Mpamugo v. R. - TCC: Fraudster’s claim that he never received reassessments for $6.8M rejected

Mpamugo v. R. - TCC:  Fraudster’s claim that he never received reassessments for $6.8M rejected

http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/180728/index.do

Mpamugo v.The Queen (September 28, 2016 – 2016 TCC 215, Graham J.).

Précis:  Mr. Mpamugo was convicted and imprisoned for several years for running a fraudulent scheme to permit non-students to obtain student loans.  CRA reassessed him in connection with the scheme for $6.8 million over the period from 1998 to 1999.  He filed appeals with the Tax Court.  CRA moved to dismiss the appeals on the basis that no notices of objection had ever been filed.  Mr. Mpamugo moved to quash his own appeals on the basis that he had never received the notices of reassessment.  The Court accepted CRA’s evidence that the reassessments had been mailed to Mr. Mpamugo and dismissed the appeals.  Costs were awarded to CRA with the parties given 30 days to make submissions on quantum.

Decision:   Mr. Mpamugo was, to say the least, a colourful character:

[4]             In 1998 and 1999, Mr. Mpamugo ran a college in Ontario through a company known as Marygold Technologies Incorporated. The college recruited a large number of “students” and assisted those individuals in falsely applying for student loans through the Ontario Student Assistance Program (“OSAP”). In 2004, Mr. Mpamugo was convicted of fraud in respect of those student loans. In simple terms, the Court found that Mr. Mpamugo fraudulently obtained OSAP funding for students who did not actually attend the college. Mr. Mpamugo was also convicted of obstruction of justice for creating false documents after the fraud investigation had begun. Mr. Mpamugo was ultimately sentenced to six and a half years in jail and ordered to pay $5,700,000 in restitution payments.

[5]             The Minister claims to have reassessed Mr. Mpamugo’s 1998 to 2002 tax years. The alleged 1998 and 1999 reassessments together assess approximately $6.8M in additional income. The reassessments mostly appear to relate to income that the Minister alleges Mr. Mpamugo received from the fraud or from Marygold. The alleged 2000 to 2002 reassessments appear to have been for relatively small amounts. I say “appear” in the previous sentences because the Minister has not yet filed a Reply so I do not know the assumptions of fact on which the alleged reassessments were based. Related assessments were issued to Mr. Mpamugo’s wife, son and daughter under subsection 160(1).

[Footnotes omitted]

He claimed never to have received the reassessments in question but his evidence was met with considerable skepticism:

[41]        I note in passing that Mr. Mpamugo’s unbelievable claim that he changed his address was not even a good explanation of why he would not have received the Notices of Reassessment. As it turns out, Mr. Mpamugo was not actually in jail on any of the dates that the Minister asserts the Notices of Reassessment were mailed. On each of the dates that the Minister asserts that she issued the Notices of Reassessment, Mr. Mpamugo was either out on bail or out on parole. In either case, he was living at home.

[42]        In summary, based on Mr. Mpamugo’s lack of credibility, I find that he did not change his address with the CRA in the years in question.

[Footnote omitted]

While the evidence of CRA was not ideal it was sufficient:

[52]        In previous cases where the Court has concluded that the Minister has failed to prove mailing, the Minister either had no evidence of mailing or the Minister’s weak evidence was outweighed by the taxpayer’s credible testimony that he or she did not receive the Notice in question. That is not the case here. The evidence before me is neither fulsome nor ideal but it is the evidence that I am left with and the evidence upon which I must decide whether the Notices of Reassessment were mailed. As set out above, the Crown need only prove that that it is more likely than not that the Notices were mailed. Faced with weak evidence that the Notices were mailed, no credible evidence that they were not received and an extremely low probability that none of them was mailed, I find that it is more likely than not that they were indeed mailed.

Costs were awarded to the Crown:

[56]        Costs are awarded to the Respondent. It is my hope that the parties will reach an agreement on costs. If they do not, they shall have 30 days from the date of this Judgment to make submissions on costs to me. In attempting to reach an agreement, I suggest that Mr. Mpamugo keep in mind my comments in paragraph 15 above.

The reference to paragraph 15 is salutary:

[15]        The Crown suggests that the Minister should not be put to the expense of having to prove mailing if the Court finds the taxpayer’s assertion to lack credibility and that that expense can be avoided if credibility is determined at Step 1. If, in a given case, the Crown thinks that a taxpayer’s unbelievable assertion has wasted the Crown’s and the Court’s time and was simply based on the hope that the Crown might no longer have the records needed to prove mailing, the Crown may seek a higher award of costs.