What is criminal breach of trust in white collar crime?

What is criminal breach of trust in white collar crime?

If you are a high-ranking official within a company or organization and improperly use its money or your influence for your personal benefit, you could be charged with criminal breach of trust.

According to the s. 336 of the Criminal Code, breach of trust occurs when “a trustee of anything for the use or benefit, whether in whole or in part, of another person, or for a public or charitable purpose, converts, with intent to defraud and in contravention of his trust, that thing or any part of it to a use that is not authorized by the trust.”

For white-collar criminals, these breaches include complex Ponzi schemes, mortgage scams, tax evasion or fraud. That last term is broadly defined by s. 380 (1) Criminal Code as any dishonest conduct which deprives or risks depriving another person of “any property, money or valuable security or any service.”

A conviction of criminal breach of trust in a white-collar setting is usually followed by incarceration and steep fines, as the example below will show.

SNC-Lavalin scandal

Perhaps the most famous Canadian breach of trust involved the Quebec-based engineering and construction firm SNC-Lavalin.

Early in 2020, the former head of SNC-Lavalin’s construction division was sentenced to eight years and six months in prison, stemming from a fraud and corruption investigation in Libya. According to the CBC, he was convicted of paying kickbacks to foreign officials and pocketing millions as he worked to secure contracts for the company beginning in the late 1990s.

In passing sentencing, the judge noted he was opting for a penalty “closer to the top of the scale given a number of aggravating factors in the case,” the story states, such as the sophisticated nature of the fraud, the degree of planning and premeditation and his behaviour after the infractions had been committed.

In the days following his verdict, the story adds, the Montreal engineering giant also settled criminal charges on its business dealings in Libya, pleading guilty to a single count of fraud and agreeing to a $280-million fine to be paid over five years and a three-year probation order.

Breach of trust is difficult to define

A 2006 Supreme Court of Canada (SCC) decision involved a director of public security whose daughter was involved in an automobile accident. According to court documents, the director asked a police officer to write a “more complete” accident report, which resulted in him not having to pay the insurance deductible of $250. 

He was charged with the offence of breach of trust by a public officer under s. 122 of the Code. The trial judge convicted the accused on the basis that he had used his office to obtain a personal benefit, the judgment reads, and a majority of the Court of Appeal upheld the conviction.

That decision was overturned by Canada’s highest court. The SCC reasoned that while the director of public security was “pursuing a personal interest contrary to the Code of ethics of Québec police officers … it does not necessarily establish the criminal offence of breach of trust by a public officer … the accused’s intention was to have the officer make a complete report, not to skew it in one direction or another.”

Court documents also offer the Supreme Court’s thoughts about what constitutes a breach of trust.

“The crime of breach of trust by a public officer … is both ancient and important.  It gives concrete expression to the duty of holders of public office to use their offices for the public good. This duty lies at the heart of good governance. It is essential to retaining the confidence of the public in those who exercise state power. Yet surprisingly, the elements of this crime remain uncertain. This appeal requires us to clarify those elements so that citizens, police and the courts have a clear idea of what conduct the crime encompasses.”

The judgment goes on to note: “Precisely what is required to establish breach of trust under s. 122 is not clear from the Canadian cases. Canada is not alone in this. As we shall see, other countries which have inherited the common law offence of breach of trust by a public officer have also wrestled with this question.

“The Criminal Code does not inform us of the elements of the offence. It simply sets out the common law offence of breach of trust by public officers in general terms,” it adds. “The purpose of the offence, the mens rea or guilty mind required for the offence and the actus reus or conduct targeted by the offence remain subject to conflicting decisions and conjecture.”

‘Top’ CEO crashes down

A former “high-flying businesswoman” in Newfoundland was sentenced to two years less a day for stealing from her real estate firm and defrauding a payday loan-style company that serves the real estate industry, according to CBC.

The judge in the case called her actions “acts of deception” before giving her a light sentence, the story states, due to mitigating factors such as her lack of prior criminal record and the fact she has taken responsibility for her actions.

Along with the jail sentence, she was ordered to repay more than $500,000 to the payday-loan style company she defrauded, related to 33 fake property deals. The story added that in 2012 she was named a Top 50 CEO in Atlantic Canada, though “just three years later, [she] couldn't use any of the cards in her wallet to buy an ice cream for her granddaughter.”

White-collar crime goes undetected

A criminologist told CBC that white-collar crime is probably quite common in Canada but there is “hardly anyone keeping tabs on the numbers,” as he commented on allegations that a man who once worked for a Maritime economic development agency was under investigation for possible breach of trust.  

At least four business owners accused him of taking their money through a sideline venture-management business in exchange for the promise of business loans that never materialized, the story states, with the criminologist noting that white-collar crime “is way more complex than your typical armed robbery or burglary.”

"Very quickly police are in well over their head in these kinds of investigations," he said. “No company wants to publicize the fact that ... essentially, a crime has been committed.”

He added that white-collar crime's impact on society is “tremendous,” ranging from financial harm to human lives lost, in the case of corporate crimes that allow unsafe products to get to market.

Sentences meant to deter others

A former indigenous chief who stole thousands of dollars from his own band was convicted of fraud, theft over $5,000 and breach of trust according to the CBC, before being sentenced to three years in prison as well as being ordered to repay $120,000.

The court was told that he misappropriated $260,000, according to the story, which added that the judge called the crimes “unacceptable” and “selfish,” noting the money could have been used to fund needed programs, and that he hoped the sentence deterred others from doing the same thing.

Jail follows breach of trust

The B.C. Court of Appeal upheld a one-year jail term for an immigration consultant in British Columbia, according to this judgment, charged for theft in excess of $1,000 and fraud in excess of $5,000.

According to court documents, people overseas seeking immigration eligibility were told to invest in government-approved funds for three years to improve their chances of getting status, with the immigration consultant owning a company that managed an approved investment fund.

A couple from China paid $150,000 to start the application process, and they were accepted as investor immigrants and landed in that capacity in Vancouver.  When they made enquiries about the status of the investment, the immigration consultant put them off until they realized the money had not been invested but had been stolen.

Another victim lost her “home and business” in Hong Kong because of the fraud, with no compensation, according to the story.

The man was convicted of obtaining $256,250 through fraud, with defence counsel arguing for a conditional sentence to be served at home. According to court documents, the judge declined to accept that guidance, stating: “I think it fair to conclude that the case law in British Columbia generally dictates a custodial sentence for white-collar crime where the theft and fraud is of this magnitude and committed in what is effectively a breach of trust situation … general deterrence requires real jail.  Accordingly, there will be a period of incarceration for one year.”

The judge also ordered $256,250 in restitution.

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