On June 11, 2018, the Ontario Superior Court of Justice in Kitchener released its decision in the criminal sentencing of investment advisor Daniel Reeve: R. v. Reeve, 2018 ONSC 3744. The Court handed out the first maximum sentence for fraud in Canadian history since the legislative changes in 2004 that increased the maximum jail sentence to 14 years.
What follows in this article are direct quotes from the trial and sentencing decisions. The statements themselves have more of an effect than we could convey by way of a summary. This blog post is helpful for fraud victims completing victim impact statements as the headings act as a checklist of the harms experienced by fraud victims that they should consider reporting to the Courts during the criminal sentencing or civil punitive damages phase of their case.
Daniel Reeve, 58 years old as of June 2018, was once a successful financial planner who owned and operated a number of licensed investment offices in Kitchener and the surrounding areas. Mr. Reeve and his firms developed an enviable reputation for integrity and success in the financial investment business.
Underneath this façade, in order to fund Mr. Reeve’s flamboyant lifestyle and failing businesses and to pay spousal support/equalization, Mr. Reeve entered into a variety of Ponzi schemes to attract investments into so-called low risk “bricks and mortar” real estate/commercial ventures. After a trial that lasted many months spanning a period of almost two years, Mr. Reeve was found guilty of defrauding at least 41 victims of approximately $10 million over the indictment period of January 2007 to September of 2009.
Woody Allen once described a stockbroker as someone who invests your money until it is all gone. The Court held that this is a good description of what Mr. Reeve did to his 41 victims. The Court held that the evidence was clear that the 41 victims deposited approximately $12 million with Mr. Reeve for what he described as “low-risk” corporate agreements. The low-risk investments were to provide interest rates of between 12 to 20 percent (sometimes higher), but in reality delivered losses in the staggering amount of approximately $10 million.
The Court noted that in the animal kingdom a predator seeks out the most vulnerable member of a herd and then ruthlessly hunts them down. The Court held that this was a fair description of the predatory tactics employed by Mr. Reeve in this large and lengthy fraud. One of the victims in her victim impact statement referred to Mr. Reeve as a monster. This comment was not unfair in these circumstances. There was no chance of any financial recovery for these 41 victims.
Fraud as Devastating as Violent Crime
The Judge who delivered the Reasons for Sentence stated that in over 40 years he had seen many victim impact statements from victims subjected to extreme physical harm and violation. The set of victim impact statements from these 41 victims was comparable to the impacts upon people who have been subjected to the cruel physical and psychological harm that you see in actual crimes of violence.
The Victim Impact Statements
The Court reported that due to the media coverage of the case and the victims’ names being published, some victims had become introverted and avoided conversations with family, friends and co-workers. Another victim stated that his embarrassment was greatly increased by the publication of his and his wife’s names in the newspaper.
We are not publishing any of the victims’ names in this story. What follows is a list of the negative impacts the victims experienced and continue to experience as a result of Reeve’s fraud.
Loss of Trust
One victim expressed a loss of the ability to trust people and/or financial institutions again. Another victim stated that she could not trust any person or organization. Yet another victim reported that trust was the foundation of all relationships and that her trust in people had been shattered.
Another victim reported that she no longer trusted people and was suspicious and doubting. She felt betrayed, shocked and upset and also felt shame and humiliation. Going to court was a nightmare. She was devastated.
Loss of Self Confidence
One victim reported that Mr. Reeve’s fraud destroyed everything she had spent building but also destroyed her faith and judgment in herself. Another victim reported that the ultimate punishment was to have her confidence in herself undermined. She felt helpless and disillusioned.
Another victim reported that he felt such embarrassment and discomfort about his loss that he quit evening school and stopped thinking about becoming a financial advisor. Another victim reported that he lost $450,000 and was mentally unable to take on a promotion at work.
Another victim reported that he had gone from enjoying a reasonably comfortable early retirement to being a recluse who worried about every dollar.
Despair and Suicide
One victim reported that as a result of Mr. Reeve’s fraud, she now shook with fear uncontrollably and had feelings of wanting to die. Another victim reported experiencing emotional torture and devastating spirals of despair.
