BC payroll worker must pay back $1.9 million in misappropriated funds

Also $100,000 in punitive damages for 'deliberate, methodical, and exploitative fraud'

BC payroll worker must pay back $1.9 million in misappropriated funds

A worker must pay her former employer more than $2 million, including punitive damages, for years of misappropriating money through the company’s payroll system, the British Columbia Supreme Court has ruled.

B.A. Blacktop is a company providing specialized paving, concrete, milling, reclaiming, and recycling services throughout BC and based in North Vancouver. The company hired the worker in 1998 to be a payroll administrator.

The worker later became a payroll supervisor with responsibility for the company’s payroll and accounts. She resigned from her position in August 2021.

Shortly after the worker resigned, B.A. Blacktop found many discrepancies in its payroll records, including those with its Canada Revenue Agency monthly and annual accounts. Unable to reconcile these discrepancies, the company conducted an internal investigation.

Years of misappropriating money

The investigation revealed that, between 2015 and her resignation in 2021, the worker had been using her knowledge of the company’s computerized payroll system to defraud it of a lot of money. The company filed a notice of civil claim on Dec. 21, 2021, and a judge ordered a freeze of the worker’s assets.

The judge also ordered the worker’s banking institutions to disclose details from her accounts so B.A. Blacktop could conduct an internal review of its finances. The company also hired a forensic accountant to investigate unauthorized payments made by the worker.

The worker filed a response to B.A. Blacktop’s claim that didn’t provide any valid reasons why the claim lacked merit. Instead, she alleged that there was a toxic workplace at the company and she was subjected to “harassment, sexual harassment, overwork, and general mistreatment” during her entire tenure with the company.

The forensic accountant conducted an extensive review over several months, releasing a report on Sept. 29, 2022. The accountant identified 885 unauthorized payments by the worker through the company’s payroll system, totalling more than $1.9 million of misappropriated funds that were deposited into 19 separate bank accounts in four different financial institutions.

Payroll system manipulated

The worker’s method involved: selecting current and past employees of B.A. Blacktop and changing the direct deposit information to one of her bank accounts; creating false payment proposals that caused the computerized payroll system to pay unauthorized wages into her bank accounts; uploading payment instruction text files for the fraudulent payment proposals to the company’s online banking platform; and then reversing the bank account information in the employee files back to the original bank accounts after a fraudulent payment was made.

The worker acknowledged taking money from B.A. Blacktop, saying she had a gambling addiction and gambled all of the money away on an online gambling portal. She claimed that she was broke and in poor health.

The court found that the evidence of the worker’s actions was “overwhelming” and were “planned and deliberate.” In addition, the worker was in a position involving a large amount of trust and responsibility.

“[The worker] perpetrated a deliberate, methodical, and exploitative fraud on [B.A. Blacktop] by using her knowledge and expertise as a payroll administrator and payroll supervisor to transfer large sums of money over six years into bank accounts she owned and controlled,” said the court.

Unsupported allegations of mistreatment

The court also found that the worker’s response to the company’s claim did not deny the fraud but instead made “broad and unsupported allegations” of workplace harassment and mistreatment. There was no clear merit to her claims and she had no defence to the fraud allegations, said the court.

The court determined that the worker was guilty of the fraud allegations and was liable for the amount of money she misappropriated from the company. It also found that the premeditated and deliberate nature of her fraud warranted punitive damages, which were “driven by the logic of retribution, denunciation, and deterrence.”

“A message must be sent to those who are placed in a position of trust over corporate funds such as [the worker] here, namely that if you steal from your employer, the consequences will be severe,” said the court.

The worker was ordered to pay her former employer, B.A. Blacktop, more than $1.9 million that she misappropriated plus punitive damages of $100,000. In addition, the worker was responsible for prejudgment interest and special costs. See B.A. Blacktop Ltd. v. Fazio, 2023 BCSC 892.

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