) ) HER MAJESTY THE QUEEN Respondent – v. –, 2010 ONSC 6830

CITATION : R. v. WAXMAN, 2010 ONSC 6830 COURT FILE NO.: 10-2766 DATE: 2010/12/10 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: ) ) HER MAJESTY THE QUEEN Respondent – and – ROBERT KAREY WAXMAN Applicant ) ) ) ) ) ) ) ) JOHN PATTON and DAVID FRIESON, for the Respondent Crown BRIAN H. GREENSPAN and SETH P. WEINSTEIN, for the Applicant ) ) HEARD: December 2, 2010 (in Hamilton) lofchik, j. REASONS FOR JUDGMENT OVERVIEW: [ 1 ] The Applicant is charged with five counts of fraud over $5,000 and two counts of theft over $5,000. The first trial commenced on April 6 th , 2009 and ended in a mistrial on June 25 th , 2009.

The re-trial is scheduled to commence with jury selection on January 12 th , 2011. [ 2 ] In 1995 the Applicant formed two companies in Delaware, Monopol Commodities LLC (“Monopol”) and Oracle International LLC (“Oracle”). In 1996, he influenced the creation of Parametal Trading Company LLC (“Parametal”), in California and MIT International LLC (“MIT”), in Connecticut.

The Crown alleges that in 1996 and 1997, using Parametal and MIT in five distinct but related schemes, the Applicant diverted approximately 19.2 million dollars (US$) away from his employer, Philip Services Corp. (“Philip”). [ 3 ] The Crown alleges that the Applicant moved approximately 17.8 million dollars from Parametal and MIT to Monopol and Oracle. The Crown further alleges that throughout 1996, 1997 and 1998, the Applicant spent this money on horse related purchases, jewellery, and clothing, wine and art.

The transactions included a withdrawal of 1.5 million dollars (US$) cash which was likely taken in the form of a cashier’s cheque. [ 4 ] In 1998, the Applicant opened a Swiss bank account using a British Virgin Islands company which he controlled, ELOHS SA (“ELOHS”). He transferred 5.8 million dollars from Oracle to Switzerland. The Crown alleges that ultimately Mr.

Waxman directed these funds largely towards horse related purchases in North America. [ 5 ] At trial the Crown intends to call Paul Cort, an RCMP forensic accountant, to provide opinion evidence with respect to various transactions including an analysis of the banking records of Parametal, Oracle, Monopol, ELOHS and MIT. It is anticipated that included in his analysis will be evidence with respect to the disbursal of funds after they were received in Oracle, Monopol and ELOHS accounts.

In particular, the Crown wishes to tender evidence that money was disbursed from these accounts for horse related activities, jewellery, wine and art. [ 6 ] The defence does not dispute the fact that the Applicant was the sole signatory of the Monopol and Oracle bank accounts and the beneficial owner of the accounts. [ 7 ] The defence does not dispute the fact that the Applicant controlled the disbursal of funds out of Monopol and Oracle. [ 8 ] The defence does not dispute the fact that as part of these disbursals 5.8 million dollars was transferred from Oracle to an

account in Switzerland in the name of ELOHS SA. [9] The defence does not dispute the fact that the Applicant was the beneficial owner of ELOHS and that he controlled thedisbursal of funds from that account. [10] The Applicant is prepared to stipulate that the monies that were disbursed from the Monopol, Oracle and ELOHS accountswere disbursed by Mr.

Waxman for his own personal purposes. [11] The Applicant argues that the sole issue to be determined in this case is whether the Applicant was authorized to engage in thetransactions between Philip, Parametal and MIT which resulted in profits to Parametal and MIT which ended up in the Monopol, Oracleand ELOHS bank accounts and whether his interest in the various companies was known to Philip.

The defence further argues thathaving regard to the fact that the Applicant was the beneficiary of a Monopol, Oracle and ELOHS companies, the manner in which theproceeds from their bank accounts was used and the details of the purchases from those accounts is irrelevant as it does not advance anyissues to be determined by the trier of fact, and further that any probative value this evidence may have is substantially outweighed by itsprejudicial effect. [12] The Applicant therefore seeks an order that the evidence with respect to the disbursal of the funds from the Oracle, Monopoland ELOHS accounts be inadmissible.

