the legal framework of investigations · 2017. 2. 2. · thoughts, activities, ideas, and searches...

THE LEGAL FRAMEWORK OF INVESTIGATIONS

Presented by: Ken Jull

January 23 , 2017

THE LEGAL FRAMEWORK OF INVESTIGATIONS

The views in this presentation are solely those of Ken Jull and do not necessarily represent the views of Gardiner Roberts or the Competition Bureau, where Mr. Jull is presently on an interchange as General Counsel

The smoking gun at the end of an investigation

3

Soltes, WHY THEY DO IT

4

• Eugene Soltes, Why They Do it: Inside the Mind of the White Collar Criminal (2016)

• David Messer, 29 year old bank manage in Tampa Florida, sat down and made a list on a yellow legal pad

Soltes, WHY THEY DO IT

5

• Fugitive on the run

• Money won’t last forever

• If caught, will go to jail

Cons of stealing from the bank

6

• Travel anywhere

• Live on islands

• Meet many women

• Party and prevent heart attack

Pros of stealing from the bank

7

• Dave, let’s face the hard facts that you are a loser…..if you don’t take it then you will regret it forever and you won’t get another chance again I promise

• Messer packed up his brown Oldsmobile with money orders, traveler’s checks, and more than $150,000 in stolen cash.

• He skipped town, ready to enjoy the life he envisioned on the right side of his list.

• The list was left behind for investigators to find

CONCLUSION AT BOTTOM OF YELLOW LEGAL PAD

8

EXTERNAL VERSUS INTERNAL INVESTIGATIONS

9

Internal versus External Investigations

10

The Huge Hurdle of Changing Practice: Why

you may not change your practice after this lecture,

but should

11

• Princeton Theological Seminary

Soltes, WHY THEY DO IT: Good Samaritan study

12

• Students at the Princeton Theological Seminary were asked to give a short talk on the parable of the “Good Samaritan” in an adjacent building, on whose path the researchers had placed a groaning “victim” slumped over in the doorway.

• Under time pressure, , many of the seminarians ignored the victim or where not inclined to offer aid

• In several instances they literally stepped over the victim as they rushed to give their talk on the parable of the Good Samaritan

Soltes, WHY THEY DO IT: Good Samaritan study

13

• 1. Become aware of the problem

• 2. Form a judgment

• 3. Establish intent

• 4. Engage in moral behavior

• 5. Record in notes the above steps

TIME PRESSURE AND CHANGE IN PRACTICE

14

THE RUBICON

15

• In R. v. Jarvis,[1] the Supreme Court of Canada has drawn a line between compliance audits and tax evasion searches. In terms of classification, the court described the ITA as a “regulatory statute”.[2]

• Officials “cross the Rubicon” when the inquiry in question engages the adversarial relationship between the taxpayer and the state.

• Adversarial is contextual: historical perspectives[1]

[2002] 3 S.C.R. 757 (“Jarvis”).[2] Jarvis, ibid., at para. 99.

Crossing the Rubicon

16

Crossing the Rubicon

17

In our view, where the predominant purpose of a particular inquiry is the determination of penal liability, CCRA officials must relinquish the authority to use the inspection and requirement powers under ss. 231.1(1) and 231.2(1). In essence, officials "cross the Rubicon" when the inquiry in question engages the adversarial relationship between the taxpayer and the state. There is no clear formula that can answer whether or not this is the case. Rather, to determine whether the predominant purpose of the inquiry in question is the determination of penal liability, one must look to all factors that bear upon the nature of that inquiry.[1] Jarvis, at para 88.

[1] Jarvis, at para 99.

Crossing the Rubicon…cont’d

18

a) Did the authorities have reasonable grounds to lay charges? Does it appear from the record that a decision to proceed with a criminal investigation could have been made?

b) Was the general conduct of the authorities such that it was consistent with the pursuit of a criminal investigation?

c) Had the auditor transferred his or her files and materials to the investigators?

d) Was the conduct of the auditor such that he or she was effectively acting as an agent for the investigators?

Factors

19

e) Does it appear that the investigators intended to use the auditor as their agent in the collection of evidence?

f) Is the evidence sought relevant to taxpayer liability generally? Or, as is the case with evidence as to the taxpayer's mens rea, is the evidence relevant only to the taxpayer's penal liability?

g) Are there any other circumstances or factors that can lead the trial judge to the conclusion that the compliance audit had in reality become a criminal investigation?

