Dubbed the ‘Magic Lady’ by the media for perpetrating a $100 million Ponzi scheme, Rashida Samji faced administrative proceeding brought by the BC Securities Commission (“Commission”) as well as criminal charges. The Commission found in 2014 that she perpetrated a fraud, imposing a disgorgement order of almost $11 million and a $33 million administrative monetary penalty (“AMP”) to serve as “a specific deterrent to [Samji] and as a general deterrent to others who would engage in similar fraudulent schemes.” On December 1, 2017, the British Columbia Court of Appeal affirmed the lower court decision refusing to stay the criminal charges against Rashida Samji on the basis that the AMP was a “true penal consequence.” After refusing to stay the charges, the trial judge found her guilty of theft and fraud under the Criminal Code.

Samji appealed her criminal conviction arguing that the criminal proceedings were double jeopardy contrary to section 11(h) of the Canadian Charter of Rights and Freedoms (“Charter“), and that she should not be punished twice for the same offence. Writing for the majority, Fisher J.A. rejected the argument that a $33 million AMP imposed by the Commission was punitive in its purpose or effect. This decision has important implications for the interplay of parallel administrative and criminal fraud proceedings and the scope of Charter protections for those accused of fraud.

The AMP is not a “true penal consequence”

To determine if a person’s Charter protections under section 11 are engaged, a court will consider if (1) it is a criminal proceeding by nature, or (2) a conviction in respect of the offence may lead to a true penal consequence. Samji conceded that the Commission proceedings were administrative; therefore the crux of the argument in the stay application and on appeal was that the magnitude of the AMP made it a “true penal consequence” such that a subsequent criminal proceeding was precluded by s. 11(h) of the Charter.

In dismissing the appeal, the majority addressed the question of whether the AMP constituted a true penal consequence based on three considerations: the AMP’s magnitude, criminal sentencing principles and its stigma and effect.

First, in assessing the magnitude of the order, the majority emphasized that the AMP was not out of proportion with the amount required to deter non-compliance. The statutory power to impose penalties will not be subject to s. 11 so long as it is “exercised in a way so as to achieve proper administrative aims” and its serves as a “meaningful general deterrent by reflecting the seriousness of the conduct.”

The Commission was entitled to consider criminal sentencing principles in crafting sanctions, including the seriousness of the conduct, the harm suffered by investors, the damage done to the integrity of capital markets, and aggravating and mitigating factors. The majority emphasized:

“It cannot be the case that simply because the Commission has discretion and tries to achieve proportionality in its sanction decisions that an AMP therefore imposes true penal consequences. To say that would provide an incentive to reduce proportionality in sanction decisions to save them from Charter scrutiny. It may also lead to greater injustice if the Commission is forced to follow a rigid mathematical formula instead of tailoring the sanction to better protect markets and deter future fraud.”

The majority also upheld the determination that the stigma suffered was not comparable to that of a criminal conviction. Samji’s submission that the AMP was “a virtual life sentence in debtor’s prison with no hope of escape” was not a sufficient basis for a finding that the AMP is punitive. In its analysis, the majority noted that Samji could not be imprisoned for failing to pay the AMP.

The Concurring Judgment

One of the difficult issues noted by both the majority and concurring judgments was that Samji brought her appeal in the criminal proceeding and yet sought a finding that the administrative proceedings of the Commission had imposed a punitive sanction. Samji wanted a finding the AMP imposed “a true penal consequence,” but had not directly appealed the AMP.

In his concurring decision, Justice Hunter addressed this issue directly by applying what he described as a “prospective” approach that considered the Commission’s statutory jurisdiction rather than the character of the penalty that it imposed. In his view, whether the penalty actually imposed was a true penal consequence is not relevant to the determination as to whether Samji was charged with an offence that engaged the protections of the Charter. The approached adopted by Justice Hunter was to determine whether a person subject to an enforcement proceeding under s. 161 of the BC Securities Act is charged with an offence that engaged Charter protections. If the AMP imposed in the enforcement proceedings was outside the jurisdiction of the Commission because it was penal in nature, then the appropriate route would have been to appeal on that basis. The consequence of Samji’s failure to directly appeal the AMP was that it must stand because to permit otherwise would be “tantamount to a collateral attack on the Commission”.

Leave to appeal to the Supreme Court of Canada is currently being sought by Samji and we will continue to monitor this important case.

Key Takeaways:

  • Although the penalty may be significant, an AMP cannot be said to be punitive so long as it is “exercised in a way so as to achieve proper administrative aims.”
  • If an AMP oversteps its bounds then the appropriate remedy is to appeal in the context of the administrative proceedings.