May the Odds be Ever in Your Favour...

Riesberry was a gambling man who wanted the odds to be ever in his favour - so he cheated. He used his position as a licensed trainer of standardbred horses to inject them with performance enhancing drugs. Riesberry was charged with criminal offences including fraud and cheating. He was acquitted. The Crown successfully appealed: 2014 ONCA 744.

The facts were as follows: on a race day in September 2010 Riesberry was caught via hidden camera injecting something into the trachea of horse at the Windsor Raceway.  The injected horse finished sixth in that race. Just over a month later Riesberry was arrested as he was heading into the Raceway grounds. A search of his truck revealed a syringe filled with performance-enhancing drugs.

Testing of the contents of the syringe revealed that it was a combination of drugs which, when not administered on a race day, are perfectly legal and have a therapeutic purpose. However, because the side effects of combination include a performance enhancing effect, administering it on race day is prohibited. Additionally, regardless of the contents of a syringe, no trainer is permitted to possess a loaded syringe at a racetrack.

Riesberry was charged with:

  1. defrauding the public of money wagered on the outcome of a horserace exceeding $5,000;
  2. cheating while playing a game with the intent to defraud members of the public engaged in wagering money on the outcome of a horserace;
  3. attempting to defraud the public of money to be wagered on the outcome of a horserace exceeding $5,000; and
  4. attempting to cheat while playing a game with the intent to defraud members of the public who would be engaged in the wagering of money on the outcome of a horserace.

The wording of these charges was of some significance at trial. The trial judge held that the use of the term “members of the public” meant that the Crown could not rely on fraud or cheating directed at other racers.

The trial judge concluded that Riesberry had injected performance enhancing drugs in to the horse in the incident captured on camera and had attempted to do the same on the day he was apprehended. The trial judge further concluded that Riesberry:

  • was not using the drug for therapeutic purposes
  • knew of the ban on syringes on race days
  • had tried to sneak a loaded syringe into the track
  • and had done the forgoing with the intent to give his horse an unfair advantage.

Notwithstanding these findings the trial judge acquitted Riesberry. On the fraud counts the trial judge found that the Crown had failed to establish a deprivation. The trial judge held that:

  • no evidence had been called about whehther any member of the betting public placed or did not place a bet because of the injection
  • the betting public did not participate in the rage, rather they only wagered on the outcome
  • the real victims, if any, would have been the participants in the race (but the indictment wasn’t particularized that way)
  • there was no evidence about the amounts of the bets on the races at issue.
  • even if the public had suffered a deprivation is was too remote

On the gaming counts the trial judge found that horseracing not a game captured by section 197 of the Code as it is a game of pure skill that does not include an element of chance.

A unanimous Ontario Court of Appeal held that horseracing bettors are in a similar position as investors:

Just as investors were entitled to rely on the accuracy of the financial statements, bettors were entitled to assume compliance with the regulatory scheme. What occurred in this case was not a minor breach or minor non-compliance with the regulatory scheme. Where there is an attempt (successful or not) to affect the outcome of a race through the use of banned performance-enhancing substances, such a significant breach of the regulatory scheme necessarily places bettors at risk of being deprived of their bets. Indeed, as the trial judge found, the very purpose of the injection was to create “an unfair advantage” for the respondent’s horse. It is obvious that a horse injected with performance-enhancing drugs could run differently than if it was not so injected; in fact, that appears to be at least part of the reason for the prohibition. @para 21

The Appellate Court found that the trial judge had also erred in finding that horseracing was not a game as contemplated by section 197 of the Code. In fact horseracing, the Court of Appeal found is precisely the type of game of mixed of skill and chance that the section provides for.

Moreover the Court gave short shrift to the trial judge’s assessment of the remoteness of the risk of deprivation, holding that:

bettors were entitled to rely on compliance with the regulatory scheme. It is no answer to say they also relied on other factors in making their bets. As the trial judge observed in this section of his reasons addressing cheating while playing a game, had they known about the doping, some bettors would likely have changed their behavior, while others would not. Thus, as a group, the betting public was deprived of information about the race that they were entitled to know; they were also deprived of an honest race run in accordance with the rules. As we said in the previous section of these reasons, in our view, the trial judge erred in law in failing to consider the regulatory scheme in relation to the issue of deprivation. @para 33

In a relatively unusual step the Court of Appeal substituted verdicts of guilt on the fraud charges. The Court of Appeal found that the trial judge had made all of the necessary findings of fact to support a conviction for fraud and attempted fraud but had used the wrong legal test in reaching his conclusion. Thus, the convictions were entered and the matter back to the trial judge for sentencing.

A different remedy however, was imposed on the cheating and gaming counts. The Court found that “while the respondent could reasonably have been convicted if the correct legal test were applied” the necessary findings of fact had not been made to enter convictions. The trial judge did not conclude that the race even met the section 197 definition of a game or whether a particular form of cheating had impacted on the game. Since these necessary findings of fact had not been made, a new trial was ordered on those counts.


New & Notable: Maxwell - not so smart after all

Norman Maxwell thought he had a clever scheme. His scheme involved defrauding the Bank of Montreal to the tune of $375,000; he did so through several transactions occurring over the period of about one month. 

