stages of fraud during project life cycle red flags

Transcription

1 Index adjudication process 97 adjournments American civil procedure applications burden of persuasion burden of production Canadian criminal procedure case in reply 118 circumstantial evidence of guilty mind/intentional deception civil action claim, third party 106, 127 class actions 112 closing arguments 118 conduct of trial 123 crime-fraud exception to privilege criminal prosecution for fraud cross-examination defendant s case 117 discovery plan discovery process English civil procedure examination for discovery 107 examination in chief exclusion of witnesses 113 implications indictable offences 101 insurance policies as admissible evidence 125 lawyer/client privilege 124 modus operandi 123 motions in limine opening statements plaintiff s case 117 pre-enquete hearings private prosecutions re-direct settlement privilege summary convictions 101 testifying, tips on testifying as expert trial judge s decision trial record 125 voir dire 114 appendices applying and ranking inculpatory and exculpatory factors bankruptcy duties and offences black ops top 20 checklist Canadian criminal procedure vs. civil procedure 135 case of fraud and similar offences claiming loss of profits in fraud case

2 1488 Index conflict of interest checklist construction fraud data analytics criminal fraud and similar offences e-trial checklist find arson before you look for arsonist 1393 FINTRAC s red flags of suspicious transactions forensic investigator s testimony at trial group ranking and inconsistent rankings impeachment checklist 134 interviewing suspect and other witnesses metadata and s methods of tracing using example new tort of invasion of privacy piercing corporate veil police checklist information police need for filing complaint of fraud 947 questions for examination of personal debtor tracing and banking system typical case involving pro rata sharing of funds verification method victim impact statements 948 witness statements arson investigations, see insurance fraud and arson investigations Big Data Analytics, big financial institutions and big money fraud litigation 1399 Big Data Analytics explained financial institutions and , fraud detection and how it works credit cards customer s right to privacy 1419 protection by banks steps in Big Data Analytics identify risks of loss and moral hazards in network identify stakeholders understand information and liability flow within network understand limitations of construction fraud 1139 construction pyramid fraud audit of bidding process bid process closing out project construction contract administration stage management and employee fraud management fraud in procurement process discretionary clause 1141 duty of fairness procurement process bid bond bid contract 1140 call for tender construction contract 1140 response to tender 1140

3 stages of fraud during project life cycle red flags Index 1489 conveyances, see insolvency fraud, fraudulent conveyances and tracing Criminal Code and planning fraud engagement 815 actus reus 821, advance fee scams 820 aiding and abetting fraud attempted fraud authority apparent 861 ostensible 861 bona fide purchaser 884 bribery 832, 836, , 885 burden of proof 834 Canada Evidence Act, s. 5(2) 883 civil fraud , 874, , 916 civil litigation as investigatory tool implied undertaking rule no stay of civil case pending completion of criminal proceeding commercial dishonesty 816 common pecuniary fraud 833 compensating victims of fraud disclosure of Crown Brief res judicata and prior criminal conviction restitution, forfeitures and recovering property conflicts of interest and bribery of domestic and foreign officials constructive fraud under civil and penal statutes full disclosure and franchisee full disclosure and securities legislation corporate fraud 815 credit card checks and invasion of privacy credit card fraud 818, 825, 881 Criminal Code provisions criminal fraud , 836, 874, 892, 912 criminal organizations disclosure 838, , material change , 867, 870 Disclosure Document discovery rules due diligence 882 evidence gathering absolute liability offences aiding and abetting 838, Canada Evidence Act, s Canadian Charter of Rights and Freedoms, s , , 1062 directing mind of corporation 890, identification doctrine smurfing 887 extortion and compounding false document 819, forensic investigation forfeiture order 903

4 1490 Index forgery franchisors gathering evidence conspiracy to commit fraud 827, hearsay evidence 905 management fraud , 891, 900 indemnification indictable offence 826, 840, , 881, 885 insider, reporting 863 mail fraud 815, 816, mens rea 821, 894 misuse of criminal law money laundering 867, embezzlement 885 mortgage 885 shell companies 884 smuggling 884 negligence 882 planning fraud investigation pretexting professional investigation recovery of assets re-litigation 910 new evidence 910 requisite intention for fraud restitution order 819 restrictive (non-competition) covenant 871 secret profits 862 sentencing , 892, special relationships 867 summary conviction 843, 877, 881 tipping torts 879 witness cooperation blow it up 888 rain down day-to-day practice of forensic investigator 1121 client interview engagement acceptance considerations assistance throughout litigation process 1127 conflicts of interest 1127 fees 1127 independence and objectivity 1127 quality and competence timing and staffing considerations 1128 engagement letter notes of initial meeting obtaining information from client Personal Information Protection and Electronic Documents Act 1124 performance of engagement defending fraud claims 1167 abuse of process 1186

