R. v. Kanagalingam
Between Her Majesty the Queen, and
Nirmalarasan Kanagalingam
Nirmalarasan Kanagalingam
[2011] O.J. No. 4553
Court File No. 012409/10
Ontario Superior Court of Justice
Oshawa, Ontario
M.L. Lack J.
Oral judgment: September 9, 2011.
Ontario Superior Court of Justice
Oshawa, Ontario
M.L. Lack J.
Oral judgment: September 9, 2011.
(37 paras.)
REASONS FOR SENTENCE
1 M.L. LACK J. (orally):-- Nirmalarasan Kanagalingam was convicted on July 13, 2011 by a jury of one count of conspiracy to commit fraud over $5,000 contrary to s. 465(1)(c) of the Criminal Code, five counts of unauthorized use of credit card data, permitting another to use, contrary to s. 342(3) of the Criminal Code, five counts of fraud over $5,000 contrary to s. 380(1)(a) of the Criminal Code, five counts of unauthorized possession of credit card data contrary to s. 342 (3) of the Criminal Code, and one count of participating in the activities of a criminal organization contrary to s. 467.11(1) of the Criminal Code. He is before me today for sentencing on these convictions.
The General Nature of the Fraud
2 These convictions all relate to Mr. Kanagalingam's participation in a debit card skimming operation targeting point-of-sale terminal pin pads. Before outlining Mr. Kanagalingam's actual participation, it is necessary to describe the nature of the operation, in general, to appreciate its organization and sophistication. The scheme involves a number of people each of whom plays one or more roles in implementing it.
3 The evidence established that first a person involved in the scheme solicits and obtains the complicity of an employee working in a commercial establishment. Thus, the scheme involves that employee's breach of his trust relationship with his employer and the employer's customers. A point-of-sale pin pad is the data-collection device through which a customer passes his or her debit card at the time of a retail purchase to make payment. After the customer keys his pin number into the device and the transaction is approved by the financial institution accessed, payment is completed. With the employee's complicity, the person involved in the illicit operation removes the pin pad from the store for a brief period of time. It is taken to a location, perhaps a hotel, where an involved party inserts a chip in it. The altered pin pad is then returned to the retail unit and plugged back in for operation. The inserted chip then records the numbers of all debit cards used in it thereafter. The altered pin pad is left in the commercial establishment to do its work for some time, usually a matter of weeks.
4 There are two ways to remove the recorded data. The old way was for an involved party to simply snatch the pin pad from the store and download the data. The new way involves using technology which allows an involved party to download the data directly to his "smart phone" without physical removal of the pin pad from the store. Either way, the collected data is ultimately processed using a computer program. An involved party can write a captured debit card account number to a blank card containing a magnetic strip, like a blank gift card. The result is that each debit card that has passed through the pin pad and been recorded can be duplicated. It remains to get the pin number. By manually reviewing the collected data the maker of the bogus card can match the pin pad number keyed into the pin pad with the account number associated with it. That pin number is written on a label and that label is affixed to the bogus debit card. It is then possible to use the bogus debit card with the pin number to access the customer's bank account.
5 The bogus debit cards are distributed among lock boxes. The boxes are secured. One box is given to each of a number of individuals. At a predetermined time and in unison, these people are texted the code to open the lock boxes. Each individual opens his box and divides the bogus cards among people known as "runners" who each take about six cards to a nearby ATM machine and raid the account of the legitimate card owner to the card limit. This is called a "fraud spend". The fraud spend must be carefully planned to take place over a coordinated, short period of time because financial institutions have now developed computer programs which can detect a "fraud spend" and shut down the withdrawals. However, it takes time for the institution's computer to detect the pattern, somewhere between fifteen minutes and half an hour, and in that time a lot of damage can be done.
6 Finally, it should be noted that at every level of the operation those involved receive a share of the funds ultimately gathered as a result of the fraud spend.
7 So, that is the general nature of a debit-card skimming operation targeting point-of-sale terminal pin pads. My summary is based on the evidence that I heard during this trial.
