



COURT OF APPEAL FOR ONTARIO

CITATION: United States v. Baratov, 2017 ONCA 481

DATE: 20170609

DOCKET: M47883

Miller J.A. (In Chambers)

BETWEEN

The
    Attorney General of Canada

On
    Behalf of

The United States of America

Respondent

and

Karim Baratov

Applicant

Ravin Pillay and Amedeo Dicarlo, for the applicant

Heather J. Graham, for the respondent

Heard: June 5, 2017

Application for review of detention order pursuant to the
Extradition
    Act
, S.C. 1999, c. 18 by Justice A.C.R. Whitten of the Superior Court of
    Justice, dated April 11, 2017, with reasons reported at 2017 ONSC 2212.

ENDORSEMENT

[1]

Karim Baratov was denied judicial interim release in the Superior Court
    pending his hearing for extradition to the United States. He now applies to
    this court for a review of that order. He initially appealed on the basis of
    errors said to have been made by the application judge. He now argues, in
    addition, that a change in circumstances since the initial bail hearing
    authorizes this court to vary the order.

Background

[2]

The United States seeks to prosecute Mr. Baratov for conduct that
    corresponds to the Canadian offence of unauthorized use of a computer, contrary
    to s. 342.1 of the
Criminal Code
, R.S.C. 1985, c. C-46. He is alleged
    to have operated as a hacker-for-hire to gain unauthorized access to email
    accounts. On March 14, 2017, he was arrested on a warrant issued under the
Extradition
    Act
, S.C. 1999, c. 18, s. 13.

[3]

At his bail hearing on April 5, 2017, Mr. Baratov proposed that he be
    released into the custody of his parents and reside with them, subject to
    complete house arrest with stringent conditions: he would be subject to 24 hour
    supervision by his father, there would be no internet access in the home, and
    he would be subject to electronic monitoring at all times. Additionally, his
    parents would post their entire equity in the family home, close to $1 million,
    as security.

The decision below

[4]

The application judge denied the application, finding that detention was
    justified on all three grounds set out in s. 515(10) of the
Criminal Code
:
    (1) flight risk, (2) the need to protect the public, and (3) the need to
    maintain public confidence in the administration of justice. He canvassed the case
    law interpreting that section, and noted that the third ground is assessed by
    reference to: i) the apparent strength of the prosecutors case; ii) the
    gravity of the offence; iii) the circumstances of the offence; and iv) whether
    the individual, if convicted, would face a long period of incarceration.

[5]

The application judge accepted that the offence alleged is a
    "serious offence" committed for the benefit of, at the direction of,
    or in association with, a criminal organization. He therefore found the reverse
    onus provision in s. 515(6)(a)(ii) of the
Criminal Code
to apply,
    which places the onus on the accused to satisfy the court that detention is
not
justified. The application judge found that Mr. Baratov failed to discharge
    this onus.

[6]

The application judge was particularly concerned with the severity of
    the offence and Mr. Baratovs flight risk, given his ability to generate what
    appeared to be substantial income from any location where he can get internet
    access, without regard to borders. He noted that in the extradition context,
    Canadas obligations under international treaties provide a reason for the
    court to be even more probing of flight risk than in the domestic context.

[7]

He noted that with respect to the apparent strength of the prosecutors
    case, the test is whether there is some evidence on which a properly instructed
    jury
could
convict:
United States of America v. Thomlison
,
    2007 ONCA 42. The limited role of the court in assessing the strength of the
    case in an extradition proceeding (and by extension a bail application pending
    an extradition proceeding) was well articulated by Thorburn J. in
Mandall
    v. United States of America
, 2010 ONSC 1202, para. 50:

The role of this Court in an extradition is a limited one and
    does not involve weighing the merits of the evidence against the person sought
    and determining whether his conviction in the foreign jurisdiction is likely.
    In determining the strength of the case against Mr. Mandall in this
    jurisdiction, the question is not whether he is likely to be convicted in the
    United States, but rather, whether this Court is likely to order his
    extradition.

