November 2, 2021

Union manager sentenced to nine months in prison for defrauding $225,000 from his employer

Do you have measures in place in your business to prevent and promptly identify possible fraudulent acts committed by your employees?

The facts in R. c. Aldik, handed down by the Court of Quebec (the judgment) last August, are a reminder of how important it is not to neglect fraud and pay attention to your employees in positions of trust, in particular those in charge of your computer networks.

Background

Aldik had been an IT and communications manager for the UES 800 union for almost five years before being caught red-handed embezzling funds from his employer into his own personal account. He used various fraud techniques, such as fabricating false invoices,, over the past three years. He ended up embezzling over $225,000, which caused significant financial consequences for the union. Moreover, once his employer discovered the fraudulent scheme, he took off with the passwords necessary for the proper operation of the computer systems.  In particular, his employer was required to pay to secure and restore the systems, as well as pay for locksmith services.

He was indicted with 3 counts further to his fraudulent activity and the creation of false documents. He initially claimed his actions were attributable to his difficult financial situation and then to compensate him for his overtime, but he subsequently pleaded guilty to all three charges.

Therefore, the judgment was solely to determine which sentence was fair and appropriate under the circumstances.

The decision

First, various aggravating and mitigating circumstances in the case were considered:

  • Mitigating circumstances: The judge considered the fact that Mr. Aldik showed remorse and expressed regret to the union officers, and that he pleaded guilty and had no criminal background. He also took the initiative to reimburse part of the money he had embezzled.

It should be noted that when the court imposes a sentence for a fraud-related criminal offence, it does 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.

  • Aggravating circumstances: The premeditation of the crime was considered. The judge determined that Mr. Aldik’s crimes were motivated by his desire to make quick money to maintain his lifestyle, and his fraudulent acts were motivated by the pursuit of profit. The judge also found that Mr. Aldik had abused the bond of trust with his employer.

Then the judge emphasized that at sentencing, it is important to keep in mind the objectives of the sentence, in particular denunciation and deterrence. Thus, even if there are mitigating circumstances, in the case of major fraud that is planned and takes place over a long time, the objectives of the sentence may justify a severe consequence such as imprisonment.

In the end, the judge found that factors such as the consideration of totality and proportionality, the seriousness of Mr. Aldik’s fraudulent acts as well as the significant consequences to the union tipped the scales in favour of a stiffer sentence. Therefore, he sentenced him to nine months in prison, prohibited him from holding a position where he would oversee a company’s finances for three years and ordered him to pay the union around $61,000 as compensation.

Takeaway 

The Canadian justice system takes fraud very seriously. That being said, employers should make sure effective tools and monitoring mechanisms are in place to identify at the source and quickly address any fraudulent activity from their employees.

We believe the key to prevention is developing and implementing clear policies, in particular regarding standards to prevent fraud and corruption, ethical rules,  preventing conflicts of interest, using employer property, as well as employee training.

This is particularly critical considering the current trend towards remote working that seems here to stay and poses an additional threat to the security of the employer’s assets and computer data.

Author:

Andréane Giguère 

Senior associate, Norton Rose Fulbright

The author would like to thank law student Emma Saint-Laurent for her assistance in preparing this piece.

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