This case deals with sentencing of a lawyer, Mr. Viccars, for facilitating a tax evasion scheme dealing with tax write offs for computer software. It has nothing to do with charities or non-profits but it is interesting to read the judge’s comments as it relates to lawyers and their responsibilities. Governments have been using criminal proceedings to go after some people involved with fraudulent issuance of charitable donation receipts, what is sometimes referred to as fraudulent receipting. It will be interesting to see if criminal prosecutions will be used as a tool to deal with professional advisors involved with certain sophisticated abusive charity gifting tax shelters. “
One thing that made me chuckle was the judges note in terms of aggravating factors “The total amount of tax sought to be evaded was over $700,000.00.” That is an aggravating factor. When one thinks of the tens or hundreds of millions of dollars lost to some abusing gifting tax schemes $700,000 seems rather tiny!
“Eventually, Mr. Viccars joined Marge Norman and a Mr. James Yelle  as recorded partners in the S.R.O. Partnership. The S.R.O. Partnership was ostensibly formed to acquire, develop, and market computer software. However, I find that the S.R.O. Partnership was formed, in reality, to provide a vehicle by which the offender, and others, could improperly obtain the benefits of special tax amortization rules under the Income Tax Act which were applicable to software acquisitions.”
“14] Those tax amortization rules provided that the acquisition cost of computer software was eligible for a 100% tax write-off for two years following the purchase of the software.
 I find that Mr. Viccars devised a plan under which he would, through a corporate entity, acquire computer software at a relatively low price, then sell it to the S.R.O. Partnership for an inflated price, thereby creating an inflated capital cost allowance which would in effect be distributed to those who had purchased partnership interests in the S.R.O. Partnership. I do not suggest that any third party who purchased partnership interests in the S.R.O. Partnership in order to obtain the tax write-off was aware of the offending aspects of the transaction.”
“ The purpose of the scheme was to obtain the benefits of the 100% capital cost write off then in effect for computer software acquisitions. Those who invested in the SRO Partnership had allocated to them their proportionate share of the resultant partnership write-off. The SRO Partnership filed with Revenue Canada a Partnership Information Return (T5013) and each partner filed a copy of it with their personal tax return. For example, in the taxation year 1994, the T5013 Supplementary for Mr. Viccars indicated that his share of the SRO Partnership loss was $94,794.00.  Likewise, his share of the SRO Partnership loss for the 1995 taxation year was $112,744.82.  Revenue Canada (as it then was) calculated, and I accept, that none of the 1994 loss was properly claimed, and that only $18,348.00 of the loss was properly claimed in 1995.  “
“ Through his personal tax returns, professional billings to the various parties, and tax benefits claimed by entities he owned, Mr. Viccars had benefits in excess of $287,000 accrue to him as a result of this scheme.”
“ Aggravating Factors
1. The scheme was complex, devious, and well thought out. It involved the use of off-shore companies, nominee directors, “bearer” shares (thereby making it difficult to determine who actually controlled the company), and backdated documents (all to mislead the S.R.O. Partnership accountant into claiming a larger loss).
2. The total amount of tax sought to be evaded was over $700,000.00.
3. Mr. Viccars involved a number of innocent people in the scheme. For example, there were many innocent investors who were unaware of the dishonest nature of the loss which the S.R.O. Partnership was claiming, and which the investors then included in their personal tax returns. Those people suffered the loss of the expected tax credit. Further, Ms. Craig was involved for the sole purpose of having her act as a founding partner. While she may have been too trusting when she consented to act as a founding partner, she was unaware of the scheme into which she was being drawn. Ms. Craig was originally charged along with Mr. Viccars, Ms. Norman, and Mr. Yelle, though early in the proceedings the charges against her were withdrawn. 
