R. v. Abedi, 2012 ONCJ 540

COURT FILE No.: Toronto DATE: August 27, 2012 Citation: R. v. Abedi , 2012 ONCJ 540 ONTARIO COURT OF JUSTICE BETWEEN: HER MAJESTY THE QUEEN — AND — VICTOR ABEDI Before Justice H. Borenstein Heard on May 24, 2012 Reasons for Sentence released on August 27, 2012 Mr. Brock Jones ......................................................................................................... for the Crown Mr.

Ferhan Javed .................................................................................................... for Victor Abedi BORENSTEIN J.: [ 1 ] Victor Abedi has pleaded guilty to four criminal charges relating to his involvement in a large scale, very well organized fraud organized by Varuj Mehrabian and a few others. The victim was the Business Development Bank of Canada, which is to say, Canadian taxpayers. The loss was $14 million. [ 2 ] An agreed statement of facts has been filed as an exhibit on this sentencing.

To briefly describe the nature of the fraud, Mehrabian and the other principal organizers of this conspiracy recruited individuals to set up sham companies which were then used to apply for large loans to the BDC. Part of BDC’s mandate is to provide large loans to qualified Canadian businesses where those loans fit their lending criteria. The loans applied for in this case were large and were ostensibly to be used to purchase equipment for capital projects. Some of the sham companies acted as loan applicants, some were set up to look like suppliers of equipment to be purchased with the proceeds of these loans.

Mehrabian allegedly involved accountants and others and created a paper trail of phoney invoices and other documentation to facilitate this scheme. [ 3 ] Paul Kirchner was a Senior Account Executive with BDC whose job it was to review and conduct due diligence on the companies submitting loan applications. He would then provide his recommendation to the bank as to whether the loan should be approved. [ 4 ] Mehrbabian recruited Kirchner to become part of his scheme.

Kirchner knowingly approved numerous fraudulent loans, many in the range of a half a million dollars. [ 5 ] As already indicated, the total loss to BDC arising out of the various fraudulent loans perpetrated by the Mehrbabian’s conspiracy was $14 million. The loss as a result of Abedi’s involvement was approximately $850,000, most of which went to Mehrabian and the other principals. [ 6 ] Abedi received approximately $50,000 for his involvement. Abedi’s involvement [ 7 ] Turning to Mr. Abedi specifically. [ 8 ] He is 45 years old. He has no criminal record.

He was born in Iran and attended boarding school in Italy where he met Mehrabian. He then came to Canada at age 18 without any family at the urging of Mehrabian. Mr. Mehrabian was one of his first friends. The two have remained friends since and Mehrbaian was his employer. Abedi has been hard working since coming to Canada. He worked at a car dealership and then a media company, OMG, where he became manager. He was involved in a motorcycle accident and has back problems to this day. Abedi was unable to work for a period of time after the accident. He turned to Mehrabian for help.

Mehrabian owned a clothing store and hired Mr. Abedi as a salesman. Abedi was earning approximately $24,000 a year before becoming involved in this scheme. Abedi had better credit than Mehrabian did.

[ 9 ] Prior to becoming involved in this fraud, Mehrabian asked Abedi if he could place his home in Abedi’s name so that he could re-finance his house. This was due to Mehrabian’s poor credit. Abedi allowed Mehrabian to place his home in Abedi’s name and refinance the house. [ 10 ] Mehrabian then approached Abedi with a business proposal. He told Abedi that he wanted to set up a new company and make Abedi the director. Abedi did not know what it would involve but agreed believing he was to become involved in a legitimate business.

This fact is agreed to by the Crown. [ 11 ] Abedi became the sole director of this new corporation. He went to the bank and opened the accounts. Thereafter, he allowed Mehrabian to use the corporation and its bank account, as his own. Almost immediately, Abedi saw a $600,000 deposit made into that account and was asked to sign cheques disbursing those funds. At that point, he knew there was something fraudulent going on but chose not to question Mehrabian.

He chose to remain wilfully blind to the fraud and permitted Mehrabian to continue using this corporation for the next two years to perpetrate this fraud resulting in an $850,000 loss to the BDC. While Abedi did not create the fraudulent invoices or documents, he did permit them to be used to support this scheme and did sign cheques when necessary to disburse the funds knowing that no equipment had been obtained as had been represented to the BDC.

Approximately $300,000 of the $850,000 of the fraudulent loans were deposited directly into Abedi’s personal bank account which was then used for Mehrabian’s expenses including expenses for the house Mehrabian placed in Abedi’s name. In effect, Abedi allowed his corporate and his personal bank account to be used at will by Mehrabian. [ 12 ] In exchange for Abedi’s participation in this fraud, Mehrabian increased Abedi’s employment salary from approximately $500 per week to $1,000 per week for the roughly the next two years.

