R. v. Leo-Mensah, 2010 ONCA 139 - charity receipting fraud results in longer sentence

October 28, 2010 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: News, Canadian Charity Law, Avoiding 'Charity' Scams

Charity receipting fraud in Canada is a big problem.  According to CRA, between 100,000-135,000 donors have been involved between 2004 and 2009 with hundreds of millions in fraudulent donation receipts issued.  There is no question that the courts will sentence anyone involved to prison.  The issue is how much time.  In R. v. Leo-Mensah it dealt with that issue.  The Crown sought a stiffer sentence and the courts agreed and gave the accused an extra two years, that is after he had already spent 11 months in pre-trial custody for which he receive a credit on a two-for-one basis.  He also received a significant fine.  The trial judge had not taken into account “as an aggravating factor, that the value of the fraud committed exceeded $1,000,000.  This she was obliged to do pursuant to s. 380.1(1)(a) of the Criminal Code.”

The court also noted:
“Third, given the magnitude of the fraud, the breach of trust, blatant abuse of the charitable donations scheme under the Income Tax Act and Mr. Leo-Mensah’s pivotal role in the scam, the sentence imposed falls below the range that has been established by this court for large-scale fraud cases.  The amount and duration of the fraud perpetrated by the respondent is significant, amounting to almost $3.28 million over a three-year period and involving hundreds of fraudulent tax returns.  In R. v. Bogart 2002 CanLII 41073 (ON C.A.), (2002), 61 O.R. (3d) 75 (C.A.), leave to appeal to S.C.C. refused, [2003] 1 S.C.R. vi, this court established that a penitentiary sentence is the norm, not the exception, in cases of large-scale fraud and in which there are no extraordinary mitigating circumstances.”

If you want to read about receipting fraud here are some slides from CRA on the subject:
http://www.globalphilanthropy.ca/index.php/blog/comments/cra_presentation_major_non-compliance_issues_by_danie_huppe-cranford_for_ic/

 

Here is the full text of the case:

http://www.canlii.org/en/on/onca/doc/2010/2010onca139/2010onca139.html

CITATION: R. v. Leo-Mensah, 2010 ONCA 139

DATE: 20100224

DOCKET: C50648

COURT OF APPEAL FOR ONTARIO

Weiler, Gillese and MacFarland JJ.A.

BETWEEN:

Her Majesty the Queen

Appellant

and

Paul Leo-Mensah

Respondent

Beverly J. Wilton and Ghazala Zaman, for the appellant

Paul Leo-Mensah, acting in person

Heard: February 3, 2010

On appeal from the sentence imposed on May 28, 2009, by Justice Sheila Ray of the Ontario Court of Justice.

Gillese J.A.:

[1]          Mr. Leo-Mensah operated a business through which he, or those whom he employed, prepared and submitted his clients’ income tax returns.  As part of the tax services that he provided, Mr. Leo-Mensah provided false charitable donation receipts to his clients.  He either submitted the receipts to the CRA upon request or provided them to his clients.

[2]          In 2003, 2004 and 2005, he submitted 801 tax returns claiming approximately $11.7 million in false charitable donations. As a result of these false claims, tax refunds in the amount of approximately $3.28 million were paid out by the CRA to Mr. Leo-Mensah’s clients.

[3]          Mr. Leo-Mensah failed to report the income that he derived from his fraudulent activity.  As a result, he evaded income tax of $42,457.00 in 2004 and $103,309.00 in 2005.  He failed to file an income tax return for 2006.

[4]          Mr. Leo-Mensah pleaded guilty to one count of fraud (Criminal Code, s. 380(1)(a)) and two counts of income tax evasion (Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, s. 239(1)(d)).  After being given credit on a two-for-one basis for 11 months of pre-trial custody, he was sentenced to one day in jail and fined $145,766.00, concurrent on all charges (the “global fine”). 

[5]          The Crown seeks leave to appeal sentence and, if leave is granted, asks that the sentence be increased.  It argues that the sentence imposed was manifestly unfit given the seriousness of the offences. 

[6]          Mr. Leo-Mensah responds by arguing that he was not the mastermind behind the scheme, that others participated in it and should be held accountable, and that he was duped by pastors into believing that the scheme resulted in money being given to needy children in Africa. 

