Fraudsters are the thinking person's criminal. They
not only plan the fraud, but they plan their exit strategy if they
get caught. First, they spend as much of their
ill-gotten gains as they can so that if the victim hires a forensic
accountant to trace where their money went, they discover it has
been dissipated, usually in a dissolute lifestyle. Then they place
their legitimate earnings in Insurance based RRSP that is exemption
from seizure. Finally, they go bankrupt so the victim loses
all hope of recovery. Thanks to an amendment to bankruptcy
legislation, RRSPs remain the property. They get to live off
their RRSPs in their retirement while their victims go begging.
That seems wrong, but that is the law--- or so most people
Debra McNabb was one such fraudster. On the surface
she was the conventional, long serving assistant to her boss over a
quarter century. Underneath however, she enjoyed the finer
things in life. Not a dissolute lifestyle to be sure, but she
enjoyed a lot of consumable items with no salvage
value. Approaching retirement, she had little
savings to show for a lifetime of labour. So what did she
do? Over the last six years she worked, she embezzled
$300,000 from her employer to pay her personal credit card.
She embezzled another $350,000 over the same time period on other
consumable items. When she finished her fraud, she
retired and moved to New Brunswick. Shortly after arriving in
New Brunswick she put $206,000 of her personal savings in an
Insurance company based RRSP ("a Seq. Fund") and a
further $117,000 in an interest trust fund which she also believed
to be creditor-proof. When the employer sued her for
fraud she defended the lawsuit for a while and ran up her
employer's legal bill to approximately $400,000. Then, on
the cusp of a motion for summary judgment against her, she withdrew
her defence to the proceeding and went bankrupt. She had
hoped this would leave her employer with a "paper"
judgment. Debra was wrong.
First, a New Brunswick judge said her $117,000 in Trust RRSPs
could be seized by an “equitable receiver”, a court
appointed official who replaced Debra’s trustee and who
handed this RRSP to Debra’s employer.
More recently, an Ontario Judge confirmed that the Insurance
legislation that allowed creditor proofing was not to be used as an
instrument of fraud. After Debra embezzled from her
employer she knew she owed him some $650,000. In the face of
that debt she could not convey any assets out of her name
because of the Fraudulent Conveyances Act of Ontario. But wait, she
was not transferring any asset to anyone else, she was simply
transferring it into another form of investment that she also
owned. That did not matter, said the Ontario judge.
Fraudulent Conveyance legislation should bear as large and liberal
interpretation as it took to prevent fraud, and in this case the
transfer of the RRSP into a Seq Fund when the fraudster knew she
owed the fraud victim substantial funds was unlawful, and the court
ordered the Insurance Company to pay the proceeds of the RRSP to
the fraud victim without regard to the statutory protections
afforded a Seq. Fund.
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
Canadian engineering and construction giant SNC-Lavalin has been charged by the RCMP with paying bribes of nearly $48 million to Libyan government officials and defrauding Libya of nearly $130 million.
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