Why the Criminal Process is Secondary in Fraud Recovery – Part I

Criminal Search Rights Override Victim Recovery Rights 

This blog summarizes a recently published decision from the Ontario Superior Court of Justice, R. v. TM, 2019 ONSC 2408,which once again demonstrates why fraud victims are, in most cases, well advised to withhold making a criminal case in fraud cases at least until such time as there is no reasonable prospect of recovery. 

Fraud victims need to understand that the Canadian criminal justice system, in its application of the Canadian Charter of Rights and Freedoms, does not put the interests of victims ahead of rogues. The interests of victims are subordinate to the Charter rights of rogues, such as a right to unreasonable searches by police and others involved in the criminal justice system, and right to a trial in the criminal system in a reasonable time. What is “reasonable” and “unreasonable” is the subject of endless litigation, such as depicted in the TM case as described below.

Fraud victims also need to understand that the Canadian criminal justice system will prioritize punishing the police bringing fraud cases for violating some Charter “right” of some alleged rogue over respecting the rights of fraud victims notwithstanding the government policy promoting criminal restitution order or retribution by way of a conviction and sentence. We review the unfortunate state of Canadian Charter of Rights litigation in Canada in the TM case as discussed below, as well as the 2018 decision of R. v. Villanti, 2018 ONSC 4259.

R. v. Tashanna Mullings, 2019 ONSC 2408 

In a decision dated April 16, 2019, the Ontario Superior Court of Justice (criminal courts) dismissed a criminal fraud prosecution against TM on the basis that, at the time of her arrest and detention for a bail hearing, she was subjected to a strip search that offended the Canadian Charter of Rights and Freedoms. This decision is important to fraud victims as it demonstrates how risky it is for victims of fraud to rely on the criminal justice process to even have their loss considered for restitution or retribution through a conviction and sentencing.

TM was an employee of a major bank working as a credit card specialist at the bank’s call centre. In the course of her employment, TM took calls and received sensitive personal credit card information from customers. The Crown alleged that she fell in league with fraudsters resident in Canada but originating in Ghana, and provided them with credit card information from over 100 of the bank’s customers. This credit card information was then used by the Ghana rogues to purchase significant quantities of lumber from American lumber companies. The lumber was shipped into Ontario and then “fenced” to local construction companies. 

According to the criminal Court’s reported decision, most of the transactions were charged back to the American lumber companies, meaning the victimized lumber companies suffered over $1M in losses. The loss incurred by the bank was therefore a fraction of what the lumber companies incurred. The police conducted a significant and expensive investigation at the taxpayer’s expense resulting in the arrest of the two operating minds of the scheme, VD and EH, both of whom originated from Ghana, and their trucker/fencer, SA.

Without providing any meaningful analysis on the merits of the charges against TM, the criminal Court stayed the criminal case after hearing from the Crown’s witnesses. The Court justified the stay of proceeding on the basis that the police conducted a strip search of TMat the time she was arrested which the Court deemed was “unreasonable”. 

Because TM was being held for a bail hearing along with the general population at a detention facility, the police justified the strip search as necessary to prevent harm to prevent weapons from entering the facility and ensure the safety of other detainees. Additionally, as the police’s investigations indicated that TM was part of a well-organized criminal operation, the police also justified the search as necessary to detect small electronic communication devices that could be used to communicate with other conspirators. The Crown argued the police position was entirely reasonable.

As stated, the Court provided no analysis on the merits of the fraud case against TM. This needs to be repeated. When the merits of the case are not given a proper analysis, it is difficult, if not impossible, to determine whether to stay proceedings as declared by the criminal Court is actually “reasonable”. It is only with a proper analysis of the merits of the case against TM that victims of fraud and the public at large can evaluate whether the “capital punishment” of ending a criminal proceedings with a stay of proceedings is “reasonable” in the circumstances. In other words, a concern of fraud victims is that a Charter ruling that does not factor in an analysis of the merits of the criminal case seems “unreasonable” on its face.

A Charter ruling by the criminal Courts that does not factor in an analysis of the merits of the criminal case seems “unreasonable” on its face. This needs to be repeated. Instead, the criminal Court fixated upon trauma experienced about strip searches in general. The criminal Court remarked that strip searches are humiliating, traumatic, and degrading experiences for women, minorities and abuse victims. The criminal Court compared strip searches for weapons and contraband to as “akin to sexual assault”. Shockingly, the criminal court infers that police searches are akin to sexual assaults. The criminal Court noted that TM was a black pregnant woman, and gave the impression that she had been traumatized by her arrest.

