Pastuch primer Breaking down Sasks 55million fraud case

The woman at the centre of what the Crown described as one of the largest investor frauds in Saskatchewan history — taking victims for $5.5 million — says she’s sorry, and hopes to serve at least a portion of her time in a healing lodge.“I’m sorry for what happened,” Alena Marie Pastuch said Thursday, appearing in Regina court via video link from Prince Albert’s Pine Grove Correctional Centre. “I feel badly,” she added, saying she now appreciates the impact she’s had on the lives of her victims.As remarked upon by the judge, Pastuch was virtually unseen throughout Thursday’s proceedings. She sat completely bent over, so only a sliver of a grey sweatshirt was visible on the camera. She so, revealing only the crown of her head and her neck at times, as she gave her slightly-muffled apology.Her lawyer Kevin Hill, appearing on her behalf in the Regina courtroom, explained Pastuch wasn’t being disrespectful to the court, but was more comfortable in that position due to a health condition.The 54-year-old former Regina businesswoman was found guilty on June 27 of fraud, theft and money laundering, five years after she was first arrested and 12 years since investors began putting money into her five tech companies, ostensibly to create anti-fraud and child protection software. Justice Richard Elson stayed the latter two charges, finding they essentially duplicated the fraud count, and “no person is to be punished more than once for the same offence.”Crown prosecutor Dana Brule sought a 10-year prison sentence, on par with other large-scale frauds in this province and elsewhere.After parting company with four lawyers (one private, one Legal Aid and two court appointments), Pastuch represented herself during the trial when Elson declined to allow her a third court-appointed lawyer. She was, however, represented by Hill for the sentencing submissions Thursday. He suggested a six-year, three-month prison term is appropriate and told the court Pastuch would like Elson to recommend she serve her time at a healing lodge. Such a recommendation wouldn’t be binding on Correctional Service Canada but would be considered.Although there are approximately 80 victims, only 18 submitted victim-impact statements, which Brule read aloud in court. They spoke about trust and loss — trust that they were dealing with a respectable, successful businesswoman who came from a “good” family of values built on faith; the loss of millions that had altered lives and futures.“They say pay it forward, but in our case, pay it back,” read one statement from a couple who lost $50,000.“My retirement is not what I envisioned,” said another from a man, now in his 70s, who was forced to sell a mobile home he had for retirement in Arizona. He lost $200,000.A couple who lost $1.2 million had hoped to spend their retirement working with charitable causes. Instead they couldn’t retire, and ended up in counselling to deal with their new reality. They felt embarrassed and hoodwinked by a woman they believed in, and disappointed in a justice system that has moved slowly.Elson said he’ll render his decision Friday morning.Here’s a review of Elson’s verdict in June and some of the Saskatchewan case precedents he was given Thursday by the Crown:THE VICTIMSAfter helping organize a family reunion in 2004, Pastuch renewed old connections or made new ones, and her early investors were largely what Elson described as “semi-distant” family members. But as word spread of her “guaranteed” or “zero risk” investment, more people came on board, while others upped their ante. In the words of one investor, he felt certain she wouldn’t “cheat” family.Some 80 people, 56 of whom testified at a lengthy trial earlier this year and last, invested more than $5.5 million between January 2007 and November 2009, when the province’s securities regulator issued a cease trade order against Pastuch and her companies. Many victims told not only of their own investments but also those of others who, as couples or a group, pooled funds.Investments by individuals ranged from $10,000 to $1.26 million, the latter by a couple looking for a secure place to grow their money after selling the farm. A total of 17 individuals or groups put in amounts at or exceeding six figures.Investors only recovered $137,097; most lost everything. Former Regina businesswoman Alena Marie Pastuch, left, leaves Regina’s Court of Queen’s Bench in custody on June 27 after being found guilty on charges of theft, fraud and money laundering. TROY FLEECE / Regina Leader-Post Alena Marie Pastuch, 48, tries to hide her appearance after being released from Provincial Court in Regina on Thursday, June 5, 2014. BRANDON HARDER / Regina Leader-Post DREAMS AND DECEPTIONSThe judge found “the evidence of culpable dishonesty is — in a word — overwhelming.” Pastuch