R. v. Briand

Date: 20101101 Docket: 09/78 Citation: R. v. Briand and Matthews (No. 3), 2010 NLCA 67 IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR COURT OF APPEAL BETWEEN: REYANNE BRIAND AND EARL MATTHEWS APPELLANTS AND: HER MAJESTY THE QUEEN RESPONDENT Coram: Wells, Rowe and Harrington, JJ.A. Court Appealed From: Provincial Court of Newfoundland and Labrador Grand Bank Appeal Heard: September 10, 2010 Judgment Rendered: November 1, 2010 Reasons for Judgment by Rowe, J.A. Concurred in by Wells and Harrington, JJ.A. Counsel for the Appellants: Derek Hogan Counsel for the Respondent: Jeffrey Summers Page: 2 Rowe, J.A.: INTRODUCTION [1] Earl Matthews and Reyanne Briand were convicted of fraud and possession of property obtained by fraud for operating a “Ponzi” scheme. They were each sentenced to three years for fraud and six months concurrent for the related possession offence. They appealed conviction and sentence. In an earlier stage of proceedings before this Court, the appeal from conviction was dismissed. This decision relates to the appeal from sentence. FACTS (a) Circumstances of the Offence [2] The circumstances of the offence were set out by my brother Harrington in his Reasons for Oral Decision dismissing the appeal against conviction. [4] In early 2007, the complainants, residents of the State of Iowa, viewed an internet website established by the appellants which invited parties to deposit funds into their investment fund named “Aid4Families”. The appellants intended to invest client funds in foreign exchange markets and promised to pay their depositors a 120% annual return with a guaranteed monthly payment of 10%. [5] The trial judge found that the complainants: found the website in February, made inquiries of the [appellants] but did not invest in the plan. Six months later, when the website was still on the internet, and there having been no adverse publicity about it, [the complainants] incorrectly assumed that the investment plan offered by the [appellants] was valid. Despite early misgivings, the complainants borrowed heavily, in the second half of 2007, from ten credit card accounts and forwarded the proceeds to entities as named by the appellants. The trial judge found that the complainants initially deposited the sum of $165,000 in US currency, in two deposits of $30,000 and $135,000 respectively, to an account designated as Aid4Families established by the appellants at a bank in Quebec. These funds were transferred to a credit union in that province after the bank closed out the account due to complaints from the provincial securities regulator. Page: 3 [6] The trial judge also found that in September, 2007 the complainants forwarded two money orders payable to Pay4Families totalling $178,500 in US currency, the first for $153,500 and the second for $25,000, to the appellants at an address in this province. The appellants presented the larger one of them to a credit union for deposit into an account they had opened. [7] The appellants also represented on their website that the fund had philanthropic goals and was aligned with a “Government Income Supplement Program” purported to be recognized nationally. Indeed, they used the acronym “G.I.S.P.” to describe the investment product they were promoting. [8] The complainants testified that prior to forwarding these funds, they received representations from the appellants that their deposits were insured with a private insurer called the Canadian Investment Protection Fund, (“CIPF”). There is such a fund but the appellants were not participants in it. The appellants were later forced to delete all references to CIPF on their website by virtue of a complaint by CIPF to the Quebec securities regulator. However, they continued to make representations to their handful of clients that their fund was “insured”. [9] Between the time of the initial review of the website by the complainants and their first transfers of funds, the appellants had run afoul of the Quebec securities regulator. The regulator issued a cease trading order because the appellants were attempting to sell unregistered securities through their internet scheme. It later placed a freeze on all funds on deposit by the appellants with financial institutions in Quebec which included the two initial amounts forwarded by the complainants totalling $165,000 US. [10] Subsequently, during the summer of 2007, Ms. Briand returned to her roots in this Province along with Mr. Matthews. Following that move, the two amounts of $153,500 and $25,000 respectively, forwarded to the appellants in this province, were made by money orders payable to a purported new fund named “Pay4Families”. The larger amount was placed for deposit with a local credit union in Marystown. While making the deposit, Ms. Briand falsely advised an employee of the credit union that the complainants’ money order represented the proceeds of the sale of property in the United States. The credit union initially advised Ms. Briand that the funds could not be accessed for twenty working days and this was later revised to a hold period of thirty working days. [11] The complainants had been guaranteed that an initial payment in the amount of approximately $16,500 would be made on October 1, 2007. They never did receive any monthly payments on any of their “invested funds”. Because of their need for money to service their substantial debt burden to US credit card issuers, the complainants were pressuring