R. v. Burden, 2014 ONCJ 477

Citation: R. v. Burden , 2014 ONCJ 477 ONTARIO COURT OF JUSTICE Old City Hall - Toronto BETWEEN: HER MAJESTY THE QUEEN — AND — CAROLYN BURDEN ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) M. Lockner For the Crown S. Goldstein For the Defendant Heard: June 3, 4 and 5, August 22 and 23, November 26 and December 6, 2013 and March 11, 2014 REASONS for JUDGEMENT MELVYN GREEN, J.: A. INTRODUCTION [ 1 ] Max the Mutt Animation Inc. (“Max the Mutt”) is a Toronto-based animation school. Carolyn Burden, the defendant, was employed by the company from mid-2010 to mid-2011.

She performed a number of administrative roles, primarily related to the school’s bookkeeping, accounting and financial management functions. Approximately $160,000 was electronically transferred from Max the Mutt’s business account to the defendant’s personal account during the course of her one-year’s employment. The defendant says that these monies were proper and authorized compensation for the services she performed for Max the Mutt (hereafter, the “school”, the “firm” or the “company”).

The prosecution says the total transfer exceeded the defendant’s authorized income with the school (post-deductions) by more than $100,000 and that the alleged over-payment was a product of the defendant’s fraudulent conduct.

As a result, the defendant faces two charges of fraud over $5,000, one covering the period from May 25 to December 31, 2010 and the second extending from January 13 to May 20, 2011. [ 2 ] Several witnesses testified on the behalf of the Crown, including Maxine Schacker (one of the firm’s owners and, in effect, its chief executive officer) and Skye Sepp (the firm’s office manager in early-2011). A number of critical bank records were introduced through a third witness, an employee of the Bank of Nova Scotia (BNS) at which the school and the defendant maintained accounts. The

defendant testified, as did a second former employee, Rosanne McCallum, for the defence. [ 3 ] As always, the Crown bears the burden of proof. It must establish the essential elements of each charge beyond reasonable doubt to ground a conviction for that count. Failing this, an acquittal must follow. B. EVIDENCE (

a) Common (or Undisputed) Ground [ 4 ] Max the Mutt is a government-regulated private “career college” that offers diplomas in a variety of media and communications disciplines. It first opened its doors in 1998. While the number of employees varies, the school generally retains between twelve and eighteen faculty members. It also employs about five or six, perhaps a few more, administrative staff – one of whom was the defendant in 2010-11. [ 5 ] The administrative side of the company was in some turmoil in early 2010.

Noelle Belgrave, then the office and business manager, suddenly fell ill and left in March or soon after for medical reasons. John Rhodes, the bookkeeper and registrar, left around the same time. When his advice was sought, Jay Gold, the firm’s external accountant and auditor, recommended that that the defendant, who then worked for him, fill in for Belgrave and Rhodes, at least on a temporary basis while he, Gold, billed the company for her services.

The defendant, as Gold’s employee, had assisted Max the Mutt with its year-end audit the previous spring and was thus familiar with the company’s books. [ 6 ] Schacker hired Tariq Hussain as a replacement bookkeeper. He worked with the defendant or under her supervision until he left the firm around July of 2010. The defendant had by then transitioned from Gold’s employ to a fulltime position at Max the Mutt. [ 7 ] Max the Mutt maintained its primary bank account at a nearby branch of the BNS.

Bank records of electronic deposits, withdrawals and payments made through this account during the relevant period are exhibits at this trial. Maxine Schacker and Tina Seemans (both partners in the firm) had routine access to the firm’s banking records as, apparently, did Belgrave (when she was not on medical leave) and the defendant. Only Schacker and Seemans had cheque-signing authority. BNS electronic fund transfer (EFT) technology was in place at Max the Mutt in 2010, allowing for the digitally processed payment of vendors, employees and other company obligations.

It is a matter of central dispute, however, as to whether the defendant could execute EFTs without Schacker’s or Seeman’s oversight or authorization. (

b) The Banking Records [ 8 ] BNS banking records form the basis of a crucial assembly of EFTs made from the school to the defendant during the course of her employment at Max the Mutt. Skye Sepp prepared this compilation, on Schacker’s instructions, following the defendant’s departure. The integrity of the accounting entries is not in dispute.

Accordingly, the issue before me is not how much money was transferred from the company to the defendant but, rather, whether the defendant had the capacity to independently effect these transfers and, if so, whether the EFTs to the defendant’s personal account and the quantum involved were sanctioned by her employer or otherwise consistent with the defendant’s authorized remuneration. (

c) Matt the Mutt: The Crown Witnesses (

i) Maxine Schacker [ 9 ] Maxine Schacker helped found Max the Mutt and is one of its three proprietors. She held the job titles of “director” and “president” in 2010. She was then 69 and remained actively engaged in the daily operation of the company. Schacker’s background was chiefly in the creative side of the industry. She had, it appears, little business experience or training or, put frankly, any natural acumen in this field of endeavour. Her energy and attention was divided between the school and several grave family health issues in the 2010- 11 period.

She was not, she claimed, detached from or disinterested in the financial affairs of the firm. She asked to see statements and have them explained. However, and as she frequently volunteered, her testimonial recall, particularly of dates, sequence and detail, was far from perfect. In her own words, her “memory was not completely clear” and, repeatedly, she was “not entirely sure” about portions of the historical narrative. [ 10 ] At the defendant’s suggestion, she and Schacker together attended at the BNS to set up an electronic banking service.

