R. v. Samaroo Date:, 2011 BCPC 503

Citation: R. v. Samaroo Date: 20110406 2011 BCPC 0503 File No: 65681 Registry: Nanaimo IN THE PROVINCIAL COURT OF BRITISH COLUMBIA REGINA v. Tony Samaroo, Helen Samaroo aka Lai Sheung Ng, M.G.M.Restaurants Ltd., Samaroo Holdings Ltd. REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE J.E.SAUNDERS Counsel for the Crown: B.Jones; R.Gibson Counsel for the Accused: S.Kelliher for Tony Samaroo; C.Tollefson for H.Samaroo ; G. Jones, Q.C. for M.G.M. Restaurants Ltd. and Samaroo Holdings Ltd. Place of Hearing: Nanaimo , B.C. Dates of Hearing: Feb 1-3, Sept 21-24, Nov 15-19, Dec 13-16, 2010; Feb 21-24,2011

Date of Judgment: April 6, 2011 INTRODUCTION [ 1 ] Tony Samaroo, Helen Samaroo (also known as Lai Sheung Ng) (the “Samaroos”), Samaroo Holdings Ltd. (“Samaroo Holdings”) and MGM Restaurants Ltd. (“MGM”) are charged with the contravention of sections 239(1)(

a) and (

d) of the Income Tax Act (“ITA”) and sections 327(1)(

a) and (

c) of the Excise Tax Act (“ETA”) for the personal and corporate taxation years of 2004, 2005 and 2006 respectively. [ 2 ] At the commencement of the trial, on September 20, 2010, the information was amended in respect of count 3 which alleges that the Samaroos evaded payment of taxes of $512,776 by understating their taxable income in an amount of $1,791,169.00.

The information was further amended on November 17, 2010 in respect of counts 1, 2, 4, 5, 11, 12, 13, 19, 20 and 21 by increasing the understated taxable income, specifically for Tony and Helen Samaroo on counts 1, 2, 4 and 5; for Samaroo Holdings on counts 11, 12 and 13; and failing to report GST for Samaroo Holdings on counts 19, 20 and 21. [ 3 ] Particulars were filed by the Crown on September 21, 2010 and further amending particulars were filed on February 22, 2011. [ 4 ] The trial took 19 days to complete, almost all of which was used for the Crown’s case, and was replete with applications for rulings by both sides.

The Crown called 24 witnesses and filed affidavit material. There were 51 Crown exhibits most of which were large binders containing hundreds of working papers, characterized by confusion on occasion because the numbers of the Crown exhibits did not tally with the defence documents and judge’s copies. There were also volumes of other documents, filed as exhibits, which were not referred to. [ 5 ] The defence called Tony Samaroo as the only witness.

OVERVIEW [ 6 ] Tony and Helen Samaroo (the “Samaroos”) have been married since 1982 and have lived in Nanaimo since then. [ 7 ] They are equal shareholders in three corporations in Nanaimo, namely MGM, Samaroo Holdings, and Samaroo Motel Ltd., which owns and operates the Harbour Light Motel. Samaroo Motel Ltd. is not named in the indictment. From the outset, in his opening submissions, the Crown indicated that the motel was not the “subject of anything of interest in our case”. Samaroo Holdings owned a nightclub during the years in question. The Samaroos have owned and operated the MGM since 1985. [ 8 ] Mr.

Samaroo emigrated from Trinidad to Canada in 1970 when he was 20 years old. He lived and worked in Regina for a few years and trained to work as a cook. He moved to British Columbia and worked in Vancouver, Victoria and Fort St John before settling in Nanaimo. He is 62 years old. He has worked for all the years he has lived in Canada, mainly in the food and entertainment industry. [ 9 ] Mrs. Samaroo emigrated from Hong Kong. She has worked in the food and entertainment business with her husband since they married.

She is 52 years old. [ 10 ] The Samaroos retained a bookkeeper when they first started up business in Nanaimo and soon retained the services of an accountant, Mr. Ruggles, whose business was taken over by Ed Heese.

