Pair convicted in dealership 'car swapping' scheme want charges tossed

Two men found guilty of fraud following a 20-day trial that examined a complicated scheme involving used cars at a New Minas, N.S., dealership are attempting to have their charges tossed due to delays in hearing the case.

Darren Bateman, 59, who has a previous conviction in a car-flipping scam, and Orlando Smith, 64, appeared in Halifax provincial court Wednesday for an update on the status of their Charter challenges, which are scheduled to be heard in May.

The pair were convicted last year of fraud and possession of proceeds of crime for their roles in "car swapping" deals designed to maintain the dealership's bank financing, but which a judge ultimately concluded benefited the two men.

The men were charged in 2018, and went on trial over a number of days in 2021 and 2022, before being found guilty in March 2023. In the fall, new lawyers for Bateman and Smith filed applications regarding delays in the case being brought to trial.

Under the Supreme Court of Canada's 2016 Jordan decision, cases should be tried in provincial court within 18 months, and within 30 months in superior courts, although judges can take into account delays caused by the defence or due to "exceptional" circumstances.

Details of the scheme

The dealership at the centre of the case was Summit Hyundai, where Bateman worked under contract and where Smith was general manager and a shareholder. The company was started by a man named Ken Barrett in 2005.

The car-swapping scheme was set up in 2015 to deal with a ballooning inventory of overvalued used cars, due to the practice of overpaying for trade-ins as a way to entice customers to buy new vehicles.

The issue with the high inventory was that Summit's bank had requirements linked to the line of credit the dealership used to buy vehicles for resale, according to a decision from Judge Elizabeth Buckle, who presided over the trial. A used vehicle could remain unsold only for a certain period before Summit had to repay the bank out of its own funds.

To get around the problem, according to the ruling, Summit began selling used vehicles to a company operated by Bateman, which in turn sold different vehicles back to Summit, allowing the dealership to reset the clock on its loans.

'Unethical and perhaps fraudulent'

In her decision, Buckle called the practice "unethical and perhaps fraudulent," and said she believes it was Barrett, desperate to keep on good terms with the bank, who came up with the idea, although he was not charged.

The fraud for which Bateman and Smith were accused relates to the value of the vehicles. The value of the vehicles swapped between the two companies was supposed to be equal, but instead was "lopsided" in favour of Bateman's company to the tune of $450,000, the judge found.

Some of the money generated by the fraud, the judge said, flowed from Bateman's company to Smith, his wife, her business and to Bateman himself. In addition, she found Bateman and Smith guilty of fraud related to specific vehicles.

In 2000, Bateman was handed a $1.1-million fine and 23 months house arrest for a car sales scam involving sales tax.

Barrett sold Summit Hyundai in 2017 for a loss.