R. v. Scinocca, 2013 MBPC 37

CITATION: R. v. Scinocca , 2013 MBPC 37 Date: 20130620 IN THE PROVINCIAL COURT OF MANITOBA BETWEEN Her Majesty the Queen ) Peter Edgett, ) for the Crown ) and ) ) ) Paul Scinocca ) Gerri Wiebe, Accused ) for the Accused ) ) ) Reasons for Decision delivered ) June 20, 2013 ) Devine P.J. INTRODUCTION [ 1 ] This is a sentencing decision that raises the issue of whether a conditional discharge can be granted where the paramount sentencing objectives are denunciation and general deterrence. [ 2 ] The offence involved a fraud on the government, specifically Manitoba Film and Music.

Paul Scinocca pleaded guilty to three counts of uttering forged documents, under s. 368(1)(b), between the dates of July 27, 2007 and December 21, 2009. [ 3 ] The central issue in this sentencing for the offender is whether a criminal conviction will be registered. The Crown is seeking a substantial fine which will result in Mr. Scinocca having a criminal record. The defence is seeking a conditional discharge, which will result in Mr.

Scinocca not having a criminal record, as long as he complies with the conditions of a probation order. [ 4 ] The role of the sentencing judge is to impose a fit and appropriate sentence. I must consider all the facts and circumstances of the offence and offender and balance the seriousness of the offence with the degree of responsibility of the offender.

In order to do that, I must consider the circumstances of the offence and the offender within the context of the sentencing objectives and principles set out by Parliament in the Criminal Code . [ 5 ] I have thoroughly reviewed the Agreed Statement of Facts, the case books filed by counsel, the book of references and other documents filed by the defence and counsels’ very good oral submissions. CIRCUMSTANCES OF THE OFFENCE [ 6 ] Paul Scinocca met Brandon Friesen in 1999 and they became friends. Friesen founded Studio 11 and Arbor Records.

[ 7 ] Mr. Scinocca joined Arbor Records in 2007. He had no training in business management, but his friend convinced him to help out the company, as its General Manager had resigned. Mr. Scinocca worked as the company’s manager from August 2007 to May 2009. [ 8 ] Manitoba Film and Music (The Manitoba Film & Sound Recording Development Corporation) is a statutory Provincial Corporation created under The Manitoba Film and Sound Recording Development Corporation Act to promote the film and music industries in Manitoba.

It provides grants to Manitoba record labels to subsidize the cost of the production and promotion of music. The granting system works like this: a promoter applies to MFM for a grant to offset the costs of producing or marketing an album. The projected costs are set out in the application. The MFM then approves the project up to a certain dollar amount. The promoter then produces the album or markets the albums, sending in invoices to MFM as the project unfolds. The MFM sends the promoter money as it receives the invoices. [ 9 ] Mr.

Scinocca was involved in three such grant applications and submitting invoices: first, recording the album “The World and Everything in it” by Team Rezofficial, second, marketing that album, and third, promotion of the record “No Lies” by Tracey Bone. [ 10 ] The fraudulent documents created by Mr. Scinocca were as follows. In the case of recording the Rezofficial album, MFM agreed to provide a grant in the amount of $10,000 to Arbor Records if they met or exceeded the projected cost of $23,389.05. Mr. Scinocca then created inflated invoices from the recording studio in order to get the full grant amount.

Incidentally, Mr. Scinocca was a co-owner of the recording studio. [ 11 ] With respect to the marketing of the Rezofficial album, all but two of the invoices Mr. Scinocca sent to MFM were altered or fraudulently created. There were 16 of them. [ 12 ] In the case of marketing Tracey Bone’s album, all 10 of the invoices were false. [ 13 ] The objective was to create sufficient invoices to obtain the maximum grant amounts from MFM. Arbor Records obtained $18,125 from MFM fraudulently. [ 14 ] In oral argument, counsel for Mr.