Mr. Kanagalingam's Participation in the Fraud
8 The charge of conspiracy to commit fraud, Count 1, relates to events centering on the taking of a pin pad from a Sunoco gas station in Whitby on about November 28, 2008. The night employee, a student, was approached seeking his complicity in a scheme to remove the pin pad from the station for a short period of time to alter it. The employee alerted police, who monitored what happened thereafter. The parties dealing with the removal were Kajenthiran Vijayakumar and Vigitharam Selvaraj. The pin pad was taken to a nearby hotel for alteration. It is obvious from the verdict that the jury found that Mr. Kanagalingam was the individual for whom these men and others waited for quite some time that evening. Mr. Kanagalingam ultimately received the pin pad and was about to compromise it when police intervened. It appears he travelled from Brampton to Whitby late that night to do the alteration. He received the pin pad from Mr. Selvaraj in direct violation of the terms of his probation, which I'll discuss in a minute. The evidence established that Mr. Kanagalingam played a key role in events. Everyone was waiting for him. On Mr. Selvaraj's agreed statement of facts, which he acknowledged under oath in Provincial Court and which the jury was entitled and, in fact, required to consider, which I am satisfied beyond a reasonable doubt the jury accepted as true, members of the organization worked under the direction of Mr. Kanagalingam. Following further investigation, Mr. Kanagalingam was charged with five counts of fraud and related offences in connection with the compromising of pin pads in the Yorkdale Guess store in the summer of 2008 and in the Woodbridge Guess store on two occasions in May 2008 and at the end of August 2008. Mithun Indrakumaran installed the pin pad at Yorkdale. It is implicit in the jury's findings of guilt that they accepted that Mr. Indrakumaran worked for Mr. Kanagalingam in doing so. Mr. Kanagalingam was "the handyman" who altered the pin pad. That was an expression used to describe him. He counselled Mr. Indrakumaran on what to do. He advised him throughout. He received the bulk of the funds from the fraud spend and he paid Mr. Indrakumaran his share when it was completed.
9 Aruncumar Ravindran was responsible for installing the pin pad at the Woodbridge store. His evidence at the preliminary hearing and at his plea of guilty, which the jury had to consider as part of the evidence at trial, established a link between Mr. Kanagalingam and the Woodbridge frauds. However, in view of the fact that the jury acquitted Mr. Kanagalingam of the charge of instructing the commission of a criminal offence for the benefit of a criminal organization, I find that the jury had a reasonable doubt that Mr. Kanagalingam directly instructed Mr. Ravindran. The particulars of the count, the instructing commission of a criminal offence for the benefit of a criminal organization, required the jury to be satisfied beyond a reasonable doubt that Mr. Kanagalingam instructed both Mr. Ravindran and Mr. Indrakumaran directly. Mr. Ravindran testified that Mr. Indrakumaran and his lawyer drew up the agreed statement of facts to which he agreed in the Provincial Court. Mr. Ravindran said that he did not give his lawyers the detail. In light of this it is difficult to know the extent to which the jury found that Mr. Kanagalingam was involved with Mr. Ravindran in the Woodbridge frauds. Therefore, for the purposes of sentencing, I am not taking the Woodbridge frauds into consideration.
The Loss and the Impact of the Frauds
10 Crown counsel filed an impact statement from Robert Fodor who is Vice President of fraud management at Interact Association, which provides ATM services across Canada. Canadians use automated banking machines extensively. Mr. Fodor wrote that in 2009 cardholders withdrew cash from automated banking machines that did not belong to their own financial institution - I think by that he meant they used ATM machines away from the bank, he's not counting when people go to the bank and use the machine at the bank. He said that away from the bank they used these machines over 244,000,000 times that year, using one of 58,217 ABMs available in the Canadian marketplace. He provided statistics that show the magnitude of the fraud problem over the period 2003 to 2009. In 2003, $44,000,000 was reimbursed to fraud victims. That represented 29,000 exploited debit cards. In 2008, reimbursement had increased to $104,000,000 reimbursed on 148,000 exploited cards. So, between 2003 and 2008 it had more than doubled. In 2009, which is the next year, reimbursement had increased to $142,000,000 reimbursed on 238,000 exploited cards. Mr. Fodor noted that the time and effort to investigate each fraud is a significant burden on his association as well as financial institutions, terminal deployers and merchants.
11 This is not a victimless crime. The impact on cardholders is significant. Money is taken directly from their bank accounts. They can be burdened in the short term with being unable to meet basic living requirements. How do you pay your rent or buy groceries when there is no money in your account? How do you pay for something, some good, that you've picked up at a store when you suddenly find that your card has been blocked because of a fraud investigation? Ultimately, the customer will be reimbursed, but that is in the long term after he or she proves that they are the victim of a fraud. And ultimately, it is the user that pays for reimbursement in the form of increased charges to insure these losses.
