Sentencing Fraud

This page was last substantively updated or reviewed January 2020. (Rev. # 95589)

• < Criminal Law/Sentencing
• < Offences
• < Fraud

Overview

The Association of Certified Fraud Examiners created a taxonomy of fraud:

• Corruption
  • Conflict of Interest (purchasing schemes, sales schemes)
  • Bribery (Invoice kickbacks, bid rigging)
  • Illegal Gratuities
  • Economic Extortion
• Asset misappropriation
  • Cash
    • Theft of Cash on Hand
    • Theft of Cash Receipts
      • Skimming
        • Sales (unrecorded, understated)
        • Receivables (Write-off schemes, lapping schemes, unconcealed)
        • Refunds or Other
      • Cash Larceny
    • Fraudulent Disbursements
      • Billing Schemes (shell company, non-accomplice vendor, personal purchases)
      • Payroll Schemes (ghost employee, falsified wages, commission schemes)
      • Expense Reimbursement Schemes (mischaracterized expenses, overstated expenses, fictitious expenses, multiple reimbursements)
      • Cheque Tampering (forged maker, forged endorsement, altered payee, authorized maker)
      • Register Disbursements (False voids, false refunds)
  • Inventory and Other Assets
• Financial statement fraud
  • Net Worth/Net Income Overstatement (timing differences, fictitious revenues, concealed liabilities and expenses, improper asset valuations, improper disclosures)
  • Net Worth/Net Income Understatement (timing differences, understated revenues, overstated liabilities and expenses, improper asset valuations, improper disclosures)

Offence Wording

Fraud

380 (1) 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,

(a) is guilty of an indictable offence and liable to a term of imprisonment not exceeding fourteen years, where the subject-matter of the offence is a testamentary instrument or the value of the subject-matter of the offence exceeds five thousand dollars; or

(b) is guilty

(i) of an indictable offence and is liable to imprisonment for a term not exceeding two years, or

(ii) of an offence punishable on summary conviction,

where the value of the subject-matter of the offence does not exceed five thousand dollars.

Minimum punishment

(1.1) When a person is prosecuted on indictment and convicted of one or more offences referred to in subsection (1) [fraud], the court that imposes the sentence shall impose a minimum punishment of imprisonment for a term of two years if the total value of the subject-matter of the offences exceeds one million dollars.
[omitted (2)]
R.S., 1985, c. C-46, s. 380; R.S., 1985, c. 27 (1st Supp.), s. 54; 1994, c. 44, s. 25; 1997, c. 18, s. 26; 2004, c. 3, s. 2; 2011, c. 6, s. 2.
[annotation(s) added]

– CCC (CanLII), (DOJ)

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Draft Form of Charges

See Fraud (Offence)

General Principles

Maximum Penalties

Offence(s)	Crown Election	Maximum Penalty
s. 380(1)(a) [fraud over $5,000] From September 15, 2004	N/A	14 years incarceration
s. 380(1)(b) [fraud not exceeding $5,000]	summary election	2 years less a day jail and/or a $5,000 fine (from Sept 19, 2019)
s. 380(1)(b) [fraud not exceeding $5,000]	indictable election	2 years incarceration
s. 380(1)(a) [fraud over $5,000] Until September 14, 2004	N/A	10 years incarceration

Offences under s. 380(1)(a) [fraud over $5,000] are straight indictable. The maximum penalty is 14 years incarceration.

Offences under s. 380(1)(b) [fraud not exceeding $5,000] are hybrid. If prosecuted by indictment, the maximum penalty is 2 years incarceration. If prosecuted by summary conviction, the maximum penalty is 2 years less a day jail and/or a $5,000 fine (from Sept 19, 2019).

Minimum Penalties

These offences have no mandatory minimum penalties.

