Her Majesty the Queen - v. -, 2015 SKPC 181

IN THE PROVINCIAL COURT OF SASKATCHEWAN Citation: 2015 SKPC 181 Date: December 30, 2015 Information: 24388430, 24388437 Location: Saskatoon _____________________________________________________________________________ Between: Her Majesty the Queen - and - Joshua Douglas Johnston Appearing: R. Ritter For the Crown Self For the Accused SENTENCING DECISION R.D. JACKSON , J I BACKGROUND [ 1 ] The accused pled guilty to various charges stemming from investment fraud perpetrated between June 1, 2008 and October 31, 2010 (real estate fraud) and February 25, 2015 and May 22, 2015 (Shuswap Lake fraud), respectively.

[ 2 ] The guilty pleas involving the real estate fraud were entered following discussion and negotiation between counsel on October 7, 2014, prior to the commencement of the second day of a three week trial. The accused pled guilty to the following charges on Information #24388430:

a) Fraud over $5,000 involving 13 investors, contrary to s. 380(1) (

a) of the Criminal Code ;

b) Fraud under $5,000 relating to two investors, contrary to s. 380(1) (b);

c) Money laundering contrary to s. 462.31(1) of the Criminal Code ; and

d) Possession of proceeds of crime contrary to s. 354(1) (

a) and 355 (

a) of the Criminal Code . [ 3 ] An up-to-date list of the victims and amounts currently owing was provided by the Crown on December 21, 2015, reduced slightly from the initial amount alleged of $1,228,450.00 to $1,192,417.00:

a) Over $5,000 Eldon Dahl $565,450.00 Marge Bailey $70,000.00 Carmen Bailey $10,000.00 Andy Kotelmach $85,000.00 Josh Mattison $20,000.00 Mark Jakubowski $50,000.00 Heath Pearce $15,000.00 Shalloon Dahl $7,500.00 Leanne Campbell $10,000.00 Stacy Bestvater $86,567.00 Carl Rosenau $100,000.00 Tim Rosenau $100,000.00 David Johnston $70,000.00 (

b) Under $5,000: Michael Boehm $400.00 Kristina Kuervers $2,500.00 _____________ Total $1,192,417.00

[ 4 ] Sentencing was adjourned to February 2, 2015, to permit the accused time to order his affairs and raise funds to be applied toward restitution to the named victims. Defence counsel stated that such restitution had been specifically discussed with his client as part of the plea comprehension, with a view to ameliorating the impact of sentencing. [ 5 ] On February 2, the accused advised the Court that he had retained new counsel from Calgary to make application to expunge his guilty pleas.

A hearing then took place on March 30, with witnesses called by Crown and defence, which was then adjourned to May 25, for decision. [ 6 ] A written decision was handed down May 25, 2015, denying the accused’s application to expunge his guilty pleas. [1] A further wrinkle was added on this date when, prior to the decision being rendered, the Crown presented three new charges, two counts of which involved new fraud allegations concerning a cottage on Shuswap Lake, British Columbia and a third count relating to a breach of undertaking for failing to keep the peace (Shuswap Lake fraud), as contained on Information #24388437. [ 7 ] The accused was remanded into custody on the new charges and was subsequently denied bail in docket court which was upheld upon review by the Court of Queen’s Bench.

He has accordingly remained in custody throughout on the Shuswap Lake fraud charges. [ 8 ] Prior to adjourning on May 25, the accused, through counsel, advised the Court that he wished a sentence hearing to dispute the individual quantum amounts as claimed by the real estate investors.

Accordingly, four days were set aside, November 2 - 5 inclusive, for this purpose. [ 9 ] At the outset of the sentence hearing on November 2, the accused informed that he did not wish to proceed and was prepared to admit all of the individual amounts of the real estate frauds. [ 10 ] Sentencing was then re-scheduled to December 7, 2015 at the accused’s request so that he could arrange new counsel and have similar fraud charges from Alberta waived into Saskatchewan for guilty pleas to be dealt with at the same time.

