WHAT IS CONSIDERED “FRAUD” IN CANADA?

Fraud is a very broad crime that covers all kinds of dishonest conduct. Generally speaking, to defraud someone means to “deprive by deceit.” In other words, a fraud usually involves a “deprivation” (or loss) combined with “deceit” (or a dishonest act).

There are three key aspects to the offence of fraud:

• • A dishonest act,

• • A loss suffered by another party (or a risk of a loss), and,

• • Knowledge that the act that it could result in another person suffering a loss (or the risk of a loss).

These concepts might seem simple enough, but can get complicated very quickly. As a result, fraud can be a very difficult crime to define. If you are in doubt about whether a certain act might be fraudulent, you should get advice from a lawyer.

1. Dishonest act

In the words of the Criminal Code, a person commits fraud by “deceit, falsehood, or other fraudulent means.” This means the dishonest act can include all kinds of misbehaviour. It can include outright lies or deception, and in certain cases, it can even include withholding important facts from someone (dishonesty by omission).

A judge decides whether an act was dishonest by considering how a reasonable person would interpret the person’s behaviour. The judge is concerned with the “community standards of dishonesty.” The question a judge asks is: “would an ordinary, reasonable person, who understands this business or activity, consider this person’s actions dishonest?”

Deciding whether a reasonable person would consider an act dishonest can be tricky, and depends on all the circumstances. For example, if a person sells a car, they may not have to tell the buyer about all of the problems with the car. The law generally upholds the old adage “buyer beware.” “Sales talk” that simply exaggerates the car’s qualities might not be fraudulent. But if the buyer specifically asks the seller something (e.g. “has the car ever been in an accident?”) and the seller lies about it, a judge might consider this fraud.

2. Loss or risk of loss

For a fraud to take place, another person needs to suffer some kind of deprivation or loss. This loss has to be “pecuniary,” or in other words, some sort of financial loss that relates to money or property. If a dishonest act only hurts someone’s feelings, or gives someone an unfair advantage that is not financial in any way, this isn’t enough for a person to have committed fraud.

A “loss” includes even the risk of a financial loss. As a result, even if the dishonesty does not actually cause someone to lose any money or be deprived of anything valuable, a person can be guilty of fraud if there was a risk of this happening.

3. Knowledge of the risk of loss

For someone to be guilty of fraud, they must have been personally aware that their behaviour would cause someone to suffer a loss, or that their behaviour put another person at risk.

This means that truly accidental and even negligent acts may not be fraudulent. A careless (but unintentional) misstatement about a product that a person was selling would not be enough for a fraud. The person who makes a negligent-but-accidental mistake is not aware that their behaviour was creating a risk that the other person would suffer a loss, and is not guilty of fraud.

The question is not whether the person personally believed their behaviour was honest. Someone who unreasonably believes that their dishonest behaviour was honest can still be guilty of fraud.

Similarly, a person can be guilty of fraud even if he hoped that his behaviour would not cause anyone to lose money. It is awareness of the risk that matters, not the accused’s personal hopes or desires about the outcome.

Finally, even if a person did not actually know that their acts put another person’s money or property at risk, they can be found guilty if they are either “reckless” or “willfully blind” about whether their behaviour created a risk of a loss. If a person “sees a risk” of a financial loss and decides to “take a chance,” this can be enough for a fraud.

WHAT ARE SOME EXAMPLES OF FRAUD?

The technical description of fraud is complicated. The following examples illustrate some potential ways a person can commit fraud:

• • “Ponzi schemes” and similar deceptive investment schemes.

• • Credit and debit card fraud, where fake or stolen cards or numbers are used to make purchases or withdraw money.

• • Making dishonest statements or promises during a business transaction. For example, selling a car with an odometer that has been rolled back.

• • Submitting false expense or reimbursement claims where there is no legal justification for the claim.

• • Insurance fraud, where someone defrauds their insurer by providing false or incomplete information.

• • Benefits fraud, where someone submits a claim for reimbursement for services that were not actually provided.

• • Retail fraud schemes, where stolen items are returned to a store for a refund, or where barcodes are altered before an item is purchased or returned.

• • Mortgage fraud schemes, where “straw buyers” of homes are used to sign up for mortgages.

What each of these very different offences has in common is: (1) a dishonest act; (2) that deprives someone of money or property; and (3) where the offender is aware there is a risk that someone will suffer a loss.

WHAT ARE THE POSSIBLE SENTENCES FOR FRAUD IN CANADA?

As discussed, fraud is a very broad offence. Some frauds can be very minor, committed impulsively, and only resulting in a small loss. On the other hand, some fraudulent activities are planned, deliberate, sustained and result in major financial consequences for the victim. Since fraud can cover a wide range of wrongdoing, the possible punishments are also wide-ranging.

For example, sentences can range from probation, to fines, to “house arrest,” all the way to lengthy jail sentences. Additionally, a person found guilty of fraud will often be ordered to make “restitution” to the victim of the crime. This means that the offender may be required to pay back the victim. Depending on the amount of fraud, a restitution order may be significant and can result in lifelong financial consequences.