[7]          For the reasons that follow, I would grant leave to appeal and allow the appeal.

ANALYSIS
[8]          In my view, the sentencing judge erred in three respects. 

[9]          First, it appears that she failed to consider, as an aggravating factor, that the value of the fraud committed exceeded $1,000,000.  This she was obliged to do pursuant to s. 380.1(1)(a) of the Criminal Code. 

[10]      Second, the sentencing judge appears to have placed significant emphasis on Mr. Leo-Mensah’s childcare obligations when determining his sentence.  She likened his circumstances to those of the accused in R. v. Pierce 1997 CanLII 3020 (ON C.A.), (1997), 32 O.R. (3d) 321 (C.A.), leave to appeal to S.C.C. refused, [1997] 3 S.C.R. xiii.  Unlike the situation in Pierce, however, in the present case there was no evidence before the court on the extent of the respondent’s childcare obligations.  At the time of his arrest, the respondent was separated from his spouse and his four children continued to live with their mother. 

[11]      Third, given the magnitude of the fraud, the breach of trust, blatant abuse of the charitable donations scheme under the Income Tax Act and Mr. Leo-Mensah’s pivotal role in the scam, the sentence imposed falls below the range that has been established by this court for large-scale fraud cases.  The amount and duration of the fraud perpetrated by the respondent is significant, amounting to almost $3.28 million over a three-year period and involving hundreds of fraudulent tax returns.  In R. v. Bogart 2002 CanLII 41073 (ON C.A.), (2002), 61 O.R. (3d) 75 (C.A.), leave to appeal to S.C.C. refused, [2003] 1 S.C.R. vi, this court established that a penitentiary sentence is the norm, not the exception, in cases of large-scale fraud and in which there are no extraordinary mitigating circumstances. 

[12]      I would note, as well, that in accordance with R. v. Ward reflex, (1980), 56 C.C.C. (2d) 15 (Ont. C.A.), separate fines are to be imposed for each offence and such fines are not to be made concurrent. 

[13]      It will be apparent that I do not accept that Mr. Leo-Mensah was but a dupe in this matter.  The sentencing judge found that he planned and organized the scheme in order to defraud the government of Canada.  She stated that Mr. Leo-Mensah “was the instigator and the primary participant in this scheme and his degree of moral culpability or responsibility for the offences is very high”. 

[14]      I see no reason to interfere with these findings.  If there are other people who participated in the fraudulent activity, the respondent is free to provide that information to the authorities who may take legal action against them.  The fact that others may also be guilty of offences does not diminish the respondent’s culpability, however.  There is an inadequate record to determine the veracity of the respondent’s claim that he was motivated by a desire to help needy children in Africa.  Assuming that to be the case, however, it does not justify or excuse the wrongdoing that he committed.

[15]      While this court has been reluctant to re-incarcerate an offender who has served the sentence originally imposed and been released into the community, reincarceration is warranted where the original sentence was so far below that which was required that the interests of justice require the court intervene: see R. v. D.G.F., 2010 ONCA 27 (CanLII), 2010 ONCA 27 at paras. 33-34.  In my view, this is such a case and a period of reincarceration is necessary. 

DISPOSITION
[16]      Accordingly, I would grant leave to appeal sentence and allow the appeal.  I would sentence the respondent to a further two year period of incarceration and substitute for the global fine, separate fines for each of the two income tax offences, namely, a fine of $42,457.00 for the conviction for income tax evasion in 2004 and a fine of $103,309.00 for the conviction for income tax evasion in 2005. 

RELEASED:  February 24, 2010 (“E.E.G.”)

“E.E. Gillese J.A.”

“I agree K.M. Weiler J.A.”

“I agree J. MacFarland J.A.”

 

Do you require legal advice with respect to Canadian or Ontario non-profits or charities?

Contact

Charity Lawyer Mark Blumberg

Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.

mark@blumbergs.ca
416.361.1982
Download vCard

Connect

Locate

Blumberg Segal LLP
Barristers & Solicitors
#1202 - 390 Bay Street
Toronto, Ontario
M5H 2Y2 Canada

Charity Law List

Join Blumbergs' non-profit and charities newsletter
View recent issue: May 2019