Toronto-area lawyer cleared of money-laundering charges
A 75-year-old Toronto-area lawyer has been acquitted of all charges that he helped launder more than $3-million in proceeds from a client’s illegal drug-export business after a judge labelled the prosecution’s key witness “wholly unreliable.”
But long-time real-estate lawyer Kenneth James could still face discipline from the Law Society of Upper Canada in a separate case in which he is contesting allegations he was involved in mortgage fraud.
“His life and his reputation were really torn to shreds. At this point, he is going to focus on rebuilding everything that he had before this all came down,” Mr. James’s lawyer, Scott Bergman, said in an interview. “Remarkably, he has always maintained a very strong confidence in the integrity of the justice system to get to the right result.”
In a decision dated Jan. 7, Justice David Rose of the Ontario Court of Justice ruled that Mr. James should be completely acquitted of a list of charges that include possessing and dealing with $3-million obtained by crime, attempting to defraud the government of Canada and unlawfully exporting a controlled substance. The Crown has 30 days to appeal from the date of the ruling. Crown attorney Kevin Wilson declined to comment on the case or whether the Crown will appeal.
The criminal charges came in 2012, after a two-year RCMP investigation launched when one of Mr. James’s clients, Afshin Dastani of Vaughan, Ont., was arrested. According to the ruling, in May, 2010, police raided Mr. Dastani’s home at the request of Australian authorities who were investigating illegal shipments of ephedrine from Canada. Investigators here found “a significant quantity of ephedrine” in Mr. Dastani’s house, as well as $1-million in cash in $10,000 bundles.
Ephedrine is a key ingredient in the street drug methamphetamine. It is legal, but heavily restricted within Canada, and cannot be shipped across the country’s borders. According to the ruling, Mr. Dastani was illegally exporting ephedrine via websites set up to market nutritional or weight-loss supplements. He later pleaded guilty to charges that included exporting ephedrine, and received a sentence of two years less a day plus two years probation, Justice Rose’s ruling says.
While he was a client of Mr. James, Mr. Dastani was attempting to evade taxes on his millions in profits using a shell company Mr. James set up for him in the Turks and Caicos Islands, the ruling says. Between 2008 and 2011, Mr. Dastani would make payments to the shell company or other companies that would end up at an account held in trust with Mr. James’s law firm, James and Associates.
When Mr. Dastani asked Mr. James for his money, the ruling says, he would get it back in cash, less a 1 per cent fee. Mr. Dastani also testified that the scheme was supposed to involve the generation of false invoices that would have labelled payments to the offshore company as fees, but that no invoices were ever made.
According to Justice Rose’s ruling, the criminal case against Mr. James hinged on whether the Crown could prove beyond a reasonable doubt that the lawyer actually knew the money coming from Mr. Dastani was the proceeds of crime – profits from the illegal export of ephedrine.
Justice Rose concluded that Mr. Dastani’s evidence that he told Mr. James what he was doing was “wholly unreliable.” In his ruling, Justice Rose says Mr. Dastani contradicted earlier testimony and even acknowledged he did not tell Mr. James about his ephedrine business.
Mr. James agreed to suspend his practice pending the proceedings. In a strange twist, his previous discipline hearing over the separate mortgage fraud allegations was derailed in December, 2011, after the lawyer chairing the discipline panel recused himself because he was also acting as a criminal lawyer for Mr. Dastani. It was launched again with a new panel.
The money laundering allegations against Mr. James surfaced as the legal profession as a whole neared the end of a lengthy battle with the federal government over a push to make lawyers comply with anti-money-laundering rules and report suspicious transactions to authorities, as banks and other financial institutions are required to do.
Last year, the Supreme Court sided with the country’s provincial and territorial law societies, exempting them from federal rules and allowing them to bring in and enforce their own anti-money laundering regimes. The law societies, which regulate lawyers, now ban lawyers from receiving more than $7,500 in cash on a single matter, in most cases, and require them to verify their clients’ identities.