He was advised by the Court that sentencing submissions would proceed on that date irrespective of whether counsel had been obtained or the Alberta charges had been brought in. [ 11 ] On December 7, the Crown informed that in addition to the outstanding guilty pleas before the Court, the accused had also pled guilty in docket court to the two counts relating to the Shuswap Lake fraud and had adjourned his sentencing to today’s date. The accused confirmed this to be the case and consented to all matters being dealt with together.

He also advised that he had not been able to secure counsel nor had he arranged to have the guilty pleas on the outstanding fraud charges in Alberta waived into Saskatchewan. Further, he informed that he was prepared to speak to sentence without benefit of legal counsel on this date to have matters concluded.

II PARTICULARS OF THE OFFENCES Real Estate Fraud, Money Laundering and Proceeds of Crime [ 12 ] Over the course of two and one-half years, the accused solicited funds from the various individuals as set out, for the purpose of acquiring real estate properties primarily in the provinces of Alberta, but also in Saskatchewan and Florida. The pitch involved flipping the properties for quick profit which, according to the accused, he had been very successful at in past. He utilised friends and family to assist gaining trust and confidence of community members in the Kindersley area.

A common theme related to his extensive family ties in the area socially and through church affiliation. [ 13 ] Promises of large return on investments never seemed to materialize and the investors were routinely rebuffed and assuaged with ongoing lies about imminent payoffs, and in several instances inveigled out of further funds.

[ 14 ] The accused however, as soon became apparent, was simply conning all of the investors. No returns were paid and have not been paid to this date, over six years later. [ 15 ] Through diligent and prolonged police investigation it was ultimately learned that no evidence of any investing or acquisition on behalf of the investors ever took place.

Some addresses of so called investment properties did not even exist and others appeared to be the subject of an unrelated ongoing mortgage fraud scheme involving commercial lenders. [ 16 ] As for the investor money itself, the accused filtered these funds through a complex web of some forty-two different bank accounts belonging to the accused, his limited companies, friends and co-workers.

From these accounts, the accused was able to channel payments to himself and various others including even the Hell’s Angels in Calgary with whom he had previously been associated. [ 17 ] In a warned statement to police on May 17, 2012 the accused acknowledged that he primarily utilised the investment monies for his personal use which included attempted acquisition of two luxury homes for himself in Calgary as well as vacation property in Shuswap Lake, BC.

Payments to the Hell’s Angels he claimed were even larger than the Crown alleged which he stated were as a result of fear and extortion once certain members found out he had large amounts of money available to him. [ 18 ] Irrespective of where the truth lies on the precise extent and nature of how the investors monies were squandered, what is certain is that they were. The accused by calculated and clever design was able to structure a direct conduit from the pockets of the innocents to his own to maintain an opulent lifestyle.

Ironically, he then used this “image of success” to investors to buttress his persona of a successful real estate entrepreneur. Shuswap Lake property [ 19 ] As noted, the accused pled guilty to a separate fraud involving the purported sale of the Shuswap Lake property. Presumably, this is the same property involved in the initial fraud investigation which the accused had attempted to acquire for himself with investor funds.

When the sale could not be completed the accused forfeited the down payment, however, the owner permitted the accused periodic use thereafter. [ 20 ] According to the Crown’s synopsis, the proposed sale came about when a neighbour learned from the accused, whom he believed to be the owner, that “his” cottage was for sale. The neighbour contacted his friend, Douglas Simpson in Calgary, who obtained confirmation from the accused that yes he was selling the cottage for the sum of $225,000.00. The reason he gave for selling was to help his brother out concerning financial difficulties over a condominium sale.

Simpson had also seen the accused at this cottage from time to time when he visited the neighbour so his suspicions were not aroused in any respect. Mr. Simpson then ultimately solicited his friend Michael Facco to join him in the purchase. [ 21 ] Johnston later reduced the selling price to $110,000.00 if the buyers could pay cash and shorten up the time for payment. Personal meetings followed whereby the buyers ultimately agreed and paid the $110,000.00 in cash to be held “in trust” until finalization of the sale.