the appellants for their guaranteed monthly return. In response, in late October, the appellants returned the complainants’ second money order, in the amount of $25,000, which had not been deposited. The appellants, in an email dated October 27, 2007, advised the Page: 4 complainants that this transaction was “a partial payment of the monies due to be paid October 1, 2007 and was not a refund.” The complainants were never notified that the money order for $153,500 would not clear the credit union for thirty business days, i.e. until November 9, 2007. [12] None of the problems with the Quebec securities regulator, or the freezing of bank accounts in Quebec, or the delay in clearing money orders deposited in this Province, were disclosed to the complainants. Instead, the appellant Briand, using the alias “Jessica”, sent the complainants an email on October 5th stating: We have received your information and it was sent to the bank on Thursday once it had been entered into our system. The wire department said that it can run anywhere from 48-72 hours to be received. Thank-you for your patience and have a great weekend. [13] The trial judge found that the representations made by the appellants regarding the size of potential returns, guarantees of payment and the insurance protection against loss were false. The modifications of the representations in subsequent emails or website changes did nothing to remove that falsity. Rather, during the course of the appellants’ dealings with the complainants, the falsity was exacerbated. Following the removal of the reference to CIPF on the website, the appellants continued to falsely represent on its amended website that their fund was insured. This representation was also made in a brochure that the appellants circulated. The trial judge found that the appellants represented that they would, “Insure your deposit for nearly 10x’s as much as your other bank pay (sic) you…”. [14] In addition, the appellants were using depositor’s funds for their personal use. … ... [27] Details of the appellants’ fraudulent representations, non-disclosure and wrongful use include: (a) that the complainants’ deposits with the appellants would earn a guaranteed 120% annual investment return at the rate of 10% per month, when such promises were unrealistic and, more importantly, such promised rates of return could not be realized simply because the complainants’ funds were never invested; (b) that the funds were sanctioned as part of a “Government Income Supplement Program”, when they were not; Page: 5 (c) with respect to insurance, first, that funds were insured through the CIPF (the fund existed but the appellants’ scheme was never part of it), then failure to disclose that CIPF filed a complaint with the Quebec securities regulator reporting the false website representations of the appellants, and finally continued representations that the deposited funds were insured; (d) false representation of the size of the staff working for their fund by having Ms. Briand use at least two false names while communicating with the complainants and communicating information implying a substantial and sophisticated organization; (e) the misrepresentation that the appellants move from Quebec to this province was due to the global financial crisis and the imposition of tighter financial controls, when the move was motivated by the appellants’ desire to avoid regulatory and banking problems in the province of Quebec; (f) failure to disclose to the complainants that their bank and credit union accounts had been frozen in Quebec by the securities regulator; (g) failure to disclose that the first money order for $153,000 sent for deposit with the credit union in this Province in September 2007 was being held for thirty business days before clearance and thus the funds could not be invested before the second week of November; (h) failure to disclose any of the continuing regulatory and banking problems and the freezing of accounts at a chartered bank and later at a large credit union which prevented any investment activity of the funds deposited in Quebec; (i) failure to disclose that due to the freezing of accounts in Quebec and the thirty business day hold in this province none of the complainants’ funds had been placed in the foreign exchange market as promised; and (j) use of depositors’ funds to finance their personal business investments and meet their personal expenses. Page: 6 (b) Circumstances of the Offenders [3] The circumstances of the offenders were set out in a pre-sentence report prepared by the Regional Probation Officer. Key facts include: - Mr. Matthews is 38 years old. - He has no criminal record. - He is an American. - He has a year of study toward a business degree at a United States college. - He has worked in a variety of office jobs, including a couple of years as a broker in Florida. - He married Ms. Briand in June 2008: their relationship began in 2002. - They have two children, born in 2004 and 2005. - Their relationship appears stable. - Mr. Matthews will be deported to the United States upon release from custody. - Mr. Matthews maintains that he has done nothing wrong. [He appears to have persuaded himself that that through currency speculation he could achieve returns sufficient to make his scheme work.] - He was “polite and courteous” throughout the police investigation. - Ms. Briand is 35 years old. - She is a citizen of France and Canada. - She has no criminal