Ed Heese and his bookkeeper Deborah Ferens, did the bookkeeping and accounting for the Samaroos personal tax returns, and the books and income taxes of the corporations and remitted the GST and PST on behalf of the corporations, during the taxation years in question and continue to do so. [ 11 ] On March 3, 2006 a letter was sent by the Canada Revenue Agency (“CRA”) to the Samaroos about an audit of the MGM. On March 20, 2006, Glen Foster from the CRA attended at the MGM and met with the Samaroos.

As a result of his findings, an investigation began which led to the issuance of search warrants and the seizure of numerous documents at the MGM, at the nightclub owned by Samaroo Holdings, the motel owned by Samaroo Motel Ltd., the Samaroo’s home, the Banks and credit union, and the offices of the accountant, Ed Heese. [ 12 ] When challenged about the funds which had been deposited in the personal and corporate accounts in 2004 and 2005, Tony Samaroo told Glen Foster in March, 2006, that he had been saving $100 bills for over thirty years and had deposited them when he heard that the old $100 bills were going to be discontinued by the Government of Canada. [ 13 ] Keith Kendal is the CRA accountant who was the investigator of the financial circumstances leading up to the charges.

He generated a plethora of working papers which are contained in the numerous binders filed as exhibits. He did a joint net worth analysis of the Samaroos.

He reviewed the documents seized from the Banks, the corporations, and the accounting firm. [ 14 ] The Crown has a number of theories, as particularized on September 21, 2010 and February 22, 2011, namely that the Samaroos understated the income of the MGM and Samaroo Holdings resulting in not paying the proper amount of GST, that they reported the cash sales for only two of the three shifts of the MGM during the taxation years of 2004, 2005 and 2006, that Tony Samaroo made cash deposits to the joint personal account of himself and Helen Samaroo and the corporate accounts of MGM and Samaroo Holdings during the taxation years of 2004, 2005 and 2006 which came from unreported sales at the MGM and nightclub, namely Samaroo Holdings.

A further Crown theory is that the Samaroos paid cash from unreported funds from the MGM and Samaroo Holdings for liquor purchases, wages of employees and business supplies, during the taxation years ending 2004, 2005 and 2006. [ 15 ] The amount of unpaid taxes alleged against Tony and Helen Samaroo is $512,776 each, based on understated income of $1,791,169.

[16] Tony Samaroo’s explanation is that he accumulated savings over many years, starting as early as 1970 shortly after he arrived inCanada, which he kept as $100 bills, firstly at his home, and then in safety deposit boxes at the banks as he did not trust banks due toexperiences described to him by others in Trinidad. Helen Samaroo was from mainland China and held a similar distrust of Banks so theykept their joint savings as $100 bills. He and Helen Samaroo had inheritances which they saved in that manner as well.

When he heardthat the Canadian Government was discontinuing the old $100 bills in 2004, he began depositing the bills to various accounts. [17] The Crown alleges that it was impossible for the Samaroos to accumulate so much money based on the net worth analysis doneby Keith Kendal for the period 1980 to 2003.

He did not interview the Samaroos before doing the net worth analysis and did not includethe cash on hand which was in the form of savings and inheritances nor did he factor in capital cost allowance over the years involved.He relied on historical data, the seized documents and his own notional figures to determine their net worth to support his theory thatthey could not have saved over a million dollars. THE ISSUES [18] There are two issues.

The first issue is whether Tony Samaroo is credible (see R v D.W.(1991), 122 N.R.277, 46 O.A.C.352, (SCC), 63 C.C.C.(3d) 397 (S.C.C.) which is now trite law that the court must acquit the accused in three situations:

a) ifhe is believed, or,

b) even if he is not believed but the court is left with a reasonable doubt by his evidence, or

c) even if not left in doubtby the evidence of the accused, whether on the basis of the evidence which is accepted, the evidence establishes proof of guilt beyond areasonable doubt. [19] The second issue is the strength of the Crown’s case in proving guilt beyond a reasonable doubt on the basis of the hypothesesdeveloped by Keith Kendal. ANALYSIS OF THE RELEVANT EVIDENCE [20] Glen Foster was the first Crown witness.

