Disbarred lawyer ordered to pay nearly $800,000

A disbarred lawyer is appealing after a judge sentenced him to seven years in jail for his role in a $1.5-million small-business-loan fraud.

Disbarred lawyer ordered to pay nearly $800,000
An Ontario Superior Court judge has sentenced a former lawyer to seven years in jail for his role in fraud and money laundering.

A disbarred lawyer is appealing after a judge sentenced him to seven years in jail for his role in a $1.5-million small-business-loan fraud.

In R. v. Kazman, Ontario Superior Court Justice Nancy Spies also ordered 62-year-old Marshall Kazman to pay almost $800,000 in combined restitution and fines in lieu of forfeiture. 

Kazman acted on his own behalf at trial, but he hired criminal lawyer Richard Litkowski to represent him for the purposes of sentencing. Litkowski, an associate at Toronto firm Hicks Adams LLP, says Kazman has appealed both the sentence and the conviction, and it has received bail pending the outcome.  

“In terms of the length of sentence, our position is that it’s too long and doesn’t reflect some of the mitigating circumstances put before the court,” Litkowski says.  

According to Spies’ April 12 decision, Kazman and his co-accused Gad Levy were convicted of five counts of fraud over $5,000 in relation to loans obtained from a number of banks and one count of money laundering following a five-month trial. Kazman and Levy were also found guilty of committing the frauds for the benefit of or at the direction of a criminal organization they formed with a third person who earlier pleaded guilty, Miriam Cohen.

Spies found the three conspired to obtain a number of fraudulent loans under the federal government’s Canada Small Business Financing Program, which had been set up in the mid-2000s with the aim of spurring economic growth by making funds available to borrowers with limited experience and security. After four initial loans were made to Cohen, Spies found the group branched out to find new borrowers. 

The trial focused on 16 loans made between 2007 and 2010, almost all of which defaulted within two years, of which Spies found 12 were tainted with fraud. 

At the sentencing, Litkowski argued that Kazman was not as culpable as Levy, but Spies found he played a “key role” in the scheme and that his legal experience was valuable to the operation. 

In addition, she found Kaz‑man took a leading role in laundering the proceeds of the fraud as signing officer for a number of construction companies that provided borrowers with fraudulent invoices to present to the lenders for payment out of loans.  

“The funds then flowed back and forth between various other companies owned by Ms. Cohen and Messrs. Kazman and Levy who benefited in varying degrees from payments made to various companies that they owned and to them personally,” Spies wrote.

Despite an avalanche of character reference letters presented on behalf of Kazman, concerns about his health following a 2013 heart attack and Kazman’s active role in his 12-year-old son’s life, Spies accepted the Crown’s recommendation for a seven-year total sentence of incarceration, including five years for the fraud convictions and one year for money laundering, all running concurrently, plus a further two years consecutively for the criminal organization count. 

Litkowski argued that the fraud convictions should result in a two-year sentence to run concurrently with one year for the money laundering count, but Spies rejected the proposal as clearly “unfit.” 

One of the aggravating factors she considered related to Kazman’s disbarment in 2006. In Law Society of Upper Canada v. Marshall Kazman, a 2-1 majority of the disciplinary panel stripped Kazman of his licence to practise after finding him guilty of professional misconduct over five real estate transactions. 

Although Kazman did not profit from the deals outside of the fees he collected, the panel found he prepared false affidavits and that he was not a “dupe” but instead had “adverted to the probability that these transactions were fraudulent” and avoided making further inquiries “because he did not want to be fixed with actual knowledge.”

Spies said it was significant that Kazman became involved in the frauds before her while appealing the penalty in his law society case. 

Despite the fact Kazman is in receipt of social assistance, Spies also ordered him to pay $300,000 in restitution, after stating that she did not believe he had not profited from the purchase and sale of various properties during the period covered by the frauds.  

“This is the fraudster’s dilemma,” explains Jacob Stilman, a partner at litigation and criminal defence boutique Lo Greco Stilman LLP. 

“When you commit a fairly sophisticated fraud, courts are going to be very skeptical of anything that you say, whether you’re acting for yourself or represented by counsel,” he adds. 

The judge also ordered Kaz‑man to pay a fine in lieu of forfeiture of more than $480,000. 

Although a deadline for payment has not yet been set, Kaz­man will see four years added to his sentence in the event he defaults. 

Richard Shekter, a litigator at Toronto firm Shekter Dychtenberg LLP, says fines in lieu of forfeiture are relatively new to the Criminal Code. 

“But it’s a very powerful tool that is now quite commonly requested by the Crown,” he says.

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