ANALYSIS: [13] Defence counsel has stipulated in argument that there will be no evidence that the money from the subject accounts was usedfor the benefit of Philip or that Philip received any of the money. [14] To be admissible the Crown must establish on a balance of probabilities that the evidence detailing and itemizing theexpenditures from the accounts of Oracle, Monopol and ELOHS is relevant to an issue at trial. [15] Relevance can only be assessed by having regard to the respective positions taken by the parties in the course of the trial.

Forevidence to be relevant, the fact the party is attempting to establish must be material or relevant to a material issue in the case. Regina v. Watson (1996), (ON CA), 108 C.C.C. 3rd 310 (ONT. C.A.) Regina v. Arp (1998), (SCC), 129 C.C.C. 3rd 321 (S.C.C.) Regina v. Handy (2002), 2002 SCC 56 , 164 C.C.C. 3rd 481 (S.C.C.) Regina v. Corbett (1988), 41 C.C.C. 3rd 383 (S.C.C.) [16] As stated by Binnie J. in Regina v. Handy, supra: The issues in question derived from the facts alleged in the charge and the defences advanced are reasonably anticipated.

It is thereforeincumbent on the Crown to identify the live issue in the trial to which the evidence [of disposition] is said to relate. If the issue hasceased to be in dispute, as for example when the fact is admitted by the accused, then the evidence is irrelevant and it must beexcluded...

The relative importance in the issue in the particular trial may also have a bearing on the weighing up of factors for andagainst admissibility. [17] The Crown case here would be proven if the jury is satisfied that the Applicant had diverted the funds from Philip throughillegal means for his personal use without authorization. [18] The evidence with respect to the disbursement of the money from the Oracle, Monopol and ELOHS accounts is not necessaryto address any of the questions posited by the Crown or to support their theory of liability.

Establishing control of the accounts can beachieved without the details of how the funds were spent. In fact the Applicant does not dispute he controlled Oracle, Monopol andELOHS and that he was the beneficiary of those accounts and that the funds were disbursed for his personal use. In my view theproposed evidence with respect to where the money was disbursed has no relevance to any other facts in issue.

In particular, it has nobearing on the issue of whether the transactions in copper were authorized and whether the Applicant’s interest in Parametal or MIT wasknown. [19] The Crown alternatively asserts that the proposed evidence is relevant to the issue of intent. However, in order to proveintent, the Crown need only demonstrate that the Applicant financially benefitted from the transactions. The particulars of how andwhere the money was ultimately spent are irrelevant.

One cannot infer the existence of fraud or theft from the manner in which theApplicant ultimately consumed the money from the accounts he controlled. [20] In order to determine whether the money was fraudulently obtained the jury must focus upon how the money found its wayinto the relevant bank accounts and there is no nexis between the evidence relating to the disbursal of the funds and any of the facts inissue. [21] Relevance is not determinative of admissibility as a trial judge has a broad discretion to exclude evidence where its prejudicialeffect outweighs its probative value or where its admission would render the trial unfair.

Regina v. Mohan (1994), (SCC), 89 C.C.C. 3rd 402 (S.C.C.) Regina v. Seaboyer (1991), (SCC), 66 C.C.C. 3rd 321 (S.C.C.)

[ 22 ] The evidence of spending is not logically probative of intent or any of the elements of the offence of fraud and theft. The evidence does not reveal the fraudulent transactions themselves. Instead the evidence the Crown proposes to advance reveals transactions that follow the alleged fraud. The only effect or impact of this evidence would be to induce sentiments of anger and condemnation which would then deflect the jury from rational dispassionate analysis upon which their deliberations should rest.

It invites a prohibitive line of reasoning, namely that because the Applicant spent large sums of money on what will inevitably be perceived as extravagant and luxurious items, he is more likely to have engaged in a fraud. [ 23 ] Based on that analysis, the proposed evidence in my view would be more prejudicial than probative of any live issue and should therefore not be admitted at trial. Lofchik, J. Released: December 10, 2010 CITATION : R. v.

WAXMAN, 2010 ONSC 6830 COURT FILE NO.: 10-2766 DATE: 2010/12/10 ONTARIO SUPERIOR COURT OF JUSTICE HER MAJESTY THE QUEEN – and – ROBERT KAREY WAXMAN REASONS FOR JUDGMENT Lofchik, J. Released: December 10, 2010