He testified that his audit revealed a large net worth discrepancy for the years 2004and 2005 when applied to the shareholder loan account of MGM and that a review of the business and personal bank statements showedunexplained cash deposits of over $600,000 and unexplained shareholder loan contributions of over $500,000. He reviewed records forMarch, April and May of 2006 and extrapolated certain figures relating to credit and debit card sales, monthly sales and average monthlyfood purchases based on those records.

He also noted that prior to March 2006 the bookkeeper only recorded sales for two cash registerring-offs daily and after March, 2006, the bookkeeper recorded three daily ring-offs. As a result of his findings, the case was sent forinvestigation. [21] He was told by Tony Samaroo that the cash infusion into the personal account and shareholder accounts was from savings inold $100 bills which he had deposited in 2004 and 2005 when he heard the Government of Canada was discontinuing old $100 bills.

Heconfirmed there were indeed three safety deposit boxes at the banking institutions which Tony Samaroo told him about. [22] Keith Kendal testified that he had taken the file for investigation.

He accessed bank documents, affidavits from the LiquorDistribution branch, GST returns, personal and corporate tax returns, documents from the accountant Ed Heese, including daily salessheet summaries for MGM and Samaroo Holdings and Samaroo Motel Ltd., payroll records and personal and corporate bank statements. [23] His theory was that the Samaroos had taken unreported cash from MGM and Samaroo Holdings during 2004 and 2005 anddeposited it to their personal accounts and then into the shareholder loan account.

He investigated the motel as well but of note, thatcorporation is not included in the indictment, despite the fact that Kendal believed that the Samaroos were paying cash to the employeesat the motel, MGM and the nightclub from unreported funds. [24] He followed the paper trail and concluded that Tony Samaroo, for his benefit and that of his wife, was misappropriating cashfrom one of the daily ring offs at the MGM on the basis of the daily cash report which was completed each day by Diane Ye, one of thesupervisors. There were three shifts every twenty four hours: a day, night and graveyard shift.

The daily cash report only showed acolumn for a day and night shift. [25] He noted cash deposits were made to all three corporations during the years under investigation. He generated an enormousvolume of working papers to track where the cash had come from. Some of those working papers included Samaroo Motel Ltd.

Heworked out there was an excess of cash of $491,736 put into all three corporations and $661,000 into the personal accounts of theSamaroos, during 2004 and 2005. [26] He looked at the payroll of the nightclub, restaurant and motel and concluded the Samaroos were using unreported cash to paytheir employees, specifically $216,537 for wages. He looked at the liquor expenses and sales for the MGM and nightclub andconcluded there was unreported cash of $281,571 being used to buy liquor in 2004 and 2005.

He considered the records of third partysuppliers for the three businesses, and concluded there was unreported cash of $140,160 being used. He concluded that there was anunaccounted amount of cash in the sum of $1,791,168.76. [27] In his view, the Samaroos could not accumulate savings of over a million dollars so he did a net worth analysis and looked attheir tax returns over the period 1980 to 2003. He made certain assumptions around their income and assets.

He concluded they couldnot have amassed savings of that magnitude so the Samaroos must have been skimming cash off the MGM on one shift to account for thebulk of the unreported cash and skimming cash from the nightclub to a lesser extent. [28] He used Glen Foster’s three month snapshot to extrapolate backwards to establish the average cash value of one till take at$50,000 per month. He noted that food sales but not food costs went up after the auditor’s visit.

He used his calculations to establishenormous mark ups of up to 393% for the MGM and night club to arrive at the figures which the Crown seeks to rely on in theindictment which was amended on two occasions. Kendal made numerous changes to his own working papers during his testimony tocorrect errors. [29] He confirmed there had been over $400,000 in cash and cash equivalent found at the Samaroo’s home and at the MGM during

the search by CRA which was not seized. [ 30 ] He conceded in cross examination that he and Foster came up with completely different numbers on their analysis of the MGM shareholder account. Kendal also conceded that he had not factored in capital cost allowance in his calculations which could account for almost one million dollars (Transcript November 17, 2010, page 84 lines 37 to 44). He conceded that he had completely forgotten to do so.