The EFT program permitted Max the Mutt to electronically deposit, withdraw and transfer funds (including cheque-writing and salary transfers to employees’ accounts) from a single secure access computer housed in the defendant’s office. The system, Schacker recalled, was operational before the defendant assumed fulltime work for the school. Only she and the defendant, she said, had authority, by way of user names and passwords, to use the EFT system.

In cross-examination Schacker was shown an email addressed to the defendant (dated December 4, 2010) in which Schacker reports that she “received the email with the directions to get me onto the electronic banking system”. “Once we’re on,” she continues, “I’ll be right next door, so any time you get thrown off please feel [free] to interrupt me and I’ll come in and put in my password again!” Schacker could not recall the context of this communication but insisted that the defendant either shared her, Schacker’s, EFT password or had her own password soon after the introduction of the system at the firm.

Further, it was not unusual for the defendant to conduct the firm’s electronic bank transfers while working from her home. [ 11 ] When pressed, Schacker appeared genuinely confused about the process of electronic transfers. She did not record or remember any of her EFT passwords after that first issued to her, nor could she clearly recall whether the operation of the system required use of an ancillary device – sometimes called a fob or token. She strenuously denied routinely signing off on EFT transactions. She could recall only a single occasion when she had done so.

The defendant, she said, conducted all of the firm’s electronic transfers of funds (including pay packages to the defendant’s own account) and she, Schacker, was not “automatically” advised of any EFTs. “We trusted her entirely”, Schacker said of the defendant, “until the last day she was there”. A number of emails sent from Schacker to the defendant in 2010 and 2011 were entered as exhibits at this trial. Although tendered for a different purpose, they incidentally, and

frequently, display expressions of consideration, affection and personal concern for the defendant’s health. [ 12 ] The defendant never entered a written contract with the school. While still in Gold’s employ, Max the Mutt paid the defendant’s principal for her work on the company’s year-end accounts and, it appears, for some additional services for which she independently invoiced the school. Schacker recalled that she and the defendant initially agreed that the defendant was to be paid $35 an hour for this “free lance” work.

An invoice dated May 21, 2010 reflects some 31 hours of work the defendant billed to Max the Mutt on this basis. It also contains the notations “EFT 25 May 2010” and “Entered in Q/B [QuickBooks] 6/21/10”. Schacker signed off on this invoice. Until prompted in cross-examination, Schacker could not recall receiving another invoice from the defendant. In any event, no invoice dated later than May 21, 2010 has been entered into evidence at this trial. [ 13 ] The defendant styled herself the company’s chief financial officer when she moved to fulltime employment.

She also performed much of the work Rhodes had done earlier, including bookkeeping and the preparation of payroll deductions and taxes. According to Schacker, the defendant had complete responsibility for executing the firm’s financial affairs. [ 14 ] Schacker’s firm recall (reflected in contemporaneous thought-process emails to herself) was that the defendant wanted to be paid $35 an hour for a 35-hour, 5-day workweek, or a little less than $64,000 a year. Schacker wanted to pay her no more than $60,000, an annual salary that could be met by deducting a couple of weeks of unpaid vacation.

In cross-examination, Schacker identified two further invoices from the defendant, dated April 15 and May 15, 2010, for work performed between March 1 and May 1 of that year. The first was calculated at a rate of pay of $35 an hour, and the second an hourly remuneration of $50. Schacker could not recall if the defendant was still working for Jay Gold, fulltime for Max the Mutt or was in the process of transitioning between the two at the time she had approved these two invoices.

However, once the defendant assumed a fulltime position with the company, Schacker categorically denied that her pay ever varied according to her occupational role or function or that it ever exceeded $35 an hour. Further, once employed on a fulltime basis the defendant paid herself through payroll transfers without any sign-offs from Schacker. [ 15 ] Schacker was initially “not sure” if the defendant was an employee of or contractor to Max the Mutt. In cross-examination she clarified that the defendant was on salary from the time she began to work fulltime for the school.

Schacker generally referred to the defendant’s compensation as a “salary”. The defendant, she explained, was to be compensated on the same fixed biweekly basis as were the firm’s other employees. Although not entitled to any ancillary benefits beyond her hourly remuneration, the school did pay into federal employment insurance on the defendant’s behalf.

There was no reason, Schacker testified, why the firm would electronically transfer any funds other than her “salary” to the defendant’s personal bank account. [ 16 ] The defendant’s annual earnings were, according to Schacker, at the “top end” of the firm’s pay scale. Rhodes, for example, earned $45,000 a year. Sepp’s annual starting salary as office manager was $30,000; he was earning $5,000 more as the school’s registrar at the time of trial. Schacker herself drew or earned only $55,000 a year, and most employees were paid between $25,000 and $30,000 annually.

The defendant, said Schacker, had never expressed any dissatisfaction with her salary. [ 17 ] Schacker had relied heavily on Noelle Belgrave (a friend as well as the firm’s office and business manager) for financial advice before health complication forced Belgrave’s sudden departure. Marcia Gittens, who had served a Belgrave’s assistant, then assumed the office manager’s functions. Gittens began a maternity leave and was replaced as office manager by Sepp in December of 2010. Belgrave, meantime, returned to the school’s employ in January 2011.

Schacker insisted that the defendant was never the firm’s office manager, although she contemplated her filling this role, if only on a temporary basis, as set out in an August 2010 email to herself. Schacker agreed that the defendant did perform some registrar-related functions to the degree that she dealt with student fees and tuition. [ 18 ] The execution of the firm’s financial affairs was left to the defendant once she was hired on a permanent basis. Schacker quickly came to rely on her assessment of the company’s fiscal health.

