Canada: Minimum Mandatory Jail Sentence For Fraud Over C$1-Million

Copyright 2011, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on White Collar Crime, July 2011

Overview

Bill C-21, the Standing Up for Victims of White Collar Crime Act, received Royal Assent just prior to May's federal election. The Act introduces new sentencing provisions related to fraud, creating a two-year minimum sentence for fraud over C$1-million among other important amendments. The Act will enter into force on a date to be determined by order-in-council. These new sentencing provisions signal the clear intention of the Canadian government to impose more serious sanctions on those convicted of fraud.

In our Blakes Bulletin: Government of Canada Re-Introduces Bill Seeking to Create Mandatory Jail Sentences for White Collar Crime, we advised that Bill C-21 had been introduced on May 3, 2010. Bill C-21 was one of a number of justice initiatives debated in the last Parliament, and was promoted on the basis that the Canadian justice system had earned a reputation for being "soft" on investment fraud.

Bill C-21 was eventually passed with all-party support in the House of Commons and the Senate. In the course of the debate, many MPs told stories of individual constituents who had been the victims of fraud, with the names of Earl Jones, Vincent Lacroix and Bernie Madoff – and their now notorious crimes – mentioned on numerous occasions.

Details: Changes Made to Section 380 of the Criminal Code

As passed by both the House of Commons and the Senate, Bill C-21 makes a number of significant changes to section 380 of the Criminal Code (the Code), the general provision dealing with fraud.

  1. New section 380(1.1) of the Code will impose a minimum mandatory sentence of two years' imprisonment if the total value of the subject matter of the offence (or offences) exceeds C$1-million. While C$1-million appears on its face to be a large amount, one can readily see the frauds affecting the capital markets or the so-called Ponzi/pyramid schemes which have gained such high profile in recent years easily exceeding this amount.
  2. Section 380.1(1) of the Code will now require that a judge consider a number of new aggravating circumstances when handing down a sentence for fraud, namely the magnitude, complexity, duration, or degree of planning of the fraud; whether the fraud had a significant impact on the victims given their personal circumstances (such as age, health, and financial situation); the offender's failure to comply with applicable licensing rules or professional standards (for example, those for securities brokers, lawyers, or accountants); and whether the offender concealed or destroyed records related to the fraud or to the disbursement of the proceeds of the fraud. These aggravating factors are, of course, in addition to those currently found in section 380.1(1), such as whether the offence involved a large number of victims. Most of these factors are already being considered by most sentencing judges, amongst many other factors; however, their codification likely gives them more prominence. Note that the changes to section 380.1(1) also require that the aggravating (and mitigating) circumstances taken into account by the court during sentencing be stated in the record.
  3. New section 380.2 of the Code will allow courts to impose a prohibition order in addition to any other punishment for the general offence of fraud. Such an order would prohibit offenders from seeking employment that involves having authority over the real property, money, or valuable security of another person. The length of any such prohibition order is left to the discretion of the sentencing judge.
  4. New section 380.3 of the Code will require the court to consider making a restitution order under section 738 or 739 of the Code if a person is sentenced or discharged under section 380 for fraud. The court is also obliged to ask the prosecutor whether victims of the offence were given an opportunity to indicate whether they were seeking restitution, and if a victim seeks restitution and the court declines to make an order to that effect, the court must give reasons for its decision in the record. These provisions may increase the frequency of restitution orders in Canadian fraud convictions, though critics are mindful that proceeds of fraud have often long disappeared by the time law enforcement authorities have been alerted to the situation. Nonetheless, a greater focus on restitution at the criminal proceedings stage is a recognition that a civil remedy for criminal fraud is often not a practical option for most victims of fraud due to high legal costs and relatively small losses at the individual level.
  5. New section 380.4 of the Code will provide that the sentencing judge may consider a written community impact statement, made by a person on a community's behalf, which describes the harm done to – or losses suffered by – the community as a result of the commission of the fraud. Unlike traditional victim impact statements, which must be considered under section 722 of the Code, the court's consideration of a community impact statement under new section 380.4 is discretionary. However, the use of "community impact statements" is a recognition that fraud negatively affects the public at large and not only individual victims. It results in a loss in faith and confidence in investment advisors and in the capital markets and undermines the efficiency of the economy.

What Could Have Been

Though the Act has undoubtedly increased the severity of the punishment for fraud under section 380 of the Code, it is not as harsh as some members of Parliament would have liked. The House of Commons committee that considered the bill declined to adopt amendments that would have eliminated accelerated parole review for white collar criminals and that would have made section 380(2) of the Code – fraud affecting the public market price of stocks, shares, merchandise or anything that is offered for sale to the public – subject to the two-year minimum mandatory sentence.

Conclusion

The passage of Bill C-21 represents yet another step in a now obvious trend by the Canadian government to treat white collar crime more seriously. Subject to sentencing guidelines, trial judges continue to have significant discretion in deciding the appropriate punishment in each case. However, the message that the government is clearly sending to trial judges is that in exercising this discretion, more significant consequences ought to be imposed on those who commit fraud.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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