12 Moreover, an individual's privacy is invaded when these frauds are investigated. One only has to look at Exhibit 53 in this case, which are details of the bank's financial spreadsheet, to see the details about an individual's banking that must be publicly disclosed as part of the investigation and presentation of a case such as this. Public confidence in the banking system on which everyone relies is eroded by these frauds. Merchants' reputations are jeopardized when investigations trace these frauds back to the specific sites where an ABM has been compromised.
13 Anecdotally, the prevalence of this type of fraud could be gleaned from the jury panel. The number of potential jurors who reported that their credit or debit cards had been compromised was very surprising.
14 Focusing on the offences here, there was no actual financial loss in connection with the Whitby gas station scenario since the matter was nipped in the bud. However, the Yorkdale and two Woodbridge frauds resulted in total loss of $476,000. I am only considering Yorkdale. The Yorkdale fraud amounted to $129,775 lost.
Mr. Kanagalingam's Personal History
15 I don't think that either of the lawyers told me how old he is, but I reviewed the transcript that was made an exhibit. I deduced that he is approximately 35 years old. He came to Canada in 1991 as a refugee from Sri Lanka. He is a landed immigrant. He married in 2006. He and his wife have three children. The children are ages five, four and the youngest is a few months old. He lives with his wife in Brampton.
16 Mr. Kanagalingam has a criminal record. On May 3, 1999 he was convicted of assault causing bodily harm for which he was sentenced to six months in jail and placed on probation for three years. At the same time, he was convicted of assault with a weapon and sentenced to six months concurrent.
17 On May 13, 2002 he was convicted of attempting to use a forged credit card and given a suspended sentence and one year probation in addition to 49 days he had served in pre-sentence custody. He was also convicted of attempted possession of a forged credit card and given a suspended sentence and one year probation, concurrent.
18 On June 6, 2006 he was convicted of attempted fraud over $5,000 and received a six-month conditional sentence and three years probation in addition to six days he had served in pre-sentence custody. That sentence reflected a joint submission. The transcript from the sentencing hearing was made an exhibit in this case on sentencing and shows that the conviction relates to events that took place on December 22, 2004. Mr. Kanagalingam apparently approached an employee of a Sunoco gas station in Whitby and offered him $20,000 in cash every two weeks if he would allow him to install an attachment to the credit/debit card reader and to install a pinhole camera in the ceiling over the reader to capture personal identification numbers used in the key pad. The employee notified police. It is noteworthy that one of the terms of his probation at the time, to quote from the judge on the sentencing at page 43 of the transcript was: "You'll not possess any credit card, debit card, credit card data or document of identity not in your own personal name, and you'll not possess any blank credit card, blank debit card, devices for reading, recording or imprinting a credit card, or equipment for surreptitious video recording." So, Mr. Kanagalingam was on probation at the time he committed the offences for which he is being sentenced today. The offence for which he was on probation relates to the same kind of scheme, being set up in a similar manner to what we have here. Moreover, the offences before me are in direct violation of a specific term of his probation. In June 2006, at the time of the sentencing, Mr. Kanagalingam's counsel told the court that Mr. Kanagalingam's wife was about to give birth to their first child. He and his wife were involved in a small café business which was not doing well. They owned a house at the time. His counsel here told me that the café did not do well. The couple sold their house to his father-in-law who served as his surety on his bail on the current charges. Mr. Kanagalingam works for his father-in-law now and assists with an accounting business. Mr. Kanagalingam's wife works as a cashier at a local Tim Horton's shop in Brampton.
19 At the sentencing hearing I was provided with a letter of support for Mr. Kanagalingam from his sister attesting to his role as a caring and responsible family man and friend. A letter from the head priest at his temple was also filed. He wrote that Mr. Kanagalingam is a courteous and well-mannered member of the temple community who attends regularly with his children and helps at the temple. A letter was also filed from his father-in-law who describes him as a very obedient, loyal and respectful family member. The father-in-law acted as surety for Mr. Kanagalingam over the last two and half years and writes that there were no breaches. He writes that he would be prepared to sign a "bail-out agreement again", meaning, I believe, that he would support an arrangement to keep Mr. Kanagalingam out of jail. A letter of support was also filed authored by his wife's uncle. He also described Mr. Kanagalingam as a family-oriented person who cares dearly for his children. He believes that Mr. Kanagalingam was in the "wrong place at the wrong time".
