



COURT OF APPEAL FOR ONTARIO

CITATION:  R. v. Waxman, 2014 ONCA 256

DATE: 20140403

DOCKET: C54368

Watt, Hourigan and Pardu JJ.A.

BETWEEN

Her Majesty the Queen

Respondent

and

Robert Karey Waxman

Appellant

Brian H. Greenspan and Naomi M. Lutes, for the appellant

Alexander Hrybinsky and Randy Schwartz, for the
    respondent

Heard: March 24, 25 and 26, 2014

On appeal from the conviction entered on March 11, 2011 by
    Justice Thomas R. Lofchik of the Superior Court of Justice, sitting with a
    jury, and the sentence imposed on October 20, 2011, with reasons reported at
    2011 ONSC 6207.

ENDORSEMENT

[1]

Robert Waxman appeals his convictions on
    four counts of
fraud
    over $5,000. His convictions on two counts of theft over $5,000 were stayed
    pursuant to
Kienapple
    v. The Queen
,
    [1975] 1 S.C.R. 729. He was sentenced to eight years incarceration and was
    subject to a US $17,990,740.98 restitution order, and a fine in lieu of
    forfeiture of US $15,514,643.61, to be paid within three years of release from
    custody, failing which an additional six years imprisonment would be imposed.
    The appellant also seeks leave to appeal his sentence.

[2]

The charges stem from
    the appellants concurrent service as a director and senior officer of Philip
    Services Corporation (Philip), a publicly held waste management firm, and as
    a director and senior officer of Philip Enterprises Inc., a wholly-owned
    subsidiary of Philip. Philip Enterprises Inc. operated as part of Philips
    Metals Recovery Group division, of which the appellant was president. As
    described below, the appellant was convicted for having wrongly profited at the
    expense of his employer from his undisclosed involvement in copper trading.

[3]

During the period 1994 to
    1997, Philip was experiencing cash shortages. The Metals Recovery Group helped
    alleviate these cash shortages through ring out transactions whereby the
    Metals Recovery Group would enter into legitimate two way transactions with an
    independent party for the sale and immediate repurchase of copper cathode.
    These transactions did not result in a change of ownership in the underlying
    copper, but their payment terms generated cash flow for Philip.

[4]

Between April 1996 and
    April 1997, the Metals Recovery Group, under the appellants direction, carried
    out 69 three way ring out copper transactions involving Philip, an independent
    company, Pechiney World Trade (U.S.A.), Inc. (Pechiney), and a company in which
    the appellant held a 75 per cent ownership interest in, Parametal Trading Inc.
    (Parametal).  During this period he also carried out one two way transaction
    involving only Parametal and Philip. Parametal's total profit on these
    transactions was $7,352,543.70. The appellant personally received payment
    through a company he owned, Monopol Commodities LLC (Monopol), of over $4.9
    million from these transactions.

[5]

The appellant also
    arranged ring out transactions involving MIT International (MIT), a company
    owned by his friend, Mark Schmidt-Fellner. Between November 1996 and April of
    1997, there were seven three way ring outs involving MIT. In each of these
    transactions MIT would purchase copper from Philip and sell it to Pechiney. MIT
    made a profit on each of these transactions. The appellant held no ownership
    interest in MIT, however, he would instruct Mr. Schmidt-Fellner to wire money
    to Oracle International LLC (Oracle), a company he owned. MIT made a profit
    of $623,104.36 on these seven ring outs and most of these funds were forwarded
    to Oracles bank account.

[6]

In addition to the ring out
    transactions, the appellant used his position at Philip to arrange for the transfer
    of copper from Philip to other parties with no payment being received by
    Philip. For example, Philip transferred copper to Parametal in a series of
    transactions, but never billed Parametal for the copper that was transferred.
    Parametal made a profit of $8,866,822.98 on these transactions and the
    appellant received approximately $8,571,060 through Oracle. Similarly, Philip
    bought copper from Pechiney and forwarded the copper to MIT but never sent MIT
    an invoice. MIT then sold the copper to Pechiney. Pechiney then paid MIT for
    the copper by depositing the money into MIT's bank account. Each time Pechiney
    paid MIT, a few days later MIT made a payment to Oracle's bank account. MIT's
    profit on these three transactions was $1,148,270, of which $1,092,700 was
    transferred to Oracle's bank account.

[7]

At trial the appellant
    conceded, among other things, that the funds diverted to Monopol, Oracle and
    another company he controlled, Elohs SA, were used for his own personal
    purposes. The appellant called no evidence at trial, but argued that the jury
    should have a reasonable doubt as to his guilt.

