R. v. Watts - OnSCt: Co-founder of Fiscal Arbitrators sentenced to 6 years in prison for fraud

R. v. Watts - OnSCt:  Co-founder of Fiscal Arbitrators sentenced to 6 years in prison for fraud


R.v. Watts ( June 6, 2006 - 2016 ONSC 4843 CanLII, Bale J.).

Précis:   Mr. Watts and his cousin were the co-founders of Fiscal Arbitrators.  Many Fiscal Arbitrators cases have been blogged on this site.  It was simply a scheme to have taxpayer claim large tax refunds as a result of bogus business losses.  Fate caught up to Mr. Watts and he was found guilty of fraud and sentenced to 6 years in prison.

Decision:   Oddly enough Mr. Watts did not earn a great deal from perpetrating a very large fraud:

[1]               Following a twenty-three-day jury trial, Lawrence Watts was found guilty of one count of fraud, in an amount exceeding $5,000, contrary to section 380(1)(a) of the Criminal Code. The charge arose from the preparation, by the offender, of one or more income tax returns for 241 Canadian taxpayers. In each case, a non-existent business loss, of a non-existent business, was reported which had the effect of extinguishing the taxpayer’s tax liability for the then current, and three previous years. This resulted in a claim for a refund of all of the tax paid in the three previous years, and of the money withheld at source by their employers for the then current year. The taxpayers who testified at trial gave evidence that they had not carried on a business, or incurred the losses reported on their returns, had not suggested to Watts that they had incurred losses, and did not know where the numbers on their returns had come from.

[2]               The total amount of federal tax revenue that would have been lost had all of the returns been assessed as filed was $10,507,131, based upon the reporting of $64,253,889 of non-existent losses. However, at some point, Canada Revenue Agency caught on to the scheme and began to disallow the refund claims. The actual amount paid out in federal tax refunds, or otherwise credited to the taxpayers’ federal tax accounts, was $2,750,288

[3]               In preparing the tax returns, Mr. Watts used the business name “Fiscal Arbitrators”. For his services, the taxpayers were charged twenty per cent of the tax refunds, or credits, received from CRA. Documents seized from Watts’ office showed projected revenue of $1,902,227.

[4]               Pursuant to an admission made by Mr. Watts under section 655 of the Code, the parties agreed that the total amount received by Fiscal Arbitrators was $545,401.92, that after payments to agents and promoters, a sum of $298,256.21 remained, that the remaining amount was split between Watts and a partner, Carlton Branch, all with the result that the personal benefit to Watts was $149,128.11.

His sentence however was quite substantial:

Lawrence Watts – you were found guilty, by a jury, of defrauding the Government of Canada, in an amount exceeding $5,000. On that conviction, and for the reasons given, I sentence you to serve six years in federal penitentiary. In addition, you will pay a fine in lieu of forfeiture, in the amount of $149,129.11, of which $100,000 will be paid no later than June 16, 2016, and the remaining $49,129.11 will be paid no later than June 6, 2019. In default of payment of the fine, you will serve an additional two years, to be served consecutively to the six-year term, and to any other term of imprisonment that you are then serving.