Frauds Against Employers: When Civil and Criminal Matters Collide
When an employer uncovers evidence of a fraud committed by one of its employees, it is often faced with the question of whether to take civil action, report the matter to the police, or both. The same conduct can often give rise to proceedings in civil and criminal courts. In those cases, it is no surprise that criminal proceedings are given priority, as a conviction in a criminal matter may well determine the outcome of any civil proceeding.
As a result, it is crucial that someone facing fraud charges against their employer be represented by an experienced lawyer to defend them with both criminal or civil findings.
Consider R. v. Plate: Employer Fraud Charges
For example, in R. v. Plate,[1] an individual was convicted by a jury and later sentenced to 5 years in jail for defrauding his employer. The allegations were that Mr. Plate submitted inflated and/or fake invoices to the company where he worked as a manager. The conduct occurred over a 3-year period and resulted in overbilling of approximately $22 million. Mr. Plate was one of the insiders who helped facilitate the scheme. At trial, the evidence was that he personally benefitted from two cheques totaling $77,930 and annuities in the amount of $1,440,000. While Mr. Plate was not a central figure in the fraudulent scheme, his acquiescence allowed the fraud to continue.
In the subsequent civil proceeding, Atlas Copco Canada Inc. v. David Hillier et al,[2] Justice Dunphy of the Ontario Superior Court of Justice was asked to consider what weight to attach to findings made at the criminal trial and whether they were sufficient to entitle the employer to summary judgment against Mr. Plate. Justice Dunphy highlighted one of the many critical findings made at the criminal trial: that Mr. Plate had specific knowledge of the existence of the fraudulent scheme and that he was in the best position to stop it. He did not. His acquiescence allowed the fraud to continue, and Justice Dunphy found that, because he had a fiduciary duty to his employer, he did not have the option of remaining silent in the presence of a fraudulent scheme that actively caused harm to his employer. Because Mr. Plate had knowledge of the fraudulent scheme and received some benefit from it, he was liable for the full amount of damages during that period of time. The overbilling during that time was found by the sentencing judge at his criminal trial to be $22 million. While this included amounts received by other parties, those frauds only remained unhindered and undiscovered because of Mr. Plate’s conduct and breach of his fiduciary duty. Despite only receiving approximately $1.58 million, he was found liable for the remaining $20 million. It is clear that findings made in a criminal trial can have a decisive impact on civil proceedings.
Mr. Plate appealed the judgment to the Court of Appeal for Ontario.[3] The issue on appeal was whether Justice Dunphy erred in granting a summary judgment against Mr. Plate in sole reliance on the findings made in his criminal proceeding by the sentencing judge. The Court of Appeal confirmed that Justice Dunphy properly admitted the criminal findings into evidence. However, the Court of Appeal found that Justice Dunphy did not consider the relevant factors in determining what weight he could give to the sentencing judge’s findings that Mr. Plate was a fiduciary. The Court of Appeal sent the matter back to Justice Dunphy to determine whether there was a genuine issue requiring a trial on the breach of fiduciary claim.
If you are the subject of a criminal investigation or face charges, you should contact a lawyer experienced in fraud charges. At Damien Frost & Associates LLP, we will advise you of your rights and defend against allegations of fraud or thefts against employers. Contact us today to schedule a free consultation.
[1] R. v. Plate, 2016 Decision on Sentence (unreported – October 25, 2016)
[2] Atlas Copco Canada Inc. v. David Hillier et al., 2018 ONSC 1588
[3] Plate v. Atlas Copco Canada Inc., 2019 ONCA 196
By: Daniel Libman -