Counsel:
S. Niblock, Esq. For the Federal Crown
R. Davidson, Esq. For the Accused
The judgment of the court was delivered by Stevens-Guille Prov. Ct. J.
¶ 1 MR. NIBLOCK: Good morning, Your Honour. My name is Niblock. I'm appearing for the Federal Crown this morning.
¶ 2 STEVENS-GUILLE PROV. CT. J. (orally):— Mr. Niblock.
¶ 3 MR. NIBLOCK: I wonder if Madam Clerk could call the San Francisco Gifts Limited and the Barry Slawsky matters.
¶ 4 MR. DAVIDSON: Your Honour, I appear as counsel for the body corporate and also as counsel for Mr. Slawsky. Mr. Slawsky, together with corporate counsel, are in the body of the courtroom. There are a number of informations before this Honourable Court and I believe that the Information that we will be proceeding upon is sworn December the 20th, 2004, by Constable Williamson and that is a nine-count Information.
¶ 5 I believe that my learned friend Mr. Niblock will be electing to proceed by summary conviction and if he is going to proceed by summary conviction then I can indicate to the Court what my instructions are respecting that particular Information.
¶ 6 THE COURT: Mr. Niblock?
*Election
¶ 7 MR. NIBLOCK: That's correct, Sir, by way of summary conviction.
¶ 8 THE COURT: Which Information are we proceeding on for the clerk's benefit here?
¶ 9 THE COURT CLERK: It ends in 666, Sir.
¶ 10 THE COURT: Mr. Davidson?
*Plea
¶ 11 MR. DAVIDSON: Your Honour, I have instructions of the body corporate and I appear as agent and counsel for the body corporate to waive the reading of the nine counts on the Information which allege violations of the Copyright Act and to enter a guilty plea on behalf of the corporation for those offences.
¶ 12 THE COURT: I will accept the plea of the corporation if the Crown is accepting it without more. Having done that I take it that all other matters against the individuals on that Information and the other Informations are all being withdrawn? Am I right about that?
¶ 13 MR. NIBLOCK: That's correct, Sir.
¶ 14 THE COURT: All of the matters that have not Been pled to this morning are dismissed. We will hear the facts.
*Agreed Statement of Facts
¶ 15 MR. NIBLOCK: Thank you, Sir. I trust you have an agreed statement of facts.
¶ 16 THE COURT: It was handed to me as I walked into the courtroom, but go ahead. I can --
¶ 17 MR. NIBLOCK: Would you prefer me to read it, Sir?
¶ 18 THE COURT: I am a fast reader. Go ahead, Mr. Niblock.
¶ 19 MR. NIBLOCK: In December 2003 a dolphin lamp was purchased from a San Francisco Gifts store located in St. John's, Newfoundland. That lamp did not work properly and was returned to the store for a refund. The refund was refused by the store and because of the manner in which the lamp had reacted to being plugged in the lamp was turned over to a fire marshal in St. John's. The fire marshal sent the lamp to Underwriters Laboratories, which is hereinafter referred to as UL, as a certification label on the bottom of the lamp identified UL as being the testing agency.
¶ 20 At the UL testing facility the lamp was tested and found that there were problems with the lamp overheating which caused a short circuit. UL determined as well that the certification sticker placed on the lamp which purported to be that of United Laboratories -- I'm sorry, that should be Underwriters Laboratories, Sir, was in fact counterfeit.
¶ 21 On May 3rd, 2004, Mr. Ed Rays (phonetic), who was engineer project handler of UL, placed a phone call to San Francisco Gifts store in St. John's, Newfoundland, and advised the employee that the lamp bore an unauthorized reference to the UL mark. The employee stated that they no longer sold the product. Mr. Rays requested that a store manager phone him.
¶ 22 On May 6, 2004, UL received a telephone call from an individual who was later identified as the store manager in St. John's who advised that the store was no longer selling the product and that the head office for San Francisco had been advised about the telephone call and problems with the lamp.
¶ 23 San Francisco Gifts Limited is headquartered in Edmonton, Alberta, is engaged in the sale of a variety of different items in their stores located throughout Canada. There are approximately 85 San Francisco stores across Canada. All major functions of the company are controlled or monitored from head office in Edmonton, including administration, merchandising, leasing, and personnel.
¶ 24 Underwriters Laboratories is an independent organization that operates testing facilities throughout the world for testing, certification, and quality assessment of products, systems, and services. UL tests products to an appropriate Canadian standard and if the product is found to be in compliance with Canadian standards UL will issue an identification or listing mark which confirms that the product has been tested and certified. UL issues specific issue numbers to each manufacturer who contacts UL to have items tested.
