Retired Halton fraud detective Carey Smith, who headed the investigation, testified that in all, Canada Revenue was bilked of at least $24-million, a figure the defence disputed…lawyers for the convicted men said their clients were too impoverished to pay any restitution.
The Globe and Mail
July 14, 2004
Two get prison time for billing taxman of millions in GST
Two Southern Ontario men who helped orchestrate the biggest GST fraud in Canadian history drew four-year penitentiary terms yesterday. A third co-conspirator escaped prison time with a conditional sentence.
And despite the scale of the theft, it would not be hard to replicate, the chief prosecutor said later.
"There's been no change in the regulations or the legislation," Crown attorney Paul Stunt said. "If you've got like-minded people willing to do the work, similar things could probably be done now."
Concealed by an elaborate trail of paperwork, the giant fraud lasted more than three years and involved a string of fictitious car companies that ostensibly shipped cars to dealers in other provinces. Many of the supposed recipients were native Canadians, who because of their tax-exempt status are eligible for GST rebates.
But the cars never existed — Project Phantom was the code name for the lengthy Halton Regional Police investigation — and it was the organizers of the scheme who collected the rebates.
Authorities could only guess at the full loss sustained by the Canada Revenue Agency. At yesterday's court hearing in Milton, Madam Justice Lynda Templeton of Superior Court said the scheme siphoned at least $11-million from Ottawa, possibly a great deal more.
Retired Halton fraud detective Carey Smith, who headed the investigation, testified that in all, Canada Revenue was bilked of at least $24-million, a figure the defence disputed.
Sentenced yesterday was Ewaryst Prokofiew, 44, of Mississauga, who received a four-year prison term for conspiracy and fraud. Joseph Rothe, a 51-year-old St. Catharines resident, got the same sentence. Each was also ordered to pay $500,000 in restitution.
A third man, Gregory Postnikoff, 55, of Oakville, was convicted on the same charges but was handed a conditional sentence of two years less a day, meaning he can serve his sentence at home.
Earlier this year four co-accused were found not guilty on the same charges, which arose as the result of an unrelated cheque-writing swindle.
The prosecution encompassed years of complex investigation, thousands of documents and dozens of investigators. But at its core was a tangle of phony transactions at car auctions on a native reserve in New Brunswick.
The accused men — most of whom are or were car dealers in the Golden Horseshoe region — lined up a steady supply of vehicles that were to be sold at the auctions.
The cars never materialized and were never purchased. But the operators of the fraud claimed that they had been sold, and because of the natives' tax-exempt status were able to claim the GST exemption.
For the most part, the people working at the auctions had no idea what was going on, court was told.
Not much has changed, Mr. Stunt said. In particular, he noted, tax authorities still have no real means of tracking a car that is purchased in one province and sold in another. Nor is there any way to verify the date of sale.
"It all just gets lost in the shuffle."
At a presentencing hearing this month, lawyers for the convicted men said their clients were too impoverished to pay any restitution. Mr. Stunt, however, said yesterday he doubted that.
"They're bright and they're knowledgeable and they won't do much time; perhaps … eight months," he said. "They can both get back in the work force and make money."
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