Factors…cont’d

20

By way of summary, the following points emerge:

1) Although the ITA is a regulatory statute, a distinction can be drawn between the audit and investigative powers that it grants to the Minister.

2) When, in light of all relevant circumstances, it is apparent that CCRA officials are not engaged in the verification of tax liability, but are engaged in the determination of penal liability under s. 239, the adversarial relationship between the state and the individual exists. As a result, Charter protections are engaged.

3) When this is the case, investigators must provide the taxpayer with a proper warning. The powers of compulsion in ss. 231.1(1) and 231.2(1) are not available, and search warrants are required in order to further the investigation.[1]

[1] Jarvis, at para 99.

Summary of Jarvis

21

ACROSS THE RUBICON IN SEARCH OF DUE DILIGENCE

22

The decision of the Supreme Court of Canada in Canadian Oxy Chemicals Ltd. v. Canada (Attorney General)[1] imported the notion of “reciprocal fairness”:

[1] (1999), 133 C.C.C. (3d) 426 (S.C.C.), at para. 27.

Searches in Anticipation of Due Diligence

23

In addition, as pointed out by the intervener Attorney General of Ontario, denying the Crown the ability to gather evidence in anticipation of a defence would have serious consequences on the functioning of our justice system. In order to be fair, the criminal process must “enable the trier of fact to ‘get at the truth and properly and fairly dispose of the case’ while at the same time providing the accused with the opportunity to make a full defence”; R. v. Levogiannis, 1993 CanLII 47 (SCC), [1993] 4 S.C.R. 475, at p. 486. This reciprocal fairness demands that the Crown be able to fairly seek and obtain evidence rebutting the accused’s defences. If the respondents’ submission on the interpretation of s. 487(1) were accepted, a search warrant would never be available for this purpose. This narrow interpretation would frustrate the basic imperative of trial fairness and the search for truth in the criminal process.[1]

[1] Canadian Oxy, at para. 27.

Reciprocal Fairness

24

It is necessary to examine effluent discharge records, effluent water quality sampling and analysis records, mechanical and instrument maintenance records, environmental control records, instrument calibration records and flow rate calculation records covering an extended period of time before and after October 13, 1994. This will . . . permit analysis of the maintenance programs undertaken by CanadianOxy Chemicals Ltd.

It is necessary to examine company personnel records covering the period between January 1, 1994 and February 28, 1995 . . . to determine if any company employees have been disciplined in any manner as a result of this incident. . . . [1]

[1] Canadian Oxy, at para. 6.

Wide Scope of Due Diligence Documents

25

29 The broad powers contained in s. 487(1) do not authorize investigative fishing expeditions, nor do they diminish the proper privacy interests of individuals or corporations. This is particularly true with respect to personnel records which may contain a great deal of highly personal information unrelated to the investigation at hand. Judges and magistrates should continue to apply the standards and safeguards which protect privacy from unjustified searches and seizures.

The Brake on the Breadth of the Search is the Traditional Judicial Discretion to Prevent Fishing Expeditions and to Protect Personal Privacy

26

SEARCHES AND PRIVACY

27

While workplace policies and practices could diminish an individual's expectation of privacy in a work computer, these sorts of operational realities do not in themselves remove the expectation entirely: the nature of the information at stake exposed the likes, interests, thoughts, activities, ideas, and searches for information of the individual user. The police infringed Cole's rights under section 8 of the Charter. He expected a measure of privacy in his personal information on the laptop.

R. v. Cole, [2012] 3 S.C.R. 34

28

NORDION: AN EXAMPLE OF A COLEWARRANT

29

Nordion

• In an email, the engineer, who received kickbacks of some of the funds, told the agent, “Nordiondoes not want to see the bribes in your cost estimate and justification.” The engineer and the agent hid the scheme from Nordion by communicating in Russian and misrepresenting how the agent would use the funds it received from Nordion.

30

Nordion

• “Friendly” search warrant executed by RCMP at Nordion premises to obtain computer disc of engineer

31

Offshore Bank Accounts32

Nordion

• The SEC Order, released on March 3, 2016, states that the Commission considered remedial acts promptly undertaken by Nordion, Nordion’s self-reporting, and their cooperation afforded the Commission staff. “Nordion self-reported the conduct to authorities in both the U.S. and Canada, conducted a thorough internal review, identified the illegal conduct, voluntarily produced witnesses from Canada for interviews in the U.S. and translated documents, and implemented substantial remedial measures to prevent future violations

33

MUDDY WATERS IN THE RUBICON

34

Types of Regulatory Statute

35

Types of Regulatory StatuteAn Early Crossing of the Rubicon?

