R. v. Bortolussi, [1998] 1 CTC 145

Browne J.:

On May 26, 1997 Robert Bortolussi was before me and entered a guilty plea to all seven counts in the indictment. All charges relate to offences contrary to s. 380(1 )(a) of the Criminal Code. The time span in the various counts is in its totality 2 years from January 1992 to January 1994. An agreed statement of facts was presented and a finding of guilt made with reference to the pleas on the seven counts.

Material was presented and argument followed on issues of sentencing. The matter is before the court today for disposition.

The agreed facts are as follows:

1. Robert Bortolussi, a chartered accountant, resides in the City of London, Ontario. He is 40 years old and is the father of two young children ages two and five. He was an officer, director, or agent for a group of companies listed hereinafter which operated as masonry subcontractors for the building industry throughout Ontario.

2. Robert Bortolussi did not have an ownership interest in any of the companies. They were owned by his father and sisters. He was employed as the Controller.

3. In his capacity as an officer, director, or agent of such companies, he was responsible for the payrolls including making the proper periodic remittances to the Receiver General of Canada. During the periods of time set out in the indictment, the accused on behalf of these companies was failing to deduct, under-remitting or not remitting at all the income tax, Canada Pension Plan, and Unemployment Insurance deductions taken or that should have been taken from the employee’s paycheques and for the employer’s portion of the Canada Pension Plan and Unemployment Insurance to be remitted on behalf of the employees. On the books of the companies the various source deductions were calculated and properly recorded.

4. In addition, the accused was responsible for the remittance of the Goods and Services Tax pursuant to the Excise Tax Act. Again the accused on behalf of the companies either under-remitted or did not remit at all the G.S.T. collected from customers of the businesses.

5. The following is a schedule of the remittances that were not made by the accused in relation to the various companies, and includes the accused’s position in relation to each company.

Indictment		Year	Payroll		GST		Accused’s
Count			Remittances		Remittances		Position in
			Not Made		Not Made		Company
1.	825153	1992	$	328,617.88	$	65,704.14	Controller/Agent
Ontario Lim							—	Never an
ited							Officer or Direc
							tor
2.	Provincial	1992	$	315,017.44	$	55,029.30	Director/Officer
Masonry Inc.
1993		$365,720.1 0		36,830.91		Direc-
					tor/Officer
3.	100555	1993	$	90,418.70	$	28,032.91	Director/ Officer
Ontario Inc.
4.	1000554	1993	$	82,677.24	$	21,276.89	Director/ Officer
Ontario Inc.
5.	AB Tile	1992	$	30,956.98	$	3,318.80	Controller/Agent
							—	Resigned as
							a Director and
							Officer on Dec.
							12/90
6.	102513	1993	$	31,593.12		n/a	Director/Officer
Ontario Inc.

Indictment		Year	Payroll		GST	Accused’s
Count			Remittances		Remittances	Position in
			Not Made		Not Made	Company
7.	980368	1992	$	637.11	n/a	Director/Officer
Ontario Inc.
1993		$		n/a	Direc-
		7,683.01			tor/Officer
TOTALS:			$1,253,322.00		$213,099.00

6. Of the $1,253,322 of source deductions, $174,095.94 was collected and $1,080,226.10 remains unpaid. Of the $213,099.00 of GST, $40,963.00 was collected and $163,789.20 remains unpaid. The companies are no longer in operation and it is unlikely that the balances owing will be paid.

7. GST and source deduction amounts were used by the companies to pay other creditors. The companies did not have sufficient moneys to pay current liabilities as they came due and ultimately ceased operations. Revenue Canada was not the only creditor unpaid when the businesses ceased operations.

8. Payroll auditors met with Robert Bortolussi in the course of investigation of the matters and the auditors did not receive the best of cooperation and at times Robert Bortolussi was not truthful.

9. Robert Bortolussi did attempt to assist in the collection of amounts for Revenue Canada after assessments were issued.

10. Robert Bortolussi made no personal gain or profit from these events. He did however, continue to draw a salary.

11. The Income Tax Act provides that any amounts deducted or withheld from employees wages are deemed to be held in trust. The Excise Tax Act deems GST funds to be trust funds.