He also conceded that he had not factored in the inheritances and savings or cash in hand that the Samaroos may have had during the operative years between 1980 and 2003 as he did not interview them before he did the net worth analysis. [ 31 ] He had some difficulty explaining his theory of how Tony Samaroo was taking cash each day from the cash sales at the MGM and could only say that one ring off was not being reported. Of note, each till tape for each shift, records cash, debit, credit and cheque sales.

He could not say what the average sales for one till tape was because of too many variables to account for but he believed that there was about $2400 of cash per day being stolen over two years to arrive at the figure of $1.6 million. He was also challenged that Diane Ye filled in the daily sales

summary sheets so Tony Samaroo would have had to change the sheets in order to skim off the cash. He also conceded that the skimming of cash could have occurred over many years outside the period in the indictment. [ 32 ] He was told that there had been a provincial audit done of the night club for the period from 2003 to 2005 and no problem regarding taxes or unreported cash was found which, surprisingly, he did not appear to consider to be relevant.

He was also challenged that he could have been completely wrong in his assumptions around liquor sales at the nightclub by up to 34% on the tax calculation. [ 33 ] In re-examination, he stated that the capital cost allowance could account for a large discrepancy in his calculations and should have been in his net worth calculations and, in his own words, he was “floored” that he forgot. [ 34 ] The Crown called a large number of other witnesses, such as staff and suppliers, whose evidence was brief and mainly so uncontentious that many of them were not cross-examined. [ 35 ] Alan Jones of the CRA testified that he was present when the search warrant was executed at the MGM in January, 2007 and that there was over $200,000 cash found in the safe consisting largely of new $100 bills which Tony Samaroo advised him he had purchased.

Tony Samaroo also told him that the cash was from savings over thirty years and that all sources of cash were reported. Robert Winker accompanied him and he confirmed that he had personally counted $100,000 of bills. The cash was not seized. [ 36 ] Alvin Ginther sells buns to the MGM and has done so since 1990. He confirmed that he was paid in cash in the past and by cheque for the past five to seven years. He provided an invoice and was given receipts when he was paid with cash. [ 37 ] Danny Jonsson sold eggs to the MGM for twelve years up until 2006.

He was paid in cash from the till by whomever was on duty and provided invoices and receipts. He confirmed that it was commonplace for smaller restaurants to pay with cash. [ 38 ] James Allen has delivered bread for eleven years to the MGM. He was paid in cash from the till by whomever was working, and provided an invoice and was given a receipt. [ 39 ] Diane Ye worked at the MGM from 1994 to 2005. She was the supervisor for the night shift. She confirmed there were initially two shifts which went to three shifts when the graveyard shift was added in 1997. She was responsible for filling out the daily

summary for all three shifts and stated that there were two sheets of paper and not one that she filled in, and that the second sheet contained the daily

summary for the graveyard shift. [ 40 ] She became angry and hostile when asked in cross examination why she had failed to mention to any of the investigators the existence of a second sheet on the daily

summary until February, 2010 when she spoke to Keith Kendal. She was vague and evasive in her response. She conceded that she had an affair with Tony Samaroo and her employment terminated in 2006. It was clear from her demeanour and evidence that she harbours considerable animosity towards the Samaroos as a result.

Her bias against them was palpable. [ 41 ] Jennifer Reynolds works for Brewer’s Distribution and confirmed that Tony Samaroo paid for the liquor in cash which was a common practice. [ 42 ] John Spensley confirmed that he was paid in cash for the tills and business equipment that he sold to the MGM. [ 43 ] Jean Barker was the chef at the MGM since it opened and confirmed there were three shifts at one time but he only worked the morning shift. [ 44 ] Merle Thompson worked as supervisor at the MGM from 1988 to 2003 and also confirmed there had been three shifts for a time. [ 45 ] Crystal and Jacqueline Bacon were both chambermaids at the Harbour Light motel for number of years.

