Taking a Byte out of Crime

Canada's first "electronic courtroom" put two criminals behind bars and provided invaluable insights for the fraud examiners on the case.

By By James W. Davies, CFE, CGA, CFI

In 1996 and 1997, I participated in the preliminary hearing for what would turn out to be Canada's largest tax fraud ever prosecuted. The courtroom was awash in paper. The case involved 400 bankers boxes of seized documentary evidence, six seized computer hard drives, hundreds of seized diskettes, various seized backup tapes, 3,000 income tax returns, taxpayer representations, and investigation work papers.

Two Toronto businessmen and a Swiss national, who was arrested in Florida and extradited to Canada, were charged with two counts of defrauding the public of tax revenues by making false partnership loss claims of $118 million, and defrauding Canadian investors of $22 million in 36 limited partnerships. They were also charged with producing false documents to Revenue Canada and to investors to whom they promised part ownership in 36 luxurious 80-foot yachts. In reality, only two yachts existed. The accused used two Swiss shell companies, which purported to supply services and financing for the operation but, in reality, only provided false invoices, loan statements, and other documentation.

At the time, I was a complex case manager in the Toronto Centre Tax Office's Investigation Division; my job was to assist in presenting the mountain of evidence in court. The daunting task centered around maintaining 12 sets of 36 volumes for the judge, the witnesses, the defense and Crown (the federal prosecutor) lawyers, the court reporters, and all the administrators. Handling this much paper was too cumbersome and expensive.

In 1995, we had acquired a state-of-the-art imaging system to "digitize" documents. The system not only provided us with a less costly method of disclosure than paper but its search engine also gave us a powerful analytical investigative tool. But we still didn't have an effective method to present the digitized evidence before a judge and jury.

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