Available Dispositions

Offence(s)	Crown Election	Discharge s. 730	Suspended Sentence s. 731(1)(a)	Stand-alone Fine s. 731(1)(b)	Custody s. 718.3, 787	Custody and Probation s. 731(1)(b)	Custody and Fine s. 734	Conditional Sentence (CSO) s. 742.1
s. 380(1)(b) [fraud not exceeding $5,000]	any
s. 380(1)(a) [fraud over $5,000] Nov. 20, 2012 onward	N/A
s. 380(1)(a) [fraud over $5,000] September 15, 2004 to Nov. 20, 2012	N/A
s. 380(1)(a) [fraud over $5,000] Until September 14, 2004	N/A

Consecutive Sentences

There are no statutory requirements that the sentences be consecutive.

Mandatory Minimum

The mandatory minimum sentence for fraud over $1 million has been found in at least one instance to be unconstitutional as "cruel and unusual" punishment under s. 12 of the Charter.

Conditional Sentences

Conditional sentences are available for offences of fraud under $5,000.

Conditional sentences are available for offences of fraud over $5,000 where the offence was committed prior to the amendment to s. 742.1 on November 20, 2012.

Unless prohibited by law, the court should be considered a conditional sentence in all circumstances where incarceration is contemplated.

Custodial sentences are considered preferable "[w]here punitive objectives such as denunciation and deterrence are particularly pressing, such as in cases in which there are aggravating circumstances."

For most courts, the amount defrauded will be sufficient to determine if incarceration is required.

In major frauds involving breach of trust, denunciation and deterrence are to be emphasized and will usually result in jail sentences.

Certain courts have stated that conditional sentence orders should not be granted where there is a breach of trust. However, others suggest that it is not a full prohibition. Rather is it rate where it is a large scale fraud.

Incarceration is often ordered where there is no remorse. Also where there is no acceptance of responsibility.

Where there are exceptional or extreme personal mitigating circumstances, general deterrence can be satisfied by a conditional sentence.

Restitution and community service work are not sufficient to amount to exceptional circumstances to warrant a conditional sentence.

Where the aggravating factors overwhelm the mitigating factors, a sentence of imprisonment is mandated.

The “ruin and humiliation” brought upon the accused and his family due to the offence and professional loss coupled with a conditional sentence can be sufficient to satisfy denunciation and deterrence.

Res Judicata

A person convicted of fraud and income tax evasion may be sentenced separately for each offence.

Sentencing Principles

Primacy of General Deterrence and Denunciation

Major instances of fraud over $5,000 require emphasis on general deterrence and denunciation. The same goes for cases involving breach of trust and offences that involve a substantial amount of dishonesty.

The purpose of general deterrence is to assuage people from engaging in fraud which is often easy to commit and highly profitable. Without sufficient punishment, the temptation of taking the risk of a lesser punishment in exchange for a large sum of money would make it worthwhile.

Where general deterrence is to be emphasized there is limited concern to achieve rehabilitation.

Denunciation should adequately reflect the public’s condemnation of this offence and the offender’s conduct.

Where there is a "large-scale" fraud, it will generally attract a sentence of imprisonment absence "unusual circumstances".

Gravity of Fraud

Fraud's are often found to be offences with a high degree of moral blameworthiness as fraud involves a great deal of forethought and conscious effort. It has been called the "thinking person's" crime.

Lawyer or Other Professionals

A "great deal of confidence" is imputed upon lawyers by the public and legislature to hold onto large sums of money. They should not be seen as getting lesser penalties or else it will harm the reputation of the profession.

Social Assistance Fraud

It is suggested that the "paramount consideration" whether dealing with fraud against welfare authorities is deterrence. It has also been said that the focus should be upon "protection of the public."

Defrauding publicly funded programs "corrodes the public's attitude to such forms of assistance -- and hence so undermines them."

Factors

Section 380.1 states aggravating factors relating to fraud:

Sentencing — aggravating circumstances

380.1 (1) Without limiting the generality of section 718.2 [factors of sentencing], where a court imposes a sentence for an offence referred to in sections 380 [fraud], 382 [manipulating stock exchange], 382.1 [insider trading] and 400 [false prospectus], it shall consider the following as aggravating circumstances:

(a) the value of the fraud committed exceeded one million dollars;

(b) the offence adversely affected, or had the potential to adversely affect, the stability of the Canadian economy or financial system or any financial market in Canada or investor confidence in such a financial market;

(c) the offence involved a large number of victims; and

(d) in committing the offence, the offender took advantage of the high regard in which the offender was held in the community.