Another victim reported personal shame, embarrassment and loss of self-worth that destroyed his 50 years of striving to prove his excellence to his family and community. Now he was too ashamed to be seen in public and as a result had relocated away from Kitchener.
Another victim reported that he had felt depressed and had lost sleep and that his decision-making process was not what it used to be. Another victim reported feelings of embarrassment and humiliation that turned to anger with feelings of sadness, regret and violation.
Another victim reported feeling “financially raped”. Her emotional world crumbled and her doctor prescribed anti-depressants and counselling. She thought about suicide as her life insurance would then help her son and daughter. Ten years later, she had lost many years of her life to a negative emotional state which still threatened to take her under. Her financial state remained dire.
Another victim reported feeling that he could not afford to go to a movie and basically did nothing but watch the world go by. Another victim reported that he stopped vacations with his children, as well as movies, dinners and outings.
One victim reported that as a result of Mr. Reeve’s fraud, he developed Ménière’s disease.” This resulted in disabling vertigo, dizziness and sleepless nights that took several years to overcome by a change in lifestyle and nutrition.
Another victim reported that the loss of her money, marriage, home, job, and return to school at age 48 put a great deal of stress on her, and that she was later diagnosed with a hyperthyroid condition.
Another victim reported that the stress caused a form of psoriasis on her hands and feet which made it difficult to walk. She further reported that the medication required to treat this condition cost $300 per month, even with a drug plan.
Another victim reported that the depression and sleepless nights might be a cause of the fibromyalgia from which she now suffered. Her self-doubt contributed to her physical suffering. Another victim reported that Reeve’s fraud had been a horrific emotional experience. Her nerves were bad, which caused an outbreak of eczema.
Another victim reported that she nearly died from internal bleeding and stomach reconstruction due to stress caused by Mr. Reeve stealing from her. Her trust level was now gone at a late stage of life.
Another victim reported spending a lot of time in hospital with symptoms of panic attacks, breathing problems and chest pains which he believed were caused by the loss of his savings. He was afraid for his future because he and his wife were in their late 80s and he was not sure how they would afford extra care for themselves.
Another victim reported that due to her stress she was diagnosed with AFib (atrial fibulation) or rapid heartbeat. Another victim reported developing high blood pressure and that he would be on medication for the rest of his life. This was a result of the stress of having to pay bills with no cash flow and wondering if he would be able to cover expenses. He was angry due to being forced to work in his later years due to his loss of money.
Another victim reported feeling angry all the time. He had not been to a dentist in years, as he could not afford it. Another victim reported that he had become fatigued and was mentally and emotionally unstable with frequent bouts of anger.
Loss of Marriage and Other Relationships
One victim reported that her husband had pressured her to invest with Reeve, and that Mr. Reeve’s fraud resulted in an overwhelming loss and complete financial blow that decimated her spousal relationship. She reported that Reeve’s fraud destroyed everything she had, emotionally and physically, including the loss of her marriage and her home. She reported that she was loath to trust another man and might never again have another significant relationship due to this catastrophic event.
Another victim, an honest truck driver who lost everything and was left with debt and depression, reported that as a result of his depression he went through a divorce. He had since remarried but any plans to retire at a normal age were long gone. He just wanted to give up.
Another victim reported that he suffered from anxiety and mood swings. This led to severe depression and hospitalization for approximately six weeks. This in turn led to his separation from his wife in April 2014 and ultimately divorce.
Another victim reported that she was facing an uncertain future as her husband had left her with three children and a mortgage renewal. One victim lost her life savings. She barely slept as she worked at night to earn extra money and cared for her children during the day. She and her husband nearly divorced but stayed together for their children.
Loss of Retirement / Requirement to Return to Work
One victim reported that Reeve’s fraud destroyed his retirement plans and that he and his wife, in her mid-50s, both returned to work despite his wife suffering from diabetes. Another victim reported that she had little financial reserves to see her through the rest of her life and had a general feeling of insecurity.
Another victim reported that her retired husband had to go back to work full time 7 days a week working 12 hour days to make up for their losses. Another victim reported that she was working full time plus two part time jobs in order to put money back into their retirement funds. Their dreams for an early retirement were gone.