¶ 25 UL certification label is registered as copyright in Canada. In June 2004 Sergeant Ken Chatel of Calgary Customs and Excise RCMP learned of the incident in St. John's and decided to investigate San Francisco stores in the Calgary area. Sergeant Chatel attended a number of stores in Calgary and located a variety of different lamps in the different stores that all had counterfeit labels from UL on the lamps.
¶ 26 On the 21st of June 2004 search warrants were executed on the Calgary San Francisco Gifts stores. During the execution of the search warrants in Calgary other counterfeit products were located. In Calgary items were located that were counterfeit products bearing the symbols of Playboy, West Coast Chopper, and marvel comics.
¶ 27 On the 24th of June, 2004, Lethbridge RCMP executed a search warrant at the San Francisco Gifts store in Lethbridge. At that location lamps bearing the counterfeit UL symbol as well as other counterfeit products bearing the Playboy, West Coast Chopper, and Marvel Enterprises Incorporated designs were located.
¶ 28 On June 8, 2004, Constable Sandy Williamson of the Edmonton Customs and Excise section of the RCMP received a phone call from Sergeant Chatel in Calgary. As a result of this information Constable Williamson attended the San Francisco Gifts Limited stores located throughout Edmonton. In all the stores Constable Williamson located five different types of lamps which all bore the UL certification mark which bore control numbers 6622. That control number had been determined to be counterfeit or invalid by UL as a result of the Newfoundland lamp being found.
¶ 29 Constable Williamson performed a corporate search on San Francisco Gifts Limited and determined that the director and sole shareholder was Mr. Barry Slawsky of Edmonton, Alberta.
¶ 30 On June 25th, 2004, search warrants were executed on seven San Francisco Gifts Limited locations in Edmonton. A search also occurred at the head office of San Francisco Gifts Limited located at 12210 Mount Lawn Road in Edmonton. This location contained the head office and the general warehouse. In the warehouse in the office of Bob Dawson, who was identified as the head of sales for San Francisco, were located a number of counterfeit UL labels. In the office that was identified as belonging to Mr. Barry Slawsky were also located a number of counterfeit UL labels. In the warehouse were located motors for items that were sold by San Francisco Gifts Limited. Two of the motors were found to have had their boxes open and counterfeit blue labels attached.
¶ 31 Constable Williamson contacted UL during the search and spoke with the program manager of customs and counterfeiting operations for UL. That individual advised Constable Williamson that the labels should never have been found in any of the offices as only the manufacturer of the items should have those labels.
¶ 32 Also located in the office of Barry Slawsky was a letter faxed from a location in China advising Mr. Slawsky that if payments were not made that the individual who wrote the letter would attend Canada to advise the authorities that Mr. Slawsky was using counterfeit labels.
¶ 33 Six locations of San Francisco Gifts Limited in various malls in Edmonton were searched by RCMP during the execution of the search warrants. In these stores were located lamps with the counterfeit UL labels as well as counterfeit products bearing name or identification of companies West Coast Choppers, Playboy, Marvel Enterprises, and Orange County Choppers.
¶ 34 On June 22nd, 2004, Saskatoon RCMP executed search warrants on three locations of San Francisco Gifts Limited and storage in Saskatoon. In the storage in Saskatoon were located counterfeit products bearing the brand name or other labels of Playboy, West Coast Chopper, and Marvel Enterprises. Also found were lamps bearing the counterfeit UL certification labels.
¶ 35 On June 24th, 2004, in Regina, Saskatchewan, Federal Enforcement section of the RCMP executed search warrants on two locations. In the San Francisco Gifts Limited stores in Regina were found lamps bearing the counterfeit UL certification labels and in one store were found copyrighted products bearing the label of Playboy and West Coast Chopper.
¶ 36 On June 28th and June 29th, 2004, in three locations in Winnipeg RCMP Federal Enforcement section executed search warrants and located lamps in three stores of San Francisco Gifts Limited bearing counterfeit UL certification labels, and on July 6, 2004, in Brandon, Manitoba, RCMP located lamps bearing the counterfeit certification labels in a San Francisco Gifts store.
¶ 37 On July 20th, 2004, RCMP executed a search warrant in a Yorkton, Saskatchewan, location of San Francisco Gifts and located lamps bearing the counterfeit UL certification labels, and on the 19th of July, 2004, in Prince Albert and North Battleford, Saskatchewan, warrants were executed by the RCMP and lamps bearing the counterfeit certification labels from UL were located. In the Regina stores were also found items that represented to be clothing manufactured by Tommy Hilfiger. These items were confirmed to be counterfeit.
¶ 38 A number of stores in Ontario were also searched by RCMP by way of a plain view voluntary search. In eight different San Francisco Gifts locations, which in Ontario are known as San Diego Gifts Limited, lamps bearing the counterfeit UL labels were seized.