Scinocca argued that with respect to the Tracey Bone project, there were in fact enough legitimate invoices that the full grant amount would have been paid by MFM in any event, saying that Arbor Records expended $6,283.00 in legitimate expenses. The invoices they sent to MFM totalled $10,578.50, however, as indicated on the Agreed Statement of Facts, sufficient to be granted the full grant amount of $5,000 to which they were not entitled if expenditures were only $6,283.00. The fraud was discovered before the full grant was sent. Arbor received $2,500 of the intended $5,000.

Defence also argued that there were sufficient legitimate invoices for the Rezofficial recording contract. With respect to the Rezofficial marketing contract, she argued that only $1,035.97 could not have been substantiated. [ 15 ] All of that is to say that Arbor Records and Mr. Scinocca did not fully realize on the fraud. [ 16 ] The offender did not pocket any of the money. He benefitted by continuing to be employed by a company that was in financial straits. THE OFFENDER [ 17 ] Mr. Scinocca is 44 years old, married with five year old twins. He does not have a criminal record.

He graduated from the University of Manitoba with an advanced degree in Geography and Specialized City Planning in 1993. He has been a volunteer coach for the St. James Rods Football Club for the past eight to nine years. He has been an avid curler with the St. Vital Curling Club for the past 10 years. He also has musical interests. He studied audio engineering in Toronto and after that met Brandon Friesen in 1999. [ 18 ] Mr. Scinocca was contacted in February/March 2010 by the investigator into this fraud. He was fully cooperative.

The investigation was completed in April 2010 and then turned over to the Financial Integrity Unit of the RCMP to determine whether a criminal investigation should be conducted. Mr. Scinocca was left with the impression from the original investigator that criminal charges or a civil suit could result. A civil suit was filed by MFM. Mr. Scinocca and the defendant Brandon Friesen settled the suit earlier this year for $25,000 each, covering not only the $18,125.00 in fraudulent invoices, but also some of the costs of the investigation and litigation. [ 19 ] The RCMP conducted a criminal investigation.

In December 2012 Mr. Scinocca was charged with these offences. [ 20 ] In the meantime, Mr. Scinocca studied and completed his Real Estate Agent’s course and exam in December 2010. When his licence was up for renewal, the Securities Commission granted him a conditional licence, pending the outcome of this sentencing. CROWN SUBMISSIONS [ 21 ] The Crown is seeking a global $1,000 fine.

He emphasized the following: • The offender played a material role in the fraud, adding to his moral culpability; • This was a fraudulent scheme on government; • The offender did not stop until an innocent third party discovered the fraud; • The maximum sentence for uttering forged document is 10 years in jail; • This was a repetitive offence. The offender submitted 28 altered or fraudulent invoices over the course of two years; • The operation required a fairly high degree of effort and sophistication. For example, Mr. Scinocca matched up cancelled cheques

from Arbor Records with false invoices he created; • A discharge would not give effect to the objective of general deterrence; • There should be a permanent record of this offending behaviour to protect the public. DEFENCE SUBMISSIONS [ 22 ] The defence is seeking a conditional discharge. Much of its argument focussed on Mr. Scinocca’s work as a real estate agent and that the Manitoba Securities Commission has granted him a conditional license pending the outcome of this sentencing, and has advised him that he will not have a licence should a criminal conviction be registered.

The defence also emphasized: • More than full restitution has been made - $25,000; • Mr. Scinocca has also paid a portion of the cost of the MFM investigation into the fraud; • The breach of trust factor often found in fraud cases is not present in this case; • That Friesen, not Mr. Scinocca, was the directing mind; • Mr. Scinocca did not personally benefit; • The early guilty plea; • The anxiety, stress and suffering experienced by Mr. Scinocca as a result of these charges.

THE PURPOSE OF SENTENCING [ 23 ] The fundamental purpose of sentencing as set out in s. 718 of the Criminal Code is to contribute to respect for the law and the maintenance of a just, peaceful and safe society by imposing just sanctions. The sanctions to be imposed have several objectives. The relevant sentencing objectives in this case are denunciation and general deterrence. This is not in dispute between the parties. [ 24 ] Mr. Scinocca is like many of the offenders who commit these types of offences: educated, middle-class, well-respected members of their communities who do not have criminal records.

