It Even Happens at Work…

By Dave Oswald

Did you know that email isn’t – and was never designed to be – a secure way to communicate? Fake emails can be created quickly and doctored to look genuine and perfectly legitimate.

We’ve done many investigations that illustrate how easily email can be manipulated. Unfortunately, too often people don’t challenge or question the authenticity of  emails.

One of our investigations dealt with a female employee, “Joan”, who presented dozens of emails to the HR department, which a male colleague, “Bob”, had sent her. They started relatively innocently, with compliments on her looks, but soon made 50 Shades of Grey look mild as they became more lewd and suggestive. 

The HR Manager called Bob in to discuss the emails. Bob denied having sent the emails and was insistent that he never had, nor would ever write emails to Joan in this light.

The company called Forensic Restitution in to prove Bob sent the emails. It was the company’s intent to fire him, based on their policies and the nature of the emails, but with Bob’s rebuttal of the emails, they wanted to be sure. The only proof the company had was the hardcopies of Joan’s emails when lodging her claim as Joan had stated that she had deleted the electronic version. 

The company did not have an email archiving system, so Forensic Restitution imaged Bob’s computer to investigate if the emails were on Bob’s computer.  No trace of the offensive emails were found.  Forensic Restitution then used word patterning to determine if the same type of wording was used in other emails. Again nothing was found.  Joans computer was then imaged, and we discovered that the author of the offensive emails was non other than Joan

Joan had sent the emails to herself. She’d figured out how to change email addresses from her email to Bob’s email address and had then sent the emails purporting to be from Bob to herself.  

When we questioned her, she stated she did not like Bob and wanted to get him fired. The two employees sat next to each other and she admitted that she did not like his actions. Since she liked her job, she figured the best solution was to set him up. In the end, she was forced to leave.

In another case, a man , Kevin, lied on his CV to get a job, claiming that he had an accounting degree. Kevin started by forging an email from a University confirming that he had his degree. The employment agency accepted the email, and did not follow up on its validity.  Kevin was put forward for an accounting position that he obtained.

After working at the company for three months, Kevin sent an email to the Payroll Department pretending to be from his boss, indicating that Kevin’s pay was due to be increased as he had completed his probation period.  As Kevin’s boss was a hard person, no one questioned her decisions.  Everyone just accepted that the boss had spoken and his salary was updated.

Once his three-month probation passed, he sent another email and got a $30,000 bonus. Nothing was ever questioned, so he rewarded himself with more money, almost doubling his salary, even adding on a year-end bonus. After 18 months, he was finally caught.

The fake emails weren’t what actually tripped him up: he used the company credit card while on vacation. The credit card company contacted the employer to alert them of the card’s use. This “well-paid” employee stole about $400,000 in total.

Forensic Restitution investigated an employee “Karen” at an insurance company.  We found Karen had faked emails to receive money for false claims she’d made on behalf of a large client. Karen submitted eight claims over a year. None of them were flagged or checked because they were within her signing authority.

At the end of the year, the department manager met the client for lunch and the topic of the claims came up. The manager mentioned that it must have been a hard year for the company because of the number of claims they submitted. 

Dismayed, the client said they hadn’t submitted anything that year, and an investigation was launched. We were able to prove the amount of money the employee had stolen.

Other details uncovered in the investigation revealed that she’d had affairs with two of her bosses. They agreed not to tell on her if she didn’t tell on them, and she was allowed to resign rather than be fired. 

In all these instances, the emails had been tampered with.  If an email appears odd in any way, it’s better to pick up the phone and call the person to confirm.

The Categories of Fraud Are Not Closed

By David Debenham

Frauds often have a fraudster, a shill assisting the fraudster, and a “mark” who is being deceived.  The role of the shill is to persuade the mark that the scam is real, that there really is money to be won if only if the mark is talented or lucky enough.   Now the shill may be in on the scam, or the shill may also have been deceived by the fraudster and allowed to win nominal amounts by the fraudster, so that the shill can lure friends and family into investing (and losing) to the fraudster far more than the shill has gained.   The innocent shill (“a dupe”) is horrified to learn that they have induced lifelong friends into losing their life savings.  When the fraud unravels, the fraudster pleads sweet innocence—- they did not tell the marks anything false—- all the misrepresentations were made by the dupe, often to his friends, and passed on to others.  Now what?

  Is a mark, who has entered into an agreement with an alleged fraudster’s  corporation, otherwise pre-empted from bringing a claim in  fraud for allegedly fraudulent representations because those allegedly fraudulent misrepresentations were made to a third party?  In such a circumstance, is the only available claim to a plaintiff one of breach of contract against the fraudster’s shell company?  

In Vitacea Company Ltd et al v The Winning Combination Inc. et al[1]  the plaintiffs, TSI Group Ltd. (TSI) and Vitacea Company Ltd. (Vitacea), are the manufacturer and distributor of a product known as “Vitamints” which are vitamin-enriched mints.  They entered into a licensing agreement with the defendant, The Winning Combination Inc. (TWC), a Winnipeg-based company, whereby TWC would distribute Vitamints in Canada.  The defendant, Bukhari, is the CEO of TWC. The motion in question dealt with allegations in the Statement of Claim that Mr. Bukhari and TWC acquired and registered trademarks and domain names in the United States on behalf of Vitacea with respect to Vitamints and then, contrary to the terms of the licensing agreement, sold those rights to a third party, knowing full well that they belonged to the plaintiffs.