Mr. Bortolussi is a chartered accountant. I am advised that following the finding of guilt the appropriate licensing body was advised of the plea and the finding of guilt. It appears the right to continue as a chartered accountant will be revoked.

The court was also advised that Mr. Bortolussi intends to make an assignment in bankruptcy recognizing that a discharge in any such proceedings will not release debts incurred where there has been a finding of fraud. Mr. Bortolussi terminated his employment in October 1996 in circumstances which I shall address in subsequent comment. Mr. Bortolussi did not personally gain from the approximately $1,400,000 under-remitted or not remitted. Of the approximate amount of $1,400,000 there remains outstanding $1,243,000 with no prospect of recovery of that amount or any significant part thereof. Both counsel are in agreement that because of in- ability to pay, that restitution is not appropriate as part of the disposition in this case. The material falls short of explaining a causal connection between the intended bankruptcy and events applicable to the 7 counts.

Mr. Bortolussi is 40 years of age. He has been married for 10 years. There are 2 children, aged 5 and 2. He was born in Italy, coming to Canada at age 5. His father was employed as a bricklayer, starting his own business in 1973. Robert Bortolussi is the eldest of 4 children. He completed Grade

13. He obtained a B.A. degree and following that he pursued an accounting career obtaining a chartered accountancy designation in 1983. He worked at a chartered accounting firm until 1988 when he left to join his father’s business or businesses. He was then age 29. His employment was as controller. The business was expanding beyond its masonry initial core business to general contracting. The timing and the economy were not favourable to success as illustrated by the fate of the different corporations in the 7 counts. The pattern was that an individual corporation would be formed for each job. As set out in the agreed facts, funds due to the federal government were either under-remitted or not remitted. The funds available to the corporation because of failure to remit were used to pay creditors. The corporate records required would include complete payroll records. When government auditors made inquiries, he was not truthful about the payroll records and an ensuing audit found large amounts not remitted on the actual payroll theretofore not disclosed.

I am told that both Mr. Bortolussi’s parents have declared bankruptcy and are now discharged. In 1996 the pattern appeared to be repeating itself with individual corporations being used for individual jobs. The issue of remittances again came to the fore in the summer of 1996. Mr. Bortolussi resigned in October 1996 to avoid further problems with remittances. New companies continued to be incorporated for each job and experienced financial difficulties resulting in insolvency and/or bankruptcy. Mr. Bortolussi recounted this pattern in his history to Dr. W.J. Komer as referred to in his report of June 17, 1997. Since October 1996 Mr. Bortolussi has been at home involved in responsibilities for the children. He wishes to pursue retraining involving computers.

Counsel are in agreement by way of joint submission that the period of incarceration not exceed 2 years less a day. Counsel are not in agreement on the appropriate period of incarceration within that period of 2 years less a day. The Crown’s submission and argument was based upon the appropriate period being in fact 2 years less a day. The defence position was that the appropriate period be in the range of 6 months to 12 months. Both counsel are in agreement that this is not a case for an order of restitution or fine.

A preliminary inquiry was waived and the guilty pleas were entered in a timely way. Mr. Bortolussi is a first offender. Given the joint submission that the sentence will involve a period of less than 2 years, the defence argues for a conditional sentence permitting the sentence to be served in the community subject to supervision and conditions of a compulsory nature with conditions fashioned to this particular case.

Both counsel referred to the general principles of sentencing set out in ss. 718 and 718.2 of the Criminal Code with specific reference to s. 718.2(a)(iii):

Evidence that the offender, in committing the offence, abused a position of trust or authority in relation to the victim shall be deemed to be in aggravating circumstances.

Defence counsel argued that the nature of trust in these fact situations, being a statutory trust, constituted a trust of a different nature from the breach of trust usually referred to in the following fact situations:

parent/child

employer/employee

The Crown’s position, as I understand it, is that a breach of trust is a breach of trust. It is not necessary to pursue this debate to any great length. The appropriate legislation constitutes employee deductions as deemed to be held in trust and constitutes or deems G.S.T. funds to be trust funds. The factual distinction here of lack of personal gain has more to do with weight than any fine-tuned argument addressed to a distinction between a statutory and other form of trust.