36

DOES THE RUBICON FLOW WHEN THE PENALTY IS AN

ADMINISTRATIVE MONETARY PENALTY?

37

Rubicon Shifts in Location Between Criminal and Civil

38

The Supreme Court of Canada released its anticipated decision in Guindon v. Canada on July 31, 2015, which held that administrative monetary penalties ("AMPs") under section 163.2 of the Income Tax Act (the "ITA") are not offences that trigger constitutional protections such as the right to be presumed innocent.

Guindon 2015 SCC 41

39

August 27, 2010

November 4, 2010

January 2011 February 17, 2011

Formation of audit plan: preliminary high risk of unreported income in relation to potential AMP

Meeting with D re level of bookkeeping; Auditor had formed the intention to consider AMPs

Discovery of “white out” on some records; something “wrong” requiring referral but not convinced tax evasion

Referral to enforcement section

TIMELINE: Alleged underground economy file

40

130: While the applicability of civil liability penalties under section 163(2) of the ITA was examined by the Auditor in depth, I cannot conclude that the Auditor strayed into the determination of penal liabilities for the Applicants that may arise for offences under the section sections 239(1)(a) and section 239(1)(d) of the ITA or under paragraphs 327(1)(a), (c) or (d) of the ETA.

Giroux: auditor did not stray into penal

41

135 The fact that there are similarities between the elements giving rise to the imposition of penalties under section 163(2) and income tax evasion and false reporting charges under section 239(1) and that there is a considerable overlap in the elements of civil and criminal offences, does not necessarily mean that an inquiry in aid of possibly assessing section 163(2) civil penalties is also an inquiry that is automatically subsumed into a tax evasion investigation.

Giroux: similarity of amps and penalties not conclusive

42

138: Moving along the continuum, as the audit progressed it is possible that the Auditor became aware of the existence of reasonable grounds that an offense may have occurred. That in itself is insufficient to support the conclusion that the predominant purpose of the Auditor's inquiry was the determination of penal liability [see Jarvis at para. 89]. Perhaps the Auditor could have reasonably concluded the existence of those reasonable grounds earlier than her evidence suggests. However, I am not satisfied that her focus lay in the direction of establishing that an offense attracting penal liability had occurred.

Giroux: Continuum

43

139 I cannot reasonably conclude that all of the ingredients of the offenses attracting penal liability could be thought by the Auditor to have occurred while she was in the course of conducting this audit and specifically at some time well before January 2011. It is more likely that such a point was reached upon receipt of the third party confirmations of the altered invoices. That occurred almost immediately preceding the referral to the CRA Enforcement Division. Hence the investigative function was not triggered prior to the referral to the Enforcement Division. [See Jarvis at para 89]. I am not convinced that the Auditor purposefully or unreasonably delayed coming to such a conclusion about penal liability to enable

her to conduct a criminal investigation for tax evasion.

Giroux: quick referral after third party confirmation

44

141: For the reasons mentioned earlier, the evidence being sought by the Auditor was relevant to taxpayer liability generally and in particular liability for civil penalties. It is not relevant only to the taxpayer's penal liability but it was eventually seized under warrant from the Auditor and used to assist the Enforcement Division with their own analysis and the laying of charges. As noted in Tiffin, when considering this factor the word "only" is critical to the analysis.

Giroux: penal not the “only” consideration

45

144 On the basis of my analysis above, even if the Auditor may have through her comprehensive and lengthy audit process possibly waded into the waters of the analogical Rubicon, I am not satisfied that the Applicants have proven that she did in fact cross it and therefore that the Applicants’ Charter rights were engaged.

Waded into Rubicon but not crossed

46

DETENTION

47

Detention and why it matters

10. Everyone has the right on arrest or detention

•(a) to be informed promptly of the reasons therefor;

•(b) to retain and instruct counsel without delay and to be

informed of that right; and

•(c) to have the validity of the detention determined by way

of habeas corpus and to be released if the detention is not

lawful.

