Two high-profile cases in late 2018 demonstrate both the potentially grave consequences of securities law violations and the difficulties prosecutors face in securing convictions for white collar crime. In the first, the Provincial Court of British Columbia sentenced Vancouver-resident Ayaz Dhanani to a rare prison term for securities law violations following Dhanani’s guilty plea in connection with the fraudulent solicitation of investments from five British Columbia residents. In the second, the Public Prosecution Service of Canada (PPSC) stayed charges against an alleged organized crime group believed to be laundering over $1 billion per year through B.C. casinos in what was one of the largest money-laundering prosecutions in Canadian history.
The Dhanani case – A rare prison sentence for securities misconduct
The Dhanani guilty plea and sentence represents a good outcome for the British Columbia Securities Commission (BCSC). Following investigations conducted by the BCSC’s Criminal Investigations Branch, Dhanani was charged with offences under both the Criminal Code and the British Columbia Securities Act. The charges and resulting guilty plea stem from Dhanani fraudulently soliciting nearly $200,000 in investments from five B.C. residents and directing the funds to himself. Dhanani did so in contravention of a prior BCSC order prohibiting him from engaging in investment-related activity, which arose as a result of Dhanani’s earlier fraudulent conduct. The B.C. Court sentenced Dhanani to a combined total of 36 months in prison followed by 36 months of probation on release. The Court also ordered him to pay $194,568 in restitution to the five victims.
Statistics that the Canadian Securities Administrators (CSA) published in 2016 and 2017/2018 enforcement reports show that the Dhanani case is a rare instance of an individual receiving a prison sentence for securities-related misconduct. In 2017, a total of only 25 individuals received prison sentences in connection with violations of securities laws. Eight of those individuals were sentenced under the Criminal Code and 17 were sentenced under quasi-criminal provisions in provincial securities legislation. Similarly, in 2016, 23 individuals received prison sentences in securities cases: nine in Criminal Code cases and 15 under securities legislation.
A failure to obtain a conviction in a major money laundering case
The BCSC’s success in the Dhanani case came just a few days before federal prosecutors announced that they were staying charges laid in a highly-publicized British Columbia money-laundering case.
In 2015, the RCMP launched an investigation, dubbed Project E-Pirate, into an organized crime group which officials believed was laundering money through British Columbia casinos. In 2017, the RCMP charged Silver International Investments Ltd. (Silver) and its two principals, Caixuan Qin and Jain Jun Zhu, with several offences including laundering the proceeds of crime and failing to register a money services business. According to the RCMP’s allegations, Silver took in about $1.5 million in cash deposits per day, and may have laundered over $1 billion per year in total. However, notwithstanding the severity of the allegations, on November 27, 2018, the RCMP announced that it had made a joint decision with the PPSC to stay the charges. While neither organization has indicated publicly the reasons for the stay, news reports have stated that the inadvertent disclosure of the identity of a police informant may have been one of the reasons for the decision to abandon the proceeding.
By Lawrence E. Ritchie, Geoffrey Grove and Elie Farkas, Osler