Alberta Man Jailed and Fined $800K for Defrauding CRA of COVID-19 Subsidy Claims
Leslie Sand of Brooks, Alberta, has been sentenced to 3.5 years in jail and fined nearly $800,000 for defrauding the Canada Revenue Agency (CRA) through fake COVID-19 subsidy claims and tax evasion.
Sand, the sole shareholder of the fictitious Flyte Deck Corporation, posed the business as a drone flight and 3D printing company with no actual operations or income. Between April 2020 and August 2022, he fraudulently applied for several government programs, including the Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Rent Subsidy (CERS), using forged documents such as fake payroll records, commercial leases, and bank statements.
In total, Sand received $603,376.44, which he did not report as taxable income. He was arrested following a joint CRA and RCMP investigation. The CRA warned that willful tax evasion can result in severe penalties, including fines of 50% to 200% of the evaded tax and up to five years in prison, while criminal fraud charges can lead to sentences of up to 14 years. Beyond the sentence and fines, Sand must repay all taxes owed, along with accrued interest and penalties.
What is Tax Evasion?
Tax evasion typically involves the unlawful avoidance of tax obligations, and is addressed in detail under sections 238 and 239 of the Income Tax Act and section 327 of the Excise Tax Act (ETA).
According to section 239(1) of the Income Tax Act, a person commits an offence if they:
- (a) Provide false or misleading information in any tax return, certificate, or document submitted to the CRA;
- (b) Destroy, conceal, alter, or dispose of records to avoid paying taxes;
- (c) Falsify or omit entries in accounting records;
- (d) Willfully attempt to evade or avoid compliance with tax laws; or
- (e) Collaborate with others to carry out any of these offences.
If convicted on summary conviction, the offender may face fines of up to 200% of the evaded taxes and/or up to two years in prison. For more serious cases prosecuted by indictment under subsection 239(2), penalties may include up to five years’ imprisonment. The ETA’s subsections 327(1) and (2) contain similar provisions.
Moreover, section 238(1) makes it an offence to fail to file or submit required tax returns, punishable by a fine of up to $25,000 and/or one year in prison upon summary conviction.
In severe cases of deliberate fraud, charges under section 380 of the Criminal Code may apply, carrying a maximum sentence of 14 years in prison.
Voluntary Disclosures Program (VDP): A Lifeline for Correcting Tax Mistakes
Tax evasion carries stiff penalties, including hefty fines and potential jail time. Fortunately, the Canada Revenue Agency (CRA) allows taxpayers to come forward and fix past errors through its Voluntary Disclosures Program.
What Is a VDP Application?
A VDP application is a formal submission to the CRA in which a taxpayer admits to previously unreported or misreported information, such as:
- Income that was never declared
- Overstated or ineligible deductions/credits
- Unfiled GST/HST returns
- Undisclosed foreign assets or offshore earnings (e.g., Form T1135)
- Late or missing returns
- Cryptocurrency gains that were not reported or that were misreported
Eligibility Criteria
To be accepted, a disclosure must satisfy all five of the following conditions:
- Voluntary – The CRA has not yet initiated contact about the issue.
- Complete – Every relevant detail and document is provided.
- Penalty Exposure – The matter involves a risk of penalties if uncovered.
- Aged Information – Generally, at least one reporting period is more than a year overdue.
- Payment – Full payment of the estimated tax owing (or a credible arrangement) accompanies the submission.
Potential Benefits
If the CRA approves the disclosure, the taxpayer can obtain:
- Protection from criminal prosecution
- Full or partial cancellation of penalties
- Reduction in interest charges
- Peace of mind from voluntarily resolving the problem
Two Relief Streams
- General Program – Designed for less‐serious non-compliance; offers both penalty relief and partial interest relief.
- Limited Program – Aimed at more egregious cases; shields the taxpayer from prosecution but still imposes most penalties and usual interest.
By acting before the CRA comes knocking, taxpayers can dramatically reduce the financial and legal fallout of past mistakes—and restore their standing with the tax authorities.
Pro tax tips – whether to accept the voluntary disclosure is also at the CRA’s discretion
Although tax evasion can result in harsh penalties and imprisonment, taxpayers still have the opportunity to come forward voluntarily and correct their mistakes through a Voluntary Disclosures Program (VDP) application, potentially avoiding penalties, provided they act before the CRA initiates contact.
However, acceptance into the program is not guaranteed, as the CRA has full discretion to approve or reject a disclosure. For the best chance of success, it is strongly advised that taxpayers consult an experienced Canadian tax lawyer to properly prepare and present their application.
FAQ
What is tax evasion and what are the consequences?
Tax evasion generally refers to the illegal act of violating tax laws to avoid paying taxes. A person convicted under these provisions may face a fine of up to 200% of the evaded tax and/or up to two years of imprisonment upon summary conviction.
What is the voluntary disclosure application and how can it help taxpayers who made errors on their previous tax returns?
The Voluntary Disclosures Program (VDP) grants relief on a case-by-case basis to taxpayers and registrants who voluntarily come forward to fix errors or omissions in their tax filings before the Canada Revenue Agency (CRA) knows or contacts them about it.
If accepted, the VDP will remove all criminal liability. Under the general program, the VDP also grants relief on all penalties and offers a 50% interest relief for periods other than the most recent 3 years.
Disclaimer: This article just provides broad information. It is only up to date as of the posting date. It has not been updated and may be out of date. It does not give legal advice and should not be relied on. Every tax scenario is unique to its circumstances and will differ from the instances described in the article. If you have specific legal questions, you should seek the advice of a Canadian tax lawyer.