The crimes here were committed by a professionally well-educated person who apparently did not have a personal motive other than perhaps maintaining his own employment. The motives appear to have included a desire that the family businesses continue rather than terminate by reason of insolvency. The motives perhaps include a desire to see trade creditors paid.

I wish to comment upon the usual mitigating factor of remorse as indicated by a waiver of preliminary inquiry and timely guilty pleas. The reality of the waiver and the guilty pleas is to save time, expense and the issue of uncertainty as to outcome. These matters clearly speak to mitigation. Oddly enough, the medical brief filed on behalf of Mr. Bortolussi containing the report of Dr. W.J. Komer, previously referred to, contains the following:

Although he states that he understand now that his actions were illegal, he states that at the time he was not advised, nor did he understand from his training as a chartered accountant that his actions could have led to charges of fraud. As a result he states that he has no remorse for his actions. Although stating emphatically that he would not do it again as he knows that this is against the law. He stated that he did not personally gain from his actions, although continued to receive a salary from the financially troubled companies. Subsequent to being charged, he states there were no problems with remittances until the summer of 1996. He again sought advice and eventually resigned as controller on September 6, 1996 as he stated that the company was unable to pay the government and he did not want any further problems. These companies have apparently gone bankrupt, although his father has started new companies again. Mr. Bortolussi states that he would not find himself in a similar situation again even if he were working for a family business.

In open court on June 26, the issue of this quotation from the doctor’s report was addressed. Mr. Bortolussi advised that he met with the doctor for less than an hour. He had no specific recall of using the word “remorse”. He indicated in open court that he was remorseful. Such a comment is obviously self-serving but in all the facts of this case I accept that Mr. Bortolussi is entitled to have the waiver of preliminary inquiry and the timely entering of a guilty plea considered as a mitigating circumstance. I accept his differences with Dr. Komer’s letter and prefer for the disposition to be made by me to accept that Mr. Bortolussi is indeed remorseful.

Defence counsel urged that I consider sentencing cases involving Income Tax Act violations and certain such cases have been relied upon in the defence argument. I agree with the defence position as indeed does the Crown, that these cases are of assistance. However, I do not conclude that they are determinative.

Section 742.1 of the Criminal Code now reads as follows:

Where a person is convicted of an offence, except an offence which is punishable by a minimum term of imprisonment, and the court

(a) imposes a sentence of imprisonment of less than 2 years; and

(b) is satisfied that serving the sentence in the community would not endanger the safety of the community and would be consistent with the fundamental purpose and principles of sentencing set out in ss. 718 to 718.2.

Sub-paragraph (b) was amended May 2, 1997. The two leading cases of the Ontario Court of Appeal to this date are R. v. Pierce (1997), 5 C.R. (5th) 171 (Ont. C.A.), Doc. C22984. Judgment February 26, 1997 and R. v. W.

(J.) (1997), 5 C.R. (5th) 248 (Ont. C.A.), Doc. CA C19832. Judgment April 8, 1997. The judgment in R. v. Pierce was delivered by Finlayson J.A. The judgment in À. v. W. (J.) was delivered by Rosenberg J.A. Pierce was charged with fraud. After trial he was sentenced to 21 months. The appeal varied the disposition to a sentence of 12 months, refusing the application to permit sentence to be served in the community. The judgment indicated that a breach of trust traditionally has drawn a severe custodial term even for first offenders. In À. v. W. (J.) the offence involved touching a person under 14 years of age for sexual purpose. The trial court imposed a 12 months custodial term. The appeal was granted with respect to sentence, allowing time to be served in the community.

Both of these cases and the legislative amendment make it clear that a rigid two-step process contemplated by R. v. Scidmore (1996), 3 C.R. (5th) 280 (Ont. C.A.) was rejected. It is regretful that the May 2nd amendment had not been in effect at the time of release of the two judgments in R. v. Pierce and R. v. W. (J.)