5 black arts 1167 black ops blame others blaming victim 1168 burden of proof 1177 challenging plaintiff s claim to privilege correctness 1179 cross-border issues 1178 discoveries and undertakings 1193 discovery plan entrapment 1198 ex turpi causa 1168, expert witness, suing fault foreign judgment procured by fraud fraudulent concealment 1170 fraudulent conveyances improper inducement improper purpose , innocence at stake test jurisdiction justice system 1167 knowing assistance or receipt 1171 laches 1169 limitation periods motion for particulars motions for security for costs 1189 Ontario s Limitations Act, s pre-trial conferences presumption of regularity principles of proportionality 1191 procedural fraud production motions scope striking pleadings suspect as expert witness 1196 evidence expert, see expert evidence in litigation process privilege, see privilege rules of, see fraud investigations and rules of evidence examination in aid of execution 715 admissibility apportionment of liability contempt order 723 debtor 715 examination of finances examination of third parties intentional misconduct 725 jury 720, 729 net worth analysis property held in trust 722 property transferred prior to judgment 716 Index 1491

6 1492 Index questions asked on examinations in aid of execution releases res judicata and subsequent lawsuits rules of privilege 717 tax evasion 720 void trust expert evidence in litigation process 769 conflict of interest 805 contingency fees and objectivity cross-examination expert evidence expert opinion evidence expert testimony , , 779, 796, forensic standards impartiality , 792 introducing expert evidence at trial expert s curriculum vitae expert s report 806 fraud engagement rejection of expert evidence 793 jury , 774, , , motions in limine negative judicial comments objectivity and expert witness order for experts to meet and confer pre-trial conferences 117, , 812, primary facts 776, 796, privilege and expert s report qualifications of experts , rejection of expert testimony relevance 771 reliability role of expert witness scope of expert testimony trier of fact necessity in assisting 772 proper inferences 776, 807 who can be expert forensic investigation as science 1219 Anton Piller order 1229 audit evidence auditing process Canadian Institute of Chartered Accountants 1219 checklist to successful engagement conducting investigation with due care 1235 disclosure 1234 forensic examination 1228 freeze and formulate phase investigation phase 1223 pre-engagement and planning procedure phase 1222 rejecting evidence 1229 reporting and wrap-up phase 1223

7 sales and collection cycle systematic evidence gathering tax evasion 1234 Index 1493 forensic investigator forensic, meaning of 1-2 forensic investigator 1-2 forensic team practice of, see day-to-day practice of forensic investigator professional obligations and liabilities of, see professional obligations and liabilities of investigator fraud arson, see insurance fraud and arson investigations construction, see construction fraud conveyances, see insolvency fraud, fraudulent conveyances and tracing criminal, see Criminal Code and planning fraud investigation financial institutions, see Big Data Analytics, big financial institutions and big money fraud litigation insolvency, see insolvency fraud, fraudulent conveyances and tracing insurance, see insurance fraud and arson investigations law of, see law of fraud social media, see social media investigations and law of privacy tracing, see insolvency fraud, fraudulent conveyances and tracing fraud investigations and rules of evidence 1077 affidavit evidence 1085, , 1106 apology burden of proof business records rule chain of custody circumstantial evidence civil proceedings balance of probabilities onus, reverse onus of proof 1077 co-conspirator s exception to hearsay rule criminal litigation beyond reasonable doubt 1077 proving guilt 1077 document preservation documents in possession doctrine evidence obtained in contravention of Charter hearsay inadmissibility provisions 1096 personal information Personal Information Protection and Electronic Documents Act prior consistent statements 1113 proving fraud real and demonstrative evidence 1078, 1105 red flags , 1090, 1094 remorseful fraudster requests to admit right to remain silent

