has said repeatedly that general deterrence is central to the sentencing process in cases involving large scale frauds withserious consequences for the victims: see: McEachern, Bertram and Wood, Gray and Holden, [2000] O.J. No. 3481, supra. Importantly,the court has said the same thing since the introduction of the conditional sentencing regime. Conditional sentences have been rejected inlarge scale fraud cases such as Pierce, supra, and Ruhland, [1998] O.J. No. 781, supra, and commented on adversely in the leadingOntario case dealing with conditional sentences, R. v.

Wismayer (1997), (ON CA), 115 C.C.C. (3d) 18 (Ont. C.A.). In Pierce, Finlayson J.A. observed, at p. 40: I would ... refuse the application to permit the appellant to serve the sentence in the community. The abuse of a position of trust orauthority in relation to a victim is an express aggravating circumstance set out in the sentencing guidelines under s. 718.2. This factor hastraditionally drawn a severe custodial term even with first offenders.

In the Pierce decision, at 29-30, the court stated: In all of the circumstances, when the competing principles of rehabilitation and general deterrence are considered, the nature of thisparticular crime with the large amount of money that is involved, all of which is apparently not recovered, it seems to me that a custodialsentence has to follow, that is so even though she has no criminal record. That is so even though this will be the first time in her life thatshe has experienced jail. I am quite alive to the principle that jail should be the last resort in the difficult matter of sentence. The reason isclear.

This country, from coast to coast and especially the heavy populated urban areas of Southern Ontario, abounds with fraudsmen whowould regard a low or a non-custodial sentence in these circumstances as an irresistible temptation to take the risk of spending a fewshort months in jail (a Canadian jail) in return for attempting the crime of fraud or theft where the prize exceeds $150,000. To some, sucha prospect would be almost irresistible.

Great care must be taken in the matter of sentence for a criminal offence such as fraud at thislevel of seriousness, to avoid the prospect that by over-emphasizing the principle of rehabilitation, the crime, to many, would be worththe risk of being caught. See also R. v. Clarke, at para. 17; R. v. Paul, at para. 15-6; R. v. Steeves and Connors, at 286-7; R. v. McIvor (1996), 1996 ABCA 154, 106 C.C.C. (3d) 285 (Alta. C.A.) at 286. "[A] sentence of six years is within the correct range of sentences for major frauds" and sentences in the 3 to 5-year range are common:R. v. Dobis, at 271; R. v. Bertram, at 3; R. v.

Wilson, (ON CA), [2003] O.J. No. 1047 (C.A.) at para. 5. Penitentiarysentences in the six-year range have been imposed in cases involving millions of dollars. The Dobis decision, at 273, includes at thelower end of "large-scale frauds", the McEachern case involving $87,000. and the fraud in Pierce in the amount of $270,000., while a$200,000. defalcation was described as a large-scale fraud in R. v. Robinson, at para. 4, 11.

By way of jurisdictional comparison, inEngland, on a guilty plea to theft or fraud of sums between GBP100,000 and GBP200,000 the appropriate sentence is in the range of 2 to3 years' imprisonment: R. v. Clark, [1997] EWCA Crim 3081 at 4-5. [15] I will first address the issue of whether a penitentiary sentence is required in this case. [16] Despite the aggravating factors present in this case, I am of the view that there are three compelling reasons to concludethat an upper range reformatory sentence would be appropriate. [17] First, Ms.

Fung has entered guilty pleas and waived her right to a preliminary hearing and trial. She has fully acknowledgedher guilt, is sincerely remorseful and assisted investigators attempting to track the loss to TD. I do not doubt the position taken by theCrown that the prosecution case was strong. However, it is important to remember that these cases are difficult to investigate andexpensive to prosecute and a guilty plea is an important mitigating factor. [18] Second, as of November 13, 2013, full restitution has been made to the TD in the amount of $1, 850,000.00.

Payment wasmade a little over two months after the initial fraud had been reported by the bank to the Toronto Police Service. The restitution includedinterest accrued on the outstanding funds as well as legal costs incurred by TD. This restitution amount was based on the documentedloss to TD at that time of $1,788,543.57 plus interest charges of $61,194.75. As counsel observed, full restitution for a fraud of thismagnitude is a rarity and, in my view, justifies a significant reduction in sentence. [19] Third, I accept Dr. Gojer’s view that Ms.

Fung’s fraudulent conduct appears to have had a compulsive component driven byanxiety and depression. She has suffered from a major depressive illness following the discovery of her husband’s affair and the accidentthat he had which resulted in serious injuries to himself and the death of his mistress. She developed irrational and distorted beliefs thatallowed her to steal from her employer in order to provide a very comfortable lifestyle for herself and her children. Dr.

Gojer stated that“her offending can be understood as an abnormal response to stress and fueled by a chronic depressive illness.” [20] The next issue to be determined is whether this is a case for a conditional sentence? [21] Ms. Fung is a 62 year old first offender who has almost single handily raised two children and is active in her church. Thecourt has considered the good character evidence presented at the sentencing hearing.

She does not present a risk to the community.Crown concedes that she is eligible to receive a conditional sentence. [22] The issue becomes whether the imposition of a conditional sentence in this case would be consistent with the fundamentalpurpose and principles of sentencing set out in sections 718 to 718.2.

[ 23 ] After careful consideration of the relevant sentencing principles and objectives, the aggravating and mitigating circumstances of both the offence and the offender, I am of the view that a custodial sentence should be imposed in this case for several reasons which include: • The magnitude of the fraud- almost $1.8 million. • The high degree of sophistication of dishonesty, planning and deceit on the part of Ms. Fung to both execute and cover up the fraud. • The lengthy period of dishonesty. On her own admission, Ms.

Fung committed this fraud over a period of 14 years. • The multitude of transactions she conducted in order to commit and cover up the fraud. • The fact that she was caught as opposed to any voluntary termination of the criminality • Ms. Fung ran the risk that innocent subordinates would fall under suspicion. She caused other bank employees to complete several transactions. No doubt they acted out of respect for the authority of the accused as a supervisor. • Ms.

Fung continued the fraudulent scheme after her retirement with written directions to her former subordinates to continue the cover-up. [ 24 ] As observed by Trafford J. in R. v Palantzas [2009] O.J. 3862 , a case involving a large scale breach of trust by a bank manager at para 47: Integrity in the conduct of the financial affairs of a bank is important to the bank and the community. All employees of banks and other such financial institutions must appreciate, and abide by, basic standards of integrity. Most such employees do most of the time.

Those who do not, including the defendant , must appreciate that crimes of this magnitude will not be treated casually by this Court. The defendant’s conduct… was a flagrant departure from the standards of the bank and this community. [ 25 ] For the above reasons, I am satisfied that a conditional sentence would not provide adequate emphasis to principles of denunciation and general deterrence in this case.

The severity of the crime and the applicable sentencing guidelines from the Court of Appeal regarding large scale breach of trust frauds strongly militate against the imposition of a conditional sentence. [ 26 ] Ms. Fung will be sentenced to 14 months on count 1 and 3 months consecutive on count 2. The total sentence is 17 months. [ 27 ] There will also be an order made under s. 380.2 prohibiting Ms.

Fung from seeking, obtaining or continuing any employment for becoming or being a volunteer in any capacity that involves having authority over the real property, money or valuable security of another person for five years. Released: September 19, 2014 Justice T. Lipson Appendix 1

Appendix 2