What is the penalty for white-collar crime?

January 06, 2021

What is the penalty for white-collar crime?

White-collar crime, a term that encompasses frauds and thefts committed by business and government professionals, is not dependent on the threat of physical force or violence. Yet it is not a victimless crime, as a single scam can wipe out someone’s life savings or cost a group of investors dearly. As the Canadian Encyclopedia explains, “corporate crimes cause far more financial harm, and many more personal injuries (some leading to death) than do traditional crimes such as theft, robbery and assault.”

That is why the courts strive to impose harsh penalties for these crimes, as dictated by the Canadian Criminal Code or provincial and municipal laws. Depending on the offence, penalties include fines, paying the cost of prosecution, forfeitures, restitution and imprisonment. 

Criminal fraud

Section 380 of the Code states “Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security or any service” is guilty of fraud.

That section adds, “Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, with intent to defraud, affects the public market price of stocks, shares, merchandise or anything that is offered for sale to the public is guilty of an indictable offence and liable to imprisonment for a term not exceeding fourteen years.”

The Code also contains the following fraud-related offences that apply in a business context: theft (s. 322 and s.334), criminal breach of trust (s. 336), destroying documents of title (s. 340), forgery (s. 366), trafficking or possession of forged documents (s. 368), disposal of property to defraud creditors (s. 392), falsification of books or records (s. 397), fraudulent manipulation of the stock exchange (s. 382), insider trading (s. 382.1), fraud on the government (s. 121), false prospectus (s. 400) and secret commissions (s. 426).

Administrative/regulatory fraud

Administrative and regulatory fraud falls under the federal statutes that include the Bankruptcy and Insolvency Act and the Income Tax Act. In many cases, provinces have established enforcement bodies to administer the legislation, such as the Ontario Securities Commission, wihich is responsible for administering the Ontario Securities Act.

On the federal level, the Competition Act contains several offences closely related to fraud. They include false or misleading representations (s. 52(1)), deceptive telemarketing (s. 52.1(3)), pyramid selling or multi-level marketing plans (s. 55 to s. 55.1) and the destruction or alteration of records (s. 65(3)).

The Code states that penalties for criminal fraud include unlimited fines, restitution orders and imprisonment of up to 14 years.

If someone is charged with fraud under $5,000, the Crown has two choices. They can proceed by indictment and seek the maximum penalty of two years in federal prison followed by three years of probation. If the Crown instead decides to treat the fraud charge as a summary conviction, the maximum penalty is two years less a day in a provincial jail and a $5,000 fine.

Courts come down hard

An Ontario court judge gave this observation about the penalties for white-collar criminals, in a case where a man was sentenced to six months in jail for wilfully evading $374,058 in income taxes. Quoting from an earlier judgment, he said: “The public, of course, suffers when a man defrauds the government of over half a million dollars. Somebody else has to make up that shortfall and it falls upon every citizen. That is why the public has an interest in seeing that those who defraud the government pay the appropriate penalty, and that penalty must be a reflection of the revulsion which society feels. Public confidence has to be maintained.”

In another Ontario court case involving a man convicted of counterfeiting money, the judge remarked about the reasons for harsh penalties for that white-collar crime.

“I am required to impose a sentence which on the face of it for white-collar crime of large magnitude must appear to be relatively severe. It must be a sentence that reflects the principle of general deterrence. It must be a sentence that when sent out into the community of other would-be counterfeiters; is such to cause them to consider, to stop, to pause and question whether or not the crime is worth the time.”

Stating he has looked at numerous other similar cases for guidance, he added, “The one fact that is clear from all of the cases is that counterfeiting is an offence that is generally considered to be on the higher scale of the seriousness of offences in the hierarchy of non-violent or white-collar criminal offences.”

In a judgment from the Supreme Court of Newfoundland and Labrador, we are given this guidance, again quoting from an earlier decision: “White collar crimes are usually committed by people with no criminal records and in fact a good background. It is those very qualities that allow them to be granted trust by their employers. We can lock our doors against intruders and criminals but we are defenceless from attacks from within, and by virtue of their good records, white-collar criminals such as the accused are able to attack and cause significant damage from within.”

Finally, this stern warning is contained within a B.C. provincial court judgment: “I think there is a need to show people who want to go to the public for money without complying with the Securities Act that the penalties may be much more severe than that, that they may not be able to simply pay fines and get out of it in that manner, and that there is a very real danger if a deliberate evasion of the Act has been found that they will go to jail,” the judgment reads.

Getting tough on white-collar crime

In 2011 the federal government passed Bill C-21, Standing Up For Victims of White Collar Crime Act, providing tougher sentences for fraud. That included a mandatory minimum penalty of at least two years for fraud over $1 million. A government news release states that lesser sentences can also be increased if any of these aggravating factors are present:

• if the fraud had a significant impact on the victim, given the victim's particular circumstances, including his/her age, health and financial situation;
• the offender's failure to comply with applicable licensing rules or professional standards; and,
• the magnitude, complexity, and duration of the fraud and the degree of planning that went into it.

“The government is listening to the concerns of victims of fraud, and are helping them seek the restitution they deserve," the justice minister at the time stated. “We will continue to take tough action on white-collar crime and protect the safety and security of our communities.”

Canadian white-collar cases

These cases show the courts are serious about prosecuting fraud. They also illustrate how experienced legal counsel can help reduce the sentences for those convicted of white-collar crimes.

• In 1972, Harold Ballard was found guilty of 48 out of 50 charges of theft, tax evasion and fraud, according to CBC. At his trial, the judge said the president of Maple Leaf Gardens showed “a clear pattern of fraud” involving the misuse of $205,000, including $82,000 of Gardens money used to remodel his home, the story states, with Ballard sentenced to three consecutive three-year terms in Millhaven prison, of which he only served one year.
• In 1994, NHL player agent and hockey promoter Alan Eagleson was charged by the FBI with 34 counts of racketeering, obstruction of justice, embezzlement and fraud in the United States. The RCMP later charged him with eight counts of fraud and theft. In 1998, he pleaded guilty to three counts of mail fraud in Boston and was fined US$700,000. Later that year, he pleaded guilty to fraud and embezzling hundreds of thousands of dollars from the  Canada Cup tournament and was sentenced to 18 months in jail, of which he served six.
• In 2009, Garth Drabinsky and his Livent co-founder were found guilty of fraud and forgery in Ontario Superior Court and he was sentenced to seven years in prison. He filed an appeal, remaining free on bail until 2011 when the appeal court reduced his sentence to five years. He was released on day parole in 2013 and granted full parole in January, 2014.
• In 2017, after orchestrating the largest Ponzi scheme in Canadian history – with 2,400 global investors losing up to $400 million – two men were released from prison after serving just over two years of their 12-year sentences, according to the CBC. “The work on this case didn't end in court,” their lawyer told the CBC “We are pleased that our client is at liberty and abiding by the requirements of Corrections Canada.”

How I can help

Mounting a defence for those charged with white-collar crime can be complex since the laws governing the various offences that fall in the category are ever-evolving. If you are charged with a white-collar crime, you want a lawyer who keeps abreast of all the new developments. Call me for a free consultation so we can start building your best case to present to the court.

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