8 1494 Index rules of evidence, primer on credibility hearsay evidence similar fact evidence standard of proof use of evidence from civil procedure in criminal trial voluminous records rule fraudulent transfers, see insolvency fraud, fraudulent conveyances and tracing insolvency fraud, fraudulent conveyances and tracing 551 assignments and preference back tracing 598, 613 bankruptcy , bona fide purchaser assignments and preferences fraudulent conveyances mortgage fraud 648, mortgagee tracing , , , , , , , 618, 620, 634, , 673 Bulk Sales Act 663 claim, equitable 557, 584, , , 636, claiming rules, summary of clawback tracing mixed funds pyramid and Ponzi schemes competing victims claims constructive trust 583, , 622 breach 583, 594, 612 equitable tracing claim 585, 594, 621, 644 fictitious payee 679 fictitious person , following assets 586 fraudster s estate fraudulent conveyances and preferences Fraudulent Conveyances Act , , 591, 642 fraudulent instrument , fraudulent misrepresentation , , 638, 649 good faith purchaser 556 good title 586, , 592, 603, 621, , , 657 mortgage fraud , 670 indefeasibility of title indoor management rule 648 initial bankruptcy event 565, , 645 innocent purchaser 561, 642 insolvency 623 insolvency fraud insolvent person 558, , 572, 623 kiting 679 knowing receipt claims , 644 Land Titles Act , law of tracing, original assets , , 620 matrimonial litigation

9 mixed trust account 595, 672 nemo dat and land titles legislation nemo dat principle , personal accounts , 686 phoenix company preferences under Bankruptcy and Insolvency Act arm s length, meaning of Bankruptcy and Insolvency Act, s. 95(1) 565 evidence of pressure vs. diligent creditor forcing sound business decision 568 generally preference rules summarized proof of fraud three months/12 months start 566 trustee in bankruptcy, role of proprietary remedy registered owners 648, replacement exception to tracing 599 role of bank rules for following assets 588 subrogation substitute assets tracing checklist tracing claims , tracing money used to discharge fraudster s debt tracing principles transfers at undervalue , 629 trust account , 628, , value fraud voidable title 637 wilful blindness , , 628, 683 insurance fraud and arson investigations 1345 arson for profit arson experts , arson investigation gone awry investigating arson need for transparency arson as exemplar for civil fraud behavioural red flags , civil fraud situational red flags usual suspects insurance bases or premises 1347 insurance risk loss reserves insurance fraud investigations as science, see forensic investigation as science litigation process as part of, see litigation process as part of investigation public, see public investigations law of fraud 29 actual fraud 38-39, 43-45, 73 Index 1495

10 1496 Index actus reus amber lights arm s-length relationships 43 breach of confidence 70 breach of fiduciary duty caveat emptor churning 87 Competition Act constructive fraud 38-39, 43-45, 73 Consumer Protection Act corporate veil Criminal Code deceit 48-51, definition 30-31, determining fraud disclosure domestic rules, understanding 5-10 duty of director 72 employee fraud employee s duty 64-65, employment contract exemption, private company fiduciary relationship 44, 56, firing employee fraudulent misrepresentation 48, fundamental breach of contract 63, 65, 68 good faith 43-44, 61 implications of alleging fraud 63, 96 insider trading insurance Land Registration Reform Act 45 management fraud mens rea negligent misrepresentation 48-51, non-disclosure 46 Ontario s Business Corporations Act, s Ontario s Securities Act 78-81, 85, 87 oppression remedy oppressive conduct participating in fraud pleading fraud proposals red flags 13-27, 92 repudiation securities legislation shares and stocks 79 significance of finding fraud (fraus omnia corrumpit) special contracts 36 taxonomy of fraud (fraud tree) 2-5 unconscionable conduct unequal relationships voidable contract why allege fraud working definition 37-39

11 Index 1497 litigation process as part of investigation, see litigation process as part of investigation criminal, see Criminal Code and planning fraud investigation defending fraud claims, see defending fraud claims examination in aid of execution, see examination in aid of execution expert evidence, see expert evidence in litigation process rules of evidence, see fraud investigations and rules of evidence litigation process as part of investigation 283 ambush at trial, preventing best evidence rule 365, 367, 1128 Certified Forensic Investigators 286 Certified Fraud Examiners 286 changes in rules of court changing investigator s role discovery process , , , e-discovery compared with computer forensics and data e-discovery compared with computer forensics in fraud case IT process during e-discovery and fraud investigation draft reports examinations for discovery bifurcation to avoid discovery challenging opposing experts, investigator s role in 357 critically evaluating expert opinions discovery of relevant facts in privileged documents 355 finding witnesses generally expert opinion, credibility , 360, expert witness, role of affidavits on motions and applications applications and motions combining civil and criminal proceedings effect of criminal charge, conviction or acquittal generally investigators and criminal proceedings litigation as final stage of pre-trial investigation motions for summary judgment parties to litigation using courts to get evidence from non-parties experts of deceit, perils of investigators acting as forensic science hard drives, production of investigations after trial 375 investigators assisting legal counsel 363 negligent investigation 284 standard of care witch hunt investigation lessons learned peer review strategies for avoiding investigative failures trial and admissibility of evidence kind of evidence sought by investigator trial as final stage of investigation using suspect s evidence against him at trial 368