The defendant’s early reports were so encouraging that Schacker bought a modest company car, tweaked employee salaries and explored larger facilities for the school. Based on the defendant’s rosy financial projections, Max the Mutt moved into a more expansive and expensive rented space in late-2010 or early-2011. [ 19 ] The financial forecasts suddenly changed in the spring of 2011. Schacker learned that the firm’s account had been “frozen”. The defendant told Schacker this was an “error”. Schacker’s concern deepened when she checked the company account on her own computer and found only a minimal cash balance.

The defendant, when queried, assured Schacker that she had $15,000 in hand that she intended to deposit the next day. [ 20 ] Schacker was surprised by the firm’s apparently sudden financial decline. The defendant’s January-February projections had been very promising. Now things appeared so dire that Schacker began to lay off employees. She met with Sepp that day, Thursday, May 12, 2011. He showed Schacker a new spreadsheet generated by the defendant. When compared with the January-February projections it was clear that the “actuals” (true income and costs) had since been altered.

They could not reconcile the projections. The defendant remained in her office while Schacker, Sepp, Belgrave and Seemans tried to make sense of the seemingly inconsistent financial documentation. The defendant did not return the next day or ever again. But for an email attributing her absence to stress, Schacker had no further contact with the defendant. [ 21 ] Schacker and Sepp soon conducted a search of the defendant’s office. They found a printout of what Schacker construed as unauthorized transfers to the defendant’s personal bank account.

They also located the name of an accountant who Sepp called on speakerphone about their concerns. The accountant suggested that the defendant had perpetrated a fraud. This was the first time the possibility of criminal conduct by the defendant had occurred to Schacker. A call to the police followed. Schacker meantime, asked Sepp to review the Max the Mutt accounts during the defendant’s tenure. [ 22 ] In Schacker’s estimation, approximately $110,000 in excess of the defendant’s authorized earnings accrued to her personal benefit. “For us”, Schacker said, “$100,000 means a lot”.

As a result of the financial debacle, the employees’ salaries were reduced and Schacker drew no further income from the firm until September of that year. [ 23 ] Until her discovery of apparent misappropriations, Schacker thought the defendant a very competent financial officer. She had, however, begun to question her fit in the firm. The defendant was frequently absent and sometimes uncommunicative. She kept the

door to her office locked. And there was some personal friction between the defendant and Belgrave on the latter’s return. [ 24 ] Roseanne McCallum was another former employee at Max the Mutt. While she acknowledged a salary dispute, Schacker testified she had dismissed McCallum because of complaints from Gittens and the defendant rather than any financial disagreement.

Whatever McCallum’s grievance or its merits, her termination was the subject of an outstanding civil action against Max the Mutt at the time of the defendant’s trial. (ii) Skye Sepp [ 25 ] Skye Sepp was hired to replace Marcia Gittens as office manager at Max the Mutt in mid-December 2010. Gittens trained him during the two weeks their employment overlapped. He then relied on the defendant for advice. [ 26 ] Sepp’s friend, Niall Dowdell, introduced him to the company. Dowdell was employed fulltime by the firm in IT services. Sepp was then a 26-year-old university graduate who had interned for an NGO in England.

He confirmed that his starting salary was $30,000 a year, as set out in a written contract with the firm. Sepp’s initial responsibilities were chiefly on the school’s academic side and, as a result, he had relatively little exposure to its financial affairs.

He assumed the role of registrar (later renamed bursar) after the defendant’s departure and held the position of operations manager when first called to the witness box. (By the time he resumed his testimony, following a lengthy recess, Sepp had left the company to return to university.) During the five months their employment overlapped, Sepp and the defendant had frequent daily contact as the defendant dealt with the financial obligations of every student. Like the other employees, Sepp was paid by way of a biweekly EFT direct deposit to his bank account.

To the best of his knowledge, the defendant alone was executing these transfers on behalf of the company. [ 27 ] As there was then no one else to do the job, Sepp, along with a newly hired bookkeeper, assumed many of the defendant’s responsibilities when she left in May 2011. Belgrave, who had returned to work as the firm’s general manager in January 2011, took over many of Sepp’s administrative duties so that he could devote himself to these tasks.

They included having to recreate the firm’s 2010-11 “missing” financial records. [ 28 ] Sepp’s account of the dawning realization of a financial crisis at Max the Mutt in late-spring 2011 closely parallels Schacker’s recall. In late-February the defendant reported tight but viable financial projections. Some two and half months later, it had all gone south. Schacker, Seemans and Belgrave told Sepp on Thursday, May 11 th that they had just learned that the firm’s fiscal situation was so dire that they had to let everyone but the receptionist go. They could not explain what had changed.

Shown copies of the defendant’s February and May financial projections, Sepp noticed a number of significant discrepancies between the two statements. Seemingly fixed entries had been altered between the two dates and a modest projected income had been converted into a significant loss. They found a second May projection that only added to the perplexity and their growing sense of panic. Sepp could not recreate or reconcile the defendant’s figures. His own immediate efforts to reconstruct the spreadsheets projected substantial negative cash flow deep into the year.

His impression was that the significance of the cash shortfalls, even as reported by the defendant, had escaped the attention or appreciation of the firm’s owners. [ 29 ] Sepp and Schacker still had confidence in the defendant. They hoped to resolve their confusion by meeting with her the next day, Friday, but an email that day advised she would not be coming to the office. They tried, without success, to reach Jay Gold, the firm’s accountant. Instead, they spoke on speakerphone with a “career college” accountant whose card was on the defendant’s desk. He suggested the possibility of fraud.

