Court Orders and Judgement - Jean Lafleur

June 27, 2007

This document is a translation

COURT OF QUEBEC

CANADA
PROVINCE OF QUÉBEC
DISTRICT OF MONTRÉAL
LOCALITY OF MONTRÉAL
"Criminal Division"

No: 500-01-003695-076

DATE: June 27, 2007

PRESIDING: THE HONOURABLE SUZANNE COUPAL, J.C.Q.

HER MAJESTY THE QUEEN

Prosecutor

LAFLEUR, Jean

Accused

SENTENCE

[1] The accused has pleaded guilty to 28 counts of fraud totalling $1,568,561.17.

[2] The crimes were committed between September 1996 and March 2000. They were committed against the Government of Canada in the context of the Sponsorship Program.

[3] The goal of the Sponsorship Program was to promote a positive image of Canada by involving the government in popular events.

[4] Selected sports, cultural or community organizations were awarded large sums of money by the Government of Canada to finance various events.

[5] In exchange, these organizations agreed to provide the government with visibility by using symbols, such as the Canadian flag, on their promotional items or in their advertising.

[6] When the crimes were committed, the accused was the directing mind, president, Chief Executive Officer (CEO), director and the sole shareholder (through another company) of the advertising agency Lafleur Communication Marketing Inc. In that capacity, the accused's agency, along with eight others, was selected to manage various files as part of the Sponsorship Program.

[7] The accused was responsible for negotiating and awarding contracts for his company, Lafleur Communication Marketing Inc., with Public Works and Government Services Canada, which acted on behalf of the government in the Sponsorship Program.

[8] The accused had the authority to issue cheques from his company and was responsible for cashing cheques from the Government of Canada. Furthermore, the company's financial statements were also personally submitted to him by the company's accountant.

[9] The 28 offences committed over more than 3 years involved the issuing of 76 fraudulent invoices. The invoices were submitted for payment to the Executive Director of the Sponsorship Program, Joseph-Charles Guité, who acted on behalf of Public Works and Government Services Canada by authorizing the contracts and approving the invoices submitted by the advertising agencies.

[10] Joseph-Charles Guité was also indicted for his participation in this fraudulent scheme.

[11] In the joint statement of facts presented for the purpose of sentencing (S-2), the parties summarized as follows the modus operandi of the fraud as follows:

58. […]

• Claiming mock-ups at $2,750.00 each when the evidence shows that mock-ups were never produced or that the cost of production by external suppliers was lower;
• Claiming fees on behalf of subcontractors when the contract provided for invoicing at actual cost plus a 15% or 17.65% profit;
• Invoicing for production costs for what was actually sponsorship management work that was included in its 12% or 15% agency fees;
• Invoicing fees for employees when there was no production;
• Overbilling for sponsorships; (Grand-Prix F1)
• Going over production budget to the detriment of the sponsorship budget without the knowledge of the organizing committees, which were not always aware of the actual amount the Government of Canada had allotted to the contract.

[12] The following sentencing principles are applicable in the present case:

718. Purpose - The fundamental purpose of sentencing is to contribute, along with crime prevention initiatives, to respect for the law and the maintenance of a just, peaceful and safe society by imposing just sanctions that have one or more of the following objectives:

1. to denounce unlawful conduct;
2. to deter the offender and other persons from committing offences;
3. to separate offenders from society, where necessary;
4. to assist in rehabilitating offenders;
5. to provide reparations for harm done to victims or to the community; and
6. to promote a sense of responsibility in offenders, and acknowledgment of the harm done to victims and to the community.

718.1 Fundamental principle – A sentence must be proportionate to the gravity of the offence and the degree of responsibility of the offender.

718.2 Other sentencing principles – court that imposes a sentence shall also take into consideration the following principles:

(a) a sentence should be increased or reduced to account for any relevant aggravating or mitigating circumstances relating to the offence or the offender, and, without limiting the generality of the foregoing,

…

(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 aggravating circumstances;

…

(b) a sentence should be similar to sentences imposed on similar offenders for similar offences committed in similar circumstances;

…

[13] Restitution is also part of the sentencing process and may affect the length of detention^{Footnote 1} . In R. v. Zelensky, the Supreme Court affirmed the discretion of a trial court to make an order for restitution^{Footnote 2}. In this regard, the court finds that the financial capacity of the accused is a relevant factor and restitution should not be a replacement for civil proceedings. One must also bear in mind the future capacity of the accused to pay^{Footnote 3}.

