What criminal charges will be laid against the mastermind of a $54 million Ponzi scheme?
Holden was tried on two counts in an indictment alleging that from the beginning of 2005 to the end of 2012, he committed fraud and money laundering. He was found guilty of both offences. His fraud in count 1 was $54,159,737. In this decision, the Court dealt with his sentencing.
Holden was the owner of the Seaquest companies. Through these companies, Holden committed a Ponzi scheme, in which money contributed by later investors generated artificially high rates of return for the original investors. Money from the new investors, rather than being used to make the promised investment on their behalf, was instead misappropriated, and used directly to repay or pay interest to old investors, usually without any revenue-producing activity other than the continual raising of new funds.
Holden personally solicited funds from investors by: (1) making false, deceitful and fraudulent representations to them about the nature of their investments; and (2) directing that money contributed by later investors be used, in whole or in part, not for the intended purpose, but instead to repay principal or pay interest to earlier investors at artificially high rates of return.
The Crown established beyond a reasonable doubt that: Holden deprived a great many of his investors of something of value; he caused the deprivation by deceit, falsehood and other fraudulent means; he intended to defraud his investors who were deprived of something of value; and the value of the property in question exceeded $5,000. The minimum amount of Holden’s personal benefit from the Ponzi scheme is $4,888,374. The fact that Holden was enriched to this extent makes it clear that this was not a desperate scheme to defraud investors to save a failing company. It was a fraud perpetrated for purposes of personal gain.
There were 65 victims of this fraud. Most of them are largely not sophisticated investors, and they are not large institutions. Some of them were defrauded of all of their assets, or their life savings. Some were of an age where they cannot recoup those losses. The overall effect of this fraud on the victims can be characterized as catastrophic and devastating.
Holden is 57 years of age. In 1995, Holden pleaded guilty to 46 offences under the Securities Act. He was sentenced to imprisonment for 90 days to be served intermittently and two years of probation. In 2000, Holden pleaded guilty to three counts of fraud over $5,000 and was sentenced to imprisonment for six years. Holden was released on parole in 2002 after serving one third of his sentence. He was recommitted 19 months later for violating his parole.
Counsel for Holden filed a number of character letters attesting to his honesty and other positive qualities. The Court held that these letters were a testament to the fact that Holden remained able to deceive others and conceal his dishonesty. Holden took no responsibility for his actions. He blamed his inadequate supervision of his business and his placing his trust in employees for the losses suffered by those he defrauded. But it was Holden who breached the trust placed in him by his investors. The Court noted that Holden was incorrigible.
Denunciation and general deterrence are the paramount purposes of sentence for large-scale frauds. Mitigating factors and rehabilitation are secondary. Given Holden’s history and his age, there was little hope that whatever sentence imposed would deter the offender, meaningfully contribute to his rehabilitation, or provide or awaken in him a sense of responsibility or an acknowledgement of the harm he has done.
Section 718.1 of the Criminal Code requires that the sentence be proportionate to the gravity of the offence and the degree of responsibility of the offender. This offence was a sophisticated, large-scale fraud of long duration with many victims. The magnitude, complexity, duration or degree of planning of the fraud committed was significant. The harm done to the victims was catastrophic and devastating. A court sentencing a person for fraud shall not consider as mitigating circumstances the offender’s employment, employment skills or status or reputation in the community if those circumstances were relevant to, contributed to, or were used in the commission of the offence.
Maximum sentences should be imposed rarely, and only if the offence is sufficiently grave and the offender sufficiently blameworthy. A maximum sentence is available if it achieves proportionality in view of the individual offence and the individual offender. In the Court’s view, a 12-year sentence of imprisonment for the fraud offence sufficiently achieved the pertinent objectives of sentencing. The Court imposed an eight-year sentence of imprisonment for the money laundering offence, which was to be served concurrently.
The Court also considered the appropriateness of restitution. A restitution order should not be made as a mechanical afterthought to a sentence of imprisonment. It should be made with restraint and caution. Ability to pay is not the predominant factor. A restitution order may be made even where there does not appear to be any likelihood of repayment. The Court made the restitution order requested by the Crown.
Finally, the Court ordered a fine, in lieu of forfeiture, in the amount of $54,159,737, and assigned a period of ten years from the expiry of Holden’s global twelve-year sentence of imprisonment to pay the fine, with a term of five years’ imprisonment in default of payment to be served consecutively.
Counsel: David Friesen and Matthew Asma, for the Crown and David Burke for the Accused