DENUNCIATION AND GENERAL DETERRENCE FOR FRAUD OFFENCES [ 25 ] Fraud offences like uttering forged documents call for denunciation and general deterrence. [ 26 ] These types of white collar crimes are usually committed by well-educated, first time offenders like Mr. Scinocca. As the Newfoundland and Labrador Supreme Court recognized in Simms (cited at paras. 17 and 18 of Young ): The publicity, humiliation and loss of employments acts as a specific deterrent to offenders for these types of cases.

More often than not, it is the offender’s only brush with the legal system. . . . in the majority of cases, the psychological pain and suffering and the material loss brought on themselves as a result are devastating and more than sufficient to convince them to never again attempt anything so foolhardy. Thus, in imposing sentence, individual deterrence . . . . is not a major concern, nor is public safety. [ 27 ] The sentence I impose must unequivocally denounce the commission of fraud against a government corporation that provides small grants to promote Manitoba film and music.

The sentence must also deter others from believing that creating inflated, premature and false invoices in order to obtain this government funding is a mere technical violation. Where there is planning involved, as there was here, general deterrence is important. As Justice Holmes observed in De La Boursodiere , general deterrence is necessary where planned and methodical frauds are committed with an eye to detection and successful prosecution (at para. 50). [ 28 ] The question is whether a conditional sentence can give proper effect to those objectives. OTHER SENTENCING PRINCIPLES IN

SECTION 718.2 OF THE CRIMINAL CODE [ 29 ] I have taken into consideration the aggravating and mitigating circumstances in this case. Aggravating Circumstances • The fraudulent conduct was planned; • It involved a series of steps that were executed over a period of time; • It was sophisticated; • There were 28 separate false invoices created; • It did not stop until an innocent third party contacted MFM . Mitigating Circumstances • Guilty plea at the earliest possible opportunity

• No criminal record • Positive letters of reference • A criminal conviction will have a negative impact on Mr. Scinocca’s career as a real estate agent. [30] The defence has urged me to impose a conditional discharge for a number of reasons, but especially because a criminal recordwill affect Mr. Scinocca’s ability to continue working as a real estate agent. Mr. Scinocca has been working as a real estate agent foronly about 2½ years. Likewise, in letters of reference his employer and co-workers urge the Court to impose a conditional discharge toavoid loss of his real estate licence.

Let me make it perfectly clear – Mr. Scinocca has plead guilty to Criminal Code offences. Thesentence I impose does not change that fact. [31] I must impose a sentence that is fit and appropriate for the offence and the offender. [32] It would be an error of law for me to allow this to be a determining or deciding factor in imposing a conditional discharge. Justice Steel dealt with the analogous situation in R. v. Wisniewski, 2002 MBCA 93, where the offender was sentenced by way of aconditional discharge to avoid negative immigration consequences. The Court of Appeal substituted a fine.

Justice Steel stated that anoffender’s immigration status should not be a decisive factor in granting a conditional discharge in a situation where it would nototherwise be appropriate. The Court should not be put in a position to essentially by-pass or undermine the job of the SecuritiesCommission in determining the fitness of real estate agents. I will leave the decision of whether Mr. Scinocca can be a real estate agentto the governing body that has jurisdiction to decide that question. My concern is to impose a fit and appropriate for this offender andthe offences before me.

When the Ontario Court of Appeal was asked to grant a shoplifter a conditional discharge to avoid deportationJustice Arnup responded as follows: The Court ought not to grant a discharge in cases where a discharge would clearly not be called for, merely because it is represented thatthe immigration authorities or the Immigration Appeal Board may not exercise that degree of compassion or sensitivity to thecircumstances that it is suggested the Court should exercise. R. v.

Melo (1975), (ON CA), 26 CCC (2d) 510 at 516; cited with approval in Wisniewski, supra, at para. 15 [33] If a deportation order faced by a shoplifter cannot tip the scale in favour of a conditional discharge, then suffice it to say that acareer change faced by someone uttering forged documents over an extended period cannot tip the scales. [34] The effect on one’s career or employment arose in the seminal case dealing with conditional discharges, Fallowfield, a decisionof the British Columbia Court of Appeal. The offender was 26, married, with no record.