20 Mr. Kanagalingam was arrested on the conspiracy charge, that is, the offence relating to the Whitby gas station, in November 2008. He was in custody for 10 days and released December 10, 2008. He was arrested for breaching his bail in January 2009. The term he breached was not to be out his house except in the company of his wife. His father-in-law's letter gives the impression that he fully complied with his bail. That is not correct. On April 21, 2011 he was convicted of breach of recognizance and received a $100 fine in addition to one day pre-sentence custody. On February 24, 2011 he was arrested on the charges relating to the Yorkdale and Woodbridge offences and re-released on March 2, 2011.
21 Mr. Kanagalingam has therefore been on bail since November 2008. The terms were stringent, house arrest. At one point, the Crown offered to loosen up on the terms of the bail but Mr. Kanagalingam's surety declined to agree to a change.
22 I am told that Immigration Canada has given Mr. Kanagalingam notice that it intends to deport him. I am told that once a deportation order is issued, he may appeal to the Immigration Appeal Division to stay the deportation order, but he may only do that if any term of imprisonment he receives in connection with these charges is less than two years.
The Position of the Crown on Sentencing
23 Crown counsel seeks a sentence of five years on the five counts of fraud over $5,000, that is, Counts 8 to 12, concurrent one to the other. He seeks a sentence of two years on the conspiracy to commit fraud, Count 1, concurrent to the other counts. He seeks a sentence of two years on the offence of participating in a criminal organization, Count 7. He asked that that sentence be consecutive. He seeks a sentence of six months on the possession of credit card data, Counts 13 to 17, concurrent one to the other, and consecutive to the other sentences. He concedes that sentencing on Counts 2 to 6, that is, permit use of credit card data to enable use of credit card, should be stayed on Kienapple principles in light of Counts 13 to 17. He also asks that a DNA order be made under s. 467.11(2) since Mr. Kanagalingam has been found guilty of a primary designated offence under s. 487.03. He asks that Mr. Kanagalingam be ordered to serve half of his sentence to obtain parole eligibility given the conviction under s. 467.11(1) which is what happens presumptively by virtue of s. 746.6(1.2). He also seeks a restitution order of $100,000 under s. 738(1)(a) payable $20,000 to each of the financial institutions which were defrauded.
The Position of the Defence on Sentencing
24 The defence concedes that a conditional sentence is probably not appropriate here in light of the fact that Mr. Kanagalingam was previously given a conditional sentence for a cognate offence. Defence counsel asks me to consider Mr. Kanagalingam's immigration status and consider a sentence of two years less a day so to preserve his immigration appeal rights. However, if that is not appropriate defence counsel submits that the appropriate sentence is in the range of three to three and half years globally. There is no issue that the requested DNA order should issue. Defence counsel takes exception to the ancillary orders requested, namely those relating to parole eligibility and restitution.
The Aggravating and Mitigating Circumstances
25 These are serious offences. The Yorkdale fraud occasioned a substantial loss and the Whitby conspiracy had the potential to have occasioned a substantial loss if carried out. By that I mean if the fraud had been carried out. I have already mentioned the serious impact these offences have on the community. Mr. Kanagalingam's record is an aggravating circumstance. It shows convictions on two previous occasions for cognate offences. Moreover, it shows that at the time that the offences at issue in this proceeding were committed, Mr. Kanagalingam was on probation for a cognate offence and these offences before the Court here were in direct violation of the terms of his probation. His track record shows that he is at great risk to re-offend as his prior involvement with the criminal justice system shows. The fact that these offences were committed as part of a criminal organization with a number of people working together is a serious aggravating factor. The involvement in Yorkdale followed by the involvement in Whitby over the time periods here is an aggravating factor, two times, two locations in other words. These were not impulse crimes, but were planned, deliberate and show a high level of organization, sophistication and skill on Mr. Kanagalingam's part. He has a high level of knowledge and expertise. He was one of the masterminds of what took place. These are crimes that are motivated by greed, pure and simple.
26 Mr. Kanagalingam's attachment to his family and his family responsibilities are mitigating circumstances. However, I note that he had family responsibilities at the time of his last conviction. He appreciated those responsibilities then. He acted the way he did in spite of them and with the birth of two children since he has added to those responsibilities despite his knowledge that he was putting himself and his family in jeopardy with his actions.