Sepp remained disbelieving. His girlfriend’s father, a lawyer, pronounced the circumstances “suspicious” when Sepp sought his advice over the weekend. This led to a call to Schacker and their decision to review the firm’s accounts on QuickBooks, the firm’s financial management software. The program, Sepp said, was exclusively installed on the defendant’s computer. He later testified that the receptionist also has access to QuickBooks for financial data entry. [ 30 ] Sepp, along with Schacker and Seemans (and not Belgrave), attended and searched the defendant’s office that Sunday.

There were paper folders bearing each employee’s name, including the defendant’s. However, her folder contained only a single document: the May 21, 2010 invoice for work attributed to the period between May 10 th and May 21 st . Sepp and the others were unable to access either QuickBooks or the BNS accounts; neither of the co-owners could recall their passwords and Sepp did not have one. They did locate a number of printouts detailing the firm’s 2010 and 2011 EFTs.

The defendant’s name was a conspicuous entry, with frequent and irregular transfers to her benefit in varying amounts in excess of a thousand dollars each. Some of these payments occurred within a few days of each other or even on the same day. This dramatically contrasted with the firm’s usual payroll protocol. But for Dowdell, none of the staff submitted invoices for their work and all were paid by way of EFT on the same day every two weeks. The owners’ suspicions naturally deepened, as did Sepp’s.

They called the police and reported their concerns. [ 31 ] Sepp did not have his own password or any knowledge of the defendant’s. Belgrave, however, did have the necessary tools to gain entry to QuickBooks and the EFT system, and Sepp borrowed her user IDs and passwords to access the firm’s electronic accounts until, some time later, he was given his own user name and password.

Although he had no signing authority, Sepp discovered that with even with the registrar’s password access (as opposed to the extended powers, if any, granted the system’s “super-administrators”) he had the capacity to very simply conduct any EFTs, including payroll, without anyone having to sign off on the transfers – “a one-step process”, as he put it. Max the Mutt did not introduce a second user sign-off procedure or the additional safeguard of security tokens until June or July of 2011, long after the defendant had left the firm.

As before the defendant’s departure, each employee's biweekly pay was manually input for each pay period; there were no automatic or recurring payments. [ 32 ] By setting the computer search parameters to the defendant’s name, Sepp was able to use the BNS banking records to track the electronic payments the defendant received during the course of her work for Matt the Mutt. These records reflected the defendant’s nominal change in payee status from “vendors” (that is, contractor or “free-lancer”) to “salary-staff” in early-July 2010.

Sepp generated an “EFT Payment History” report respecting the defendant’s company-sourced income. The very first recorded electronic transfer to the defendant was in the amount of $1,093.75, consistent with the invoice for this amount found in a paper folder in the defendant’s office bearing her name. It was dated May 25, 2010, recorded 31.25 hours of work at $35 an hour, and bore Schacker’s handwritten initials next to a stamped line reading “approved”. It was the only defendant-related invoice Sepp was ever able to locate, although he conceded he had not searched the files in Schacker’s office.

Sepp agreed it a reasonable inference that the defendant may have invoiced her work

prior to May 21, 2010, but he had found no record of her being paid for any work before that date. [ 33 ] Sepp used an Excel program to summarize the firm’s BNS entries respecting the EFTs made to the defendant’s benefit. The firm’s employees received 26 biweekly salary payments over the course of a year. There were three times as many EFTs to the defendant in the same time period. Of these, there were only five entries referable to the standardized pay-date and in a net amount ($1,696.26) commensurate with an annual gross salary of $60,000.

Many of the electronic transfers to the defendant’s personal account were on consecutive days and, by way of illustration, there were four transfers totaling more than $15,000 within three days in early December 2010, including two amounting to $7,550 on the same day. These transfers were bracketed by a further EFT to the defendant of more than $3,000 a few days earlier and some $12,000 within the following week. In total, approximately $30,000 was electronically transferred to the defendant’s account within about a two-week period in December 2010.

Nor was this a particularly aberrant interval: substantial transfers of monies to the defendant’s account in November 2010 and January 2011 were also captured in the BNS banking records. [ 34 ] Over the course of the twelve months spanning May 25, 2010 to May 20, 2011, a global sum of $159,018.70 was electronically transferred to the defendant’s account – approximately $107,000 in 2010 and more than $51,000 in 2011.

Assuming the defendant’s annual gross salary from Max the Mutt was about $60,000 a year and her annual net income thus amounted to under $44,000, Sepp calculated that the defendant had received approximately $115,000 more from the firm than that to which she was legitimately entitled. [ 35 ] Sepp agreed, in cross-examination, that the defendant “did quite a bit of work” while employed at Max the Mutt and that she had her “hands and feet in different departments at different times”.

He did not recall her occupying a position of “controller” (a question never put to Schacker); job titles, he explained, were “elastic” at the firm. Schacker, Sepp agreed, “had a lot on her mind” and “sometimes forgot things”, including, on occasion, having approved something she later could not recall. She did, if irregularly, inquire about taxes, creditors’ bills and the like. Sepp also agreed that the firm, in his opinion, was “not managed well”. [ 36 ] The discovery of the alleged defalcation gravely impacted the company. Many employees, including Sepp and Belgrave, went without pay for several weeks.

The firm was compelled to negotiate rent reductions with its landlord. Schacker and Seemans (if not for the first time) recapitalized the firm to keep it afloat. (

d) Matt the Mutt: The Defence Witnesses (

i) Carolyn Burden [ 37 ] Carolyn Burden, the defendant, was 47 at the time of trial. She lived with her two sons and had been divorced for eight years. She had completed all but one of the levels required to qualify as a certified general accountant and had worked as a bookkeeper for approximately 25 years. In 1986, when only about 20, she had been convicted of the offence of theft over $5,000. Much more recently, in 2010, she was convicted of a second offence: fraud under $5,000. [ 38 ] The defendant was working for Jay Gold, a chartered accountant, in 2009.