record. - She has some higher education, but no university degree. - She has had several jobs, some full time, others part time. - Ms. Briand has the support of her parents in St. Lawrence with whom she, Mr. Matthews and their children resided before sentencing. Page: 7 - “[Ms. Briand’s] parents, who view her as being very capable, saw her as being an assertive individual especially in her past relationship [an earlier marriage]. They stated they don’t see the same degree of assertiveness in this relationship [her marriage to Mr. Matthews].” - Ms. Briand maintains that she has done nothing wrong. [This appears to be Ms. Briand “standing by her man”, to quote Loretta Lynn.] - The senior RCMP officer involved in the case “believes [Ms. Briand] to be in denial and believes that … she was willfully blind”. - She was “polite and courteous throughout [the police] investigation”. - Neither offender has problems with alcohol, drugs or gambling. - Both offenders were viewed as suitable for a conditional sentence, were such a sentence to be imposed. [4] As well, a report from Nova Institution for Women states that “Ms. Briand presents a low risk to re-offend in any manner”. (c) Sentencing Decision [5] In his sentencing decision, rather remarkably, the Provincial Court judge said almost nothing about the circumstances of the offenders. He did not, for example, refer to the fact that neither has a criminal record. [6] This places the sentencing decision afoul of the principle set out in s. 718.2(b) of the Criminal Code: [A] sentence should be similar to sentences imposed on similar offenders for similar offences committed in similar circumstances. How can this be given effect when the sentencing judge effectively ignores the circumstances of the offenders? [7] Similarly, s. 718.2(a) provides that: A sentence should be increased or reduced to account for any relevant aggravating or mitigating circumstances relating to the offence or the offender … (emphasis added) Page: 8 The sentencing judge ignored the “circumstances relating to … the offender”, notably that, for both, this was a first offence. [8] The sentencing judge went on to “consider the impact of the crimes on the victims” stating, “they were brought to practical financial ruin”. He characterized their losses as a “financial disaster”. [9] This is not accurate. While $178,500 US was sent by the complainants to the offenders, most of this money was recovered. What might have been a “financial disaster” in the end was a far less severe loss. [10] The sentencing judge then asserted, as a central part of his sentencing rationale, that, “the accused chose to operate from Canada” to avoid potentially more severe punishment for fraud in the US. This was speculation. There was no evidence to support this. [11] Finally, the sentencing judge (no doubt relying on s. 718.2(a)(iii)), treated as an aggravating factor that the offenders were in a “position of trust” in relation to the complainants. This is clearly wrong. No such position of trust existed. The Crown conceded this point. [12] As the Ontario Court of Appeal stated in R. v. Kirk (2004), 188 C.C.C. (3d) 329 at para. 23: [The offender] was not in a position of trust. The relationship between the parties was strictly commercial. This does not detract from the criminality of [the offender’s] behaviour, but the facts do not support a finding of “breach of trust” as an aggravating circumstance. Here, as in Kirk, the relationship between the offenders and the complainants was “strictly commercial”. [13] Chief Justice Lamer wrote in R. v. M.(C.A.), [1996] 1 S.C.R. 500 at para. 90: Put simply, absent an error in principle, failure to consider a relevant factor, or an overemphasis of the appropriate factors, a court of appeal should only intervene to vary a sentence imposed at trial if the sentence is demonstrably unfit. [14] In this case, the sentencing judge: (a) failed to consider relevant factors, notably the circumstances of the offenders; Page: 9 (b) overemphasized an appropriate factor, by misstating the financial loss suffered by the complainants; (c) considered a factor for which there was no evidentiary basis, i.e. operating in Canada to avoid possible penal sanctions in the US; and (d) erred in principle, by treating as an aggravating factor that the offenders were in a position of trust in relation to the complainants, when no position of trust existed. [15] For all these reasons, I would set aside the sentence imposed by the Provincial Court Judge. I will now impose a sentence that is fit, having regard to the circumstances of the offence and the offender. A FIT SENTENCE (a) Relevant Case Law [16] The Crown acknowledged that the factum filed on behalf of the offenders contains a useful review of recent sentences for fraud in this province. That review is as follows: R. v. Stevens (2008) 275 P.E.I.R. 277 (NLSC) … . Offender pleaded guilty to 15 counts of fraud. Fourteen of the victims lost between $5000-$30,000 and the other $137,337.12 (paras. 26 & 27). Each was a former client, relative, or long time acquaintance of the offender (para. 23). After reviewing 13 cases from Newfoundland and Labrador, Butler J. commented that “the range of sentence for similar offenses appears to be six months – two years less a day.” (paras. 