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Husband of woman guilty in $1M fraud goes on trial

Michael Cady isn’t on trial for fraud, but the Crown says he knew where the money came from and spent it anyway
170522_karen and michael cady
Karen Cady (left) pleaded guilty in September 2021 to a $1M fraud scheme. Her husband, Michael, is currently on trial, charged with laundering the proceeds of crime and possession of property obtained by crime.

While Michael Cady isn’t on trial for stealing more than $1 million from a local business, he allegedly knew where that money came from as he and his wife spent it on a lavish lifestyle, said the Crown’s office.

Michael Cady pleaded not guilty on Monday to charges of laundering the proceeds of crime and possession of property obtained by crime after his wife, Karen Cady, stole more than $1 million from Henninger’s Diesel.

Michael Cady is being represented by defence lawyer Glenn Sandberg.

Karen Cady was sentenced to four years in prison in September last year after she pleaded guilty to possession of a fraudulent document used in the commission of an indictable offence and fraud over $5,000. This was Karen Cady's third fraud conviction in the past 15 years. She was further sentenced to one year concurrent to another offence relating to possession of a forged document.

The Crown alleges that between Feb. 10, 2016 and May 21, 2020, a total of $306,677.29 in fraudulently obtained funds flowed into assets owned and registered to Michael Cady. Those funds were filtered through his Northern Credit Union account, said the Crown.

For Michael Cady’s RBC account, fraudulent deposits accounted for more than 36 per cent of all deposits. On several occasions, large cash withdrawals occurred on the same date, or shortly after the receipt of an electronic money transfer, the court heard.

“This is not a case of fraud itself, and it is not an issue that Karen Cady defrauded Henninger’s Diesel,” said assistant Crown attorney Carolyn Hacket, of the Serious Fraud Office. “Rather, this is a case of whether Michael Cady knew he received money from the fraud, and what he did with it.”

Diana Fuller, owner of Henninger’s Diesel, testified Monday that she noticed the Cadys spending thousands and thousands of dollars on items they should not have been able to afford. She said she watched as they lived, in her opinion, “well above their means.”

“You’re reluctant to question an employee on matters that are private, like, where are you getting all the money, but I do remember she told me she had gone bankrupt twice, and I just told her to slow down,” said Fuller. “I told her it’s easy for expenses to get out of control, and you don’t want to find yourself in a position where you can’t keep up with payments.”

Karen Cady told her boss her husband, Michael, had a lot of money, and that he worked a lot. However, Michael Cady’s notice of assessment for the 2015 tax year showed an income of $58,701. In 2016, he made $38,761, and in 2017, he made $39,409, according to documents from Canada Revenue Agency.

Karen Cady also told Fuller that Michael had inherited more than $400,000 from his father, who had passed away.

Fuller said it wasn’t unusual to see Michael Cady at Henninger’s Diesel. On occasion, he visited  the shop to see his wife, or he was there on behalf of his own employer, who conducted business with Henninger’s Diesel.

She told the court she did speak to Michael Cady about the inheritance, but didn’t go into detail about the amount. 

“I wanted confirmation of the inheritance,” Fuller told the court.

Fuller said she suggested a financial planner after she was told they were keeping most of their money in a safe in their basement. 

She said she was told the Cadys had it covered, and that Michael Cady did not want to discuss the supposed inheritance.

“Did he seem surprised when you asked about the inheritance,” Hackett said. 

“No,” Fuller said. 

“Something told me I needed to press this point, but obviously I didn’t press it hard enough. I felt Michael was being very evasive, and he tried to shut down the conversation.”

Fuller told the court she accepted Michael’s explanation, but she was not very satisfied with it.

Also taking the stand was provincial police officer Ian Wright, who was the officer in charge of the investigation. The Crown poured over numerous financial documents, cheques and bank statements.

He told the court the Cadys made 3,652 fraudulent transactions after stealing a total of $1,223,944. They spent more than $1.2 million of what they had stolen.

The officer went over numerous financial statements and reports from several banking institutions detailing the thousands of transactions that took place over the duration of the fraudulent activity, as well as after Feb. 10, 2016 when it is alleged that Michael Cady took control of their account and they continued to spend that money.

When Karen Cady was sentenced, the court was told she used three methods for defrauding the company. One was the process of altering actual cheques. This involved pasting new payee information on the face of the cheque so that money was paid out to Cady. The second method involved disguising electronic transfers of funds. This involved Cady convincing the company to stop issuing paper cheques in favour of using electronic transfers.  

Court was told that this process alone allowed Cady to move more than $816,000 using 17 fake client accounts into a personal ghost account.

Third, Cady used Henninger's client credit system to pay financial credits to herself. This was a vendor reward system that gave financial credits for the amount of business carried out. This was the system that led to Cady's downfall. 

In 2019, after Cady had left the company, two vendors sought to use credits they had earned only to be told that their credits had already been paid out.

The trial continues today with cross-examination of provincial police officer Ian Wright.


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Arron Pickard

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