48

Detention and why it matters

49

Types of detention

In R. v. Therens, [1985] 1 S.C.R. 613 (S.C.C.) and R. v. Thomsen,

[1988] 1 S.C.R. 640 (S.C.C.), the Supreme Court of Canada

identified three situations that give rise to a detention: (1) where there

is a deprivation of liberty by physical constraint; (2) when the police

assume control over the movement of a person by a demand or

direction which may have significant legal consequences and which

prevents or impedes access to counsel; and (3) in situations where the

person concerned submits or acquiesces in the deprivation of liberty

and reasonably believes that the choice to do otherwise does not exist

(i.e. psychological detention). It is the second situation that the

appellant alleges gave rise to the detention in this case. (R. v.

Pomeroy, 2008 ONCA 521 at para 23)

50

http://nextcanada.westlaw.com/Link/Document/FullText?findType=Y&pubNum=6407&serNum=1985190922&originationContext=document&transitionType=Document&vr=3.0&rs=cblt1.0&contextData=(sc.UserEnteredCitation)http://nextcanada.westlaw.com/Link/Document/FullText?findType=Y&pubNum=6407&serNum=1988288207&originationContext=document&transitionType=Document&vr=3.0&rs=cblt1.0&contextData=(sc.UserEnteredCitation)

Q. Have you ever been arrested before?

A. I got into some trouble about three years ago.

Q. Do you have anything on you that you shouldn’t?

A. No. (Pause.) Well, I got a small bag of weed.

Q. Where is it?

A. It’s in my pocket.

Q. Is that it?

A. (Male puts his head down.) Yeah. Well, no.

Q. Do you have other drugs on you?

A. No, I just have the weed, that’s it.

Q. Well, what is it that you have?

A. I have a firearm.

R. v. Grant, 2009 SCC 32

51

• 44 In summary, we conclude as follows:

• 1. Detention under ss. 9 and 10 of the Charter refers to a suspension of the

individual’s liberty interest by a significant physical or psychological restraint.

Psychological detention is established either where the individual has a legal

obligation to comply with the restrictive request or demand, or a reasonable

person would conclude by reason of the state conduct that he or she had no choice

but to comply.


52

• 2. In cases where there is no physical restraint or legal obligation, it may not be

clear whether a person has been detained. To determine whether the reasonable

person in the individual’s circumstances would conclude that he or she had been

deprived by the state of the liberty of choice, the court may consider, inter alia, the

following factors:

• a) The circumstances giving rise to the encounter as would reasonably be

perceived by the individual: whether the police were providing general assistance;

maintaining general order; making general inquiries regarding a particular

occurrence; or, singling out the individual for focussed investigation.

• b) The nature of the police conduct, including the language used; the use of

physical contact; the place where the interaction occurred; the presence of

others; and the duration of the encounter.

• c) The particular characteristics or circumstances of the individual where

relevant, including age; physical stature; minority status; level of sophistication.

•


53

• 50 Although Cst. Gomes was respectful in his questioning, the encounter was

inherently intimidating. The power imbalance was obviously exacerbated by Mr.

Grant’s youth and inexperience. Mr. Grant did not testify, so we do not know what

his perceptions of the interaction actually were. However, because the test is an

objective one, this is not fatal to his argument that there was a detention. We agree

with Laskin J.A.’s conclusion that Mr. Grant was detained. In our view, the

evidence supports Mr. Grant’s contention that a reasonable person in his position

(18 years old, alone, faced by three physically larger policemen in adversarial

positions) would conclude that his or her right to choose how to act had been

removed by the police, given their conduct.


54

At para. 44 of Grant, the majority set out this summary of non-exhaustive factors that may be considered in determining whether an individual has been psychologically detained:

a) The circumstances giving rise to the encounter as they would reasonably be perceived by the individual: whether the police were providing general assistance; maintaining general order; making general inquiries regarding a particular occurrence; or, singling out the individual for focused investigation.

b) The nature of the police conduct, including the language used; the use of physical contact; the place where the interaction occurred; the presence of others; and the duration of the encounter.

c) The particular characteristics or circumstances of the individual where relevant, including age; physical stature; minority status; level of sophistication.

Regina, Respondent, and Jonathan Livingstone Seagull, Appellant [2015] B.C.J. No. 750

55

55: There is no question that the appellant was the subject of precisely focused suspicion, but this alone does not turn an encounter into a detention. What matters is the manner in which the police interacted with the suspect: Grant at para. 41.