She was assigned to conduct the year-end audit at Max the Mutt in late-2009 and early-2010. Schacker, she says, asked Gold to temporarily “lend” her to the school when Rhodes, then the registrar, left around February 2010. As a result, the defendant ended up working for both Gold and Max the Mutt – a total of 70 to 80 hours a week – between March and April or May of 2010.

She billed the two firms on an hourly basis for her work during this “transition” period. [ 39 ] According to the defendant, her transition period roles included those of office manager, registrar and controller – a mix of functions that included student and instructor contracts and tuition payments, regulatory data maintenance, and, as controller, accounting duties involving both QuickBooks and EFTs. The defendant agreed that she never “officially” attracted the job title of “office manager”. Belgrave had held this role until she was forced to leave for medical treatment in May 2010.

Gittens then occupied the role of office manager until she left on maternity leave. Sepp then replaced Gittens. However, the defendant trained Gittens and Sepp and did the office manager work for which they were not competent. [ 40 ] The defendant worked fulltime for Max the Mutt from about May of 2010 until when she left the firm in May 2011. She had attended with Schacker at the BNS when she first began work as registrar to arrange for her, the defendant’s, access to the firm’s EFT software for data entry purposes. The defendant managed the EFT system.

She could not, however, electronically release funds on her own. [ 41 ] The defendant claimed that her rate of remuneration depended on the function she performed for the firm. As registrar or office manager, she billed $35 an hour for her work. As controller, she billed $50 an hour. The defendant insisted she maintained this billing rate and differential throughout her tenure at Max the Mutt. She and Schacker had agreed that she, the defendant, would be paid $35 an hour for her works as registrar and to “target” 35 hours week to this function.

There was no agreement, however, as to a fixed annual salary or a maximum number of hours. Before source deductions, the defendant was ordinarily paid $2,450 biweekly ($35 X 35 hours X 2 weeks) for her work as registrar through the ordinary payroll protocol. After deductions, the biweekly net salary transfers to the defendant’s account, as the defendant explained, amounted to $1,692.86 in 2010 and, as a result of some minor adjustment in deductions, $1,696.26 in 2011.

However, in the seven months of fulltime employment prior to January 2011, only the very last EFT entry in 2010 (that dated December 29 th ) bore even a rough match to the expected quantum of the biweekly salary transfer to the defendant’s BNS account. The 2011 entries to the defendant’s bank account more consistently reflected the appropriate transfer amounts ($1,696.26) and, although not perfectly, the expected biweekly salary payment dates. [ 42 ] Sepp was hired by the firm in December 2010 and Belgrave returned from sick leave in January 2011.

The defendant denied that the introduction of more salary-consistent EFTs in late-2010 and through the span of her employment in 2011 had anything to do with their presence. Apart from standardized biweekly transfers, the 2011 BNS records for the defendant’s account also reflect her receipt of additional monies from Max the Mutt in transfer amounts ranging from about $700 to close to $4,000. [ 43 ] The defendant said she invoiced, on a monthly basis, for “extra” hours if she devoted more than 35 hours a week to the job of

registrar (and others) – so long, she explained, as she and Schacker had agreed on the extra work in advance. The extra work demands varied through the year, but on occasion the defendant submitted invoices in excess of $5,000 a month for registrar-related work on top of her routine payroll salary. Schacker, she said, had approved every invoice and never had a problem with them. In total, the defendant estimated that her annual gross income (payroll and invoices) for the position of registrar alone was something less than $100,000 a year.

This was supplemented by the defendant’s income as controller and office manager, positions for which she was paid on an hourly basis for the hours she set out in the invoices she submitted about once a month. The defendant estimated she had submitted between two and three dozen invoices in the course of her one-year of fulltime employment with Max the Mutt. She did not keep copies of any of these invoices.

She had last seen them in her office at the school and had “no idea” what had since happened to them. [ 44 ] The defendant and Schacker had discussed an annualized total income of $60,000, but the defendant insisted this was a nominal figure, used solely as a placeholder for financial projection purposes, and not a cap on her income claim. The defendant accepted the accuracy of the BNS records of the monies transferred into her account, but thought the

summary prepared by Sepp from these bank records somewhat inflated her compensation from Max the Mutt over the course of her fulltime employment. Any dispute as to the differential is, ultimately, of small moment. Sepp’s calculations of the payments transferred to the defendant’s account from Max the Mutt totaled $159,018. The defendant conceded filing a tax return claiming in excess of $100,000 in firm-generated income and estimated she had received more than $150,000 in total from the firm.

This income reflected “lots of extra work”, including workweeks extending from 80 to 100 hours, at her home as well as the office. The apparent discrepancy between Sepp’s expectation of her company income and her actual receipts were, the defendant explained, readily reconciled through resort to her now-missing invoices. The defendant agreed that she earned much more than her boss, Maxine Schacker, during her year at Max the Mutt, as Schacker’s annual “base salary” was only $55,000. [ 45 ] The firm’s salaried employees were generally paid the same fixed amount on a biweekly basis.

There were, the defendant said, some exceptions where salaried employees submitted invoices for hourly work on special projects or for overtime, and for which they were paid on top of the regular biweekly transfers to their accounts. No exemplary invoices appear in the record before me. The defendant claimed that her position was not unique as Niall Dowdell, another employee who worked in the registrar’s office and sometimes assisted Schacker, was projected to earn even more than the defendant.