Aggravating circumstance — value of the fraud

(1.1) Without limiting the generality of section 718.2 [factors of sentencing], when a court imposes a sentence for an offence referred to in section 382 [manipulating stock exchange], 382.1 [insider trading] or 400 [false prospectus], it shall also consider as an aggravating circumstance the fact that the value of the fraud committed exceeded one million dollars.

Non-mitigating factors

(2) The court shall not consider as mitigating circumstances the offender’s employment, employment skills or status or reputation in the community if those circumstances were relevant to, contributed to, or were used in the commission of the offence.

Record of proceedings

(3) The court shall cause to be stated in the record the aggravating and mitigating circumstances it took into account when determining the sentence.
2004, c. 3, s. 3; 2011, c. 6, s. 3.
[annotation(s) added]

– CCC (CanLII), (DOJ)

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Aggravating

Aggravating factors for major fraud include:

• breach of trust
• magnitude or size of the fraud
• degree of sophistication, planning and deception
• number of dishonest transactions undertaken in the offence
• Duration of the dishonesty
• number of victims
• vulnerability of the victims
• impact of the fraud upon the victims
• nature and extent of the loss
• efforts to conceal the fraud, including forging of documents
• personal benefit
• the number of people involved and the role of the offender
• greed as sole motivator
• termination of scheme by arrest or voluntarily
• prior record

Character of Victim

Any dishonest attainment of money "is a serious crime with its own effects, even though [the victim] institution on its face seems able to bear the loss."

Breach of Trust

Theft of money by persons entrusted with it in the course of his employment amounts to an abuse of trust within the meaning of s.718.2(a)(iii).

"Large number of victims"

The reference to "large number of victims" under s. 380.1 (1)(c) of the code will include a group of more than 50 people.

Groups a low as 13 people have been considered a "large group."

However, numbers in the range of 4 people is not considered "large."

Greed vs Advancement of Business

While greed as a motivation to fraud is recognized as a aggravating factor to sentence, the use of money to keep a business afloat is a moderate-to-high aggravating factor as well.

Method of Scheme

Drabinsky, ibid., at para 173 ("We agree that cases properly characterized as "scams" will normally call for significantly longer sentences than frauds committed in the course of the operation of a legitimate business.")

Mitigating

Mitigating factors for major fraud include:

• “substantial recovery” of the proceeds of the dishonest conduct
• voluntary repayment of restitution before sentencing
• honest motive, including a medical condition, addiction, or other motivating causes other than greed or financial gain
• major personal impact from offence, such as loss of job
• no record

No prior record is a limited factor since it is a common situation and, at least in relation to major fraud, the offender would have been less likely to have been in the position to commit the offence had the offender had a prior record. Further, the lack of a record is usually trumped by the emphasis on general deterrence.

Good Character

Good character is also of a limited factor as the good character will often help facilitate the offence. The person will often have a place in the community and a good reputation and without which they would not have been able to commit the offence itself.

The good character of well-educated persons who commit offences of major fraud are not of great concern since they are the group that tends to commit these offences the most.

The sentencing process for major fraud is "not really concerned with rehabilitation."

Gambling Addiction

Factors such as the presence of gambling addictions cannot be considered mitigating, however, can have the effect of “[reducing] moral blameworthiness”

Ranges

Alberta

There has been suggestion of three categories of major fraud:

1. non-lawyer trust thefts. These are usually below 250,000 and attract a range of penalty of 18 months to 2 years;
2. dishonest lawyer: the range can be from 12 months to 9 years
3. fraud exceeding a million without trust or lawyers: range between 3 and 6 years.

Ontario

Ontario cases have set the generally accepted range of sentence for major fraud or "complex" frauds at 3 to 6 years.

