R. v. Raza

2016 BCSC 1030 R. v. Raza IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: R. v. Raza, 2016 BCSC 1030 Date: 20160510 Docket: 26305-2 Registry: Vancouver Regina v. Faiz Khan, Fareed Mohammed Raza, Saheem Mohammed Raza Before: The Honourable Mr. Justice Myers Reasons for Sentence Counsel for the Crown: Daniel R. Meneley Counsel for the Faiz Khan: No Appearance Counsel for Fareed Raza: D. Mitchell Foster as agent for Richard S. Fowler, Q.C. Counsel for Saheem Raza: D. Mitchell Foster Place and Date of Sentencing Hearing: Vancouver, B.C. April 20, 2016 Place and Date of Judgment: Vancouver, B.C. May 10, 2016 I. Introduction [1] In December, 2015 I convicted Fareed Raza and Saheem Raza - who are brothers - of fraud in excess of $5,000 contrary to s. 380(1)(a) of the Criminal Code, R.S.C. 1985, c. C-46. I convicted Mr. Kahn of attempted fraud under $5,000 contrary to s. 463(d)(i) of the Code. The reasons are indexed as 2015 BCSC 2512, and reference can be made to that for the full facts. [2] The Crown proved that, as tax preparers, the Raza brothers issued false donation receipts to their clients in excess of the amounts that the clients provided as the purported donations. Further, when the taxpayers were being audited by the CRA, the Razas issued confirming letters from the charity to taxpayers for provision to the CRA. The period for the Raza offences was from December 31, 2002 to June 24, 2011. [3] There was little or no evidence linking Mr. Khan to the overall scheme. The only evidence against him was with respect to a receipt issued to an undercover officer, which, because it was not attached to a real return, resulted in no loss - or potential loss - to the Crown. That transaction took place in March 2010. [4] The number of tax returns containing false donation claims was over 1,700. The amount of the false claims was in the range of $11 million and the amount of tax avoided in the range of $4.9 million. I described the fraud as having been conducted on an industrial scale. II. Fareed Raza and Saheem Raza [5] The Crown asks for five years' imprisonment for the Razas. In addition, it asks for a fine of $570,000 and a $13,200 restitution order compensating twelve of the client witnesses for false donations they had made. [6] Defence argues that the term of imprisonment should be between three to four years. I will set out their submissions on the fine later. [7] Section 380(1)(a) of the Code provides for a maximum penalty of 14 years' imprisonment for fraud over $5,000. Although s. 380(1.1) now provides for a mandatory minimum sentence of two years' incarceration for a fraud offence in excess of $1 million this was not in force at the time the offences were committed. [8] The courts have repeatedly said that the principal factors of sentencing governing large fraud cases are denunciation and general deterrence. See R. v. Dieckmann, 2014 ONSC 717 at para. 34. [9] Section 380.1(1) of the Code sets out a number of aggravating factors that the court must consider when it sentences a person for fraud. At the time the offences were committed, one of these factors was that the value of the fraud exceeded $1 million. (The Code now provides that the magnitude of the fraud is an aggravating factor.) [10] I will address that issue now. [11] At trial, J.Y., a CRA investigator, estimated the amount of the false receipts at $11 million and the amount of tax avoided in the range of $4.9 million. I described this at para. 124 of my reasons: Her methodology was to accept receipts made out as Mr. Miah said he did as legitimate. She tallied the number of other Mehfuz receipts attached to returns. She added to that the returns that did not have receipts attached but only Mehfuz confirming letters. She then added the returns that had neither of these but nevertheless claimed deductions in Schedule 9 of the returns. [12] The defendants argue that because the estimate was based on Mr. Miah's evidence, which I found to be largely not credible, it is impossible to determine the amount of the fraud beyond the $26,000 received from the witnesses who testified. [13] It is true that I found Mr. Miah's evidence not to be credible. However, that was with respect to his professing that he issued legitimate receipts or operated a legitimate charity or used any money received for charitable purposes. I find that it is beyond a reasonable doubt that the whole Mefhuz scheme was illegitimate. As I said, the accused were intimately involved in issuing receipts and paperwork for it. They were central to the scheme. Mr. Miah's lack of credibility does not reduce the level of the proved illegitimate receipts; rather, it increases it because I do not conclude that all of the receipts which Mr. Miah said were legitimate were, in fact, legitimate. [14] While the defendants are correct that I cannot determine the precise amount of the fraud, I find that the Crown has established beyond a reasonable doubt that amounts were in the range of $11 million and the amount of the tax avoided in the range of $4.9 million. [15] Another aggravating factor the Crown relies on is the number of victims involved. This is something to be taken into account both under the provisions that existed at the time of the offences and currently. [16] By "victims", the Crown is referring to taxpayers who made cash contributions and were issued receipts for significantly larger amounts. (This also depended on Ms. Y's estimates.) I do not agree that the taxpayers were victims because they all had to have known that they were