Neither Schacker nor Sepp was cross-examined about Dowdell’s projections or earnings, although Sepp had volunteered that Dowdell was the only employee who invoiced the firm for his time rather than drawing a fixed salary. [ 46 ] As described by the defendant, her pay claims were set out in invoices she submitted to Schacker throughout her year of fulltime employment. Following Schacker’s approval, these invoices, like all other approved invoices, went to a data entry employee in the registrar’s office that the defendant then shared – generally Tariq Hussain or Roseanne McCallum – for posting on QuickBooks.

The original invoices were then left in a tray in the same office. The defendant would leave the originals of the approved invoices in the same tray on those occasions when she entered them into QuickBooks. Once in the tray, the invoice would be paid by EFT or by cheque by the defendant, Hussain or McCallum, with a note at the bottom of each invoice indicating the manner of payment. The invoices were then physically filed in the defendant’s office, usually by Hussain or McCallum and, “very rarely”, the defendant herself. [ 47 ] A user ID and an associated password were required to access QuickBooks.

The defendant, Hussain and McCallum each had his or her own set. If an invoice was to be paid by cheque, it was printed through the QuickBooks software and then submitted to Schacker for her signature. Each employee had his or her own unique user ID and password for the BNS EFT system, and ones different from those they employed to access QuickBooks. The EFT software was only loaded on the computer in the registrar’s office. Once into Max the Mutt’s EFT account, an employee would enter the amount of the electronic transfer and select the payee.

According to the defendant, only Schacker and her co-partners in the firm had the security identification necessary to then electronically transfer the funds. She had never actually seen Schacker review the payee entries and then execute the release of an EFT. However, the defendant’s security level did not permit her to release the transfer.

Further, the BNS EFT software would shut down after 15-minute sessions, causing the defendant to lose all her processing work unless Schacker signed off on a batch or extended the session before it timed out. [ 48 ] Based on Schacker’s estimates, the defendant prepared and issued financial projections for the firm at the beginning of each semester. These forecasts were grounded in “actuals” such as the number of students (tuition being the only source of the school’s revenue) and the staff and instructor compliment and their salaries.

These variables inevitably changed through the course of a semester – with, for example, student fluctuations, staff hirings and firings, and salary adjustments – and the changes necessarily impacted the company forecast. By way of illustration, the projection issued in February 2011 likely anticipated a profit. By May, with significantly fewer students than originally expected, the adjustment to the actuals likely generated a predicted loss that semester. Management decisions, including the purchase of a company car and opening and equipping a second location, contributed to the revised projection.

The defendant testified that she was not aware of any major problems when she left the company for the last time, on Thursday, May 11, 2011. She did not return to work the next day and was contacted by the police over the weekend. As a result, she had never had an opportunity to speak to Schacker about her financial concerns. [ 49 ] The defendant characterized her professional relationship with Schacker as “good”.

Schacker, she said, may sometimes have been distracted, but she was not disorganized and closely supervised the defendant’s work. (ii) Roseanne McCallum [ 50 ] Roseanne McCallum first worked as a model for Max the Mutt. She was then hired to work in the office where she served as a receptionist between April and November of 2010. Relying on prior business experience, she also processed invoices and payroll through QuickBooks during the spring when she shared an office with the defendant. McCallum accessed the QuickBooks program using a password she obtained from the defendant.

She moved to a desk outside the registrar’s office around June of 2010. But for those occasions when the defendant was not present and “something had to be done”, McCallum’s payroll duties were transferred to the defendant when she took over these functions around June 2010. [ 51 ] McCallum recalled entering invoices from the defendant both before and after the June transition, and as late as October 2010. Unlike other fulltime employees, she did “not believe” that the defendant was on a fixed salary.

The remuneration of those, such as models, whose income was determined by variable hours and an hourly rate of pay, involved inputting the information contained on the

invoices they submitted for the work they performed. Schacker always approved staff-submitted invoices before McCallum entered themin QuickBooks. McCallum herself had originally invoiced for her work. She no longer submitted invoices once she was hired as areceptionist and went on payroll. Her understanding was that almost every member of the firm’s staff had negotiated their own payarrangement with Schacker. She did not inquire about these arrangements. C. ANALYSIS [52] Fraud, in essence, is

an act of dishonest deprivation. Although its permutations are many, nuanced and subject to repeatedjurisprudential refinement, there is here no dispute as to the doctrine’s application to the offences charged. If I am satisfied beyondreasonable doubt that, as alleged, the defendant knowingly transferred more than $5,000 to which she was not honestly entitled from heremployer to her own benefit in both 2010 and 2011, I must find the defendant guilty of the offences upon which she was arraigned.

If,however, I have a reasonable doubt as the occurrence of these alleged frauds, acquittals must follow. [53] The defendant’s account is consistent with her innocence. That advanced through the Crown witnesses points only to her guilt. A proper legal resolution of this dispute does not rest on my determination of which version I accept, prefer or find more probable. Solong as the defendant’s evidence, or that drawn from any witness or combination of witnesses, leaves me in a state of reasonable doubt asto the offences charged I must acquit the defendant.

Again, I may only find her guilty of an offence if I am satisfied that the Crown hasproven its essential elements beyond any reasonable doubt. This is the lesson of R. v. W.(D.) (1991), (SCC), 63 C.C.C.(3d) 397 (S.C.C.) and its prodigious legacy. I have detailed the scope and essential properties of these principles and the governingauthorities elsewhere and here incorporate by reference a recent recitation: R. v. Harris, 2014 ONCJ 401, at paras. 47-50.