[14] In this regard, the joint statement of facts for the purpose of sentencing (S-2) contains the following admissions concerning the enrichment of the accused's patrimony:

[translation]

116 Between 1994 and 2000, Jean Lafleur administered $65 million in sponsorships in the context of the Sponsorship Program and invoiced the Government of Canada approximately $36 million in fees, commissions and other costs on behalf of his agency LCM;

117 According to the Kroll Report presented before the Gomery Commission, limiting ourselves to the period between April 1997 and January 2001 and not counting the sponsorship amounts, LCM obtained $26,292,731.00 in agency charges and production fees;

118 His privileged position of head of an advertising agency chosen by Public Works and Government Services Canada (PWGSC) for the Sponsorship Program enabled Jean Lafleur to enjoy considerable personal and financial benefits;

119 By enriching his patrimony, Jean Lafleur was able to maintain [TRANSLATION] "a comfortable lifestyle" for a number of years.

[15] It is also admitted that, on January 17, 2001, the accused sold his company's share capital (through 157146 Canada Inc.) to Jean Brault (through his company Communications GroupDirect Inc.). The sales agreement set out a minimum price of $1,100,000 for the purchase of the shares, for a maximum of $3,200,000.

[16] Also, according to a table (D-1) that was adduced in evidence by the defence, the accused's declared personal income from 1994 to 2005, after taxes and spousal support payments, was $5,290,671, for an average of $440,889 per year.

[17] For the purpose of sentencing in the present case, we note, inter alia, that the accused sold his main residence for $1,500,000 on December 28, 2004. The accused also sold his art collection and a tennis court.

[18] The following admissions are relevant to the accused's lifestyle (S-2):

[translation]

127. Since June 2005, the accused has been living outside Canada, namely in Costa Rica and Belize while keeping a rented apartment at 200 St-Jacques Street, Apt. 603, in Montréal, at the cost of $1,425.00 per month (lease of May 1, 2005, expired on May 1, 2007). The rent was paid by cheque on a regular basis.

128. Jean Lafleur rented a house in Buena Vista, San Pedro Town in Belize at a cost of US$1,000.00 per month, from February 1, 2006, to February 1, 2007.

[19] Finally, the court takes note of the letter of May 31, 2007 (S-1), filed by the representatives of the Department of Justice Canada, in which it is written that

1) First, the government undertakes to reduce its civil claim against Jean Lafleur by the amounts he may be ordered to pay in restitution that are now sought in the civil claim;

2) In addition, the Government of Canada undertakes not to claim the sums that will be subject to a future restitution order that are not already sought in the civil claim.

[20] The Court of Appeal stated as follows in R. v. Coffin^{Footnote 4}:

43 It is generally recognized that the nature and gravity of the offence are fundamental considerations in sentencing. Every sentence must be proportionate to the offence committed, given its nature and the surrounding circumstances^{Footnote 5}.

44 … this type of fraud risks provoking cynicism in citizens and particularly taxpayers with respect to the public institutions that are the very foundations of democratic life.

45 Taxes are levied to collect the funds necessary to fulfil the needs of citizens, particularly the most impoverished.

46 The fallacious argument that "stealing from the government is not really stealing" cannot be used to downplay the significance of this crime. The government of the country has no assets itself; rather, it manages sums common to all of its citizens. Defrauding the government is equivalent to stealing from one's fellow citizens.

[21] With respect to the sentencing objectives of denunciation and deterrence, the judgment also stated the following:^{Footnote 6}

57 In short, while a certain deference must be shown before imposing a custodial sentence based on the principle of general deterrence, the fact remains that such a sentence is justified in the present case, which involves large-scale fraud against the government by a person in a particularly privileged position.

[22] In this case, the parties agree that the court should impose a prison sentence.