It is accepted that the increased compensation to Abedi as a result of his involvement in this fraud was in the range of approximately $50,000 out of the $850,000 obtained. The rest went primarily to Mehrabian. Events since arrest [ 13 ] The various participants in this conspiracy have now been charged. Kirchner pleaded guilty early in these proceedings and was sentenced to two and a half years in jail. I was advised that he was very cooperative and was scared.

He agreed to participate in this large conspiracy when approached by Mehrabian for very little, with most of the proceeds going to Mehrabian or the other principals. Kirchner received approximately $10,000 from this $14 million fraud. He also received some suits from Mr. Mehrabian’s store and a trip to Las Vegas. [ 14 ] Kirchner breached the trust of his employer and facilitated the $14 million in fraudulent loans at Mehrabian’s request. [ 15 ] On his plea, Mr. Abedi was sworn and, under oath, accepted these facts and is prepared to testify in accordance with those facts should he be called as a witness.

Whatever the strength of the Crown’s case, it is clear that Mr. Abedi’s remorse is genuine. It is not disputed that he has added to the Crown’s case in a material way by his plea. [ 16 ] He and his wife have been married for eight years. They have no children. She works as a personal support worker. The toll that the stress has taken on him since his arrest is obvious. He has been very depressed. His marriage is ending. He is ashamed and obviously remorseful. [ 17 ] Through his counsel, he has submitted that a $50,000 free-standing compensation order should be made against him.

He only earns $13 an hour but thinks that would be a reasonable amount for him to repay over time, particularly, if he is allowed to work. Positions of Counsel [ 18 ] The Crown submits that Mr. Abedi ought to be sentenced to between 15 and 18 months in jail followed by two to three years’ probation, arguing that deterrence and denunciation must dominate this sentencing. The Crown acknowledges the value of Mr. Abedi’s plea, his cooperation and his desire to make restitution. The Crown submits that Mr. Abedi should be the subject of a $350,000 stand-alone restitution order. [ 19 ] The defence submits that Mr.

Abedi’s role, while necessary and significant, must nonetheless be balanced with the unusual circumstances of this offence. Mr. Abedi was neither the operating mind nor did he profit in any significant way from this conspiracy. His gross income doubled over the next two years from $500 to $1,000 as a result of his participation in this fraud. Accordingly, to the extent that his gain from this conspiracy is a relevant factor, it was approximately 50,000.

Analysis [ 20 ] Those are the positions of counsel. [ 21 ] Both Crown and defence submit that a sentence within the reformatory range would be appropriate in this case. I agree. The real issue in contention is whether a conditional sentence is consistent with the fundamental principles and purposes of sentencing. [ 22 ] A conditional sentence is legally available in this case. There is no minimum sentence prescribed. The offence is not statutorily precluded. The sentence sought is in the reformatory range. Mr. Abedi is not a danger to the community.

The issue is whether a conditional sentence is consistent with the purposes and principles of sentencing and, if so, whether it ought to be imposed in this case. [ 23 ] Deterrence and denunciation are the primary sentencing considerations in sentencing offenders who commit large scale,

organized frauds. Courts must denounce this conduct and those who would commit these offences must know that there will be asignificant sanctions should they be convicted.

While those are the primary considerations on sentence, they are not the only ones. [24] A fit sentence must take into account both the offence and the offender. [25] With respect to the offence, the sentence should not only reflect the nature of the crime but the specific role an individualplayed in that crime. [26] The Court must look at the antecedents of the accused and his prospects of rehabilitation. [27] It must also consider any sentences imposed on other participants of this offence, Mr. Kirchner, or those who commitsimilar offences, particularly those who are similarly situated to this offender.

A vastly disparate sentence imposed upon one participantto a crime from a similarly situated offender would be unfair and would understandably cause bitterness and resentment.

The reason forany differences in sentencing should be apparent and rationally understood. [28] A large restitution order is also part of the sentence or punishment and must be factored into the remainder of thesentence. [29] Finally, a sentence should be as minimally restrictive as possible while being consistent with the principles of sentencing. [30] Courts have held that a conditional sentence, in appropriate cases, can properly express the principles of deterrence anddenunciation although, clearly, a conditional sentence will not have the same denunciatory effect as a sentence of incarceration. [31] A conditional sentence may be longer than an otherwise appropriate period of incarceration and may include terms togive it a punitive element in order to enhance the effect of the conditional sentence: see R. v.

R.N.S. (2000), 2000 SCC 7 , 140C.C.C. (3d) 553 (S.C.C.); R. v. Killam, [1999] O.J. 4829 (Ont. C.A.); and R. v. Shoker (2006), 2006 SCC 44 , 212 C.C.C. (3d)417 (S.C.C.). [32] The decision from the Ontario Court of Appeal in R. v. Drabinsky and Gottlieb, [2011] O.J. 582 (Ont. C.A.), releasedafter Mr. Kirchner was sentenced, is instructive. [33] Drabinsky and Gottlieb were the founders and directing minds of a successful live entertainment company.