The application for review

Standard of review

[8]

Mr. Baratov seeks review of the order denying interim release. He brings
    this motion on two different bases. First, he argues that the application judge
    erred and misapprehended the evidence before him. The standard of review in
    this context requires a demonstration that the application judge made an error
    in principle:
United States of America v. Pannell
(2005), 193 C.C.C.
    (3d) 414 (Ont. C.A.), at para. 24;
United States of America v. Ugoh
, 2011
    ONSC 1810, 269 C.C.C. (3d) 380, at para. 9. The scope of review on an
    error in principle was explained by Laskin J.A. in
R. v. Riezaie
(1996),
    31 O.R. (3d) 713 (C.A.), at para. 20:

Error in principle is a familiar basis for reviewing the
    exercise of judicial discretion. It connotes, at least, failing to take into
    account a relevant factor, taking into account an irrelevant factor, failing to
    give sufficient weight to relevant factors, overemphasizing relevant factors
    and, more generally, it includes an error of law.

[9]

On this standard of review, the issue is, as Sharpe J.A. stated in
United
    States of America v. Chan
: (2000), 144 C.C.C. (3d) 93 (Ont. C.A.), at
    para. 2, not whether I would grant bail if the matter came before me at first
    instance, but rather, whether the applicant can demonstrate reviewable error on
    the part of [the application judge].

[10]

The
    second basis for the motion is that there has been a material change in
    circumstances since the order, which necessitates a variation of that order: s.
    520(7)(c) of the
Criminal Code
. If the reviewing court is satisfied
    that there has been a material change in circumstances, such that the
    application judge would not have made the order that he did had he been aware
    of these circumstances, it has the authority to vary the order:
R. v.
    St-Cloud
, 2015 SCC 217.

The first basis: error in principle

[11]

Mr.
    Baratov points to four alleged misapprehensions of evidence that require this
    courts intervention. These misapprehensions, it is submitted, prevented the
    application judge from conducting a proper application of the three-part test
    for interim release. As I explain below, although I am satisfied that the
    application judge misapprehended the evidence in some respects, these errors
    did not result in an improper application of the test. That is, the errors were
    not material and could not have affected the result.

[12]

The
    first misapprehension is said to be that the application judge found that Mr.
    Baratov had breached the secure computers of Yahoo, Google, and other
    companies, and gained unauthorized access to these computers. The Crown
    concedes that this was an error. Not only is there no evidence to support such
    a finding, but no such allegation against Mr. Baratov was ever made.

[13]

The
    second misapprehension is said to be findings that Mr. Baratov worked with
    Alexsey Belan, who was the party alleged to be responsible for the massive hack
    into the Yahoo servers, and who fled from Greece, where he was subject to
    extradition proceedings to the United States, to Russia. I find this submission
    to be mistaken. The application judge nowhere states that Mr. Baratov worked
    with Mr. Belan. His one reference to Mr. Belan as Mr. Baratovs colleague
    does not suggest that Mr. Belan and Mr. Baratov acted directly with each other,
    or even had any knowledge of each other. Colleague is used in an analogous
    sense, to indicate that both acted under the direction of the same persons, who
    were officers of the FSB, to serve the same ultimate purpose. A related point
    is that there is no evidence that Mr. Baratov knew the identity of the
    individual who instructed him to conduct the hacking, or that this person was a
    member of the FSB. Again, the application judge was under no such
    misapprehension.

[14]

The
    third misapprehension is said to be the finding that Mr. Baratov is highly
    skilled at hacking. Again, to the extent that this conclusion is drawn from
    the finding that Mr. Baratov breached the firewalls of Yahoo, it rests on a
    misapprehension. However, it does not follow that because Mr. Baratov is not
    alleged to have breached the firewalls of Yahoo, that he is not highly skilled
    at hacking. Mr. Baratovs counsel seeks to draw a distinction between spear
    phishing, which is the conduct Mr. Baratov is alleged to have engaged in, and
    breaching secure servers. I accept that the latter requires a great deal more
    technical ability than the former. Spear phishing preys on the unwary
    individual user of a computer, and defrauds them of confidential information by
    duping them into thinking that they are dealing with a legitimate entity.
    Nevertheless, spear phishing, as Mr. Baratov is alleged to have practiced it,
    involves creating spoof websites that mimic the legitimate websites of third
    parties. Mr. Baratov is alleged to have been successful at duping highly
    sophisticated persons in business and government into revealing passwords. The
    application judge justly characterized this activity as highly skilled.

[15]

The
    fourth misapprehension is said to be the finding that Mr. Baratov made a
    substantial income from the alleged hacking, totaling hundreds of thousands of
    dollars, when there was no evidence of this and the Record of the Case alleges
    evidence of only a single payment to Mr. Baratov of $104.20.