The Sentencing Objectives
27 The case law establishes that the primary objectives in sentencing an offender for fraud and related offences on the scale that took place here are denunciation and specific and general deterrence. The sentence should reflect society's aversion to these crimes. The public in general is vulnerable to them and needs to be protected from these crimes. Mr. Kanagalingam must be specifically deterred from committing such crimes again. Other like-minded individuals must also be discouraged from committing such crimes. The financial rewards associated with these crimes are great. These crimes are rampant today. The offenders are difficult to detect. The crimes are difficult to investigate and to prosecute.
The General Range of Sentence
28 The case law establishes that in the case of relatively large frauds a sentence in the range of three to five years is appropriate. However, in this case the accused has a cognate record. There is the Whitby conspiracy and the Yorkdale fraud to consider, two separate factual scenarios committed at different times and places, and the added component of group activity and the involvement of a criminal organization.
Deportation
29 Mr. Kanagalingam will likely be ordered deported. In dealing with him, I must take into consideration that if he were sentenced to a term longer than two years less a day, he will not be able to appeal his deportation. In R. v. Hamilton and Mason, (2004), 71 O.R. (3d) 1, Doherty, J.A. of the Ontario Court of Appeal, wrote that there is room for consideration of the potentially added risk of deportation in appropriate cases.
30 When I balance the mitigating and aggravating factors in Mr. Kanagalingam's case, the nature and scale of his offences, his participation in them, and the need for denunciation and deterrence, taking into account the sentence that others received in connection with charges arising from these events, and particularly here I'm talking about Mr. Selvarj, I conclude that a sentence of two years less a day would negatively impact on the broader interests of the community, which I have tried to identify here, including the need to protect the community from these types of offences by deterring potential offenders. It would also offend the community's expectation that similar punishment be meted out to similar offenders for similar crimes.
House Arrest
31 I have also taken into account that Mr. Kanagalingam has been on stringent bail conditions since his arrest. However, I note that he has been charged and convicted of failing to comply with a provision of his bail. To a large degree that ameliorates the mitigating aspect of the regulation.
Conclusion
32 In all of the circumstances, I find that the appropriate sentence on Counts 8 to 12, the convictions for fraud over $5,000, is 4 years, concurrent one to the other. The appropriate sentence on Count 1, that is, the conviction for conspiracy to commit fraud is two years. That should run concurrent to the other penalties. On the conviction of Count 7, participating in the activities of the criminal organization the appropriate sentence is two years to run consecutive to the other penalty. On the convictions on Counts 13 to 17, for possession of credit card data, the appropriate sentence is 6 months, but I am going to reduce that to "time served" to take into account the approximate ten to twenty days of pre-trial custody that Mr. Kanagalingam served, as well to take into account that he has been in custody since he was convicted by the jury, and as well to recognize his stringent bail terms. In the result, the total sentence is six years.
33 Sentencing on Counts 2 to 6, permit use of credit card data to enable use of credit card, shall be conditionally stayed on Kienapple principles in light of Counts 13 to 17.
34 A DNA order shall go in accordance with s. 467.11(1) since Mr. Kanagalingam has been found guilty of a primary designated offence under s. 487.03.
35 I am not satisfied, having regard to the commission of the offence, the character and circumstance of the offender and the expression of society's denunciation of the offence that the objectives of specific and general deterrence can be satisfied by a period of parole ineligibility determined in accordance with the Corrections and Conditional Release Act and therefore in accordance with s. 743.6(1.2) of the Criminal Code, Mr. Kanagalingam must serve one half of his sentence on Count 7 before he is released on full parole.
36 Now, the question of the restitution order. I am of the view that this is an appropriate case for a restitution order. As I said, the motivation here was greed, pure and simple. The amount involved in the Yorkdale fraud was $129,775. There is no evidence of Mr. Kanagalingam's ability to pay a restitution order. However, there is also no evidence about what he did with the money. We know that number of people shared in the funds. As I understood the evidence roughly half of it is used to pay others. Taking that into consideration on the issue of Mr. Kanagalingam's ability to pay, I make an order for restitution of $50,000 under s. 738(1)(a) payable $10,000 to each of the five financial institutions which were defrauded.
37 Those are my reasons on sentencing.
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