Tony Samaroo cashed their pay cheques on about a dozen occasions at their request and for their convenience. Becky Young was a server at the MGM on the graveyard shift for about a year and confirmed there were some cash and credit cards used for payment but mainly debit cards. [ 46 ] Francis Wilkinson worked at the nightclub from 2001 to 2008 and testified that Tony had cashed her cheque occasionally. She stated that the drinks at the time included tax. [ 47 ] Ed Heese has been the accountant for the Samaroos and the corporations since 1998 when they became his clients.

He has known them for over 20 years as he has eaten at the MGM from time to time. [ 48 ] He confirmed that Tony Samaroo had limited reading and writing skills and that he would ask him for help on occasion. Heese’s office did all the accounting for the Samaroos and the corporations, including the year end reconciliation of the shareholder loan accounts.

[ 49 ] He further confirmed that the Samaroos did not believe in RRSPs and relied on their savings and real estate to secure their investments. He knew that Tony and Helen were wary of Banks because of their knowledge of Trinidadian and mainland China banks going bankrupt. [ 50 ] He explained that the cash on hand would have to be reconciled and if the cash was under, the shareholder loan account would be debited, if it was over, the shareholder loan account would be credited. He told the Samaroos that everything had to be reported in order for the accounts to be reconciled at the end of the taxation year.

They relied on him to prepare the personal and corporate tax returns and pay GST and PST.

He confirmed that there was an audit in November, 2005 of the nightclub and no taxes were owing and the sales were correctly reported. [ 51 ] He noted that whether or not tax was included in the price of liquor, could result in the profitability being overstated by a huge margin. [ 52 ] He also said that a new worth assessment has to start with an inquiry into whether or not there is cash on hand or non-taxable income. [ 53 ] He spoke to Tony Samaroo about a lack of internal controls at the MGM and nightclub around theft, spillage, and breakages. These controls were put in place after March, 2006.

He was also aware that there was a notification in late 2003 that old $100 bills were going to be discontinued. He confirmed that Tony Samaroo told him in 2005 that he had deposited his old bills into his personal and corporate accounts and that he had told him not to do so but it was too late. He accepted the explanation and also told Foster of that fact in 2006. He recalled telling Foster that from his experience, the Samaroos had not failed to report any of their income. [ 54 ] Deborah Ferens was a bookkeeper for Ed Heese from 2000 to 2008 and did the books for the corporations.

She received a box each month, usually delivered by Leonard Perreault, who worked for the Samaroos, and she would work from the daily sales till tapes, cheques, and daily cash sheet, which always consisted of just one page. There were two columns on the sheet which changed to three in 2006. She would enter all the information each month and would reconcile the figures with the bank statements when they came in as well. She did not handle any cash. She wrote the GST and PST cheques and sent them in. [ 55 ] Tammy Forsyth was a server at the MGM and confirmed there had been three shifts between 2003 and 2006.

Katrina Rekers was also a server and worked the graveyard sift which closed down. She stated that business was slow and yielded about $200 to $500 per night of which 30% was cash. [ 56 ] Doug Smith was the nightclub manager from 2000 to 2009. He cashed cheques at the request of the staff. [ 57 ] Tony Samaroo testified at length. He described his early years in Canada. He lived and worked in Regina, Vancouver, Fort St John, Victoria and Nanaimo where he worked and began accumulating assets over the next forty years.

He described in extensive and fine detail where he had worked, what his income was, the businesses that he bought and sold and profits he made. [ 58 ] He married Helen Samaroo and between them they expanded their businesses in Nanaimo and bought and sold land and buildings. They worked extremely long hours. They pooled their savings and inheritances. He was cross examined vigorously and challenged on his explanation that the cash paid into his personal and corporate accounts came from life long savings. He was unswayed in his responses.