12 1498 Index weighing evidence tunnel vision, whether inevitable post-judgment remedies 693 bankruptcy offences contempt of court contempt on examination in aid of execution 706 equitable receiver examination by trustee in bankruptcy examination in aid of execution exempt assets 705 garnishment , Mareva injunction Quistclose trust 702 seizure 693, terminating retainer 702 practice of forensic investigator, see day-to-day practice of forensic investigator precedents affidavit affidavit in support of DAGG motion affidavit in support of Mareva motion alternative form from Bank of Montreal v. Misir Anton Piller affidavit Anton Piller notice of motion Anton Piller order application for management order application for restraint order bank account BIA and Courts of Justice Act court-ordered receiver Canada Revenue Agency jeopardy order Charter warnings by regulatory investigators 1075 DAGG notice of motion employee conflict of interest policy endorsement of warrant 964 engagement letter Feeney warrant to enter dwelling house full and final release general warrant to search under s of Criminal Code information 139 information to obtain Feeney warrant information to obtain production order John Doe rolling Anton Piller order launching private prosecution management order 951 Mareva injunction Mareva notice of motion minutes of settlement Norwich notice of motion Norwich order notice of examination in aid of execution notice of motion notice of motion for Mareva injunction order for equitable receiver from Daniels v. Daniels order on DAGG motion

13 production order production order for financial or commercial information relinquishment of interest 965 social media preservation letter opposing party social media preservation letter third parties statement of claim supplier code of conduct for hospital telewarrant to search 963 pre-judgment remedies 141 absconding debtors legislation affidavit Anton Piller order 141, assets, dissipation of 60, 179, 206 Bank Act freeze certificate of pending litigation civil litigation 141 possession rolling orders 159 civil procedure hearings ex parte 143 on notice 143 rights equitable legal writ of attachment , writ of execution 144 writ of garnishment 144 comparing pre-judgment remedies confidentiality orders court-ordered receiver criminal procedure documentation 142 search warrant cross-border issues discovery in aid of injunctive relief equity 201 equitable bills of discovery ex parte proceedings family law and fraud investigations equalization payment 147 fraudulent conveyances 206 freezing order inspection orders interim injunction interim mandatory order interim preservation of personal property interlocutory injunction jeopardy order , Mareva injunction , , , 214, motion record 152, , 203 Norwich orders , oppression, costs of investigating 150 Index 1499

14 1500 Index replevin order 146, stealing a march on court tracing order wire transfer 247, 254, 268 writs of attachment privacy, law of, see social media investigations and law of privacy privilege 983 bankruptcy confidential communications 993, legal professional privilege and meaning of confidential 1002 confidentiality 1008 contributory negligence 1017 crime-fraud exception , , 1024, , disclosure 1025 exceptions 1021, 1024 forensic accountants how privilege affects practice, discovery of evidence , forensic investigation and privilege forfeiture general rule 1014 implied undertaking rule law of privilege , discovery of evidence types of privilege 989 legal professional privilege ambit of checklist common interest privilege confidential communications and crime-fraud exception , intentional wrongdoing , 1021, 1027 joint clients , 1009, 1015, 1037 joint interest privilege legal advisor for purpose of limits of 993 reasons for rule receivers and trustees in bankruptcy rules of litigation privilege , 1028 patents 994, 1034 privilege claims 986, 1031 public interest reasonable prospect of litigation 1016 selective waiver settlement privilege 987, solicitor-client privilege 985 spousal privilege suing personally, importance of tort of conspiracy 1029, 1031 waiver 1008,