He was a corporal in the Canadian navy and hiscareer might have been affected by a criminal conviction. The circumstances of the offence were distinguishable from this case. Mr. Fallowfield moonlighted by working for a moving company. On one occasion he and his co-workers took some leftover pieces ofcarpet from an apartment building where they were delivering refrigerators. When the police came to speak with the accused, he hadfive pieces of carpet. He told the police he thought they were scraps.

The officer who testified said the accused was “rather than being athief, was more simply a foolish individual, getting involving in something slightly more serious than a foolish prank but not really a thiefat nature.” Parity [35] As Justice Steel stated in Wisniewski, the case law about discharges is only useful insofar as it sets out the guiding principles, aseach case is unique on its facts.

The weight of the case law weighs against a conditional discharge for these offences. [36] I note Durfy, 2004 CarswellOnt 4643, where a real estate agent forged an extension on a listing agreement to try to recover asales commission. He was sentenced to a $5,000 fine and a one-year period of probation and appealed.

The Ontario Court of Appealdismissed the appeal, holding that his lack of criminal record and the fact he was an otherwise responsible member of the communitywere weighed appropriately as he was not sentenced to jail. [37] The defence filed several cases where conditional discharges were ordered, but they are not similar to either the offences or theoffender in this case. Some of the cases where conditional sentences were ordered can be distinguished from this case and did not giveadequate or any weight to the principles of general deterrence and denunciation. Is a Discharge Available? [38]

Section 730 of the Criminal Code provides that a discharge can be granted where the offender is an individual and not anorganization, where there is no minimum penalty and where the maximum penalty for the offence is 14 years or life. [39] The

section also requires that a discharge cannot be granted unless: 1) The court considers the discharge to be in the offender’s best interests and 2) It is not contrary to the public interest. [40] The first criteria means that specific deterrence is not necessary. The second part of the criteria is that general deterrence is nota relevant part of the sentence (Sanchez-Pino (1973), (ON CA), 11 CCC (2d) 53 ONCA). This statement somewhatattenuated later by the BCCA in Fallowfield, where the Court said, In the context of the second condition the public interest in the deterrence of others, while it must be given due weight, does not precludethe judicious use of the discharge provisions.

[ 41 ] The Manitoba Court of Appeal has determined that a discharge is rarely available in fraud cases. Justice Steel in Wisniewski , 2002 MBCA 93 , at para. 23 observed that although the door is not closed on granting discharges in fraud cases, a review of the cases demonstrates that exceptional circumstances exist.

The two examples she cited were: 1) The accused was ordered to pay restitution of over $44,000; She was in ill health; 63; Cared for her husband who could not manage his own affairs because of brain injuries. 2) The accused was under extreme pressure from her boyfriend to make the expenditures who beat her if she did not comply; She suffered an emotional collapse; The victim of the offence supported her and wrote a letter on her behalf to the court. [ 42 ] Neither of these extremely unfortunate circumstances exist in the case at bar. [ 43 ] The Court of Appeal found that the imposition of a conditional discharge for Wisniewski was not appropriate.

Like this case, there was no element of breach of trust – it was a fraud on the government, in that case, Manitoba Public Insurance. [ 44 ] In R. v. Connors Brothers Ltd. , a company defrauded the government by ‘banking hours’ of employees which resulted in them receiving higher unemployment insurance premiums than that to which they were entitled. The plant manager Barnes concocted the scheme and took it to the Union to appease the demands of the fish processing plant workers. Revenue Canada warned Barnes that the practise was illegal, but he continued.

This was a special case where the social forces and a problematic unemployment insurance system were major distinguishing features, as can be clearly ascertained from Justice Robert’s statement: As much as anything, the Defendants were victims of the Unemployment Insurance system, which, among other things, militates against the efficient operation of many businesses but particularly the fishing business. It was a manipulation of the system that the Defendants were dragged into.