We stop here to underscore that this sort of analysis is conducted in the criminal court system, not in the civil court system, where the Charter rights are only considered if a claim is made. In other words, if TM truly was so traumatized by the search incident to her arrest for the recovery of evidence and the safety of police, prison guards and other inmates, one would have expected her to make such a claim against the police. TM never made such a claim, and accordingly the alleged traumatization from the search is viewed with skepticism. 

The criminal Court also went on to state “the mere possibility that a detainee may be concealing evidence or weapons is not sufficient to justify a strip search.” The criminal Court concluded that the strip search violated TM’ Charter rights. By way of remedy, the criminal Court concluded “there is no remedy, aside from a stay of proceedings that would be capable of adequately addressing the harm to the criminal justice system.” The concern of fraud victims reading this decision is that other remedies were not adequately analyzed. It is also worth noting that civil cases, where we suggest fraud victims seek recovery, would not engage in this debate. 

As stated, the criminal Court provided no analysis on the merits of the fraud case against TM. This is worth repeating. For the public and for victims of fraud, it is difficult to understand why this occurs. Rather, the criminal Court’s decision appears dismissive of the interests of the victims. The criminal Court held “while the charges are serious with significant losses to the business and the banks, there is no evidence that this remedy would cause additional difficulties for those parties. The harm to the criminal justice system outweighs the value with carrying on with the case.” Really? If someone engages in an alleged $1M fraud, is it not foreseeable that they may be arrested and searched incident to arrest? Is there not greater harm to the criminal system of ending a criminal case worth over $1M where there no analysis of the merits of the case? 

We note that the criminal Court did not mention that this case would have engaged the aggravated sentencing provisions of the Criminal Code had TM been convicted. The criminal Court further did not mention that governmental policy objectives emphasize that restitution orders and fines in lieu of forfeiture should be issued in circumstances such as this as a way to give victims of fraud access to justice. The criminal Court rather focused almost solely on the police strip search, and determined that the value of a strip search—which may have a value of a few thousand dollars as a civil claim—is greater than the value of an alleged +$1M fraud. There are no reported decisions of damages awards for Charter violations being worth more than a fraction of the value of the fraud that TM was involved in. 

Even if an excessive value to the strip search of $100,000 was awarded to TM, that would be less than 1/10th of the value of her alleged fraudulent conduct, assuming the search fell into the spectrum of searches that really were unreasonable. Lesser remedies to TM’s alleged search traumatization but were not analyzed. 

R. v. Villanti et al, 2018 ONSC 4259

In a decision dated June 22, 2018, the criminal Courts stayed fraud charges against Vincent Villanti, Ravendra Chaudhary, Shane Smith, David Prentice and Andrew Lloyd. The allegation was that the accused, in various roles, conducted and developed an investment program through a firm called the Integrated Business Consultants Association (IBCA) and a related company, Synergy, that raised over $13,000,000 from investors on the promise that their investment would be used to provide small businesses with start-up capital. 

The investors were told they would be able to claim any business losses against their personal income taxes. It was alleged that little to no such investments were made. Rather the $13M was used to pay commissions, salaries and expenses of the accused and companies. Investors were informed of inflated losses which, when claimed by them on their personal taxes, were subsequently disallowed by CRA, which in turn subjected the investors to ongoing assessments.

The criminal Court stayed the charges against all of the accused persons on the basis of not providing them with a trial in what the Court deemed to be a “reasonable” time. Unlike the TM case, there was no allegation that the police did anything wrong. Similar to the TM case, there was no allegation was victim complainants did anything wrong. Rather, the Court stayed the case, leaving the victims with no access to seek restitution orders, on the basis that the criminal Courts did not have a judge available to hear the case. 

A quote from the decision to end the case is somewhat astonishing. In explaining, and indeed, apologizing, to counsel for the unavailability of a judge to hear this case, the criminal Court gave the following explanation:

On January 25, 2018: Okay, so the one thing I will give people the heads up on in relation to it is with the number of judges they’ve given me for the criminal matters scheduled. Right now, that was why I was hoping that other case might turn into a resolution.

