Employee’s Silence about Fraud Leads to $20 Million Civil Judgment for Employer |
A recent decision from the Ontario Superior Court demonstrates the overlap between civil and criminal findings, and how an employer can use a criminal verdict to recover additional damages in a civil claim. In Atlas Copco Canada Inc. v. David Hillier 2018 ONSC 1558, rendered March 7, 2018, an employer “piggybacked” off of a criminal court decision to recover an additional $20 million from an ex-senior employee who accepted payments and benefits in return for allowing a fraud to continue.
This decision highlights an employer’s possible options for fraud recovery, as well as the steep costs for employees of participating in fraudulent schemes. Background – $1.5 million for Criminal Fraud The employee, Dirk Plate, was the General Manager of Atlas Copco Canada Inc.’s Construction and Mining Canada (“CMT”) division, and later became its Vice President, Global Strategic Customers. At his criminal trial, Mr. Plate was convicted of defrauding Atlas while in the CMT division and was ordered to pay $77,930 in restitution relating to two payments of fraudulently obtained funds, and to return certain annuities valued at approximately $1.44 million. In his decision, the sentencing judge found that Mr. Plate “was not as central” in the scheme as he joined it while it was already in place. While his participation was a great assist to the scheme and helped prevent it from being detected, the fraud was capable of being carried on without him. |
Decision – Additional $20 million for Breach of Fiduciary Duty
Here are the key findings from the decision:
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Breach of fiduciary duty: Justice Dunphy was satisfied, based on the criminal sentencing decision, that Mr. Plate was a fiduciary of Atlas and that his passive acquiescence in the face of a fraudulent scheme was a breach of his duties, particularly since he also accepted benefits and payments in exchange for his silence.Ultimately, Justice Dunphy concluded that there was insufficient evidence of civil conspiracy and civil fraud – other than the fraud relating to the annuities and two cheques, which were already covered by the criminal restitution order. However, Atlas proved that Mr. Plate had breached his fiduciary duties by failing to stop the fraudulent scheme.
Despite his lesser involvement in the fraudulent scheme, Justice Dunphy concluded that Mr. Plate was responsible for all losses that Atlas had suffered as a result of Mr. Plate looking the other way – including losses that arose after he had been promoted out of the CMT division. Therefore, Mr. Plate was liable for almost $23 million in damages, less any “double recovery” relating to the criminal restitution order and amounts recovered from the other former employees. Since no amounts had yet been recovered from the other employees, Justice Dunphy ordered Mr. Plate to pay $20 million to Atlas and ordered Atlas to update Mr. Plate regarding any amounts that it recovered in the future. Key Takeaways
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