CRA slammed for 'reprehensible and malicious' prosecution of B.C. couple

A B.C. Supreme Court judge has slammed the Canada Revenue Agency for suppressing and misstating evidence in its zeal to prosecute a Vancouver Island couple for tax evasion.

In a blistering 70-page ruling, Justice Robert Punnett ordered the CRA to pay Tony and Helen Samaroo nearly $1.7 million in damages for malicious prosecution of a deeply flawed case that ruined their reputations.

"A government agency maliciously used the criminal justice system to pursue the plaintiffs, and its wrongful conduct continued into the criminal trial itself. The CRA was seeking substantial terms of imprisonment and significant penalties. The manner in which the prosecution was initiated and carried out was egregious. It must be denounced," Punnett wrote.

"It affected the reputations of the plaintiffs, their professional lives and their family lives. It involved the concealment of exculpatory evidence. It involved the power imbalance of the state over the individual. It violated fundamental rights and was highly reprehensible."

The damages include nearly $348,000 for the legal fees the Samaroos spent to defend themselves in the 2011 provincial trial which ended in their acquittal.

They also include $300,000 for aggravated damages to each of them and $750,000 in punitive damages against the CRA. 

The couple, who were both immigrants to Canada, operated a restaurant, nightclub and motel in Nanaimo.

The CRA, which has 30 days to appeal, said it would be inappropriate to comment on the judgment at this time. 

The judgment describes a tax evasion case which began in 2006 with a tip. During the subsequent audit, the CRA determined that substantial cash deposits had been made to the Samaroos' business accounts.

The Samaroos claimed they had been transferring old $100 and $50 bills — from a safety deposit box full of three decades' worth of savings — into the bank because they were afraid financial institutions would no longer accept the old currency.

But investigators rejected that explanation.

They believed the couple was dodging tax by failing to report income from the restaurant.

'Argumentative, evasive, inflexible'

The investigation led to 21 charges for tax evasion. The CRA alleged the Samaroos had skimmed $1.7 million from their restaurant.

But Punnett faults CRA investigator Keith Kendal for putting forward a final report for charge approval without carrying out investigatory steps requested by a Crown prosecutor and, in doing so, providing "incomplete and erroneous information." 

"As a witness, I found Mr. Kendal to be argumentative, evasive, inflexible and reluctant to concede what clearly should have been conceded. He wrote the Prosecution Report as an advocate, not an investigator," Punnett wrote. 

"His clear intent was to see that criminal charges were laid. The presumption of innocence appeared to be meaningless to him. The manner in which he approached the evidence was not objective. He had his theory and he then sought to prove it."

The judge noted that Kendal testified he still believes the Samaroos are guilty of tax evasion, "and would, if given the chance, prosecute them again on the same theory and the same evidentiary basis."

'Unprofessional glee'

Punnett said the case suggested "an unfortunate culture within the CRA."

He pointed to a primary report which cited the fact the agency hadn't prosecuted a restaurant or nightclub in Nanaimo as rationale to go ahead with the charges. 

He also highlighted an email exchange in which a CRA investigative team leader pointed to press coverage by saying: "Front page of Wednesday's Nanaimo Daily News. I can't wait to read the edition after the guilty verdict."

And, in another email, Punnett noted, the same team leader joked: "Doesn't a guilty verdict call for a guillotine?"

"Here, the CRA employees looked forward with unprofessional glee to the plaintiffs' anticipated conviction and sentencing and their resulting ruination," Punnett wrote.

"It is appalling that the incarceration of the plaintiffs would be joked about."

'High-handed, reprehensible and malicious'

The Samaroos testified about the impact of the case, as did their grown son and daughter. 

The couple no longer live together and Tony Samaroo said he drinks and smokes more. He claimed that he "lost his spirit and his strength" in the face of the charges.

Helen Samaroo testified that "her life was turned upside down." She felt others looked at her with suspicion and she felt embarrassed to go to the restaurant. She claimed she had a breakdown after the acquittal.

Their daughter, Tricia Miller, said she withdrew from people and "stopped using the surname Samaroo because of its association with the criminal charges."

According to the judgment, the CRA and Kendal do not acknowledge their wrongdoing or any violation of professional standards. They expressed no apology and were without remorse.

Punnett admitted that no amount of punitive damages would cause the CRA financial hardship. But he said the facts of the case deserved rebuke.

"The CRA is vicariously liable for the conduct of Mr. Kendal and its employees," he wrote. "Its conduct in this case was high-handed, reprehensible and malicious."