The decision R. v. Oliver (1997), 99 O.A.C. 234 (Ont. C.A.) (May 5, 1997) is a Court of Appeal decision subsequent to the legislative amendment date and at para. 14 there is the following:

The fact that the three conditions of s. 742.1 are satisfied does not compel the imposition of a conditional sentence order. The discretion entrusted to the court can only be judicially exercised by determining upon the facts of each case, if it is appropriate to make an order, having regard to the principles and objectives of sentencing and that “[T]he principal factor, however, should be whether permitting the offender to serve the sentence in the community under a conditional sentence order would endanger the safety of the community because of the risk that the offender will re-offend.” (see Rosenberg J.A. at p. 41, R. v. J.W., supra).

This was a case of sexual assault. In para. 16 the case is characterized as more serious than that in W. (J.)There was consideration of the degree of the parental trust element. The court concluded in para. 17:

We are not satisfied that the statutory conditions and special conditions that might be sensibly fashioned are sufficient to meet the principles of denunciation and deterrence in such a Case.

The Crown in the argument in this case addressed the following factors as aggravating factors:

1) Breach of statutory trust;

2) The continuing activity over a time span of 2 years in which various quarterly reports would be required in the normal course;

3) The quantum of money exceeds 1.4 million dollars with an amount exceeding one million dollars remaining outstanding;

4) The subject matter of restitution was discussed, not perhaps as an aggravating factor but certainly not a factor or circumstance to be considered in mitigation.

Recognizing the right of silence, the Crown argues that the misleading of the government auditors which required additional investigation should be considered as an aggravating factor. The Crown argues that the only unchallenged mitigating factor is the absence of record. The Crown argued that the guilty plea and waiver of preliminary inquiry was mitigating in the sense of cost savings and time savings but that the personal remorseful factor was off-set by the “the medical report”. I have already addressed my conclusion on the issue of remorse. As I have indicated, an abuse of trust traditionally draws a severe custodial term even for a first offender.

In R. v. Katz (October 30, 1996), Roberts J. (Ont. Gen. Div.), large sums of money were fraudulently withdrawn by forged cheques over a period of time. At para. 25 Roberts J. provides:

The jurisprudence in this jurisdiction has established that “absent exceptional circumstances”, a period of incarceration is required for a breach of trust of this magnitude. In my view, the protection of society referred to in s. 742.1 subparagraph (b), (as it then was) in the light of the facts of this case, requires a term of incarceration. As a result it is my opinion that when this Court considers the seriousness of the offence, the magnitude of the sums defrauded, the fact that there is little or no realistic hope of restitution, the fact that there was no real explanation as to where the funds went, all militate against the exercise of this Court of its discretion pursuant to s. 742.1 of the Criminal Code.

[para26] In the result I decline to exercise my discretion as requested by the defence.

[para27] The sentence therefore will be that of nine months incarceration plus one year probation.

In this case there is little likelihood that Robert Bortolussi will re-offend. That is not unusual in case of this kind. See the discussion by Finlayson J.A. in R. v. Pierce:

[para39] Nor can it be said that the focus is entirely on the likelihood of the appellant re-offending. Major criminal frauds and offences involving commercial or professional breaches of trust will usually involve offenders who pose little or no further risk to the safety of the public. As stated by the Court of Appeal in England in R. v. Barrick (1985), 7 Cr. App. R. (S.) 142 at 145:

The type of case with which we are concerned is where a person in a position of trust, for example, an accountant, solicitor, bank employee or postman, has used that privileged and trusted position to defraud his partners or clients or employers or the general public of sizeable sums of money. He will usually, as in this case, be a person of hitherto impeccable character. It is practically certain, again as in this case, that he will never offend again and, in the nature of things, he will never again in his life be able to secure similar employment with all that that means in the shape of disgrace for himself and hardship for himself and also his family.