¶ 39 RCMP have sent two shirts bearing the Orange County chopper logos to the license holder for examination and the company has reported that the T-shirts are counterfeit. Samples of products bearing the West Coast Chopper logo were sent to the license holder for examination and were confirmed to be counterfeit by the license holder. Playboy and Marvel Enterprises Incorporated have also confirmed that items sent to them that were seized in searches were counterfeit items.
¶ 40 Located in the searches of some of the Saskatchewan stores and the Lethbridge store were items that were represented to be those of Fubu, or F-U-B-U, and which have been determined to be counterfeit. In some of the stores in Saskatchewan and in the Lethbridge store were also located items represented to be made by DC Comics and subsequently determined to be counterfeit. In the Saskatchewan stores were also located items represented to be that of Echo, or E-C-H-O, and later determined to be copyright.
¶ 41 It's alleged that all the items found in the stores have been distributed by San Francisco Gifts Limited from the warehouse location in Edmonton, Alberta.
¶ 42 In 1998 San Francisco Gifts Limited pled guilty to five counts under section 42 of the Copyright Act and received a fine of $1,500 on each count and in 1986 Mr. Slawsky was convicted of a breach of section 205 of the Customs Act and a breach of section 238 of the Customs Act and was fined $1,000 on each charge.
¶ 43 Those are the facts alleged, Sir.
¶ 44 THE COURT: Those facts are admitted as indicated by your signature on the agreed statement of facts, Mr. Davidson?
¶ 45 MR. DAVIDSON: Yes, Your Honour.
¶ 46 THE COURT: Thank you. What are the submissions here? Firstly the Crown.
*Speaking to Sentence by Mr. Niblock
¶ 47 MR. NIBLOCK: Yes, Sir. My friend and I have had numerous discussions about this, Sir, and we've come up with a joint submission for the Court. I can advise that the maximum penalty when Crown proceeds by way of summary conviction under these charges is a fine in the amount of $25,000, Sir, and we are seeking that amount for Counts Number 1, 2, and 3. Those counts, Sir, represent items seized that appear to have been by and large the most items seized, so those are where most of the counterfeiting appears to have taken place, Sir, with those items and those counts.
¶ 48 With respect to Count 4, Sir, seeking a fine in the amount of $12,500. In respect of Count 5, again we're seeking a .fine in the amount of $25,000. In respect of Count 6, we're seeking a fine in the amount of $12,500. In respect of Count 7, we're seeking a fine in the amount of $10,000 as well as for Count Number 8. Finally with respect to Count Number 9, Sir, seeking a fine in the amount of $5,000. Also seeking of course, Sir, forfeiture of all the items seized.
¶ 49 Those are my submissions subject to any questions, Sir.
¶ 50 THE COURT: Mr. Davidson?
*Speaking to Sentence by Mr. Davidson
¶ 51 MR. DAVIDSON: Thank you very much, Your Honour. Your Honour, the facts are as set forth in the agreed statement of facts and the sentence submission by my learned friend is a joint sentence submission subject to this Honourable Court approving it as being a fit and proper sentence having regard to the circumstances giving rise to the offences.
¶ 52 This prosecution is somewhat unique insofar as the agreed statement of facts establishes that the investigation began in basically June of 2004 and by the end of July 2004 was largely completed, that is the search warrants had been executed in various locations across Canada. It's unique because I have had, and I think the Court should be aware of, complete cooperation from all parties that were involved in this particular investigation.
¶ 53 Constable Williamson has been extraordinarily helpful and I liaised with her to make arrangements wherein the summonses could be served upon my offices so that this matter could be dealt with in a timely manner. She's been completely cooperative insofar as providing me with any information. There's been a candid flow of information back and forth as between Constable Williamson and myself-
¶ 54 I also have had an opportunity to speak to the investigator in Lethbridge and similarly he was completely cooperative, and I indicated to him from the outset that my main concern was a logistical concern so to speak, that I wanted to coordinate this prosecution as opposed to having to go to various locations within Alberta in respect of the matter and I wanted to coordinate it all in one location if at all possible. That member indicated that he would do his utmost to assist. I also told that member that I didn't want duplication unnecessarily of various disclosure packages because of the cost that would be associated with unnecessarily reproducing disclosure packages-
¶ 55 I had similar conversations with the members of Customs and Excise in Regina and Saskatoon, and again I received complete cooperation from them.