Another victim reported being devastated and that she continued to lose sleep as she and her husband lost their money saved for retirement. Now nine years later, they continued to work and could not retire for a long time. Another victim reported that he and his wife had planned to retire earlier but were now working much later than expected. In the past they travelled, but this was no longer the case.
Consequential Loss to Children and Their Education
Many victims reported that due to Reeve’s fraud they were unable to adequately pay for their children’s education, university, weddings and/or other planned financial assistance for their children and/or parents/family.
Another victim reported that he and his wife lost everything at a time when their older daughter was starting university. Another victim reported that he and his wife had been forced to say no to all three of their sons when they asked for financial help. Another victim reported that ten years later, she had a larger mortgage and her children had large student debts.
Sale of Assets
One victim reported that due to Reeve’s fraud he and his wife sold their dream home to reduce their debt. Another victim reported that due to Reeve’s fraud she had to sell her house before the bank took it over.
Consumer Proposal and Bankruptcy Consequence
One victim reported that he was forced into a consumer proposal to avoid bankruptcy and ten years later, still worked a 60-80 hour work week.
Requirement for Third Party Support
One victim reported that due to Reeve’s fraud she could no longer afford to go on vacations, and at age 65 could no longer work due to numerous back surgeries. She had lost her retirement savings and her ability to purchase and sell houses, which was her plan. Her children were helping her instead of the other way around as she had planned.
Frauds Targeted the Vulnerable, Family and Friends
The Court found that Reeve’s frauds were not restricted to just the disabled, the elderly, the grieving and the vulnerable, but that he also went after his long-time trusted family friends and clients. The Court noted that one did not even have to be his client in order to be defrauded. The Court stated that no one was too vulnerable to escape Reeve’s claws — all were equal prey and fair game, and that it could safely be concluded that Daniel Reeve was a predator who had no conscience.
Financial Status of the Victims
The Court held that considering the particular circumstances of each offence and offender is a highly individualized exercise that goes beyond mathematical calculation. For example, a $100 million fraud on multi billionaires such as Warren Buffet or Bill Gates would have the impact of a pinprick, but a $63,000 fraud on an elderly widow who has limited income and assets and who was forced, due to the fraud, to pay a large income tax bill and to initially lose her old age security pension, produces devastating and ruinous consequences.
Community Impact Voiced through Regulators
The Mutual Fund Dealers Association (MFDA) stated the obvious in their community impact statement: “that fraud on the part of a financial advisor violates investor trust and undermines confidence in the entire financial services industry.”
The Financial Services Commission of Ontario (FSCO) reported that high risk and suspicious mortgage activity has increased by 52% in Canada since 2013, with Ontario seeing the majority of the increase, and that Mr. Reeve was not a licensed mortgage broker or agent with FSCO. FSCO reported that it expends considerable human capital, time and resources to address mortgage fraud such as those perpetrated by Mr. Reeve, which is paid for by the public, and that public confidence in the mortgage sector is lost causing a chilling effect as consumers are less inclined to invest and promote a healthy and competitive market.
The Investment Industry Regulatory Organization of Canada (IIROC) wrote in its community statement that when advisors engage in fraud, they not only fail in their gatekeeper role, but also directly contribute to undermining investor confidence. This, in turn, threatens the strength of capital markets.
Motive & Opportunity
The Court held that the motive behind the frauds was to bolster Mr. Reeve’s ego and to fuel Mr. Reeve’s lavish and extravagant lifestyle. On the issue of opportunity, Mr. Reeve used his position as owner of his investment companies to obtain privileged and confidential financial information of his clients, which was given to him as their financial advisor.
In Court Apology
The Court held that although Mr. Reeve did apologize to the victims in a closing statement at the end of the sentencing hearing, his words were hollow. During his trial evidence, Mr. Reeve insisted he had done nothing wrong despite the absolutely overwhelming evidence of fraudulent intent and fraudulent conduct deliberately perpetrated. At sentencing his position did not change.
Remorse through the Presentence Report
The presentence report provided to the Court indicated that Reeve did not take responsibility for his offences, that he showed no remorse for any of his offences, and that he appeared to have little to no empathy for the victims’ losses. The report further indicated that Reeve denied any intent to defraud investors in any of his companies, and that he “fully expects to pay” in full anyone to whom he owed money or who lost money as a result of his conduct.