39 & 40). Counsel made a joint submission for an 18 month conditional sentence. Butler J. imposed a “blended sentence” of 12 months imprisonment, six months conditional (para. 113), two years probation and restitution of $293,837.12. R. v. Bradbury (2004) 281 Nfld. & P.E.I.R. 33 (NLCA) … . Offender found guilty by a jury of two counts of fraud. Offender defrauded her employer, a non- profit organization composed of seven charities, of $66,070.00 (paras. 2, 2, & 3). On appeal, sentence varied to 12 months conditional (para. 56) and restitution from $66,070 to $10,000 based on the offender’s limited means (paras. 64-66). R. v. Clarke (2000) 190 Nfld. & P.E.I.R. 263 (NLSC) … . Offender pleaded guilty to eight counts of fraud. The total embezzled was $715,000 (paras. 1& 4). Butler J. imposed 21 months imprisonment, two years probation and restitution of $715,000 (paras. 48-50). R. v. Brennan (2008) 274 Nfld. & P.E.I.R. 267 (NLSC) … . Offender found guilty by a jury of theft of $64,000, the whole life savings of an elderly couple Page: 10 (paras 1, 47 & 48). None of the money was recovered except a few bills passed at a club (para 20). In addition to six weeks time served, Handrigan J. imposed nine months imprisonment and two years probation (para 52). R. v. Rolls (1999) 177 Nfld. & P.E.I.R. 178 (NLSC) … . Offender pleaded guilty to two counts of fraud. She embezzled $179,184 from the bank where she worked (paras 1 & 2). Offender suffered psychiatric problems following the death of her son (para 15). Counsel agreed that the range of sentence was nine to fourteen months imprisonment (para 16). Barry J. imposed a 15 month conditional sentence and restitution of $20,000 (para 19). R. v. Byrne (2009) 286 Nfld. & P.E.I.R. 191 (NLPC ) … . [Member of the House of Assembly (MHA)] pleaded guilty to fraud and bribery of a government official. Offender defrauded government of $117,812 (paras 1 & 3). Pike P.C.J. imposed two years imprisonment and restitution of $117,812. R. v. Collins (2010) 293 Nfld. & P.E.I.R. 80 (NLSC) … . MHA pleaded guilty to fraud and bribery of a government official. Offender defrauded government of $139,387.98 and paid bribes totaling $10,025.00 (para 11). Hoegg J. imposed 21 months imprisonment and restitution of $139,387.98. R. v. Anderson (2009) 290 Nfld. & P.E.I.R. 59 (NLSC) … . MHA pleaded guilty to forgery and breach of his duties as a public official. The loss to the government was $89,474.34 (paras 1-3). Dymond J. imposed 15 months imprisonment and restitution of $89,474.34. R. v. Murray 2010 CarswellNfld. 66 (S.C.) … . Government official pleaded guilty to fraud and two counts of accepting bribes (para 9). The loss to the government was $177,000 (para 5). In accordance with counsels’ joint submission, Fowler J. imposed two years imprisonment and two years probation (para 27). (b) Aggravating and Mitigating Factors [17] The fraud perpetrated by the offenders could have had serious consequences for the complainants and for others. However, the complainants’ funds were largely recovered by them. (While the losses suffered by the complainants were under $30,000, that is largely because regulatory authorities, notably in Quebec, kept the offenders from getting access to most of the funds sent by the complainants.) [18] The use of the internet to perpetrate the fraud is an aggravating factor. So is the extensive pattern of dishonesty involving aliases, fictional “departments” in the fraudulent organization, repeated lying to the complainants, etc. Page: 11 [19] The fraud was not slick and sophisticated, but rather was somewhat amateurish. It is doubtful that it would have lured many ill-advised persons to “invest”. That said, the means used to further the scheme were dishonest and intended to deceive. [20] Mr. Matthews was the guiding mind behind the fraud. That said, Ms. Briand was a full participant. [21] The appellants are both first time offenders. [22] Notwithstanding her statement that she and Mr. Matthews did nothing wrong, it is clear that Ms. Briand is truly remorseful. This has been a shattering experience for her. She is unlikely ever to re-offend. (c) Analysis [23] The Appellants’ Factum stated (at para. 15): Based on the cases summarized, the appellants submit that a fit sentence is at the lower end of the range of 9-18 months imprisonment. [24] However, before the hearing, the Appellants discharged their legal counsel and represented themselves. The Appellants submitted that a fit sentence would be one to be served conditionally. [25] The Crown submitted that a sentence of two years imprisonment would be fit, emphasizing particularly Mr. Matthews’ risk of re-offending, given his continued assertion that his scheme was not fraudulent. [26] Having regard to the need for denunciation and deterrence, as well as the principle of parity, a term of imprisonment is required in this case. [27] That said, a lengthy period of incarceration is not warranted, especially given that the Appellants are both first time offenders. [28] I also accord significance to the remorse exhibited by Ms. Briand and her low risk ever to re-offend. [29] Accordingly, I would impose a sentence of 15 months imprisonment on Mr. Matthews and 10 months imprisonment on Ms. Briand. Page: 12 CONCLUSION [30] The appeal is allowed. The sentencing decision of the Provincial Court judge is set aside. A sentence of 15 months imprisonment is imposed on Mr. Matthews and 10 months imprisonment on Ms. Briand. _________________________________ M. H. Rowe, J.A. I Concur: ____________________________ C. K. Wells, J.A. I Concur: ____________________________ M. F. Harrington, J.A.