Tax fraud artists lose appeal

In her judgment, Madam Justice Sandra Chapnik described Bellfield as "haughty," "cunning" and the "producer" in an international fraud…Under the scheme, wealthy people would invest in the partnerships and write off yacht construction losses on income tax returns. Investors included Apotex head Barry Sherman, Second Cup chair Michael Bregman, financial commentator Brian Costello and businessman Howard White, who eventually spent time in jail for defrauding the federal Scientific Research Tax Credit program.

The Toronto Star
October 17, 2003

Tax fraud artists lose appeal
Nine-year legal odyssey ends for business buddies. Bogus boat scam nets jail sentence, $1 million fine.
Tony Van Alphen

Einar Bellfield, the "haughty" mastermind behind the biggest known tax fraud in Canadian history, and his partner are in jail today after losing appeals to have their convictions overturned. The Ontario Court of Appeal rejected arguments from Bellfield and Osvaldo (Osy) Minchella this week, ending a legal saga that started almost nine years ago.

The odyssey followed the collapse of a scheme that created the illusion of a fleet of phantom charter yachts to generate tax writeoffs for investors.

Bellfield and Minchella defrauded investors of almost $23 million in cash relating to claims for $118 million in federal tax losses on the bogus boats. Those claims would have cut about $60 million off their taxes.

The appeal court panel of three judges dismissed arguments by Bellfield and Minchella that federal tax investigators breached the duo's rights under the Canadian Charter of Rights and Freedoms and, therefore, the trial judge should have excluded critical evidence against them.

After the judgment, police took Bellfield and Minchella to a provincial jail in Toronto. The men will soon be moved to the federal prison system where Bellfield will start serving 10 years and Minchella seven. They will be eligible for parole after a third of their sentences.

Bellfield must also pay a $1 million fine or face another two years in prison.

Police charged the men in late 1994 and early 1995 with two counts of fraud, and two counts of uttering forged documents relating to their operation of Toronto-based Overseas Credit and Guaranty Corp.

In late 1999, a jury convicted Bellfield and Minchella on all counts after a 7 1/2 month trial. However, after a brief time in custody, a court granted them bail pending a resolution of appeals.

Bellfield, Overseas' president and promoter, and Minchella, a close associate and a former Radio Shack manager, set up a downtown office where they enticed about 600 investors with slick presentations about the tax benefits of buying partnerships in "palatial floating resorts."

Overseas said the fleet of 80-foot yachts with names like Chasing Rainbows, You Live Only Once, Garbo and Secret Passion, would operate charter trips for frolicking high rollers in the Caribbean and Mediterranean seas.

Under the scheme, wealthy people would invest in the partnerships and write off yacht construction losses on income tax returns. Investors included Apotex head Barry Sherman, Second Cup chair Michael Bregman, financial commentator Brian Costello and businessman Howard White, who eventually spent time in jail for defrauding the federal Scientific Research Tax Credit program.

But evidence at the trial showed no up-front financing for construction, false financial statements, no boats for yacht charters and the diversion of millions of dollars for Bellfield's personal use.

At one point, Bellfield, whose real name is Einar Sellander Bjellebo, collected $500,000 a month in interest payments from investors.

The jury saw copies of invoices and statements showing Bellfield diverted $8.7 million in client funds for boats he later sold, condominiums for relatives, a local brokerage account and even a fish farm for his brother.

Trial evidence also revealed Bellfield did not tell investors that accountants had warned him the tax savings might not be realized without a fight against Revenue Canada.

Revenue Canada approved the first tax claims but by late 1986, the agency started to question the existence of the yachts.

The jury heard that the men concocted phony financial statements and invoices to satisfy federal inquiries and transferred millions of dollars through numerous bank accounts to create an illusion of a booming business. One prosecutor called it "the spin cycle."

But by 1989, Overseas had no boats or charter business; Revenue Canada was rejecting claims for writeoffs, and investors stopped making payments. Overseas sank in 1991.

In her judgment, Madam Justice Sandra Chapnik described Bellfield as "haughty," "cunning" and the "producer" in an international fraud.

At the appeal, Bellfield argued Chapnik was biased because she invited the jury, income tax investigators and counsel including defence lawyers to a reception after the conviction.

Speaking for the panel, Mr. Justice Robert Sharpe said although the reception was "ill advised," it did not affect the sentencing and a person could understand why a judge would show kindness to a jury after a long, difficult trial.


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