Breach of Trust
The court held that an aggravating factor was that Reeve was in a position of trust. His victims trusted and relied upon his advice. Mr. Reeve flagrantly abused that trust.
The Court found that Mr. Reeve lost his licence to sell mutual funds in early 2007 and was not licensed to give financial/mortgage advice at the time he perpetrated his frauds, but did so anyway to the extreme detriment of the victims.
The Court held that Reeve’s fraud was committed for a period of approximately 2.5 years and involved a Ponzi scheme of considerable complexity and creative planning. The Court found that embedded within Reeve’s fraud were countless lies, deceptions and/or financial losses inflicted not only on the 41 victims but also upon many others including creditors, employees, other investors and even family members
The Court held that once it was apparent to Reeve that investors could never be repaid, he nonetheless lied repeatedly to the victims about repayment and entered into numerous repayment agreements that could not, and were not, complied with, thereby further tormenting and stressing the victims.
Downside of Trials for Rogues: Disclosure of a Dark Heart
The Court held that as the Crown had to fight for a conviction for every victim, the downside to Mr. Reeve was that the Crown laid a trail of economic deceitfulness that took numerous pages in the judgment to describe. As a consequence, the trial achieved more than proof beyond a reasonable doubt. It exposed the evil embedded in Mr. Reeve and that he was a pathologically dishonorable, deceitful individual who cared little about who he hurt as long as it was not him.
The Court held that sometimes Canadian criminal trials do more than just prove the crime beyond a reasonable doubt, sometimes they give us a window into the soul of dishonesty. The Court found the Reeve trial allowed us to look into the soul of Mr. Reeve. What was revealed beyond any reasonable doubt was a cold, calculating and clever man who was a master of deceit and manipulation who, despite the wreckage created by his greed and criminal acts, still maintains that he did nothing wrong.
Canada Should Not be a Safe Haven or Secure Refuge for Rogues
The legislative reforms in 2004 were part of a package that raised the maximum penalty for fraud from 10 years to 14 years. The legislative reforms were part of a package designed to ensure that Canada was not a safe haven or secure refuge for those intent on perpetrating frauds. The Court held that Parliament’s decision to increase the maximum penalty for fraud reflected its view of the increased seriousness of this offence, which is reflected in sentences imposed.
Parliament has increased the maximum sentence for fraud to send a message to fraudsters that Canada will not be a safe haven for criminals like Mr. Reeve. The problem is that it is a rare case where a rogue receives a serious sentence in this country. Further, even if penitentiary time is ordered, rogues are released into a halfway house after serving one sixth of a sentence, and then into their own home after serving a second sixth. Home arrest is of little consequence to rogues who can access electronics and perpetrate more crimes while theoretically in “custody.”
Justification for the Maximum Sentence
The Court held that a maximum sentence in a fraud case will rarely be imposed. A maximum sentence is only appropriate if the offence is of sufficient gravity and the offender displays sufficient blameworthiness. The sentencing inquiry must proceed on a case-by-case basis. The sentencing judge must consider all relevant factors.
The case law reveals that convictions for large scale, long-term frauds involving a breach of trust that has devastating consequences for the victims will attract a substantial penitentiary term. Denunciation and general deterrence are the paramount considerations in determining a fit sentence for large scale commercial frauds. The impact the fraud has had upon the victims is also a factor to be considered.
The Court further held that cases characterized as scams will normally call for significantly longer sentences than frauds committed in the course of a legitimate business. The trial revealed that the money raised for supposed real estate investments by Reeve was a scam.
The Court concluded that when Mr. Reeve had completed his fraud and the money was gone, many, if not most, of the victims, were left with lives of complete devastation, absolute destitution and utter despair, which in many cases continued to this day. Mr. Reeve, like a true predator, walked away until his arrest, with absolutely no empathy or remorse for the suffering and scarring left behind.
The Court asked itself rhetorically, if this scenario does not cry out for a maximum sentence, what does? The Court ruled that Mr. Reeve should receive the maximum sentence of 14 years jail.