ANALYSIS OF THE CROWN THEORY [ 59 ] The Crown theory, that the Samaroos misappropriated unreported cash and understated their income and the income of the MGM and Samaroo Holdings in contravention of the Income Tax Act and Excise Act, is based on four assumptions: namely,

a) the paper trail pursued by Keith Kendal points to almost one million dollars being deposited to the personal accounts of the Samaroos and shareholder loan accounts of the MGM and Samaroo Holdings for taxation years 2004, 2005 and 2006;

b) that Tony Samaroo skimmed unreported cash from one till tape or shift per day from the MGM and nightclub to a lesser extent, and deposited the cash into his account and into the shareholder loan account for his and Helen’s benefit;

c) Tony and Helen Samaroo used unreported cash to pay third party suppliers, liquor and wages; and

d) the net worth analysis indicates they could not have saved close to a million dollars over the years 1980 to 2003. [ 60 ] Each assumption will be dealt with separately and Tony Samaroo’s evidence will be considered in the light of the evidence the Crown has presented to support its position. [ 61 ] Before embarking on that analysis, it is important to point out that I find Tony Samaroo to be credible. His demeanour was impressive.

His explanation is consistent with significant and material aspects of the evidence and is plausible for the reasons set out below. [ 62 ] In general terms, I accept his evidence that he began working hard and saving when he first arrived in Canada in 1970. I accept that he had sound business acumen in the food and entertainment industry and bought and sold businesses with a profit.

I accept that he continued to work long hours with Helen after their marriage and that they accumulated savings from their employment and inherited funds which they held in the form of cash due to their beliefs around banking practices. [ 63 ] In specific terms, as they relate to the different aspects of the Crown’s theory itemized below, Tony Samaroo told Ed Heese about depositing old $100 bills into his corporate account well before the auditor, Glen Foster, came to the MGM in March, 2006. Ed Heese confirms this. Glen Foster was also told this by Tony Samaroo but chose not to believe him. A.

THE PAPER TRAIL OF CASH DEPOSITS [ 64 ] There was a significant amount of cash found at the Samaroo’s home, and in a safe at the MGM when the CRA executed their search warrant in 2007 which confirms Tony Samaroo’s evidence that he keeps his savings in the form of cash in a safe. The cash was

not seized. Glen Foster confirmed that he discovered three safety deposit boxes at the bank when he investigated. This corroborates Tony Samaroo’s evidence that he kept the cash in boxes at the banks rather than depositing it. [ 65 ] It is not disputed that old $100 bills were to be discontinued in 2004. There was a spike in the deposits in the Samaroo’s personal account and the shareholder loan accounts in 2004 and 2005 which is the period Tony Samaroo said he had deposited the funds.

Keith Kendal confirms the spike of $100 bill deposits in 2004 and 2005 in his evidence. [ 66 ] I accept Tony Samaroo’s explanation that he chose not to use the cash he had amassed in the safety deposit boxes and obtained mortgages instead because he wanted to build up a good credit rating in Nanaimo. He also explained that he did not worry about the interest his savings could have accumulated if he had deposited it as he felt it was safer in the safety deposit boxes as he had control over it.

It is not unreasonable for someone who distrusts banks to want to keep their savings readily accessible nor is it unreasonable to want to build up a credit rating as a businessman new to town. [ 67 ] Kendal chose not to look at the possibility that Tony Samaroo’s explanation about the source of the funds could be true. He chose instead to look at the paper trail and extrapolate back using reported cash sales to attribute unreported revenues at the MGM and nightclub.

The extrapolation is based on assumptions and is only as good as the underlying assumptions, which, if they are flawed because some or all of the relevant variables are not factored in, such as an increase in food sales due to more customers, or internal controls reducing theft, spillage and breakage, or fluctuating prices due to “bar wars”, render the final conclusion unreliable. [ 68 ] Kendal did not consider these variables. He was far off the mark as with the percentage markup at the nightclub by 34%.