[8]

There are three grounds
    of appeal on the conviction appeal: (i) the trial judge erred in instructing
    the jury as to how the appellants duty to disclose his interest in the third
    party companies related to his
mens rea
for fraud; (ii) the trial judge
    erred in response to a question from the jury about the use of the terms
    unbilled or unpaid to describe some of the transactions; and (iii) the jury
    charge was unfair and unbalanced.

[9]

For the reasons that
    follow, we see no merit in any of the grounds of appeal advanced and dismiss
    the appeal.

The
    Duty to Disclose

[10]

The appellant asserts that the trial
    judge erred in instructing the jury that he had a duty to disclose his personal
    involvement in the impugned transactions to Philip because Philip Enterprises
    Inc. and not Philip was the party to the transactions.

[11]

There was no error by the trial judge.
    There can be no serious contention that, as a senior officer and director of
    Philip, the appellant owed a fiduciary duty to his employer, Philip, which
    included, among other things, a duty of disclosure, a duty of good faith and
    the avoidance of conflicts of interest:
Canadian Aero Service Ltd. v.
    OMalley
, [1974] S.C.R. 592, at p. 606-07. The appellants duty of
    disclosure was particularly pronounced in this case, given that the purpose of
    the ring out transactions was to generate much needed cash flow for the parent
    company, Philip.

[12]

We note as well that the trial judge
    cautioned the jury that failure to disclose was not criminal in itself, but
    that the failure to disclose might form part of the basis for a finding of
    intent to defraud. The trial judge also fairly set out in his charge to the
    jury the circumstantial evidence relied upon by the appellant to support his
    submission that his supervisor might have been aware of his actions.

[13]

We conclude that the trial judge properly
    instructed the jury with respect to the
mens rea
associated with
    non-disclosure. Accordingly, we see no merit in the first ground of appeal.

Unpaid
    and Unbilled

[14]

Turning to the second ground of
    appeal, during its deliberations the jury asked a question related to count 2, a
    count which involved transfers of copper to MIT. They asked whether they only had
    to be satisfied that fraud was committed beyond a reasonable doubt, or whether
    they also needed to separately be satisfied that the transactions were unbilled
    and/or unpaid. After hearing submissions from counsel, the trial judge told
    the jury that the terms unbilled and/or unpaid were merely labels used during the
    trial to refer to certain transactions. He instructed the jury that they must
    be satisfied that the elements of fraud were proven beyond a reasonable doubt
    and referred them to the guideline he had given them to assist with their
    deliberations in deciding whether the elements of fraud had been made out.

[15]

The appellant asserts that the
    judges response to the jurys question failed to recognize the central
    importance of the issue of whether the amounts in issue were simply unpaid or
    were unpaid and unbilled.  He also argues that the question indicates that the
    jury was struggling with the issue of whether the transfers were unbilled.

[16]

We disagree. The trial judge
    correctly instructed the jury that their task was to consider whether the
    elements of the fraud alleged had been proven beyond a reasonable doubt, and
    that unbilled/unpaid was a convenient way to refer to those transactions
    during the trial. The notion that these charges were unbilled and unpaid was
    not particularized in the indictment and the Crown was under no obligation to
    prove that fact.

[17]

We also do not view the jurys question
    as evidence that it was struggling to decide whether the transactions were in
    fact unbilled. There was no need for the trial judge to have further instructed
    them on this issue. Moreover, we reject the submission that the trial judge
    ignored the defence asserted by the appellant in response to this charge. The
    trial judge fairly put the defence position to the jury, much of which called
    for inferences based on circumstantial evidence.

Unbalanced
    Charge

[18]

The final ground of appeal on the
    conviction appeal is the assertion that the jury charge was unfair and
    unbalanced. We disagree. This case was extremely complex. The trial judge did
    an admirable job in summarizing the arguments of the parties and the evidence
    in a careful and measured manner.

[19]

The trial judge raised, at the
    request of the defence, the issue of hedging notwithstanding that the defence
    never conveyed a coherent submission on how a hedging strategy would have
    either prevented the siphoning of funds to the appellant or would have
    alleviated any concerns that the board of directors might have had, if they had
    in fact been advised of the appellants profit taking activities.

[20]

We also find no fault with the trial
    judges legal instructions, which meticulously took the jury through the
    elements of each offence. Further, his responses to the jury questions were
    accurate and appropriate. Contrary to the submission of the appellant, we do not
    believe that when the jury asked for a replay of evidence that it was necessary
    for the trial judge to go beyond that request and further instruct the jury on
    the legal issues raised in the evidence that was the subject of the request.