To effect the sale process, Johnston used phoney documents containing whited out portions which obviously related to some other transaction. When questioned by the buyers as to their authenticity, Johnston stated that these documents were from previous sale attempts which had not gone ahead and that new and original documents would be provided later. Johnston also offered to sell them a boat for a fraction of the acquisition price and sought an additional loan from them of $10,000.00 offering a $4,000.00 interest rate of return.

At this point Facco became suspicious and ultimately learned through an Internet search that Johnston had been charged with fraud. [ 22 ] The buyers then discovered that Johnston was not the owner of the Shuswap cottage and never had been. Subsequent requests for return of the money went unanswered and to date the two proposed purchasers are each out their $55,000.00 contribution to the sale. [ 23 ] Police investigation traced the payment funds to two separate bank accounts controlled by the accused.

Over a short period of time all of the funds were paid out directly as cash withdrawals, payment of portions of civil judgments against his construction company

and for various other known and unknown purposes. Both accounts now show a negative balance. [ 24 ] At the sentence hearing, the accused stated that he wanted the Court to know he had permission from the owner to sell the cottage although this was not in any way a recanting of his guilty pleas, he stated. There is however absolutely no evidentiary basis to make such a statement. To the contrary, the accused according to the victims’ statements, represented he was the owner of the property.

Furthermore, all of the sale documentation referred to him as such and all of the purchase monies went directly to his accounts. [ 25 ] Even if the accused had permission to sell on behalf of the legitimate owner, which is not for one moment believed by the Court, he would have done so as agent on behalf of the seller and would not have been entitled to the benefit of the sale proceeds personally. Unquestionably, such a bald and glib assertion is yet one more example of the repeated mendacity of this accused as and when it suits his purpose.

III APPLICABLE LAW Criminal Code [ 26 ] General guidelines are contained in s. 718 of the Criminal Code which states the following objectives when considering an appropriate sentence. S. 718 The fundamental purpose of sentencing is to contribute, along with crime prevention initiatives, to respect for the law and the maintenance of a just, peaceful and safe society by imposing just sanctions that have one or more of the following objectives:

a) to denounce unlawful conduct;

b) to deter the offender and other persons from committing offences;

c) to separate offenders from society, where necessary;

d) to assist in rehabilitating offenders;

e) to provide reparations for harm done to victims or to the community; and

f) to promote a sense of responsibility in offenders and acknowledgment of the harm done to victims and to the community. [ 27 ] Further sentencing principles follow in ss. 718.1 and 718.2, not all of which apply to the present case: s. 718.1 A sentence must be proportionate to the gravity of the offence and the degree of responsibility of the offender. s. 718.2 A court that imposes a sentence shall also take into consideration the following principles: (

a) a sentence should be increased or reduced to account for any relevant aggravating or mitigating circumstances relating to the offence or the offender, and, without limiting the generality of the foregoing, (

i) n/a (ii) n/a

(ii.1) n/a (iii) evidence that the offender, in committing the offence, abused a position of trust or authority in relation to the victim, (iii.1) evidence that the offence had a significant impact on the victim, considering their age and other personal circumstances, including their health and financial situation, (iv) evidence that the offence was committed for the benefit of, at the direction of or in association with a criminal organization, or (

v) n/a shall be deemed to be aggravating circumstances; (

b) a sentence should be similar to sentences imposed on similar offenders for similar offences committed in similar circumstances; (

c) where consecutive sentences are imposed, the combined sentence should not be unduly long or harsh; (

d) an offender should not be deprived of liberty, if less restrictive sanctions may be appropriate in the circumstances; and (

e) all available sanctions other than imprisonment that are reasonable in the circumstances should be considered for all offenders, with particular attention to the circumstances of aboriginal offenders. [ 28 ] In addition, s. 380.1 of the Criminal Code states: s. 380.1(1) Without limiting the generality of

section 718.2, where a court imposes a sentence for an offence referred to in

section 380, 382, 382.1 or 400, it shall consider the following as aggravating circumstances: (

a) the magnitude, complexity, duration or degree of planning of the fraud committed was significant; (

b) the offence adversely affected, or had the potential to adversely affect, the stability of the Canadian economy or financial system or any financial market in Canada or investor confidence in such a financial market; - n/a here (

c) the offence involved a large number of victims; (c.1) the offence had a significant impact on the victims given their personal circumstances including their age, health and financial situation; (

d) in committing the offence, the offender took advantage of the high regard in which the offender was held in the community;