told early investors in 2007 she was trying to purchase the rights to computer software technology from a struggling developer. She planned to continue development so the technology could be sold quickly for a considerable profit. In time, the promises and the nature of the business expanded to the creation of their own software and assertions of interest from banks, large companies and child safety organizations.Elson found Pastuch knowingly and intentionally misled investors in several ways: the “purported business ventures” produced no marketable product or product sales; there was no originating business from which technology was purchased; there were no other injections of funds in the projects other than those from investors; there was no interest by prospective purchasers to acquire either technology or shares; there were no accounts receivable coming in from the Saskatchewan government (funds which investors were told would help act as security); she never received a $20-million valuation of the business; but for one person, there were no departing or removed investors who received full repayment; and there was no other person, board or executive to which she reported, leaving Pastuch with exclusive control.Elson found Pastuch, by conservative estimate, diverted more than $3 million of the investors’ funds and spent a “considerable” amount for personal use, including gambling, purchasing collectibles to use in a memorabilia sales business, promoting a rock band, paying a mortgage, as well as buying a house, high-end clothing, travel, fitness services, hair and beauty services, chiropractic treatments, plastic surgery, and charitable contributions.PRECEDENTS FOR PENALTIESA $5.5-million fraud puts it in the “upper echelons of (such) cases in Saskatchewan,” Brule said after the verdict. He cited four similar precedents from this province:Gregor Gmerek — received a four-year prison sentence in 2018 after siphoning off more than $1.2 million from a livestock brokerage company while handling the accounting. It’s currently under appeal.Steven Vincent Weeres — misappropriated between $650,000 and $800,000 invested in Master Keys to Success. He was sentenced in 2015 to five years in prison (less 505 days’ credit for pre-trial custody), plus two additional years if he failed to pay a $200,000 fine, upheld on appeal.Ronald Jerry Fast — headed Marathon Leasing Corp., a vehicle-leasing company that became a $16.7-million Ponzi scheme, bilking 235 victims. He was sentenced in 2014 to seven years in prison, upheld on appeal.Klaus Link —  took $1.7 million from investors and from pension funds he managed as operator of Tri-Link Consultants. He was sentenced in 2013 to 5 1/2 years in prison. TIMELINEJan. 2008: inquiry to Saskatchewan Financial Services Commission (now known as Financial and Consumer Affairs Authority) sparks a securities investigationNov. 2, 2009: first cease-trade order issued against Alena Pastuch and her companiesApril 2010: complaints to RCMP spark separate but related criminal investigation into Pastuch and companiesAug. 27, 2010: notice of hearing issued in securities investigation, setting out Securities Act allegationsDec. 5, 2012: after several interim applications and appeals, securities hearing gets underway; closing arguments filed in January 2014 after several delays and motionsJune 4, 2014: Pastuch arrested on criminal charges of fraud, theft and money launderingJune 5, 2014: Pastuch makes first appearance in provincial court on criminal charges, granted release under strict conditionsJuly 23, 2014: three-member panel issues decision finding Pastuch committed several Securities Act violationsAug. 7, 2014: Pastuch files appeal of securities decisionDec. 18, 2014: on Securities Act violations, Pastuch and her companies ordered to pay $146,638 in administrative penalties and hearing costs, and compensation of up to $100,000 to each person or company that suffered a financial loss as a result of those violationsJan. 2, 2015: sanctions decision appealed; sanctions put on hold pending outcome of appealMarch 14, 2018: Sask. Court of Appeal hearing on Securities Act violationsOct. 15, 2018: opening day of Court of Queen’s Bench criminal trialFeb. 27, 2019: Day 80 of the criminal trial, Pastuch opts to call no witnesses or testify after prosecution closes caseMarch 5, 2019: Crown prosecutor Dana Brule makes closing argument; Pastuch follows with hers on March 8March 29, 2019: Sask. Court of Appeal upholds Securities Act violations and penaltiesJune 6, 2019: Sask. Court of Appeal rejects application for rehearing of securities appealJune 7, 2019: Pastuch revisits application for mistrial or stay of proceedings on criminal chargesJune 27, 2019: Guilty verdict on criminal chargesAug. 15, 2019: Sentencing submissions [email protected]

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