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Breaking Fraud Cases from Canadian Courts
At Canadian Fraud News, we report on decisions issued by Canadian Courts related to fraud, that are not reported in the mainstream media, and that contain legal issues the Canadian public and fraud recovery experts should be aware of. The following is one such story.
On October 26, 2017, the British Columbia Supreme Court released a decision case where a pair of hockey coaches may have had good intentions to raise funds for a European hockey tour, but ultimately gave into temptation and used the funds for their own or unauthorized purposes.
The Criminal Case
Mr. Elphicke was charged jointly with Mr. Reagan on an indictment alleging three counts of fraud by deceit, falsehood or other fraudulent means to defraud the Okanagan Elite Hockey Association and various named persons who were the parents of bantam hockey players.
The Crown called a number of hockey parents to give evidence, summoned banking records from the Bank of Montreal for the OEHA, called a forensic accountant who performed a forensic audit of the banking records, and called officials from the Provincial Gaming Branch as part of its case.
It was understood that coaches, Messrs. Regan and Elphicke, were to travel free. However, a dispute later arose. And then the matter came to a head, at least insofar as the hockey parents were concerned when Mr. Reagan announced he was resigning from the OEHA.
Unbeknownst to the hockey parents, a number of events occurred during the fall of 2011 that related to the OEHA and its accounts. In September of 2011, Mr. Elphicke, at Mr. Reagan’s suggestion, attended a meeting with officials from the City of Penticton to discuss the dorm project. On October 9, 2011, Mr. Reagan entered into a contract of purchase and sale for the city for the dorm project for $900,000, with a deposit of $50,000.
The dorm property project came to a halt when the City of Penticton issued a stop-work order for violations of the terms of the project. As a result, financing fell through with the result that representations that had been made by Mr. Reagan could not be fulfilled.
While many of the parents knew of the dorm project through the attention it received in the local press, they were not aware funds they advanced to the OEHA were being used by Messrs. Reagan or Elphicke for dorm development purposes or construction.
Follow the Money – The Evidence of the Forensic Accountant
The Court found as fact that disbursements from the accounts, on account of the purchase of the dorm property, totaled $44,451. Payments made directly to Mr. Reagan, on or for his benefit, a total of $39,850 was paid either directly to Mr. Reagan or on his behalf. $19,680 went to Mike or Tana Elphicke. Some of the transfers from the account were for legitimate purposes.
Duty to Disclose
The Court found as fact that Mr. Elphicke became aware, very soon after the Bank of Montreal accounts were set up, that Mr. Reagan was charging personal expenses — clothing, food, liquor, and vehicle expenses — to the OEHA. He was aware this was wrong.
Mr. Elphicke drew Mr. Reagan’s attention to the expenditures Mr. Reagan was charging to the account by telling him on at least two occasions that receipts were needed for the expenditures, otherwise Mr. Reagan would have to repay the amounts to the account.
The Court held that Mr. Elphicke’s statements to Mr. Reagan in these early days of the operation of the accounts constitute a recognition that the funds in the account were the property of the hockey parents and any disbursement from the accounts had to be carefully accounted for.
The Permitted Use of Funds
The Court found as fact that the funds paid to the OEHA by parents were paid on the assumption they would be used for the funding of the European hockey trip that had been advertised by Messrs. Elphicke and Reagan. They understood the cost was $5,500 paid in installments and that was the maximum they would have to pay. They understood Messrs. Elphicke and Reagan would be charging administrative fees, as set out in the information circular.
The parents’ meeting held in November was held at a time when both Messrs. Elphicke and Reagan were delving deeply into the deposit monies held by the OEHA, but not a word was said at that November parent meeting by either of them, disclosing how the funds were being used. The parents were not told they would be paying Mr. Elphicke’s or Mr. Reagan’s expenses, as depicted in the audit report. They were not told they would be paying what was essentially a monthly salary to Mr. Reagan or that they would be paying for Mr. Reagan’s housekeeper.
The Court held that had they been so told, very likely most, if not all, parents would not have signed up for this ill-conceived project or have worked as hard as they did to obtain funds from friends and family as they did.
The Court held that the money Messrs. Elphicke and Reagan received from the parents was impressed with the trust it was to be used for the purpose advertised by the two men; that is, to send those persons to Europe for whom the parents paid.
The Court held that Messrs. Elphicke and Reagan had no color of right to use the funds for any other purposes other than “administrative” expenses directly related to the purpose for which they solicited the funds.
The Court concluded that Mr. Elphicke was complicit with Mr. Reagan in defrauding the hockey parents. He was in control of the banking arrangements, yet he did little to constrain Mr. Reagan’s drawing on this new cash cow the two had created. At a minimum, Mr. Elphicke was wilfully blind about the risk to which he was putting the parents’ funds to and the use of those funds.
Full Reasons for Judgment
For the full reasons for judgment for this case, see R. v. Elphicke, 2017 BCSC 2404 – https://www.canlii.org/en/bc/bcsc/doc/2017/2017bcsc2404/2017bcsc2404.html?searchUrlHash=AAAAAQAeUi4gdi4gRWxwaGlja2UsIDIwMTcgQkNTQyAyNDA0AAAAAAE&resultIndex=1
For further information on this case or any other fraud recovery inquiry, contact Canadian Fraud News Inc. at [email protected] .
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