I don’t say that to exonerate the Defendants but to show the social forces they were up against and to distinguish this case from most of the cases referred to by the Crown......... (at paras. 7 and 8). [ 45 ] Still, Justice Roberts recognized that the overriding principle was general deterrence (at para. 12). [ 46 ] In determining that it would not be contrary to the public interest to grant Mr.

Barnes an absolute discharge, Justice Roberts relied on the following: the practise of banking of hours was endemic to the fish processing industry and CEIC had overlooked the practise by individual employees for years, there were several people in the company who had been involved, but Mr.

Barnes was the only one charged and, finally, the company had a significant fine imposed, which would serve the desired effect of general deterrence (at paras. 14–16). [ 47 ] The Newfoundland and Labrador Court of Appeal in Elsharawy (1997) said that the second criteria “involves a consideration of the principle of general deterrence with attention being paid to the gravity of the offence, its incidence in the community, public attitudes towards it and public confidence in the effective enforcement of the criminal law ” (at para. 3) (cited in Hynes , 2011 PCNL) (my emphasis) . [ 48 ] In Durfy the Court held that it would not be in the public interest to grant a conditional discharge to the real estate agent who committed a breach of trust as a professional dealing with the public.

How different does that sound than Mr. Scinocca and his crime? [ 49 ] In Nathan , 2008 CarswellOnt 96 , a conditional sentence was not viewed as fit and appropriate for a man who forged five Canada Post money orders. The Court would have sent him to jail, but for his medical condition. His sentence was suspended and he was placed on probation. [ 50 ] The uttering of forged documents in Young , a 2010 decision of the Newfoundland and Labrador Supreme Court, was similar to the offences committed in this case.

The offender was an employee of the school board and director of the student exchange program run by a subsidiary company of the school board. He created false invoices in favour of a recruiting agent, which meant that money that otherwise would have stayed in the school division’s coffers, was sent to a third party. The school division was defrauded of $4,400, all of which was recovered. The Court took pains to note that it did not matter that Mr. Young did not benefit. He was allowing and he intended a third party to benefit from his actions. A conditional sentence was rejected.

The offender received a jail sentence to be served in the community. There is a distinction that it was the employer who was defrauded here, not the public. [ 51 ] A conditional sentence was contrary to the public interest because it did not give expression to the paramount sentencing objectives of general deterrence and denunciation. Disposition [ 52 ] In the final analysis, I am not satisfied that a conditional discharge would be a fit and appropriate sentence that is proportional to the seriousness of the offence and the degree of responsibility of the offender.

It cannot address the objectives of general deterrence and denunciation that are called for in this case. [ 53 ] Mr. Scinocca created false invoices, sometimes matching them up with cancelled cheques, on 28 occasions. Over a two-year

period. This was fairly sophisticated, detailed and protracted fraudulent behaviour. It took some time, first for the MFM investigator, and then the RCMP, to unravel the fraud. [ 54 ] With respect to the offender, his moral culpability is high and the exceptional circumstances that Justice Steel referred to in Wisniewski do not exist. [ 55 ] Although Brandon Friesen may have been the directing mind, there was no reasonable likelihood of conviction against him. It was Mr. Scinocca who uttered the forged documents, as I said 28 times. Over a two-year period. There is no suggestion of duress. [ 56 ] Mr.

Scinocca is not unlike other offenders of fraud – well-respected, well-educated, good husbands and fathers. I have taken into consideration his very positive references from a wide range of sources. I have also taken into consideration the impact a conviction will have on his new career as a real estate agent. [ 57 ] Nonetheless, the sentence must address not only the offender, but also the offence he commits. To impose a conditional discharge would be to look at only one side of the equation. [ 58 ] Mr.

Scinocca, I am imposing a global fine in the amount of $1,000. [ 59 ] I will waive the victim fine surcharge which in my view has been addressed in the settlement of the civil suit, by covering costs of the investigation into the fraud. Original signed by Judge C. A. Devine P.J.