A certified management accountant (“Deen”), who had committed professional misconduct, succeeded in reducing a sanction imposed by an appeals tribunal (“Appeals Tribunal”) of the Complaints Inquiry Committee of the Certified Management Accountants of Alberta (“Complaints Inquiry Committee”)

27. September 2011 0

Administrative law – Decisions of administrative tribunals – Certified Management Accountants – Professional governance and discipline – Professional misconduct / conduct unbecoming – Conflict of interest – Disciplinary proceedings – Penalties and suspensions – Judicial review – Appeals – Evidence

Deen v. Certified Management Accountants of Alberta (Complaints Inquiry Committee), [2011] A.J. No. 839, 2011 ABCA 227, Alberta Court of Appeal, July 26, 2011, C.D. O’Brien and P.W.L. Martin JJ.A. and J. Strekaf J. (ad hoc)

Deen had practised accounting for over twenty years when he faced allegations of professional misconduct. Deen handled accounting and bookkeeping for Norwegian Wood Homes Ltd. (“Norwegian”), while also arranging interim financing for them, using his own money, through a numbered company controlled by his wife, and of which he was a director. Deen contended that that Norwegian’s owners (the “Kvellestads”) understood and accepted Deen’s interest and approved each incident of financing.

In 2003, Deen and two colleagues created a new investment company (“103”) which was then used to finance Norwegian. The Kvellestads were aware of this change. Financing was arranged through a bank account in Norwegian’s name that received funds from 103 to fund housing projects approved by 103. Norwegian’s name was on the account to maintain their new home warranty program eligibility.

Cheques out of the Norwegian bank account had to be co-signed by Deen and one of the Kvellestads. Supporting documentation relied upon to open the bank account listed Deen as an officer of Norwegian, when he was not.

After several years, the business relationship ended and the parties attempted to negotiate a settlement. At that time, Deen instructed the bank to close Norwegian’s account, and transfer all remaining funds to 103, under the authority of his signature alone. Deen contended that he had instructions from Norm Kvellestad, albeit relayed through a third-party, to take these steps.

In June 2009, a Discipline Tribunal of the Complaints Inquiry Committee held a hearing into allegations that Deen had (i) improperly operated in a conflict of interest when he had his wife’s company, in which he had an interest, loan money to Norwegian and that he had (ii) been unprofessional in falsely identifying himself as an officer of Norwegian on account-opening documents and in directing closure of Norwegian’s account without appropriate signatures.

In November 2009, the Discipline Tribunal found that Deen’s conduct violated the Code of Ethics of the Certified Management Accountants in creating a financing scheme using his wife’s company, that could reasonably be expected to affect his independence, and without informing Norwegian of the nature of those interests at the time of the loans. The Tribunal also found that Deen knowingly misrepresented his status as a director of Norwegian when opening their bank account, in order to establish signing authority on the account, and that he used his signing authority to close the Norwegian account when he knew that two signatures were required for such an action.

A penalty of publication on the profession’s website and in its newsletter, a requirement to take a professional ethics course and payment of a $5,000 fine was imposed.

Although neither party appealed the findings, the Certified Management Accountants (“CMA”) launched an appeal. The Appeals Tribunal issued a decision increasing Deen’s penalty to include a 60-day suspension from accounting practice, on the basis that the original sanction did not appropriately reflect the seriousness of his conduct. The reasons for augmenting the penalty did not properly “address the factual findings or evidence considered by the Appeals Tribunal”.

Deen appealed. The Court of Appeal held that the Appeal tribunal failed to sufficiently explain the basis for increasing his penalty. The decision did not meet the test of adequate reasons laid out in Spinks v. Alberta (Law Enforcement Review Board), 2011 ABCA 162.

In addition, the Chair of the Complaint Inquiry Committee wrote to the Tribunal’s Secretary and indicated that an appeal was being launched, in part, due to Deen’s failure to admit wrongdoing or show remorse, and asserted that Deen had unjustly enriched himself to Norwegian’s detriment. CMA counsel reiterated this enrichment allegation at the Appeals Tribunal hearing. The Court of Appeal noted that such an allegation was not within the scope of the charges levied against Deen, nor was the allegation founded in evidence at hearing.

There was no finding that Deen had misappropriated funds; all funds transferred back to 103 belonged to it. A misappropriation of funds finding would have supported a more significant sanction. The evidence had established that Norm Kvellestad directed that Norwegian’s account be closed, and Deen acted on the understanding that he was so instructed.

The Appeals Tribunal failed to say whether they accepted an argument that Norwegian’s account had been closed without permission. The Appeals Tribunal did not specify whether the addition of a suspension was meant to address misappropriation of funds, or provide any particulars as to why a suspension was warranted.

The Appeals Tribunal imposed an increased sanction without providing an analysis of critical issues. Neither Deen nor the Court could understand the basis for the suspension. The Discipline Tribunal had the benefit of a “first-hand account of the evidence” establishing “relatively minor infractions.” Deen’s appeal was allowed and the sanctions imposed by the Discipline Tribunal were reinstated.

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