A 48-year-old Sudbury woman, Karen Cady, who was the bookkeeper at a small business in Sudbury, has been sentenced to four years in penitentiary for committing a serious financial fraud.
This was 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 full scope of the two sentences is four years.
Sentencing was imposed Friday morning by Justice Michael Carnegie of the Ontario Court of Justice. He presided via a Zoom teleconference along with Cady, her defence lawyer Denis Michel, Crown counsel Carolyn Hackett and Diana Fuller, president and CEO of Henninger's Diesel Limited, an engine manufacturing and service business in Sudbury.
It was back in April that Cady pleaded guilty to two offences relating to her employment at Henninger's. The first offence went back to the period of Jan. 1, 2015, to June 26, of 2019, when Cady committed fraud amounting to more than $1 million.
The second charge was that in May of 2020, Cady was found to be in possession of a forged document used in the commission of an indictable offence.
In his opening statement on the sentencing, Justice Carnegie noted that even with addressing the issue of restitution for her crime, "Ms. Cady's sentence may be small solace to her former employer and fellow employees, it must nevertheless act to deter and denounce like conduct so that the public hears loud and clear that large scale fraud from an employer does not and will not pay," said Carnegie.
In the five-year period that Cady was working at Henninger's she had gone to court for a similar fraud offence at her previous place of work. It was for fraud under $5,000. Cady was found guilty and given 18 months probation, with an order to advise her new employer of the conviction. That didn't happen.
Also, back in 2006, Cady was found guilty of another fraud against another employer, again for less than $5,000. At that time she was given a conditional discharge and also 18 months probation.
Carnegie noted that Cady had continued her fraud against Henninger's Diesel at the time of her 2016 conviction.
Court was told that Cady was hired at Henninger's in 2014 and because of her skillset, was transferred to the payroll office. By mid-2015, she had become the company's sole bookkeeper.
Court was told that Cady 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.
Carnegie said Cady was able to exploit Henninger's accounting system in a way that only she was able to see.
"The accounting system did not show the specific account numbers where the money was being deposited. This process concealed her fraudulent withdrawals from external accountant reviews for over four years," said the judge.
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.
Sometime 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.
As part of the sentencing procedure Friday, Carnegie spent nearly an hour reviewing case law of previous sentences imposed in other serious fraud cases. It was noted there is a minimum sentence of two years for fraud that exceeds $1 million and in many cases the sentence is three to five years.
Carnegie cited several cases where lesser sentences had been imposed, but those sentences were overturned on appeal and longer sentences imposed.
Carnegie said he was also taking into account the serious damage that was done to the local business. Employee bonuses were cancelled. Wages were frozen. Employee work hours were cut. The business lost many clients, the judge said.
The judge also spoke to comments Cady made in a pre-sentence report interview where she said she decided to quit working at Henninger's as a means to quit her fraudulent behaviour. Cady gave the impression that she had quit as a means to stop her criminal actions.
The judge didn't buy it.
"The duration of this conduct, the relative sophistication of the scheme, the repetition of its mechanism, and the ill-gotten profits it yielded and were represented to family as earned bonuses, all speak to an individual in control and motivated by greed," said Carnegie.
"The entire evidentiary record speaks to a primary motivation; Miss Cady acted out of greed and profited to enhance her and her family's lifestyle at the expense of her employer and fellow employees," he said.
Carnegie said there can be reasons why a sentence might be set in the minimum range, such as some health issues that Cady has. Carnegie said he had considered many factors, but said they were insufficient.
"Here I find that there are insufficient mitigating features to justify a sentence below the minimum range of three to five years — a range I acknowledge may be artificially low given the imposition of enhanced statutory maximum and minimum sentences. That the crown is seeking a sentence within this range, in any event, is instructive," he said.
The judge also commented on the issue of restitution, and while he was not mandated to place an order for restitution, he did so. Carnegie noted that in many cases appeal judges have said that restitution orders were not helpful because, in many cases, the person found guilty is usually not in any way able to make restitution.
Carnegie also noted there are forfeiture procedures underway to seize all the property Cady acquired by her crime. He said with the restitution order, it means that anything or any money seized by forfeiture would first have to satisfy the restitution order, which is in the amount of $1,017,703.
"I have determined that a four-year term of imprisonment represents a fit and proportionate sentence for the offense of fraud, over $5,000," said the judge.
"It gives me no pleasure to impose such a disposition, but I believe that only a sentence of this duration can contribute to respect for the law, and maintain a just peaceful and safe society," he added.
Cady's husband, Michael, has also been charged in relation to the scheme. Instead of pleading guilty, though, he's fighting the charges against him. His case is set to begin in mid-2022.