"Large-scale" fraud will typically be a penitentiary sentence. A conditional sentence will not be appropriate in these cases.

Ancillary Sentencing Orders

Offence-specific Orders

Order	Conviction	Description
DNA Orders	s. 380(1)(a) or (2)	For conviction under s. 380(1)(a) and (2), a DNA order is discretionary as a secondary designated offence listed under s. 487.04 (a) or (b).
Stand-alone Restitution Order - Mandatory consideration under s. 380.3	s. 380
Section 380.2 - Fraud Prohibition Order (section 380.2)	s. 380

General Sentencing Orders

Order	Conviction	Description
Non-communication order while offender in custody (s. 743.21)	any	The judge has the discretion to order that the offender be prohibited "from communicating...with any victim, witness or other person" while in custody except where the judge "considers [it] necessary" to communicate with them.
Restitution Orders (s. 738)	any	A discretionary Order is available for things such as the replacement value of the property; the pecuniary damages incurred from harm, expenses fleeing a domestic partner; or certain expenses arising from the commission of an offence under s.402.2 or 403.
Victim Fine Surcharge (s. 737)	any	A discretionary surcharge under s. 737 of 30% of any fine order imposed, $100 per summary conviction or $200 per indictable conviction. If the offence occurs on or after October 23, 2013, the order has smaller minimum amounts (15%, $50, or $100).

General Forfeiture Orders

Forfeiture	Conviction	Description
Forfeiture of Proceeds of Crime (s. 462.37(1) or (2.01))	any	Where there is a finding of guilt for an indictable offence under the Code or the CDSA in which property is "proceeds of crime" and offence was "committed in relation to that property", the property shall be forfeited to His Majesty the King on application of the Crown. NB: does not apply to summary offences.
Fine in Lieu of Forfeiture (s. 462.37(3))	any	Where a Court is satisfied an order for the forfeiture of proceeds of crime under s. 462.37(1) or (2.01) can be made, but that property cannot be "made subject to an order", then the Court "may" order a fine in "an amount equal to the value of the property". Failure to pay the fine will result in a default judgement imposing a period of incarceration.
Forfeiture of Weapons or Firearms (s. 491)	any	Where there is finding of guilt for an offence where a "weapon, an imitation firearm, a prohibited device, any ammunition, any prohibited ammunition or an explosive substance was used in the commission of [the] offence and that thing has been seized and detained", or "that a person has committed an offence that involves, or the subject-matter of which is, a firearm, a cross-bow, a prohibited weapon, a restricted weapon, a prohibited device, ammunition, prohibited ammunition or an explosive substance has been seized and detained, that the item be an enumerated weapon or related item be connected to the offence", then there will be a mandatory forfeiture order. However, under s. 491(2), if the lawful owner "was not a party to the offence" and the judge has "no reasonable grounds to believe that the thing would or might be used in the commission of an offence", then it should be returned to the lawful owner.
Forfeiture of Offence-related Property (s. 490.1)	any	Where there is a finding of guilt for an indictable offence, "any property is offence-related property" where (a) by means or in respect of which an indictable offence under this Act or the Corruption of Foreign Public Officials Act is committed, (b) that is used in any manner in connection with the commission of such an offence, or (c) that is intended to be used for committing such an offence". Such property is to be forfeited to Her Majesty in right of the province. NB: does not apply to summary offences.

Record Suspensions and Pardons

Convictions under s. 380 are eligible for record suspensions pursuant to s. 3 and 4 of the Criminal Records Act after 5 years after the expiration of sentence for summary conviction offences and 10 years after the expiration of sentence for all other offences. The offender may not have the record suspended where the offender was (1) convicted of 3 or more offences with a maximum penalty of life, and (2) for each 3 offences he "was sentenced to imprisonment for two years or more".

History of the Offence

• History of Fraud Offences

See Also

• Identity Theft (Offence)
• Theft (Offence)
• Miscellaneous Fraudulent Offences

References

• Pre-Trial and Trial Motions Checklist

• UK Sentencing Guidelines for Fraud