[21]

In summary, we see no merit in the
    grounds of appeal asserted by the appellant and do not find any basis for
    appellant intervention.

The
    Sentence Appeal

[22]

The appellant asserts on his application
    for leave to appeal sentence that the trial judge
misapprehend
ed
evidence which was critical to a proper determination of
    sentence, failed to consider mitigating factors, and found certain factors to
    be aggravating in the absence of evidence.
He further submits that the
trial judge err
ed
in
    imposing a restitution order and a fine in lieu of forfeiture
.

[23]

We note that the appellant conceded on
    the hearing of the appeal that the sentence was within the appropriate range
    for a major commercial fraud. This was a sensible concession given recent
    sentences in similar cases (e.g.
R v. Drabinsky
, 2011 ONCA 582,
R v.
    Koval
, [2001] O.J. No. 1205 (S.C.), and
R v. Bjellebo
, (2003), 177
    O.A.C. 378 (C.A.)).

[24]

We are not satisfied that the trial
    judge misapprehended any evidence in imposing his sentence. In any event, even
    if the appellant could establish some errors regarding the relatively minor
    factual references complained of, he has failed to demonstrate how such alleged
    errors rendered the term of imprisonment unfit. Similarly, we do not see how
    the failure to credit the appellant for paying back approximately ten percent
    of the missing funds, when the trial judge found that the appellant had, at
    least at one point, the ability to pay back more, rendered the sentence unfit.

[25]

This was an entirely appropriate case
    for a restitution order, as counsel for the appellant appeared to concede to
    the trial judge in making his sentencing submissions. The appellant diverted
    millions of dollars to his personal use at the expense of the shareholders of a
    public company. That he should be obliged to disgorge his ill-gotten profits is
    hardly inequitable. Depriving an offender of the proceeds of crime is one of
    the fundamental purposes of restitution orders.

[26]

We also do not see any error in the
    quantum of restitution ordered. The figure utilized was taken from expert
    forensic accounting evidence provided at trial and on the sentencing hearing.
    The appellant submitted that the quantum was overstated but provided no
    competing figure and raised no serious issue regarding the accuracy of the amount
    ordered.

[27]

In imposing the restitution order,
    the trial judge did not explicitly indicate that he was considering the
    appellants ability to pay, but he did so implicitly by reviewing the lack of
    evidence of the appellants finances. It hardly lies in the mouth of the
    appellant to complain that his ability to pay was not considered given his
    decision not to provide any evidence during sentencing regarding his financial
    position. In any event, the ability to pay is but one consideration in deciding
    whether to impose a restitution order, it is not determinative:
R. v. Eizenga
,
    2011 ONCA 113, at paras. 99-103.

[28]

The complaint raised by the appellant
    regarding the fine in lieu of forfeiture is that the trial judge failed to
    consider his ability to pay in determining the length of time for the payment
    of the fine. The trial judge ordered that the appellant has three years from
    the time he is released on parole to pay the fine. The appellant submits that
    the time to pay should not commence until an order in an unrelated civil
    proceeding freezing his assets is lifted.

[29]

We see no basis to interfere with the
    time for payment ordered by the trial judge, especially given the failure of
    the appellant to provide the court with evidence regarding his financial
    position. The appellant has been granted a significant period to pay the fine. The
    trial judge contemplated that, if he was unable to meet this deadline, further
    incarceration was not automatic, as he would be permitted to make submissions
    to the court regarding his inability to pay.

[30]

An issue arises concerning the interplay
    between the restitution order and the fine in lieu of forfeiture order. On the
    current wording of the courts orders, it is theoretically possible that
    payment of restitution would not be credited against the fine in lieu of
    forfeiture, thus exposing the appellant to the risk of double collection of the
    same amount. The parties have assured us that this is not their understanding
    of the orders and that any payment made would be credited to both orders
    equally.

[31]

For greater certainty, we would amend
    the order of the trial judge to state: the restitution order shall take
    priority over payment of the fine in lieu of forfeiture ordered herein, and the
    fine in lieu of forfeiture shall be reduced by any amount paid pursuant to the
    restitution order.

[32]

The appeal from conviction is
    dismissed. Leave to appeal sentence is granted but the sentence appeal is
    dismissed save for the clarification noted in the preceding paragraph to ensure
    that payment of restitution is also credited against the fine in lieu of forfeiture
    imposed by the trial judge.

David Watt J.A.

C. W. Hourigan J.A.

G. Pardu J.A.