Our courts have routinely recognized this reality when sentencing offenders who engage in crimes of this nature and consequently have emphasized that the paramount objective is the deterrent effect which the sentence will have on others. In this regard it should be emphasized that breach of trust or authority in relation to a victim is an express aggravating circumstance in the newly enacted s. 718.2 of the Code.

[para40] In R. v. McEachern (1978), 42 C.C.C. (2d) 189, this court considered the fitness of a suspended sentence with an order to perform 240 hours of community service and to make restitution which was imposed upon an assistant bank manager with an unblemished past who was convicted of stealing $77,000 from his employer. In increasing the sentence to eighteen months imprisonment, this court reiterated the longstanding objective in sentencing offenders who have committed crimes of this nature. It stated at p. 191:

As an assistant manager of a bank the respondent was in a position of trust. It has long been established that the most important principle in sentencing a person who holds a position of trust is that of general deterrence. The offences were serious and involved a large sum of money [$77,000]. They were concealed by the respondent until they were detected by the bank.

In our opinion, the gravity of the offences called for the imposition of a custodial term, and there were no exceptional circumstances which would justify a lesser punishment. The trial Judge placed too much emphasis on restitution, and on community service work as an alternative to imprisonment, and did not attach sufficient importance to general deterrence. The public interest requires that it be made very clear to one and all that in the absence of exceptional circumstances a person holding a position of trust who steals form his employer must expect a term of imprisonment.

[para41] What the authorities make clear is that the purpose of incarcerating these offenders is not to protect the community from any danger posed by the particular offender, but to protect the community from the danger posed by those who may be inclined to engage in similar conduct. In the context of crimes of dishonesty, and particularly those involving a breach of trust, for the purposes of resolving the issue of whether “‘serving the sentence in the community would ... endanger the safety of the community”, the risk of endangering the safety of the community must not only be measured by an assessment of the danger which the particular offender may pose if permitted to serve the sentence in the community. The risk must also be measured by an assessment of the danger which others may pose if the offender is permitted to serve the sentence in the community. The point was succinctly stated by Lamer J. sitting as a member of the Quebec Superior Court in R. v. Viger, [unreported] as cited in À. v. Cossette- Trudel (1979), 52 C.C.C. (2d) 352 at 360 (Q.S.P.):

There will also be a danger to the community if the sentence imposed is not of a nature to deter others from conduct analogous to that ... of the accused. [Emphasis in original]

[para42] Clear recognition of the need to consider the risk posed by others when applying s. 742.1 is found in the sentencing decision of Hill J. of the General Division in R. v. Wallace, a judgment of the Ontario Court, General Division, released December 6, 1996. In declining to impose a conditional sentence on an accused convicted of importing a narcotic (marihuana), Hill J. stated as p. 8:

I am inclined to the view that the use of the terminology “would not endanger the safety of the community”, as used in s. 742.1 (b) of the Code, includes both the notion of risk from the offender himself or herself, and endangerment of the community in the broader sense of dilution of the general deterrence principle to the point of eliminating any deterrent warning to like-minded individuals considering commission of the offence in question. That a safe community is advanced by the deterrence of others from committing the offence in question is clear, in my view, from a reading of s. 718 itself.

When the trial judge determines that the offence does not call for a penitentiary sentence or there is some doubt:

[para46]...

then the full panoply of sentencing guidelines should be brought into play to determine what should be the appropriate sentence. Not just the length of it, but the ultimate sentence. The sentences under consideration should include absolute and conditional discharges, fines, probation, custodial and conditional sentences. The approach should be global and avoid compartmentalization. The length of a sentence served in the community should not necessarily be the same length as that served in custody. Ultimately, the duty of trial judges is to impose a fit sentence. In arriving at that final judgment they should take into consideration all the guidelines in the Code including those which urge the fresh approach to serving conventional sentences in the community. A fit sentence should be responsive to all the sentencing guidelines in the Code, and where possible reflect the new sentencing direction set by Parliament with s. 742.1 [emphasis added].