As a result, the enormous markups of up to 393% for the MGM and nightclub which he seeks to use to establish ureported cash are equally suspect and ought not be relied on. B. SKIMMING CASH FROM MGM AND SAMAROO HOLDINGS BY TONY SAMAROO [ 69 ] The Crown’s theory that Tony Samaroo skimmed cash off one till tape per day for two years is flawed in significant respects. Keith Kendal could not explain how this was done and changed his evidence when he realized how he had miscalculated, to include the possibility that they had been taking cash for many years, well beyond the indictment period.

He also failed to do an analysis of the shareholder account and his evidence is at odds with Glen Foster’s evidence regarding the amount of the shareholder account in March, 2006. [ 70 ] Diane Ye testified that the daily

summary consisted of two sheets, one with the day and night shift columns, and the second sheet with the graveyard shift. Tony Samaroo explained that there had previously been only two shifts and he told Ye to continue to use the same sales sheet and include the graveyard shift into the night shift because the sales were so low and he left it at that. Diane Ye was hostile towards Tony and Helen Samaroo and this came across in her evidence.

Furthermore, she did not mention a second sheet to anyone, despite numerous interviews in preparation for the trial, until the eve of the commencement of the trial and there was no satisfactory explanation for this. [ 71 ] Had there been a second sheet, Tony Samaroo would have had to generate another daily sheet himself, and include the traceable payment forms such as cheques, debits and credit cards from all three shifts, in order to provide Deborah Ferens with a document which would reconcile with the bank statements and credit cards.

This would have been an elaborate and sophisticated process which he would have had to engage in every day for at least two years and there is no scintilla of evidence that he did so. [ 72 ] The Crown asks the court to draw an adverse inference that Tony Samaroo destroyed the till tapes before the audit to cover up the cash skimming. It was never put to him that he had deliberately destroyed the till tapes.

The absence of the till tapes is inconclusive and they could have been thrown out once the information was given to the accountant for recording as there was no further need to keep them. [ 73 ] The increase in food sales after March, 2006, could have been the result of the Samaroos increasing their internal controls around theft, spillage and breakage and the explanation is plausible. It is equally plausible that there was an increase in sales due to the problems with local restaurants closing down. [ 74 ] Tony Samaroo explained that the MGM changed the daily sheet

summary from two to three columns in March, 2006, on the advice of Glen Foster. He denied saying that they had previously only done two ring offs as they always did three rings offs, which Ye and many of the other Crown witnesses confirmed in their evidence. Everyone was aware there were three shifts as the MGM was open twenty four hours a day and it was advertised on that basis on the sign. Ed Heese was also aware there were three shifts for many years. The graveyard shift did not do well, according to Katerina Rekers, and they discontinued that shift in 2006, as it was not worth their while staying open.

Including the proceeds of the graveyard shift in the night shift because sales were low, is a plausible explanation. [ 75 ] The provincial audit of the nightclub concluded that there were no unreported sales and taxes in 2005 which conflicts with Keith Kendal’s assumption that the Samaroos were skimming unreported cash from the nightclub. [ 76 ] Of note, Tony Samaroo was never challenged by the Crown in cross examination that he had stolen cash from the MGM and nightclub nor was he challenged that he had skimmed the cash from one shift per day.

He was not given the opportunity to answer that very serious allegation. C. CASH PAYMENTS TO THIRD PARTY SUPPLIERS, FOR LIQUOR AND WAGES [ 77 ] Paying cash for supplies is normal provided it is recorded. This is confirmed by Ed Heese and some of the suppliers themselves. There is no reliable evidence that the unreported cash payments were $140,160 as alleged by the Crown in his opening submissions and according to the evidence of Keith Kendal. [ 78 ] Paying cash for liquor is normal according to Jennifer Reynolds of the Liquor Distribution branch.

There is no reliable evidence that the unreported cash payments were $281,571 as alleged by the Crown and Kendal’s evidence.

[ 79 ] Cashing the occasional cheque for an employee at his or her request is not unusual provided it is recorded. According to the employees who testified, the practice of cashing cheques was not significant in frequency or amount. Even Kendal’s evidence was that there was an insignificant number of cheques cashed.