[23] Three other accused involved in the sponsorship scandal have already been sentenced.

[24] Therefore, in the present case, the application of the principle of parity of sentencing set out in section 718.2(b) of the Criminal Code is critical, especially since the crimes for which Paul R. Coffin and Jean Brault were sentenced were committed in similar conditions.

[25] The Court of Appeal imposed an 18-month prison sentence on Paul R. Coffin^{Footnote 7}. Mr. Coffin pleaded guilty to 15 counts of fraud totalling $1,556,625. He had reimbursed $1,000,000 before the Court of Appeal sentenced him to 18 months incarceration.

[26] After pleading guilty, Jean Brault was sentenced to 30 months for committing fraud in the amount of $1,225,000^{Footnote 8}. The following subjective factors were accepted by the Honourable Justice Fraser Martin:^{Footnote 9}

33 …

1. He has suffered a disgrace, both publicly and within his own family; he has fallen from the heights of respectability as a businessman to the level of a pariah with whom no one wishes to associate;
2. These events and their consequences were played out under the constant glare of the media spotlight over a period of several years;
3. He lost his business;
4. He expressed remorse and plead guilty;
5. He is prepared to do community work;
6. He unequivocally co-operated in the Gomery Commission;
7. He is not a hardened criminal. Prior to the present charges, he enjoyed a spotless reputation.
8. His health is precarious;
9. He has stated that he is prepared to reimburse the Government of Canada for the illegally obtained amounts and has taken steps to do so;
10. The possibility of re-offending is almost nil;

[27] And Martin J. concluded as follows:^{Footnote 10}

54 We must bear in mind the principle of parity of sentencing contained in section 718.2(b) (supra). I believe, in the circumstance, that a sentence of 36 months does not sufficiently take into account this principle. I therefore impose a term of imprisonment of two and a half years or 30 months. I cannot, in all good conscience, impose a lighter sentence.

[28] When the accused committed the crimes, the sentence set out in the Criminal Code was 10 years for fraud over $5,000.

[29] The crimes were committed over a period of more than three years.

[30] The accused had been detained since his appearance on April 5, 2007. He entered the country of Belize on April 3, that is to say, a few days after he learned he was wanted by the authorities. He had been living abroad since June 2005.

[31] The accused pleaded guilty 22 days after his appearance, thereby avoiding a lengthy trial.

[32] The accused is 66 years old. He is divorced and the father of four adult children.

[33] The accused has undergone surgery and takes medication. His health conditions, however, did not prevent him from travelling; among other things, since June 2005, the accused had been living outside of Canada, in Costa Rica and Belize.

[34] The accused had no criminal record when he committed the crimes.

[35] The accused expressed his remorse in a letter entered in the record of the court; in it, he underscores the shadow his conduct has since cast over the lives of his children and friends.

[36] Unlike Jean Brault, who was sentenced to 30 months in the penitentiary, the accused did not voluntarily offer to reimburse the defrauded amounts. His testimony before the Gomery Commission cannot be accepted as a mitigating factor. He also has not stated that he is prepared to do community work.

[37] It should be noted that the accused is an educated man who has derived significant financial benefit from public funds, which were gathered in part through income tax paid by honest citizens, most of whom can never aspire to a financial situation comparable to that of the accused.

[38] Therefore, the admissions on the record and the evidence have satisfied me that the accused has the financial means to reimburse the money defrauded.

FOR THESE REASONS:

[39] Restitution in the amount of the frauds to which the accused has pleaded guilty is ordered. The amount is $1,568.561.17.

[40] The accused has been in detention since April 3, 2007. Given these three months of actual detention, credited for double the time, and the restitution order,

[41] The accused is sentenced to an aggregate sentence of 42 months to be served in a penitentiary, as of this date.

[42] The victim surcharge is set at $500 per charge, on the 28 charges ($14,000), payable within 12 months.

Per: [signature of Suzanne Coupal]
Suzanne Coupal, J.C.Q

Ann-Mary Beauchemin
Counsel for Criminal and Penal Prosecutions

Jean-C. Hébert
Counsel for the Accused

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