Rosenberg J.A. in R. v. W. (J.) at para.42 points out:

...that unlike a normal sentence of imprisonment, a conditional sentence of imprisonment is not subject to reduction through parole, at least while the offender is serving the sentence in the community... Courts using the conditional sentence to impose a form of “house arrest” or mandatory attendance for treatment will have to bear in mind that, subject to variation under s. 742.4, the conditional sentence may be extremely harsh if no regard is had to the fact that ordinarily the entire sentence must be served.

In this case it is agreed that Robert Bortolussi will lose his right to practice as a chartered accountant and personal bankruptcy is intended. He has been found guilty of 7 separate offences spanning a period of 2 years involving a substantial amount of money. In my view the legislative change represented by s. 742.1 is a legislative recognition that general deterrence and denunciation can be achieved under s. 742.1 by way of a conditional sentence. Various stigmas will certainly be applicable to specific deterrence and in my view equally applicable to general deterrence in this particular case where there is an absence of personal gain apart from continued employment to October, 1996. For assistance in these comments see Rosenberg J.’s comments at para. 50 in R. v. W. (J.), supra:

General deterrence, as the principal objective animating the refusal to impose a conditional sentence, should be reserved for those offences that are likely to be affected by a general deterrent effect. Large scale well-planned fraud by persons in positions of trust, such as the accused in R. v. Pierce, would seem to be one of those offences. Even then, however, I would not want to lay down as a rule that a conditional sentence is never or even rarely available. Each case will have to be determined on its own merits.

and further at para. 52:

In my view, general deterrence is neither inconsistent with a conditional sentence order nor is it a basis for reserving the conditional sentence for rare or exceptional cases. To the contrary, the objective of general deterrence can be achieved through the conditional sentence of imprisonment.

As indicated above, I agree with Rosenberg J. in paras. 53, 54 and 55 that denunciation from the perspective of society need not be found or expressed in a custodial sentence but is found also in imprisonment by way of conditional sentence. A conditional sentence served in the community is at the least subject to the mandatory statutory conditions and may be subject to conditions fashioned to the particular case, all conditions being subject to the control of a supervisor and always with the possibility of incarceration should the conditional sentence be brought to an end.

I would have preferred that the legislation used a description other than “conditional sentence” which does not immediately bring to mind concepts of imprisonment. It is my view that Parliament has not done an adequate job in communicating to the public the policy represented by the new legislation. It is my further view that it is not the task of the court to create and/or explain policy, but rather to implement policy which our legislators have enacted. I have tried to bring a principled approach to the implementation of the legislation as I understand it. My understanding is greatly as- sisted by the recent decisions of the Ontario Court of Appeal. I regard the disposition herein to be a “fit sentence”.

In his comments to the court Mr. Bortolussi expressed regret that he was unable to make any form of repayment in a monetary sense but that he hoped to be able to make repayment by community service. There are many aspects of a conditional sentence which may be more onerous than a custodial disposition.

As indicated, the joint position of both Crown and defence counsel is that there be imposed a sentence of less than 2 years, I accept that joint submission and have attempted to take into account the broad spectrum of sentencing principles including those found in the new sections of the Criminal Code. I have attempted to look at the issue of endangerment to the community in both the narrow and larger sense. I believe the statutory and other conditions address the issues of general deterrence and denunciation. The disposition I make is a sentencing of 15 months imprisonment to be served in the community subject to the statutory conditions and in addition thereto, the following conditions:

1. Perform up to 240 hours of community service over a period not exceeding 15 months;

2. Perform no duties as a chartered accountant;

3. Surrender his right to be a chartered accountant;

4. File an assignment in bankruptcy;

5. To comply with such counselling advice as the supervisor recommends;

6. To remain in his home except to attend for medical appointments, for the purpose of acquiring the necessities of life, for employment, for attending educational courses, for church services, for meeting with his supervisor, for performing community service.

7. To carry a copy of the conditional sentence order with him and produce it on request for identification by a police officer.

All argument on sentencing was on a global or total approach basis. Accordingly, the above sentence shall apply to each count concurrently.

The indictment is endorsed: “Sentence further to reasons released this date.”

DELIVERED ORALLY: September 2, 1997.

Order accordingly.