15 Index 1501 professional obligations and liabilities of investigator 1239 causation 1281 Charter remedies damage awards definition of profession distress 1279, 1323 duty of care , 1267, 1279, ethical conduct, standards and codes of 1262 exculpatory evidence 1275, 1282, 1305, 1319, 1321 fiduciary duty gross negligence , 1273 identification evidence , 1316 inadmissible evidence 1284, , 1319, 1320, 1321 investigator s opinion 1305, 1307 lie detection, scientific approaches to behavioural red flags bias in lie detection process confessions, techniques to obtain criteria-based content analysis fabricated evidence, use of forensic linguistics inadmissible evidence, use of , kinesic interviewing neuro-linguistic programming polygraph evidence statement validity analysis malicious prosecution , 1282, 1301, 1323, 1326, 1332, 1334, 1342 negligent investigation addressing problems with bad faith birth of tort Charter remedies and damage awards factors 1320 importance of private investigator and police discretion private investigators , 1274, 1318, , 1335, 1344 professional, implications of being 1257 professional liability of investigators 1265 professionalism, standard of common practice decision making under uncertainty findings of credibility new model systematic approach to advising client in fraud case 1240 use and misuse of expected value 1241 witness credibility analysis profiling standard of care , 1280 successful claims who can sue for professional malpractice wrongful convictions 1270, 1272, 1340,

16 1502 Index public investigations 1041 absolute liability actus reus 1053, 1055, 1057 audit triggers or risks audits 1047 Canadian Charter of Rights and Freedoms, s case study confessions rule cross-border investigations Crown agent fraud investigations 1047 gathering evidence, Charter consequences 1051 identification doctrine , 1056 interrogation and Charter rights investigator, internal auditor 1043 Jarvis factors 1048, , mens rea 1053, Ontario s Evidence Act, s person in authority private sector investigations 1071 prosecution for tax evasion public inquiries public interest 1057 gravity of incident 1057 regulatory investigation 1043, , right of silence rules of evidence 1041, 1078, 1085, 1099, 1120 strict liability 1055 strict liability offences tax evasion remedies obtained at trial, see remedies obtained at trial post-judgment, see post-judgment remedies pre-judgment, see pre-judgment remedies remedies obtained at trial 381 affirming contract auditor s negligence banks, liability of bona fide purchaser 420, 441, , 479, 483, 490 choice of remedy claims between fraudsters 522 clawbacks compensatory damages 395, 420, 424, 452, constructive trust 416, criminal rate of interest 460 cross-border considerations Crown s post-judgment remedies damages actual losses 386 aggravated damages 395, at common law award of damages 386, 440,

17 Index 1503 constructive fraud exemplary damages 395, expectation damages , 391 gaps in evidence/costs of investigation general damages innocent parties 386, , loss of profits , 416, 436, calculating loss of profits 388 primer on damages reliance 388 rescission restitutionary damages , 459 special rules unjust enrichment 418 variable costs 387, , deductions betterment 397 foreseeability principle mitigation principle 396 disgorgement calculations doctrine of election 435 electing between damages and disgorgement of profits equitable compensation equitable remedy accounting for profits constructive trust , 425, 465, , 488, 544 differential/direct costs differential or comparative profits direct and indirect costs 427, full/absorption costs waiver of tort 421, 423, 426 fidelity bonds fiduciary duty fraudulent inducement 390, , 401 fraudulent misrepresentation , 415, , imputing income family law generally 442 imputing income for shareholders income tax law net worth method injunctions insurance policies interest rate joint liability and conspiracy knowing assistance , knowing receipt , lawyer s negligence legal costs mandatory orders misappropriated revenue 427 personal liability , 481, 490, 517, piercing corporate veil 42-43, 490, proceeds of unlawful activity 439, 471

18 1504 Index punitive damages restitution order resulting trust royalty rate secured creditors 423, 487 solidary liability 519 specific performance 441, subrogation taxation and damages tort, void contract 386 trustee in bankruptcy, role of vicarious liability 440, winding up order social media investigations and law of privacy 1435 criminal law, reasonable expectation of privacy and new technology privacy, lawyers and social media investigators confidentiality of information 1453 deceptive or misleading conduct pretexting 1456 prohibition on contacting party represented by counsel truthfulness in statements to others privacy, social media and civil litigation privacy, workplace computer and Internet use privacy legislation in Canada Personal Information Protection and Electronic Documents Act social media evidence social media investigations 1435 social media monitoring tools websites tracing, see insolvency fraud, fraudulent conveyances and tracing transfers, see insolvency fraud, fraudulent conveyances and tracing