“TWC” argued the because the tort of deceit or fraudulent misrepresentation) committed by a defendant against a third party does not create a cause of action in civil fraud for a plaintiff against TWC.   Accordingly, TWC argues that the allegation that it committed a civil fraud against Vitacea based on alleged misrepresentations made to third parties (“Wyeth”) is not supportable at law.  The Supreme Court of Canada has confirmed[2] that in order for a plaintiff to make out the tort of civil fraud, the following four‑part test must be satisfied:

  1. a false representation must be made by the defendant;
  2. some level of knowledge of the falsehood of the representation on the part of the defendant (whether through knowledge or recklessness);
  3. the false representation caused the plaintiff to act; and
  4. the plaintiff’s actions resulted in a loss.

Some of those cases have struck out claims in fraudulent misrepresentation on the basis that the plaintiff was not the representee of the fraudulent statement made by the defendant.[3] 

The court relied on the case of Destiny Enterprises Canada Ltd. v. Kim,[4]  In Destiny Enterprises, the primary parties were “A-Mart” and E-Mart Food Centre Ltd. (“E-Mart”).  The plaintiffs and defendants in Destiny Enterprises were arm’s length commercial parties whose affairs were governed by contracts between them.  The court found that A-Mart had converted E-Mart’s property when A-Mart purported to sell the grocery store belonging to E-Mart to another party in November 2003.  The court determined that the relevant parties were guilty of equitable fraud in participating in a fraudulent venture and were jointly and severally liable in equitable fraud.  There was no evidence of a fraudulent misrepresentation flowing directly between A-Mart and E-Mart:  The fraudulent conduct that the court addressed as a “matter of conscience” was simply A-Mart’s sale of assets to a third party, with the knowledge that E-Mart was the rightful owner.  The court in that case found that such conduct amounted to “equitable fraud”.  This case makes it abundantly clear that equitable fraud may exist as between commercial parties whose relationship is governed by contract, and does not require a fiduciary duty between the parties.  

In Vitaeca, the court court held that “a court of equity may intervene ‘in circumstances where the retention of an advantage gained by one over another would be unconscionable.”  Where required, it is equity that may address a remedy if, as a result of one party obtaining advantage or gain through conduct, such conduct could be characterized as unconscionable.  In the present case, on facts which are presumed to be true, the conduct alleged in the amended statement of claim on the part of both TWC and Bukhari can be characterized as unconscionable.  It is not clear and obvious that those facts would not sustain a claim in equitable fraud.

We therefore must conclude that fraud must not be looked at through a technical lens. There is fraud, and conduct “equivalent to fraud” or “constructive fraud” or “equitable fraud”.  “Fraud in this wider sense refers to transactions falling short of deceit but where the Court is of the opinion that it is unconscientious for a person to avail himself of the advantage obtained”. Fraud in the “wider sense” is a ground for equitable relief which “is so infinite in its varieties that the Courts have not attempted to define it”, but “all kinds of unfair dealing and unconscionable conduct in matters of contract come within its ken”.[5]  When faced with a technical impediment to a claim in fraud, plead “equitable fraud”, when the categories of misconduct are many, varied, and unbounded by strict lines of demarcation.  Cases in which the dupe acts as the unknowing accomplice of the fraudster fall into this category of fraud.

[1] 2016 MBQB 180 aff’d 2016 MBCA 126

[2] Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8 at para. 21, [2014] 1 S.C.R. 126

[3] See, for example, Bernard v. Godfrey, 2010 ONSC 10 at para. 18, 199 A.C.W.S. (3d) 605Balanyk v. University of Toronto (1999), 1999 CanLII 14918 (ON SC), 1 C.P.R. (4th) 300 at paras. 65-66 (Ont. S.C.J.), and Andersen v. St. Jude Medical Inc., [2002] O.T.C. 53, at paras. 45, 47 (Ont. S.C.J.)

[4] 2014 BCSC 299, 30 B.L.R. (5th) 12. 

[5] Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, at para 39 (CanLII)

Field Investigator – WorkSafeBC – Kelowna, BC

Apply by August 19, 2021

Do you have investigations experience in a regulatory-investigation setting? We’re looking for a service-oriented team player to work with case managers and occupational health and safety professionals based in our Kelowna office, with a focus on fraud, misrepresentation, and claims investigations.

As leaders in investigative excellence, we strive to protect the accident fund by undertaking investigations that vary in scope and nature. Consider joining us to make a difference to employers and workers of British Columbia.

As a field investigator you will:

 Conduct investigations on complex, sensitive cases and Workers Compensation Act violations that may lead to the imposition of sanctions

 Investigate alleged infractions relating to the Workers Compensation Act and other legislation as required

 Assist WorkSafeBC officers with investigations on a variety of subjects including fraud, misrepresentation, compliance issues, fatal and/or serious workplace accidents, and other matters as assigned

 Prepare comprehensive confidential reports for internal use

 Establish and maintain internal and external contacts to facilitate the investigation process

… More