(

e) the offender did not comply with a licensing requirement, or professional standard, that is normally applicable to the activity orconduct that forms the subject-matter of the offence; - n/a and (

f) the offender concealed or destroyed records related to the fraud or to the disbursement of the proceeds of the fraud. - n/a Caselaw [29] Sadly, instances of significant theft and fraud orchestrated by persons in a position of trust or authority are all too common inour province and abroad. When reviewing the relevant authorities, the majority of such cases are perpetrated not by seasoned criminals,but rather by individuals with no previous criminal record such as Mr. Johnston. It is apparent that such frauds and thefts would simplybe crimes of opportunity fueled by temptation and greed.

This scenario is age old and no doubt bound to continue into perpetuity. Whatis apparent however from reviewing numerous case authorities is that penitentiary terms are almost always imposed to emphasizedeterrence and denunciation. [30] A sampling from all three levels of courts in our province bears this out: Provincial Court R v Germaine 2010 SKPC 144 Gray J. Accused 52 years of age, no previous criminal record. Over a five year period redirected slot machine revenue to himself from SIGAcasinos who had employed him to service the machines.

In total $1,199,800.00 defrauded - accused received 3 1/2 years proposed byway of joint submission plus full amount of restitution. R v Bester 2011 SKPC 134 Klause J. The accused, no previous criminal record was an accounting partner in a chartered accountant firm for over 25 years. He was in chargeof maintaining control of office books, bank accounts as well as Mosaic Potash payroll. Over 8 years he stole approximately$1,035,000.00 which money he spent on personal lifestyle. He was able to raise $303,159.00 through sale of his personal residence andother means leaving $816,631.80 still owing to his victims.

The Court imposed a period of three years incarceration plus restitution. R v Adelia Kaminsky 2015 SKPC 39 , 2015 SKPC 039 O’Hanlon J. Accused 54 years of age with no previous criminal record, worked as a financial consultant assisting investors in placing funds with twocompanies, ultimately determined to be non-existent. Accused defrauded ten people over seven years of $639,700.00 all for personalbenefit. The sentence imposed was four years plus full restitution. Court of Queen’s Bench R v Link 2013 SKQB 138 Ball J.

Accused aged 66 no previous criminal record. Convicted of defrauding some 56 individuals over a six year period of $1,700,000.00. The fraud involved a Ponzi scheme characterized by a significant amount of planning and elaborate steps to conceal the fraud. The accused took advantage of membership in service clubs and church as well as relatives to assist in recruiting. Sentence imposed was 51/2 years plus full restitution . R v Adrian 2014 SKQB 413 Danyliuk J. .

Following a preliminary inquiry, the accused, 29 years of age pled guilty to defrauding her employer, Sutton Group Realty over an approximately two year period in the amount of $199,838.48. All of the funds were used for personal benefit. The accused was sentenced to a period of 30 months incarceration plus full restitution. R v Fast 2014 SKQB 161 Danyliuk J. The accused, 71 years old, with no previous record, was convicted of defrauding numerous investors of $16,700,000.00 over a seven year period.

The accused’s business involved leasing vehicles and equipment to “credit challenged” customers at high interest rates. Fast then solicited private investors to expand his business enticing them with promises of high interest rates of return which of course never materialised. Sentence imposed of seven years plus full restitution. Court of Appeal R v Gopher 2006 SKCA 86 R v Moccasin 2006 SKCA 5 R v Night 2006 SKCA 5 Accused were band council members of the Saulteaux First Nation who committed fraud over a two year period involving land entitlement payments to the band.