Theircorporation contributed greatly to the arts communities of many cities and to the employment of actors and those working in theatre.Their company successfully produced many shows in Toronto, New York and elsewhere. They took the company public and raisedhundreds of millions of dollars through various forms of public offerings. Ultimately, in an attempt to continue to fund their projects,they falsified their accounting records to create a more favourable financial picture than really existed, thus inducing or sustaining certainfinancing. When the fraud came to light, the company went bankrupt.

While the exact loss attributable to the fraud remains in dispute,approximately $500 million of public funds had been invested in the company prior to its bankruptcy. [34] Drabinsky and Gottlieb contested the allegations vigorously. There was a lengthy contested preliminary hearing and trialand appeal. Upon conviction, Drabinsky was sentenced to 7 years, Gottlieb to six. The Court of Appeal dismissed their convictionappeals. In reducing their sentences to 5 and 4 years respectively, the Court held that: “The deterrent value of any sentence is a matter of controversy and speculation.

However, it would seem that if the prospect of a longjail sentence will deter anyone from planning and committing a crime, it would deter people like the appellants who are intelligentindividuals, well aware of potential consequences, and accustomed to weighing potential future risks against potential benefits beforetaking action”. (paragraph 159) [35] The court further held that: “In any event, this court and all other provincial appellate courts have repeatedly held that denunciation and general deterrence mustdominate sentencing for large scale commercial frauds.

Denunciation and general deterrence most often find expression in the length ofthe jail term imposed.” (paragraph 160) [36] Finally, the Court noted the value of an early plea of guilty stating: “It is impossible to catalogue the factors that in combination could justify a sentence below the usually applicable range. We would,however, make two observations. First, the investigation and prosecution of crimes like these is difficult and expensive. It placessignificant stress on the limited resources available to the police and the prosecution.

An early guilty plea coupled with full cooperationwith the police and regulators and bona fide efforts to compensate those harmed by the frauds has considerable value to theadministration of justice. The presence of those factors, depending of course on the other circumstances, may merit sentences outside ofthe range.” (paragraph 166) [37] The Crown submits that, in some respects (though not quantum) the facts in this fraud are worse than those in Drabinskyin that, in the case at bar, this was a pure scam from the beginning.

There was no legitimacy to this enterprise. [38] The defence submits that the precedential value of Drabinsky is somewhat limited in terms of the actual sentenceimposed, rather than the principles expressed, given the magnitude of that fraud, the fact that Drabinsky and Gotlieb were the directingminds, the breach of trust character of that fraud and the fact that there was no plea or signs of remorse. [39] That judgment is important and instructive in terms of the principles expressed. However, this case is different fromDrabinsky and Gottlieb and Abedi is far different from any of the other players. [40] R. v.

Tulloch, [2002] Ont. Sup. Ct. No. 5446 is illustrative of a large scale sophisticated fraud where a conditional

sentence was imposed. [ 41 ] Tulloch and others organized a fraudulent GST refund scheme whereby they sought GST refunds on false purchases of heavy equipment. They would submit false invoices and other documentation to the Government, which relied upon those documents and paid out and lost over $6 million in phony refunds. Tulloch, a car dealer, was involved in 45 such transactions over a period of eight months and his company received $438,000. By the time the fraud was discovered, the money was gone.

Tulloch was re-assessed by the Government and owes that money to what is now CRA. [ 42 ] Upon arrest, Tulloch was cooperative with the authorities pleaded guilty. He had lost everything by the time of sentencing and was living his parents’ basement. He was 39 years old and suffered from bipolar disorder and depression. [ 43 ] The Crown sought a sentence of four to six years in jail and a compensation order of $6.2 million.

The defence sought a conditional sentence and a $200,000 restitution order. [ 44 ] Justice Durno balanced the aggravating and mitigating factors and imposed a two year conditional sentence followed by probation and a $300,000 restitution order.

Can a conditional sentence adequately express the principles of denunciation and deterrence in this case? [ 45 ] Like most cases, there are both aggravating and mitigating factors to consider. [ 46 ] In aggravation, Abedi knowingly permitted Mehrabian to use his corporation to commit a substantial fraud for over two years and would sign cheques whenever Mehrabian asked him to do so.

While he was by no means a principal in this scheme, nor did he significantly profit from it, his role was a necessary one that facilitated the fraud. [ 47 ] That extent of the actual loss is also an aggravating feature of this case. [ 48 ] So are the nature of the victims of this fraud who of course are the taxpayers of Canada. Taxpayers pay significant amounts of their hard-earned yearly income to the government in income taxes. Those hard-earned dollars are intended to fund programs and services that benefit us all.