I highlightonly one proposition at this stage: as with any testimonial witness, an assessment of the defendant’s credibility – her honesty andreliability – is not conducted in an evidentiary vacuum. The evaluation, as put by Code J. in R. v. Humphrey, 2011 ONSC 3024, [2011] O.J. No. 2412 (Sup. Ct.), at para. 152: “can only be undertaken by weighing the accused’s evidence together with theconflicting Crown evidence”. [54] The defence position is that there is ample room for acquittal on two bases.

One, it is said, is that the defendant did not havethe means to execute electronic transfers without being technologically enabled to do by those in an oversight position, in particularSchacker. The defence’s second position, advanced in the alternative, is that all of the defendant’s EFTs to her own account were pre-authorized by Schacker, her boss, by way of a general agreement as to the defendant’s biweekly salary and individual pre-approval of thedefendant’s invoices for supplementary work. These defence positions share two commonalities.

First, as the employer had priorknowledge and effective control of all the impugned transactions, there is no dishonesty and certainly none that can be attributed to thedefendant. And, second, the evidentiary foundation for both defence positions predominantly rests on the defendant’s testimony. [55] Cutting to the chase, I do not accept the defendant’s exculpatory explanations, nor do they, in combination with any otherevidence, leave me in any reasonable doubt as to her guilt of both offences.

Viewed in context, relying on the evidence I do accept, andapplying a modicum of common sense, I have no doubt that the defendant fraudulently deprived her employer of more than $5,000 towhich she was not entitled in the second half of 2010 and first half of 2011 and, as a result, that she is guilty of both offences charged. [56] The defendant, I find, was trusted by her employers – in particular, Maxine Schacker, who managed the business side of thefirm and to whom she routinely reported. Schacker, in my view, was a somewhat disorganized manager of the company’s affairs.

Shewas focused on strategy and, sometimes overly, detail, but the execution of the firm’s financial operations was left to others in whom shehad invested her trust, in particular the defendant. [57] The defendant’s counsel invites me to find that Schacker was more tech-savvy than she presented on the witness stand. Thisdoes not accord with my observations or assessment. Indeed, I find that Schacker had little understanding of, let alone competence with,the mechanics of spreadsheet and electronic banking programs. She could not, she testified, recall her own passwords.

She and Seppwere unable to enter the accounting software following the defendant’s departure because, on Sepp’s evidence, Schacker could notsummon the necessary security identification. To be clear, I accept Sepp’s evidence in its entirety. He has no current affiliation with orfinancial interest in Max the Mutt and no discernable reason to fabricate. He has no history of friction with the defendant or any reasonfor personal animus.

His testimony was straightforward and neutrally tendered, self-corrected when, if rarely, he fell into error, andprimarily focused on compilations of undisputed accounting records that presented a graphic illustration of the defendant’s misconduct. [58] I appreciate that there is a single email, dated December 4, 2010, from Schacker that, it is argued, supports the defendant’sposition as to her constrained EFT access by virtue of the message being open to the

interpretation that her, Schacker’s, password isnecessary to initialize the electronic banking system. Schacker was unable to contextualize the email, let alone recall or explain it, andthe defendant’s evidence offers little further illumination but for the “time-out” feature (a potentially significant matter that, like severalothers, was never put to the defence witnesses).

What is clear, on the basis of both Schacker’s and the defendant’s evidence, is that theEFT program was in place long before December 2010 and that the defendant (as confirmed as well by McCallum) had been using it forelectronic transfers of funds well before that date. The email does not ineluctably point to Schacker’s supervisory control over thedefendant’s power to execute such transfers. It is at least equally consistent with an announcement of the resolution of a temporaryservice interruption or Schacker’s receipt of new personal security co-ordinates.

Indeed, I find no suggestion in the December email thatSchacker’s presence is required to sign off on EFTs. Rather, she seems to be telling the defendant to just let her know if there is anyfurther interruption in her access to the EFT software so that she, Schacker, can immediately rectify the situation to enable the defendantto carry on without further disruption. [59] The defendant had password access to the EFT program, but not, she says, the power to transfer funds without Schacker’selectronic sign-off.

This, of course, is inconsistent with Sepp’s evidence, which I accept, as to his capacity to directly execute EFTtransfers, without a supervisory sign-off, as soon as he borrowed the identification keys to access the system. Further, his electronictransfer powers did not depend on an elevated security clearance; the password assigned to the registrar was adequate for the task. Further still, a second user sign-off protocol was not introduced until some weeks after the defendant’s last day at the firm.

[60] On her own evidence, the defendant conducted her accounting and business management functions at her home as well aswork, amounting, on occasion, to more than 80 hours of accounting-related work a week. Schacker’s energy was divided between hermany company-related duties and the demands of a disabled husband. She also denied routinely signing off on the EFTs, insisting thatthe transfers were within the defendant’s occupational authority. Admittedly, Schacker’s recall was, on occasion, imperfect, as sheherself several times acknowledged.

While I have concerns about the reliability of some of her evidence, I do not think Schacker lied ordissembled while under oath, nor do I believe that she has mis-recalled something as significant, repeated and continuous as the EFTprotocol. Put otherwise, I believe that had Schacker regularly signed off on the EFTs, she would have both remembered and testified tothis practice. I have no doubt that the defendant, once a fulltime employee, had full control over the firm’s financial mechanics.

Assuch, she had an independent capacity to execute electronic transfers of funds and she routinely exercised this power. [61] There is no dispute of any moment regarding the monies transferred from Max the Mutt to the defendant’s BNS account:approximately $159,000 in a little under the year extending from May 25, 2010 to May 10, 2011. It seems generally agreed that thedefendant’s salary, while not reduced to writing, was about $60,000 a year, or close to $44,000 in take-home (or electronic transfer) payafter deductions.