It was determined that at least $1,000,000.00 had been stolen in this fashion. Initially all three accused had received a conditional sentence of two years less a day however this was increased by the Court of Appeal to three years imprisonment for each plus restitution. R v Bethke 2013 SKCA 135 Accused 56 years old with no previous criminal record was the treasurer of a union in Moose Jaw who over a period of five years wrote 60 cheques to herself totalling $178,320.58. The original conditional sentence imposed was increased to 15 months incarceration plus restitution.

R v Parkes 2014 SKCA 37 The accused age 56 with no previous criminal record operated a personal care home in Saskatoon. Over a period of six years she defrauded one elderly patient of $179,439.15 and was sentenced to three years incarceration plus restitution. This sentence was upheld by the Court of Appeal. IV MITIGATING AND AGGRAVATING CIRCUMSTANCES

[ 31 ] In determining a fit and proper sentence, the Court must consider the relevant factors, both good and bad, surrounding the commission of the offences, background of the accused and the manner in which the charges have been disposed of. Mitigating Circumstances [ 32 ] Comparatively, there is very little in this case that could be considered as a mitigating circumstance. The Court can think of two:

a) the personal circumstances of the accused - he is 36 years of age, married with three young children and has no previous criminal record. On this latter point however, a number of the leading authorities, as noted, evidenced that the majority of the offenders for this type of crime did not have a previous criminal record, which nonetheless did not appear to have had much impact on the sentencing process;

b) the fact that the accused pled guilty - notwithstanding his subsequent expungement application, the guilty pleas obviated the necessity of a three week trial and spared the victims the ordeal of testifying both at the trial and subsequently, the sentence hearing. Aggravating Circumstances [ 33 ] Unfortunately for Mr. Johnston, the list of aggravating factors are lengthy: Initial Real Estate Investor Fraud

a) magnitude of the fraud - $1,192,417.00;

b) scope and complexity - the evidence demonstrated a sophisticated and complex scheme involving multiple investors and the utilisation of 42 different bank accounts to launder the monies for his own use;

c) length of time the fraud was perpetrated - over two and one-half years;

d) number and demographic of victims - 15 individuals ranging from early twenties to middle age and elderly;

e) methodology employed - accused relied upon friends and family members to tap into community roots in the Kindersley area as well as common church affiliation;

f) re-victimization - many of the investors confirmed that the accused came back repeatedly to them for additional funds citing numerous excuses for the delay in results and need for more cash;

g) motivation for the fraud - pure avarice to support an ostentatious lifestyle;

h) impact on the victims - a sampling of the Victim Impact Statements indicate “sick mentally and physically”, “consumed my life and

hurt my marriage”, “had to borrow money to operate and am still paying back loans”, “used my faith in God as a weapon against me”, “feel used and preyed upon”, “felt so completely betrayed by a person we completely trusted and assumed was legitimate”, “cannot begin to express the gut wrenching sick feeling in my stomach when the realization the money was not coming back”, “planning renovations - there will now be no renovations”, “have become overworked and chronically exhausted - have to go on stress leave”, “don’t know if I can physically work the extra years that it will take to recover the funds”, “deeply wounded emotionally”, “feel very ashamed and violated”, “money took years to save and was for secondary education for our two children”, “this was to be my grandson’s college fund”, “I have sold my condo in trying to get money again”, “he is a predator - he looks to people to fund his lifestyle”;

i) portion of funds channelled directly to members of the Hell’s Angels, a known criminal organization; and i)failure to make restitution. Shuswap Lake Fraud

a) magnitude of the fraud - $110,000.00;

b) motivation - solely for personal gain;

c) timing - committed in the interlude following the entry of guilty pleas on the earlier frauds totalling $1,192,417.00;

d) impact on the victims - both related the familiar themes of betrayal and personal and family devastation;

e) failure to make restitution. II CONCLUSION [ 34 ] The Crown’s position on sentence is a combined total of six years, broken down as three years each for the initial frauds and related charges and three years in addition for the Shuswap Lake fraud. Mr. Ritter stated he felt compelled to maintain the three year position for the initial offences as this was what had been agreed to with defence counsel in October, 2014, after the first day of trial. The Shuswap Lake fraud should be treated with equal severity, however, according to Mr.