Quite practically speaking with the number of homicides, attempt murders and gun cases I have going, right now I do not have a trial judge to do this case. This will be the first case right now. That may very well change between now and then, but I thought in fairness to counsel, this is the first time I’ve had to say this post Jordan, but in relation to this indictment right now, unless they somehow give another judge or a new appointment or one of the long trials resolves in the next few weeks, that’s where we’re at……

….So, I’ll do the best we can…..And if we could just free up four or five murder cases to help out we would, but I can’t……

On February 26, 2018:  …..So I’ve lost two criminal judges in a couple of days and right now because of those medical challenges they’re facing I had to pull a judge off this case to deal with a person who is in custody on a six- week trial and I don’t have anybody to replace that judge. So it is frustrating because everybody should get to trial in a timely fashion.….

On March 1, 2018: It’s just the frustration of this Court with not having sufficient resources to do the job, despite everybody’s best effort.

So despite my efforts of getting an additional resource from another region, quite frankly, unless, as we talked about yesterday – I just added up, we have 44 homicides scheduled this year in Toronto to be tried. And we’ve been resolving some of them and what we’ve been doing it, but I can only do what I can do and Mr. Lockner, I’m out of, I’m out of options. 

The first time I have trial time for this is January of 2019 and the reason for the delay would be the unavailability of this court to be able to provide a judge to do the case. So it’s not something we’ve had to do before in a long trial, but that’s where we are. We’re hoping to get additional judges to complement. We’ve asked the Federal government for that. We don’t have those. It is frustrating, but we can only do with what we got. So….

….And I understand all the accused are ready, able and go to trial as is the Crown, and the fault lies with myself and the Court for not providing a judge.

So in effect the criminal Courts blamed the government for the dysfunction of the criminal justice process as it applies to criminal fraud cases. 

Consider Criminal Complaints with Civil Recovery is a Lost Cause

As a result of the risks to fraud victims in not having their complaint adjudicated on the merits in the criminal justice system, and for other reasons as will be explained in subsequent blogs, we recommend to fraud victims that they initially seek recovery through the civil court process, and consider whether a criminal complaint is worthwhile after the civil court process runs its course. 

When most fraud victims are put to an election as to whether they would rather recover their loss or see a criminal sanction of incarceration imposed on those who have violated their trust, they want both. When asked a second time, and it is underscored that they have to choose one or the other, they seek recovery over retribution. This is especially the case when they learn that their funds, in the hands of a rogue or frozen in the courts, are at risk of being used by the rogue to fund their criminal defence. 

One of the victim lumber companies in the criminal case obtained a civil judgment prior to the hearing of the criminal case. Other victims, who did not sue before the expiry of a two year limitation period and relied on the criminal courts to obtain justice, are now out of time to seek recovery. We underscore that this is the risk fraud victims who rely on the criminal justice system should be aware of. 

Judgment for fraud in the civil courts has also been issued against the primary rogues Vincent Dogbatse and Eric Hodgi. The trucker responsible for delivering the fraudulently obtained lumber products, Samuel Aremu, was found liable in the civil courts for civil conspiracy. The criminal case against Hodgi was stayed on request of the Crown due to lack of witnesses, and a warrant for the arrest of Dogbatse remains outstanding. Aremu was given a conditional discharge by the criminal courts for possession of stolen property, but was punished in the civil courts with a $100,000 punitive order (in addition to the loss of the fraud to Gennett Lumber being $168,000): see Gennett Lumber v. Aremu, 2019 ONSC 1345

Notwithstanding that civil judgments have been obtained against Hodgi, Dogbatse and Aremu, nothing has been recovered as against them. If there is to be a recovery, it will likely be a long term project. Not every recovery effort is worth the investment. Not every criminal complaint results in a hearing on the merits or a settlement. Fraud recovery is a high risk business. 


At Investigation Counsel PC, we investigate and litigate fraud recovery cases. If you discover you are a victim of fraud, contact us to have your case assessed and a strategy for recovery mapped out before contacting police or alerting the fraudster. We also promote victim advocacy and academic discussion through various private and public professional associations and organizations. If you have an interest in the topics discussed herein, we welcome your inquiries.

Norman Groot
Investigation Counsel PC
May 1, 2019