On one hand, if you are a first-time offender with no criminal record, and if you are charged with a minor offence, the prosecutor might agree to “divert” the offence outside of the court system through an “alternative measures program” (AMP). This could potentially allow you to avoid a criminal record altogether. For example, if a person returns a stolen item to a store in order to fraudulently obtain the value of the stolen item in store credit or cash, that person may be eligible for AMP.

On the other hand, some fraudulent offences may be very serious. If a person defrauds their employer, a charitable organization or if they exploit a position of trust, this will almost always carry the risk of a jail sentence. Similarly, frauds involving losses of tens of thousands of dollars or more, also carry a high risk of jail. Lastly, even small frauds, committed repeatedly and over long periods of time such as when someone submits false expense claims over the course of months or years can amount to a very serious fraud overall.

If you are charged with fraud or a similar offence, it is imperative that you talk to a lawyer so you understand what your options are, as well as what you are facing. An experienced fraud lawyer can tell you about the types of sentences people usually receive for different offences, and will be able to talk to you about how you might be able to avoid a conviction or criminal record.

Besides the sentence imposed by a judge, there are other serious consequences of being found guilty:

• • A criminal record can have employment consequences. Many jobs now require a criminal record check, and a conviction for an “offence of dishonesty” can make it very difficult to get some jobs.

• • A criminal record can also interfere with your ability to travel. Certain countries, such as the United States, may turn you away if you have been found guilty of one of these offences.

• • Courts can order that an offender pay restitution to the victim (i.e., pay back the amount that was stolen, or the value of the property that was taken). These restitution orders may follow you for the rest of your life, even if you later declare bankruptcy.

• • Members of professional associations, such as medical professionals, teachers, accountants, or real estate agents, can have their professional designations suspended or revoked as a result of a criminal conviction. A conviction can also interfere with career aspirations by making it harder to join one of these professions in the future.

• • It is more difficult to get a pardon (now called a “criminal record suspension”) than in the past, as it can now take ten years (or longer) before a person can apply to have their criminal record expunged.

• • If you are not a Canadian citizen, a conviction for one of these offences could have serious immigration consequences. A conviction could make it harder to become a citizen or permanent resident, or could even cause you to be deported from Canada.

• • The media often takes an interest in certain theft and fraud cases, and a conviction may be reported in the news.

WHAT SHOULD I DO IF THE POLICE WANT TO SPEAK WITH ME ABOUT A POTENTIAL FRAUD CHARGE?

It is not unusual for a police officer to contact someone they suspect might be involved in a fraud to “get their side of the story” or to “clear up some confusion.” Almost always, the police will approach you in a friendly, non-threatening way in order to put you at ease and to encourage you to speak to them. Usually, the police will contact you by telephone to schedule an appointment. The police might tell you that they need to “sort things out” or “get your side of the story.” Or they may need to speak with you to “close the file.”

Likewise, if your employer has suspicions about whether you have been committing fraud, someone from your employer may try to speak with you. A “loss prevention officer” or “corporate security officer” might visit you and ask you to speak with them, or your manager might call you into their office and start asking you questions. These situations can be even more dangerous, because everything you say can be used against you in court, but you may not have as many rights as if the police were asking the questions.

Or, you may be contacted by a lawyer for someone who claims you defrauded them. You may be sent a letter demanding that you pay back money, or be served with court papers.

No matter what the circumstances, it is always a good idea to talk to a lawyer before you talk to anyone about these sorts of allegations. Quite often, it is difficult for a prosecutor to prove that someone is guilty of a fraud unless the alleged offender admits to details that help “plug the holes” in the case. Even if you do not admit you are guilty, and even if you honestly try to explain why you are innocent, you may accidentally tell investigators things that make it easier to prove your guilt.

Many people worry that consulting with a lawyer will “make them look guilty,” but it is far more important that you get good advice about your situation than worrying about how you “might look.” The potential consequences are too significant for you to take chances when speaking with the police. You have the right to talk to a lawyer, and both innocent and guilty people need legal advice. The fact that you consulted with a lawyer cannot be used to prove your guilt in court.

For more detailed information about why you should call a lawyer, please read our page on “The police want to speak with me…”

DO I NEED A LAWYER?

If you are charged with a crime, it is important that you find a lawyer who has experience defending people charged with these kinds of offences, who can give you good advice, and who you can trust.

The lawyers at Pringle Law have extensive experience advising and representing people facing allegations of theft, fraud, “white collar” offences, property crime, commercial crime, and financial crime. This is one of our largest areas of practice, and all of our lawyers regularly defend these kinds of cases.

We have defended people charged with everything from the most minor retail fraud cases, to multi-million dollar frauds. Our lawyers pride ourselves on our knowledge of the law and our practical, client-focused advice.

Please contact us to discuss your case. We assist clients throughout Western Canada and would be happy to speak with you, with no obligation and free of charge, to help you understand your situation.