Ritter due to the highly aggravating circumstance concerning the timing of the scam and the obvious willingness of the accused to continue his cheating and fraudulent ways. [ 35 ] Mr. Johnston made no comment concerning the three year position for the initial frauds but did not agree with the Crown’s submission concerning the Shuswap Lake fraud. He has provided letters of support from family and friends. The theme of these letters speak to his strong commitment and devotion to his family and the severe hardship his absence over the past seven months has created.

Several maintain that he has now learned his lesson and urge that he receive the minimum or shortest sentence possible. [ 36 ] That Mr. Johnston’s family has suffered and will continue to suffer from his absence is undeniable, a sad fact which is an inevitable consequence visited upon those most innocent. They of course are not the only casualties. His actions have taken a devastating toll upon all of the victims and their families, some of which will never have the ability to recover financially and whose health and retirement plans have been decimated.

Further, the magnitude of the frauds project a bleak prospect for recovery of their losses. [ 37 ] As far as Mr. Johnston learning his lesson is concerned, his actions demonstrate the opposite. When he entered his guilty pleas well over one year ago, he specifically requested the time and opportunity to work and raise funds for the benefit of his victims whom he had defrauded. As noted, during the four month period allotted to him for such purpose, he actively perpetrated the Shuswap Lake fraud.

[38] The Court has given careful consideration to the statutory and common law principles to determine an appropriate globaldisposition for Mr. Johnston’s offences to which he has pled guilty. Of the authorities canvassed, Mr. Johnston’s initial frauds moreclosely parallel the cases of Link and Kaminsky where sentences of five and one-half years and four years were imposed, respectively. However, the Court is cognizant that the guilty pleas were arrived at through considerable negotiation between counsel which avoidedthe necessity of a three week trial and are in essence proposed as a joint submission.

Further, the proposed sentence of three years fallswithin the range of sentence disposition as set out by our Court of Appeal. [39] Regarding the Shuswap Lake fraud, although much smaller in magnitude compared to his earlier frauds, the amount of$110,000.00 is certainly not insignificant. More importantly however is the timing and callousness of Mr. Johnston’s actions incommitting this fraud for personal gain while awaiting sentencing on his earlier guilty pleas. The Court agrees with the Crownsubmission that these factors significantly elevate the gravity of these offences.

VI SENTENCE [40] The accused is sentenced to five years global custody in a federal penitentiary determined as follows:

a) Information #24388430 - three years custody on all counts of fraud, money laundering and possession of proceeds of crime, to beserved concurrent one to the other;

b) Information #24388437 - two years custody on each count of fraud, to be served concurrently one to the other, consecutive to the three years custody imposed on Information #24388430.[2] The accused has been on remand for a period of seven months and is grantedaccordingly a credit of 10 1/2 months to be applied against this latter sentence. [41] The total amount of surcharges applicable according to the Court’s calculation is $1,200.00, the charges being by indictmenton all six counts to which the accused has pled guilty.

At the request of the accused, all surcharges shall be converted to default time tobe served consecutively to any sentence currently being served. [42] In addition, s. 738 orders are hereby made in favour of all named victims on Informations 24388430 and 24388437, as per theamounts reflected herein. [43] The Court further imposes an Order pursuant to s. 380.2(1) prohibiting Mr.

Johnston from seeking, obtaining or continuingany employment, or becoming or being a volunteer in any capacity that involves having authority over the real property, money orvaluable security of another person, for a period of ten years from the sentencing date. [44] The Crown also seeks estreatment of all bail monies held in favour of the accused currently subject to an assignment filed inrelation thereto. The Court declines to make such order and the monies will therefore be paid out in accordance with the assignment asfiled. ______________________ R.D. Jackson, J [1] 2015 SKPC 61 , 2015 SKPC 061

[1] 2015 SKPC 61 , 2015 SKPC 061 [2] The Court having specifically considered s. 718.2(

c) of the Criminal Code, in that any combined sentence not be unduly long orharsh.