56: Nor is the fact that Cst. Cook had reasonable grounds to arrest the appellant prior to the interview definitive in establishing detention: Hall at para. 22; Pomeroy at para. 38. These cases, as well as Holt, are of limited assistance in deciding whether the appellant was detained, however, as they are factually distinct in a number of respects, and each case must be determined on its own facts in the context of all of the circumstances


56

58: Most significantly, it is apparent that the appellant was well-aware of the purpose of the interview, his potential jeopardy, and his rights in responding to the situation. He knew Cst. Cook was investigating allegations of sexual impropriety with the complainants. She told him he could be charged "right now", and that a charge of sexual exploitation was a possible outcome. The appellant knew he could leave, that he had the right to remain silent, and that he was entitled to advice from a lawyer. He voluntarily came to the interview without legal assistance, however, and spoke to Cst. Cook for almost two hours, during which he carefully retained control of what he was prepared to say, before the interview was terminated at his request.


57

59: The notion of choice is central in determining whether a person has been detained by the authorities: Grant at para. 28. Because the appellant did not testify on the voir dire there is no evidence of whether he subjectively believed that he had a choice as to cooperating with Cst. Cook. The objective evidence of their encounter clearly supports the trial judge's findings. The appellant has failed to persuade me that the judge made any reviewable error in concluding that he failed to establish that a reasonable person in his position would have concluded that he had been deprived of the liberty of choice during the interview with Cst. Cook.


58

• 45 As noted earlier, a police caution is only required if the person

making the statement is considered a suspect or ought to have been

considered a suspect. Det. Niemi testified that he did not consider Picard

to be a suspect at the time of this statement. However, the analysis does

not end there. The court must determine whether the police were in

possession of information that “would alert any reasonably competent

investigator to the realistic prospect”26 that the accused was involved in

the crime.

• ….. Therefore, I find that at the time of the June 26 statement, Picard wasonly a witness and no police caution was required.

Picard: 2016 CarswellOnt 18604

59

https://docs.google.com/document/d/1mFGZy3GaFEjrM1JvPp7bKywwQOhlvNTpifhl82SqCzc/edit#bookmark=id.1qoc8b1

STATEMENTS FROM EMPLOYEES

60

The tension between corporate and individual interests is illustrated where the prosecution seeks to admit statements made by an employee as an admission against a corporate party. The Alberta Provincial Court in R. v. Syncrude Canada Ltd.[1] permitted an employee’s statements to be admitted against Syncrude.

[1] R. v. Syncrude Canada Ltd., [2010] A.J. No. 421, 2010 ABPC 123, 52 C.E.L.R. (3d) 243. (“Syncrude”)

Statements made by an employee as an admission against a corporate party

62

A related issue is the ability of the prosecution to call an employee against a corporate accused, subject to the discretionary guidelines set out by the Supreme Court of Canada in British Columbia Securities Commission v. Branch.[1] In this scenario, the employee can be cross-examined at trial by counsel for the corporation. The admission of a statement of an employee as an admission against the corporation does not contain the same safeguard of cross-examination.

[1] British Columbia Securities Commission v. Branch (1995), 123 D.L.R. (4th) 462.

Calling an employee against a company

63

REMEDIES

64

The decision of the Supreme Court of Canada in R. v. Grant[1] has rewritten the map for exclusion of evidence.

[1] (2009), 245 C.C.C. (3d) 1 (S.C.C.) [“Grant”]

Template for exclusion

65

1. Seriousness of the Charter infringing conduct

2. Level of intrusion

3. Reliability of the evidence

Three-factor test

66

Matrix

67

• However, weighing all these concerns, in our opinion the courts below

did not err in concluding that the admission of the gun into evidence

would not, on balance, bring the administration of justice into disrepute.

The significant impact of the breach on Mr. Grant’s Charter-protected

rights weighs strongly in favour of excluding the gun, while the public

interest in the adjudication of the case on its merits weighs strongly in

favour of its admission. Unlike the situation in R. v. Harrison, 2009 SCC

34 (S.C.C.), the police officers here were operating in circumstances of

considerable legal uncertainty. In our view, this tips the balance in

favour of admission, suggesting that the repute of the justice system

would not suffer from allowing the gun to be admitted in evidence

against the appellant.

•

Three-factor test

68

http://nextcanada.westlaw.com/Link/Document/FullText?findType=Y&pubNum=6407&serNum=2019401827&originationContext=document&transitionType=Document&vr=3.0&rs=cblt1.0&contextData=(sc.Keycite)

T 416.865.2964

E [email protected]

W www.grllp.com

@KennethJull

Contact UsKen Jull, Partner

69