getting receipts for more than the actual donation. The only true victim was the Crown. [17] The CRA has succeeded in largely recovering the taxes avoided, when penalties paid by the taxpayers are taken into account. [18] Mr. Fowler, on behalf of Fareed Raza, argued that his client's culpability is less than what might otherwise be the case because the taxpayers were implicated in the scheme. I cannot see that this has any effect on the accused's moral culpability. It is not a situation of "the more the merrier". Put a different way, culpability is not a finite quantity that is to be divided between the number of accused who participate in a scheme. The Ontario Court of Appeal reached a similar conclusion in R. v. Leo-Mensah, 2010 ONCA 139 at para. 14. [19] Mr. Fowler also argues that there is no proof as to what funds were actually given to the charity and what was kept by the accused. That is true, if one is looking for an exact amount. However, there is no doubt that the Razas kept a significant portion of the cash they collected: even assuming Mehfuz to be a genuine charity or that the Razas believed it to be such, it is impossible to conclude that they operated the scheme so as to collect all the money for it. A. Circumstances of Fareed Raza [20] Mr. Raza is 42 years old. He has no criminal record. He has been married for 20 years. They have one child, a son who is almost 13. [21] Mr. Raza is from Fiji where he graduated from the equivalent of high school and then worked in accounting. He immigrated to Canada in 1997 and obtained his citizenship in 2001. Since coming to Canada he has obtained diplomas in accounting and business management. [22] In Canada, Mr. Raza worked at Somjee Tax Consultants. After Mr. Somjee died in 2000, Mr. Raza took over the business and continued that until his arrest on these charges. [23] Mr. Raza sponsored his parents to immigrate to Canada. His father is deceased and his mother continues to reside with him in his family's home, together with his wife and son. Mr. Raza's wife, sister and mother provided letters stating the role that Mr. Raza plays in caring for his son and mother, as well as the financial support he provides to his sister in Fiji, who is a single mother to three children. [24] As a condition of his bail Mr. Raza has been unable to engage directly or indirectly in any bookkeeping or accounting functions. Since his release he has been employed as a truck driver for several companies. [25] Letters state that Mr. Raza is an active member of his community and volunteers his time with several organizations including the Aisha Islamic Education Society of Canada. He has donated to the community including to the construction of Burnaby Mosque. He has also donated time and money to the Canadian Society of Fiji Muslims. B. Circumstances of Saheem Raza [26] I have been provided with far fewer details regarding Saheem Raza. [27] He is 35 years old. He is also from Fiji. He has been married since 2005. I was not told of any children. [28] Saheem's wife and mother provided letters of support. His mother said that he supports her here in Vancouver, and her other children in Fiji. [29] Since the tax preparation business was shut down, he has been working as a courier driver. C. Applicable cases [30] Tax fraud cases of similar magnitude have attracted penalties of between four and five years. In R. v. Danso-Dapaah, (15 December, 2008) Toronto, (Ont. C.J.), the accused was a tax preparer who issued false charitable receipts and prepared returns based on them. The amount of the fraud was $6.2 million and the period of the scheme was four years. The accused pleaded guilty and was sentenced to four years and three months' imprisonment on the basis of a joint submission. [31] In Leo-Mensah, the accused also was a tax preparer who issued false charitable receipts. The scheme involved $3.6 million over three years. The accused pleaded guilty. The Court of Appeal, in overturning a more lenient sentence by the trial judge, imposed an effective period of incarceration of just under four years. [32] R. v. Kutum, 2013 ONCJ 241, was another tax preparer charity fraud, involved approximately $1 million over a six-year period. The accused had stopped operating the scheme before he was caught, pleaded guilty to the offence and provided significant assistance in the investigation. The court stated that but for the mitigating factors, the sentence would be in the three- to four-year range. Due to the mitigating factors, a sentence of two years' imprisonment was imposed. [33] In Dieckmann the accused operated a payroll preparation company that did not remit payroll deductions that had been given to the company by its clients. The amount of the fraud was $5.1 million. Ms. Diekmann was given four years' incarceration. [34] In R. v. Topp, 2008 CanLII 20991 (Ont. S.C.), the accused was a customs broker who collected $4.7 million taxes and duties from clients in 463 separate transactions over a three-year period. Instead of remitting those amounts he kept them for himself. A sentence of five years was imposed. [35] Mr. Fowler relies on R. v. Au, 2011 BCSC 75. Mr. Au pleaded guilty to fraud over $5,000 for his role in selling a program called "zapper" to restaurant owners that permitted them to delete cash sales and evade income and sales taxes. Mr. Au sold the system to 23 restaurants. At the time of sentencing 14 of the 23 restaurants had been audited revealing a total of $14 million in suppressed sales resulting in a loss of $2.4 million in federal income tax and $1 million in GST remittances. A number of letters of support were filed on Mr. Au's behalf. He had no criminal record, was 58 years old, divorced and had few assets. The Crown sought a jail sentence of four to 4 ½ years while the defence requested a conditional sentence. The Court imposed a sentence of 2 ½ years. [36] Au is of limited assistance with respect to the Razas because Mr. Au was not the mastermind of the scheme. He was a salesman and installer and was paid on commission. At para. 30, Madam Justice Bruce noted that the role played by the offender in the scheme is a key factor in determining the appropriate sentence. At para. 31, she said: The authorities relied upon by the Crown reserve the four to five year sentences for those who design and instigate fraudulent schemes that cause large financial losses to the public. On the other hand, the provincial sentences imposed conditionally for tax evasion by individual fraudsters do not, in my view, adequately reflect the denunciation and deterrence required on the facts of this case. But for the fact that the Crown has been able to recover, at substantial expense and effort, the amount of tax avoided, the Razas fit into the category of offenders for whom Bruce J. noted the four- to five-year period of imprisonment is appropriate. D. Conclusion re the Razas' term of imprisonment [37] The fraud was significant. The mitigating factors are few, primarily that the Razas have no criminal record. I conclude that the appropriate term of imprisonment is 51 months for each of the Razas. E. Fine and restitution [38] As I said above, the Crown asked for a fine of $570,000 pursuant to s. 734 against each of the Razas. [39] Section 734(2) provides that a fine must not be imposed unless the court is satisfied that the accused has the ability to pay it. This is important because s. 734(4) requires that if the fine is not paid when due, a term of imprisonment "shall be deemed to be imposed". Although the Crown initially referred to some provincial court authorities from other jurisdictions to the effect that the term of imprisonment for default is not mandatory, that does not reflect the clear wording of the section, nor the Supreme Court of Canada's interpretation. In R. v. Topp, 2011 SCC 43, Fish J. stated: 32 Second, the text of s. 734(2) and the legislative intention to avoid the incarceration of offenders who are truly unable to pay their fines support the conclusion that proof of past receipt is not always conclusive of a present ability to pay. Under s. 734(5), Mr. Topp would receive a substantial prison term if he defaulted on the $4.7 million fine and was unable to show at the time of default that he no longer possessed the fraudulently obtained funds. It seems to me more consistent with the text and purpose of s. 734(2) to permit trial courts to discharge their duty under that remedial provision judicially. And this they cannot do without determining for themselves whether they are satisfied, in light of all the circumstances and the materials placed before them, that the offender is able to pay a fine. [40] While I do not accept the accuseds' arguments that the amount of the fraud has not been proven beyond the $26,000 received from the individual taxpayer witnesses, there is no evidence as to how much of the monies were retained by the accused, versus how much went to the so-called charity or Mr. Miah. There is no evidence as to the accuseds' ability to pay. I therefore decline to impose a fine. [41] The Crown asks for a restitution order reimbursing the taxpayer witnesses for the amount of cash they advanced. I decline to do this because, as I said above, they were willing participants to the scheme and not victims. F. Victim Surcharge [42] A victim surcharge of $100 is imposed on each of the Razas. III. Faiz Khan [43] At the conclusion of the hearing, I concluded that Mr. Khan should be given an absolute discharge and said that I would give my reasons for doing so when delivering these reasons. [44] Mr. Kahn is 34 years old. He lives in a rented home with his wife and mother. He has no children. [45] Mr. Kahn moved here from Fiji in 2002 with his family when he was 4 years old. He completed grade 11 of high school. He then worked in a number of positions including at the front desk of Travelodge, as a stocker at Walmart, as a courier for Dolphin Delivery, and ignominiously at F&A Accounting. [46] Mr. Khan was unemployed for some time after leaving F&A, but has been employed steadily since April 2013. From April 2013 until December 2015, he worked as a courier through RSST Trucking Inc. Since December 2015, Mr. Khan has been employed full-time as a service technician for Goodlife Fitness. [47] Mr. Kahn has no criminal record. [48] The Crown acknowledged that an absolute discharge may be appropriate due, in large part, to his minor role and the minor nature of the offence. [49] Applying the considerations set out in R. v. Fallofield, [1973] B.C.J. No. 559, I find that it is in the best interests of the accused to be given a discharge. It has been six years since the offence and Mr. Kahn has had a clean record and managed to be employed. A criminal record would only serve to make staying on that path more difficult. [50] It is not contrary to the public interest for Mr. Kahn to be given a discharge. It appears to me he may have been led down the garden path by the other accused one of whom is his uncle. There is no evidence that he profited from the attempted fraud, nor did the Crown suffer a loss of revenue. "E.M. MYERS, J."