Maxwell was charged and ultimately found guilty after trial. The trial judge imposed a sentence of 4 years jail and made two ancillary orders: (i) restitution in the amount of $293,205; and (ii) a fine in lieu of forfeiture in the same amount to be paid within 30 days prior to the appellant’s release from custody, and in default of payment, a further term of imprisonment of four years to be served consecutively to the principal sentence. Maxwell was not happy - he had sought a conditional jail sentence or in the alternative, a sentence in the range of 2 years. He appealed. The Court of Appeal dismissed his appeal: 2014 ONCA 316.

On appeal two issues were raised.

First, Maxwell took issue with the length of sentence. The court rejected this ground of appeal. 

A custodial sentence of four years in our view falls within the range of sentence appropriate for the offence and the offender who committed it. The scheme involved several individual transactions that took place over a period of about a month. The amount of money involved, $375,000, was significant. That the bank manager breached bank procedure in the hope that the appellant’s promise of significant future business does not diminish the appellant’s moral blameworthiness. Nor are we persuaded that the trial judge’s consideration of the significant personal consequences for the manager resulted in the imposition of an unfit custodial sentence.

The reasons of the trial judge reflect consideration and application of the controlling sentencing principles including denunciation, deterrence and, secondarily, rehabilitation. The appellant is a mature adult, with related but dated convictions. At the time of sentencing he continued to solicit funds from others for a highly secretive project that the trial judge was satisfied did not exist [paras 5-6].

Second, Maxwell took issue with the fine in lieu of forfeiture. The court held that the "imposition of a fine in lieu of forfeiture...reflects no error in principle" [para 8]. However, the court did vary the order by allowing 2 years (rather than 30 days) to pay and reduced the imprisonment in default from 4 years consecutive to 3 years.



New & Notable: Deterring Commercial Fraud

Garth Drabinsky and Myron Gottlieb are headed to jail; the Ontario Court of Appeal today dismissed their conviction appeals: R v Drabinsky, 2011 ONCA 582.  They wont be spending as much time there as was originally thought however. 

Drabinsky and Gottlieb established Cineplex in the 80s.  The two quickly built that business to great success and in 1989 left Cineplex after acquiring its live entertainment division.  The two then formed a partnership called MyGar.  This company operated until the sprint of 1993 when it made a public offering and became a public company known as Livent. 

Drabinsky and Gottlieb were large shareholders in Livent and fully controlled its operations.  The business was a notable success.  In 1998 there was a significant change in the management of Livent when new investors came in to run the financial side of the business. 

The new accountants began to ask some questions.  It turned out that the books of Livent had been fraudulently altered and did not reflect the true financial state of the company.  Drabinsky and Gottlieb were immediately locked out of the company and the new investors began to pursue them in relation to the fraud. 
Livent declared bankruptcy five months later. 

Drabinsky and Gottlieb were ultimately charged and convicted.  Drabinsky was sentenced to seven years jail and Gottlieb to six years [para 154].  They appealed.

After dismissing the conviction appeal the court turned to consider the sentence appeal.  In doing so the court considered, inter alia, the argument advanced that the judge erred in principle by focusing on general deterrence; the appellants argued that there was "little concrete evidence to support the contention that longer sentences provide more effective general deterrence than shorter jail terms" [para 158].  In response thereto the court held:
[T]his court and all other provincial appellate courts have repeatedly held that denunciation and general deterrence must dominate sentencing for large scale commercial frauds. Denunciation and general deterrence most often find expression in the length of the jail term imposed [para 160]; [emphasis added].    
The court then considered the range of available sentences and offered the following comments in relation to the suitability of the sentence: 
First, the investigation and prosecution of crimes like these is difficult and expensive. It places significant stress on the limited resources available to the police and the prosecution. An early guilty plea coupled with full cooperation with the police and regulators and bona fide efforts to compensate those harmed by the frauds has considerable value to the administration of justice. The presence of those factors, depending of course on the other circumstances, may merit sentences outside of the range.

Second, individuals who perpetrate frauds like these are usually seen in the community as solid, responsible and law-abiding citizens. Often, they suffer personal and financial ruin as a result of the exposure of their frauds. Those factors cannot, however, alone justify any departure from the range. The offender’s prior good character and standing in the community are to some extent the tools by which they commit and sustain frauds over lengthy time periods. Considerable personal hardship, if not ruin, is virtually inevitable upon exposure of one’s involvement in these kinds of frauds. It cannot be regarded as the kind of unusual circumstance meriting departure from the range [paras 166-167]. 
 Nonetheless, the Court of Appeal held that the failure of Livent could not be attributed solely to the appellants.  The causes of the failure were "numerous and complex"; the losses caused by the bankruptcy cannot be laid "entirely at the feet of Drabinsky and Gottlieb" [para 182].  In the absence of proof of the actual financial loss a sentence lower than that imposed was appropriate.  

Based on this finding - one which was not made by the trial judge - the Court intervened and reduced the sentences to five years for Drabinsky and four years for Gottlieb.

DG Mack