There is reliable no evidence that the amount of unreported cash used was $216,537 as alleged by the Crown and according to Kendal. [ 80 ] Kendal added 17% of taxes to the drinks at the nightclub in his analysis when taxes were included so he was off the mark by 34% which throws his calculations out significantly and renders them unreliable. [ 81 ] Tony Samaroo testified that he was advised by the accountants that he could use the cash as it came in but it had to be reported at all times and that is what he did. He does not know what a shareholder loan account is or what a capital cost allowance is.

He leaves that all to the accountant and I accept that evidence which is confirmed by Ed Heese who was a credible witness and supported the Samaroos despite being a Crown witness. D. THE NET WORTH ANALYSIS [ 82 ] The Crown’s theory is that the Samaroos could not have amassed $1.7 million dollars between 1982 and 2003. Tony Samaroo’s evidence, which I accept, is that he started saving in 1970.

A further flaw in the Crown’s theory is that the figure of $1.7 million as alleged in the indictment is undoubtedly completely incorrect as the capital cost allowance would, according to Keith Kendal, amount to a significant discrepancy and reduce the figure significantly. Likewise, the inheritances and cash on hand, even if those funds were lower than Tony Samaroo states, would still lead to a different figure which is anybody’s guess. As Mr.

Keliher puts it, the Crown has engaged in “voodoo accounting” to come up with the numbers to support the charges. [ 83 ] With the significant flaws in the net worth analysis, the discrepancies between the evidence of Glen Foster and Keith Kendal regarding the shareholder loan accounts, the unreliable extrapolation regarding sales at the MGM over a three month period and the enormous mark up calculated by Keith Kendal, which is too hypothetical to rely on and based on shifting variables, the Crown’s case is weak and the numbers alleged are highly uncertain. [ 84 ] Tony Samaroo was never challenged in cross examination about very important points such as the existence of the inheritances, that he and Helen could not have such a large amount of savings, that he skimmed unreported cash off the MGM and night club, or that he deliberately destroyed the till tapes to avoid detection and thwart CRA’s investigation.

I accept the evidence that he told Glen Foster that he does not retain records after getting them back from the accountant. [ 85 ] If the court is to rely on a net worth statement, particularly if it is a joint net worth analysis, there must be hallmarks of reliability, which do not exist in this case. As stated by the court in R v Zuk O.J.4323, “When a net worth analysis is a tool of the prosecution, the Crown must prove beyond a reasonable doubt either a likely source of the alleged unreported income or disprove beyond a reasonable doubt all non-taxable sources”.

In this case, the evidence is largely circumstantial and if it is being used by the Crown to prove its case, it must be highly accurate or it is worthless in establishing proof beyond a reasonable doubt. [ 86 ] The net worth analysis is only as sound as the underlying assumption.

The assumption relied on by Kendal in preparing the joint net worth assessment was fatally flawed because there was no accounting for the possibility of non taxable income in the form of savings or inheritances, nor was there consideration of the capital cost allowance. [ 87 ] More specifically, Keith Kendal failed to include the capital cost allowance into his net worth analysis which could account for up to a million dollars of the $1.7 million that the Crown alleges the Samaroos misappropriated.

He did not factor in the combined inheritances of almost $400,000 that Tony and Helen received and consequently he started the analysis with completely inaccurate assumptions. [ 88 ] Even if I did not find Tony Samaroo to be credible, the Crown cannot rely on the calculations of Keith Kendal to prove its case beyond a reasonable doubt by virtue of the principles enunciated in R v Zuk. JUDGMENT [ 89 ] The evidence against Tony Samaroo, Helen Samaroo, and the two named corporations in the information, cannot sustain a conviction on any of the counts alleged and they are all found not guilty and discharged.

Dated at Nanaimo this 6 th day of April, 2011. ____________________________________________ THE HONOURABLE JUDGE J.E.SAUNDERS (PCJ)