4. Mr. Viccars was a lawyer, and his professional status bestowed a heightened sense of reliability and credence upon his actions and representations. Both Mr. Raworth (the B.V.I. solicitor) and Mr. Burges (the Cayman Island banker) took comfort from the fact that Mr. Viccars was a member of the bar. Likewise, Ms. Craig testified, and I accept, that she assumed that the proposed partnership was sound because Mr. Viccars was a lawyer. I am thoroughly satisfied that Mr. Viccars traded on his professional status, and that in doing so his actions were akin to breaching the trust of the people with whom he was dealing. I note that in R. v. Shandro (1985), 65 A.R. 311 (Alta. C.A.), Laycraft, C.J.A., speaking for the panel, said at paragraph 15:
15 While a lawyer should receive no greater and no less penalty than would be imposed on any other person similarly situated, in my opinion breach of trust by a highly educated person taking advantage of his position and his education must always receive a severe penalty. Those who possess the greatest gifts and on who society has bestowed its greatest rewards commit a far greater betrayal by such acts as these than do fellow citizens who are less well endowed. “
“ There is a mandatory fine which must be imposed on Mr. Viccars. Section 239(2) of the Income Tax Act provides that every person who is convicted of, inter alia, an offence prosecuted on indictment under section 239(1)(d) “is, in addition to any penalty otherwise provided, liable to (a) a fine of not less than 100% and not more than 200% of (i) ... the amount of the tax that was sought to be evaded….” In the case, at bar, it is agreed that the amount of tax sought to be evaded was $703,935.35, and the Crown seeks the imposition of a fine in that amount (i.e., the minimum fine permitted under the statute).
 As previously noted, Mr. Viccars has no criminal record, and is 63 years of age. It would appear that the motivation for the offence was simply the accumulation of wealth, or, to put it less delicately, avarice. There is no evidence of pressing financial concerns, or of a substance abuse problem which required large amounts of money.”
 Mr. Viccars was the directing mind in a well-orchestrated scheme to defraud Her Majesty’s exchequer (i.e., the Canadian taxpayer). He took advantage of the fact that the Canadian tax system, to a large extent, relies upon the honest self-reporting of Canadian taxpayers. Mr. Viccars involved innocent people in his scheme to abuse that self-reporting system, and throughout he traded on the trust placed in members of the legal profession. He backdated documents to facilitate his plans, and used off-shore companies to mask his involvement. The amount of money involved was very significant.
 In determining an appropriate sentence, one must, of course, take into account the amount of taxes which were evaded, or sought to be evaded, but one must not be unduly influenced by that amount. The complexity of an offender’s actions in the evasion scheme is at least as important as the amount of money involved. In the case at bar, the taxes sought to be evaded as a result of the scheme totalled almost $704,000.00 While the amount is significant, there are a number of cases which exceed that total by hundreds of thousands of dollars. One might be tempted to conclude that Mr. Viccars’s sentence should necessarily be less than the sentence imposed in cases involving more money. In my view, it would be wrong to succumb to that simplistic temptation.
 As noted, the magnitude of the taxes evaded, or sought to be evaded, is an important factor to consider in sentencing. However, it is the conduct of the offender which has resulted in the evasion which is sought to be deterred, and it is the complexity of that conduct which often provides the most compelling evidence of the moral blameworthiness of the offender. In the case at bar, that conduct was well-planned, and complex. Mr. Viccars marshalled his considerable and evident legal talents, and intentionally created from a collection of both domestic and off-shore companies, a labyrinth designed solely to thwart the efforts of any investigative agency which might seek to successfully navigate the maze in a search for the truth. The complexity of Mr. Viccars’s scheme must attract a strong denunciatory sentence.
 The maximum sentence of incarceration permitted by section 239(2)(b) of the Income Tax Act is five years. In my view, taking into account all the aggravating and mitigating factors other than the length of these proceedings, an appropriate sentence would be 3 ½ years incarceration.
 However, for the reasons noted, Mr. Viccars is entitled to additional credit because of the length of time this matter has taken to proceed through the legal system. In my view, after application of that credit, the appropriate sentence is 3 years incarceration. A sentence of that length is not amendable to a conditional sentence order as sought by Mr. Viccars.
 I sentence Mr. Viccars to a period of incarceration of 3 years. I also require him to pay a fine of $703,935.35, and in default of payment there shall be judgment against Mr. Viccars in that amount in favour of Her Majesty The Queen In Right of Canada.
Dated at the City of Calgary, Alberta this 4 th day of November, 2010.
A Judge of the Provincial Court of Alberta:”
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
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.