[16]

Again,
    there is no misapprehension. The application judge made findings that Mr.
    Baratov secured substantial funds illegally. He drew an inference that the funds
    were obtained as a result of Mr. Baratovs services as a computer hacker,
    services that he advertised to third parties. It is irrelevant to the analysis
    undertaken by the application judge whether Mr. Baratov received these funds
    from the conduct covered by the Indictment, or otherwise. The fact is, Mr.
    Baratov gave evidence and was not able to persuade the application judge that
    he had any sources of legitimate income that could account for him acquiring,
    by age 22, a house, a string of luxury automobiles, and $31,000 in cash. The
    explanations that Mr. Baratov offered were found to be not worthy of belief.

[17]

What
    is relevant, for the purposes of the application judges analysis, is that
    there is evidence that Mr. Baratov is capable of generating significant
    earnings, not tied to any geographic location, and that this fuels his flight
    risk. These findings were open to the application judge on the record before
    him.

[18]

Finally,
    no error in principle was identified in the application judges rejection of
    the proposed release plan.

The second basis: material change in circumstances

[19]

Mr.
    Baratov sought (and was granted) leave to admit fresh evidence, consisting of
    the Record of the Case for Prosecution, dated May 8, 2017, the Authority to
    Proceed, dated June 2, 2017, and the First Supplemental Record of the Case for
    Prosecution, dated June 2, 2017, both from the US Department of Justice. The US
    Department of Justice certified that the evidence contained therein is
    available for trial and is sufficient under the laws of the United States to
    justify prosecution. This fresh evidence, Mr. Baratov argues, changes matters
    so significantly that it opens up a second avenue to reviewing the order of the
    application judge: a variation on the basis of a material change in circumstances.

[20]

Mr.
    Baratov argues that the case against him has changed significantly with the new
    material. He is no longer accused of participating in a conspiracy, but only
    unauthorized use of a computer. This narrows the allegations considerably, Mr.
    Baratov argues, and entails that the reverse onus provision no longer applies.

[21]

I
    do not accept this submission. The argument that there has been a material
    change is weak. The receipt of the new reports was contemplated by the
    application judge. It is perhaps more clear than the original notice that Mr.
    Baratov is not alleged to have known the others working in the scheme, but it
    nevertheless remains the case that Mr. Baratov is alleged to have performed
    work, at the direction of others, for payment, for what he knew to have been a
    criminal purpose. The element of conspiracy in a criminal enterprise thus
    remains, as does the application of the reverse onus provision. Even if I am
    wrong in that, however, and the reverse onus provision does not apply, on the
    findings of the application judge and considering the fresh evidence, the Crown
    would have discharged its onus of establishing that the release of Mr. Baratov
    would not be warranted under the three-part test.

Conclusion

[22]

There
    were no reviewable errors, and no material change. At the end of the day, Mr.
    Baratov remains a significant flight risk, and is alleged to have committed a
    serious offence.

[23]

Counsel
    for Mr. Baratov argues that what is alleged against his client is a
    comparatively minor and victimless crime.

[24]

It
    is anything but. Whether the applicant was paid nothing or was paid millions;
    whether the skill and energy expended were advanced or basic; whether he
    thought he was dealing with the FSB or with a high school principal, the
    alleged conduct remains a destabilizing attack on the integrity of systems that
    are vital to all of our wellbeing. Even unsuccessful attacks imperil public
    confidence and require the commitment of substantial resources for defence. The
    public cost, monetary and psychological, is broad and deep. The application
    judge well understood what is at stake:

Individuals are financially ruined by the pirating of their
    identifying details (which includes passwords) and the plundering of their
    accounts.

Commercial mayhem flows from the pirating of trade secrets,
    technical information and confidential communication.

National security is compromised by the acquisition of
    sensitive information. The hacker is a menace to a system that struggles to
    preserve its integrity. There are no known social benefits to the activity. We
    cannot afford to be romantic about this crime.

[25]

The
    Crown advises they are ready to proceed with the extradition hearing. I
    understand that Mr. Baratov may wish to bring applications challenging
    jurisdiction and the constitutionality of the acquisition of evidence. These
    applications can, of course, be heard together at the extradition hearing. The
    length of time Mr. Baratov spends in detention awaiting the extradition hearing
    is more or less within his control.

[26]

I
    renew my thanks to Mr. Pillay and Ms. Graham for their learned and skillful
    submissions.

Disposition

[27]

The
    application is dismissed.

B.W. Miller J.A.