Restitution Based on the Liquidated Loss
The Crown sought a restitution order of $20,042,314. This amount included principal and interest payments due to the victims pursuant to the signed agreements. The defence agreed that a restitution order should be made, but submitted that it should be restricted to the principal amounts (liquidated amounts) actually paid by the victims to Mr. Reeve — a total of $10,887,885.
The Court held that restitution orders are not civil remedies, and accordingly those orders should not include a claim for interest. The Court further held that restitution orders may be made, particularly in egregious circumstances such as breach of trust, even where there appears to be no likelihood of repayment and that although inability to pay is a factor to be considered, it is not determinative.
The Court ruled that even though there was no likelihood of repayment, a restitution order for Mr. Reeve to pay his victims $10,887,885 would be made. The Court denied the Crown’s application for interest payments to be included in the restitution.
Jail in Lieu of Forfeiture
The Criminal Code provides that where an accused is convicted of a designated offence (such as Fraud Over $5,000), the Court “shall” order the property be forfeited to the Crown. The objective of this provision is to deprive offenders and criminal organizations of proceeds of crime and thereby deter future crimes. Jail (or fines) in lieu of forfeiture is not a punishment. It is a deterrent.
The Court ruled that Mr. Reeve would be ordered to pay a jail in lieu of forfeiture order of $10,887,885, which equals the amount of the restitution order. The Court gave Mr. Reeve 10 years to pay after he was released from jail. If Mr. Reeve defaults in making the payment and the Crown can prove that he has assets, the Crown could apply to have Mr. Reeve serve a further 10 years of jail time. Canada has virtually no track record for enforcing these orders.
The Court directed that the restitution order shall take priority over payment of the jail in lieu of forfeiture ordered, and the jail in lieu of forfeiture shall be reduced by any amount paid by Mr. Reeve pursuant to the restitution order. This is a standard order to ensure that victims receive compensation ahead of the government collecting fines from rogues.
The Crown sought a lifetime common law peace bond restricting Mr. Reeve from having control over another person’s money. The Criminal Code contains a provision that the Court may make an order prohibiting an offender from seeking, obtaining or continuing any employment, or continuing any employment, or being a volunteer in any capacity that involves having authority over real property, money or valuable security of another person. The order can be for any period, including life. The Court chose not to impose this form of peace bond order in this case.
Don’t Blame the Victim
Those who are opposed to incarcerating rogues for any meaningful period of time as punishment, and for general and specific deterrence purposes, are sometimes quick to blame the victim for a lack of due diligence. The Kitchener Record quoted the lead investigator Detective Norman DeBoer of Waterloo Regional Police as stating:
“We always have the tendency to think the victims weren’t showing due diligence. We have to understand that when somebody is a predator … it could have happened to anyone. “I’m really thankful the judge made (the sentencing) about the victims.”
And that is the bottom line in this case. This is a rare case where a Court focused on the impact of the fraud on the victims and then hammered the predator rogue with the maximum sentence.
The Reported Decision
The Court’s sentencing decision is reported as R. v. Reeve, 2018 ONSC 3744, and is online at: https://www.canlii.org/en/on/onsc/doc/2018/2018onsc3744/2018onsc3744.html?searchUrlHash=AAAAAQAMZGFuaWVsIHJlZXZlAAAAAAE&resultIndex=2
The Court’s trial decision is reported at R. v. Reeve, 2017 ONSC 5376, or online at: https://www.canlii.org/en/on/onsc/doc/2017/2017onsc5376/2017onsc5376.html?searchUrlHash=AAAAAQAMZGFuaWVsIHJlZXZlAAAAAAE&resultIndex=1
It is unknown if Mr. Reeve will be appealing this decision, but give that is the first maximum sentence for fraud ever issued under the increased 14 year term, there is a chance he may.
At Investigation Counsel, we investigate and litigate fraud recovery cases. If you discover you are a victim of fraud, contact us to have your case assessed and a strategy for recovery mapped out before contacting police or alerting the fraudster. We also promote victim advocacy and academic discussion through various private and public professional associations and organizations. If you have an interest in the topics discussed herein, we welcome your inquiries.