This fraud took a substantial amount of those tax dollars and diverted them to line the pockets of a few individuals. [ 49 ] There are also considerable mitigating circumstances in this case. [ 50 ] Mr. Abedi is 54 years old. He came to this country alone at 18 and has worked hard his whole life. [ 51 ] He does not have a criminal record. [ 52 ] He did not enter this business arrangement intending to commit a fraud.

Once he became aware of it, he continued to permit it, largely out of a combination of grossly misplaced loyalty to his friend and for a relatively small increase in his salary. [ 53 ] He was not directing the fraud nor preparing the false invoices. That was all being done by others. He, in effect, allowed Mehrabian to take control of the company Mehrabian created and to use it as his own for fraudulent purposes. However, he signed the cheques disbursing the funds. [ 54 ] Abedi’s role, while necessary, is qualitatively and significantly less than Mehrabian or Kirchner’s.

It is nowhere near as culpable as the roles played by Gottlieb or Drabinsky or Tulloch. [ 55 ] Once arrested, Abedi has demonstrated his remorse, he has pleaded guilty, he has admitted the facts under oath and is willing to cooperate with the prosecution and testify against the others, including Mehrabian. By admitting the facts under oath, he has given more weight to that potential. Those are all to be taken into account as mitigation. [ 56 ] The sentence imposed upon Kirchner is a factor to be considered. Mr. Abedi, like Kirchner, profited very little from this crime.

Kirchner too was remorseful and was cooperative. However, what distinguishes Kirchner from Abedi is the fact that Kirchner was a Senior Account Manager employed by the victim bank and it was his role was to verify and recommend suitable loans. He very significantly breached the trust of his employer and was critical to this fraud. The fact that he threw away his career and his liberty for $10,000 and a few suits and a trip to Las Vegas is almost incomprehensible. His plea, his remorse and his willingness to cooperate were important factors particularly given his professed fear.

Notwithstanding those mitigating factors, his breach of trust occasioning a $14 million loss remains particularly aggravating. Abedi was not employed by the bank, did not breach their trust and was not instrumental in the $14 million loss. [ 57 ] Mr. Abedi is seeking an order that he repay $50,000. The Crown initially was not seeking restitution but then submitted that a $350,000 restitution order ought to be imposed.

A restitution order ought not be so great a burden that it extinguishes any potential for an accused to successfully re-integrate into society and move forward after serving his sentence. [ 58 ] Balancing all of these factors, together with the case law and the principles and purposes of sentencing, in my view a lengthy conditional sentence, with onerous restrictive terms, followed by a lengthy period of probation would adequately express the principles of deterrence and denunciation while recognizing Mr. Abedi’s role and his background.

It would be lenient to be sure, but appropriately so given his role, his plea and his willingness to cooperate. [ 59 ] Accordingly, Mr. Abedi will be sentenced to two years less a day to be served in the community. In addition to the

mandatory terms of that order, for the first 12 months of his sentence, he will be confined at all times to his home with the exception of going directly to and from pre-arranged employment as approved of by his conditional sentence supervisor. He will also be permitted out of his residence for legal or medical appointments as approved of by his conditional sentence supervisor or as may arise in an emergency. He will be permitted out of his residence to conduct personal errands every Saturday from noon to 4:00 p.m. At all other times, he shall be confined to his residence.

For the next six months of his conditional sentence, he will be bound by a curfew seven days a week, from 9:00 p.m. to 6:00 a.m. For the remaining six months less a day, his curfew will be from 11:00 p.m. to 6:00 a.m. [ 60 ] While serving his conditional sentence, he is not to consume any alcohol. He is to have no contact or communication directly or indirectly with Varuj Mehrabian or any of the other named co-conspirators except as may be legally required for the sole purposes of legal proceedings and only if approved of in advance by your conditional sentence supervisor.

You are to remain within the Province of Ontario throughout your conditional sentence unless you receive permission from your conditional sentence supervisor. [ 61 ] Following your conditional sentence, you will be placed on probation for a period of three years. You are to report to a probation officer within 48 hours of the commencement of your probation and thereafter as required. You will be subject to the mandatory terms of probation. In addition, you will perform 240 hours of community service within the first 18 months of probation to the satisfaction of your probation officer.

You will have no contact or communication directly or indirectly with Varuj Mehrabian or any of the other named co-conspirators except as may be legally required for the sole purposes of legal proceedings and only if approved of in advance by your probation officer. You are to remain within the Province of Ontario throughout your probation unless you receive permission to leave the province from your probation officer. [ 62 ] You will also be subject to a free-standing restitution order in the amount of $50,000.00 in favour of the BDC. Released August 27, 2012 Signed: Justice H. Borenstein