The defendant accounts for the apparent discrepancy of about $115,000 by reference to the substantial pre-authorizedwork she performed for the company (in addition to that contemplated by her salaried income) and for which she was paid on an hourlybasis for the amounts set out in invoices to the firm that were routinely approved by the its president, Maxine Schacker. Schacker, ofcourse, denies that a salary-plus-contract arrangement was ever discussed or approved.

She further denies that she ever signed off onany invoices from the defendant after the latter transitioned to fulltime employment, likely in late-May or June of 2010. And again:while Schacker’s recall is sometimes fractured, I do not believe she would have repressed or forgotten dozens of instances of regularreview and sign-offs of the defendant’s invoices, or expressed herself dishonestly under oath in this regard. [62] I have no doubt that the defendant invoiced Max the Mutt for her work before she became a permanent employee.

The invoicedated May 21, 2010, reflective of work performed in the previous two weeks, is an exemplar – likely the last – of this protocol. Twosimilar invoices have made their way into the record, both preceding that dated May 21, 2010. [63] However, and significantly so, there is not a single invoice from the defendant in evidence with respect to the work for whichshe says she invoiced the company from May 21, 2010 until her departure in May 2011, some 11½ months and $158,000 later.

Thedefendant claims she last saw them in her office, that she retained neither the originals or copies, and that she has no idea what happenedto them. Their existence is of evidentiary importance for at least two reasons: to determine, as the defendant says, first, whether she didcreate invoices for transfers amounting to the differential between her salary and her total income from the firm, and, second, whether theinvoices bear Schacker’s initials or signature authorizing the payments.

I do not at all accept the defendant’s veiled suggestion thatSchacker or Sepp removed and concealed or destroyed the dozens of invoices said to perfectly correspond with the dozens of non-salarytransfers to the defendant’s BNS account. I do not believe that either is capable of that level of mendacity. [64] I also find it inconceivable that Schacker, no matter how distracted, would have knowingly condoned the defendant’s globalcompensation package. Each of the fulltime staff earned no more than a quarter of the pay that ended up in the defendant’s bank accountin the course of a year.

Schacker herself, the company president, earned only $55,000 a year – approximately a third of the defendant’stake-home. Irrespective of the extent of her multi-tasking or her own sense of worth, it defies common sense to even imagine Max theMutt paying the defendant an income so disproportionate to the value of the firm and that earned by other employees, or that Schacker(who, for all her accounting software challenges, is no fool) would have agreed to such an arrangement and endorsed it by routinelyapproving the defendant’s invoices.

Sometimes the preposterous is just that. [65] Nor do I find McCallum’s evidence helpful to the defendant’s position. McCallum left the firm in November of 2010, wasprimarily involved in data entry, and had no real window into company policy. Contrary to the defendant’s recall: McCallum firstappears to have worked exclusively with QuickBooks (and not with the electronic banking system) and, second, transferred heraccounting duties to the defendant in June 2010. In short, she had a very narrow window on the firm’s financial operations.

I also findher memory impressionistic, perhaps not surprisingly given that she was asked to recall prosaic events that occurred some three yearsearlier. I also bear in mind that she was in the course of suing Max the Mutt at the time she testified. In short, I do not find McCallum areliable reporter of the events at issue. [66] Nor, as I have earlier noted, can I accept the defendant’s evidence. Nor does it leave me in any doubt about the centralallegations.

The defendant offered no justification for why the banking records fail to document biweekly transfers commensurate withher salary for the seven months between May and the end of December, 2010 when she was a fulltime employee of Max the Mutt and, onher own evidence, ought to have been regularly receiving these salary deposits to her account. Nor does the defendant afford anysatisfactory explanation of why salary-related EFTs only began to appear in the BNS records when Sepp was hired and Belgraverejoined the firm.

Further, and as I have already observed, there is absolutely no documentary support for the defendant’s explanation ofthe agreement said to permit invoiced work and, in my view, no credible account of the fate of the documentation that, she says,evidenced both the agreement and each instance of prior invoice authorization. In addition, of course, the defendant has twice beenconvicted of offences of dishonesty, most recently in the same year as the charges she now faces commenced.

The defendant’s priorcriminal conduct is not probative of a propensity for like conduct, but does speak, and adversely so, to the defendant’s creditworthiness, afactor impacting on my assessment of her testimonial honesty. [67] Finally, I note that our law recognizes that acceptance of a contradictory account may itself be a proper basis for rejecting adefendant’s testimony: R. v. D. (J.J.R.) (2006), (ON CA), 215 C.C.C. (3d) 252 (Ont. C.A.), at para. 53; R. v. M.(R.E.), (2008) 2008 SCC 51 , 235 C.C.C. (3d) 290 (S.C.C.), at para. 66; and R. v. Thomas, 2012 ONSC 6653 , 2012ONCS 6653, at para. 26.

I have already expressed my confidence in the essential elements of the testimony of the Crown witnesses andthe formidable incriminatory impact of the documentary banking records before me. Combined with my negative assessment of thedefendant’s honesty, I have no difficulty rejecting her exculpatory account. Accordingly, I find her guilty of both charges before thiscourt. D. CONCLUSION

[ 68 ] For the reasons just recited, I find the defendant guilty of the two counts of fraud over $5,000 on which she was arraigned. [ 69 ] I thank counsel for their industry and courtesy throughout. I also thank them and Ms. Burden for their patience in awaiting my verdict and its reasons. Released (as revised) on September 15, 2014 __________________________ Justice Melvyn Green