¶ 56 Finally, Mr. Niblock has been totally and utterly cooperative throughout the entire process because Mr. Niblock had to basically assume the carriage not only of the Edmonton situated prosecution but also the carriage of the Lethbridge prosecution because Informations had been laid in Lethbridge, and as well assume the carriage of Saskatchewan-related prosecutions which certainly would not normally fall within his mandate. There were prosecutions that were begun for identical offences, that have been dealt with this morning, in Regina and Saskatoon.
¶ 57 So Mr. Niblock was kind enough to interface with his colleagues in the Department of Justice in Saskatoon and through their good auspices and his good auspices was able to basically have everything at least factually put before this Honourable Court from all potential jurisdictions that had any complaints about either electrical appliances or clothing-related articles, so that everything finally was, if I can use the expression, funnelled into the Province of Alberta and finally if I again can use the expression, funnelled before this Honourable Court.
¶ 58 And I submit that under these circumstances the guilty plea does take on some considerable significance because this would be an extremely costly prosecution if it were to be a matter litigated in Edmonton, Lethbridge, Saskatoon and Regina, and potentially other places across Canada because the majority of the witnesses I think you can see from the agreed statement of facts are not what I might call local witnesses, that is it would involve calling somebody from UL who is situate in the United States, or calling somebody from DC Comics or elsewhere, and all of the witnesses, generally speaking, would be witnesses from outside of the jurisdiction. These people would be put to considerable inconvenience insofar as having to come before the courts and the Crown would be put to considerable cost insofar as securing their attendances before the courts. Simply the cost of making the appropriate travel arrangements in and of itself would be extremely costly.
¶ 59 So I say that first it's a unique prosecution because it's a very complicated prosecution. Second, it's unique because it's been dealt with within a time frame of less than six months, that is from when it began in Alberta and elsewhere until it's been concluded, that is it began in June and it's being concluded December 30th, 2004. Third, that throughout the whole process there was an exchange going on between counsel and the various investigators and counsel and the Crown and I've simply given to the clerk, that was passed I believe to the Court at the same time as the agreed statement of facts, some correspondence, and I'm not going to belabour this.
¶ 60 The only purpose of referring to this correspondence is that you can see from the first letter of July 29, 2004, Mr. Parker, who is corporate counsel, was liaising with Constable Williamson respecting concerns about some of the electrical devices and the next attached document is a memo circulated by San Francisco gifts dated July 29th, 2004, to all stores regarding electrical merchandise and again it was to take off the shelf those articles that were of particular concern to the investigators in this particular matter. And then there's another memorandum of July 7, 2004, that again went to all stores respecting the UL stickers and again those stickers were to be removed and the memo prepared by corporate counsel was attached when it was distributed.
¶ 61 So what I'm trying to say in an awkward way is that there has been dialogue and communication basically from when the warrants to search were executed, or shortly thereafter, amongst all of the parties that had an interest in these particular proceedings and I think that it's fair to say that there's been a spirit of cooperation throughout in respect of having this matter heard and determined in a timely manner without incurring unnecessary costs on the part of the Crown or the Royal Canadian Mounted Police who had the carriage of the investigation basically across Canada.
¶ 62 So, in conclusion, having regard to the facts, the guilty plea, and the other circumstances that have been put before the Court, subject to any questions of Your Honour I submit that the proposed penalty, which is a substantial monetary fine, I believe it totals $150,000, is a fair and proper penalty.
¶ 63 THE COURT: If I missed it, Earl Parker, who says he is the corporate counsel for San Francisco Gifts Limited, that is San Francisco and the accused corporations who have pled here, how do they get into this? Is it a franchise operation? How does San Francisco corporate head office get involved?
¶ 64 MR. DAVIDSON: Well, it's a corporate entity that operates under the name of San Francisco Gifts. So the head office becomes involved because that is the location as set out in the facts wherein the merchandise is distributed from, that is the location from which the administrative and executive decisions are made insofar as the ordering and distribution of the merchandise is made from. And then they're all basically stores that are controlled under one corporate umbrella. It's not a franchise in the sense that there's individual operators, so to speak, of different locations.
¶ 65 THE COURT: There is no suggestion that the corporation San Francisco as opposed to the Edmonton, Western Canada, and other places operation of it by Mr. Slawsky or whoever had some knowledge or are involved in this? I mean, I am talking about the big corporation.
¶ 66 MR. DAVIDSON: Well, that's who's pled guilty, Your Honour. It is --
¶ 67 THE COURT: Well, that is what I am interested in knowing. Everything I have heard said that the guilty minds were something that operated out of Edmonton. The corporation is pleading guilty. That corporation San Francisco, not the Edmonton component. This is the San Francisco corporation that is pleading guilty and thereby saying that we had guilty knowledge that this was going on where all of the places were we found out that it was going on.
¶ 68 MR. NIBLOCK: Well, that's the understanding of the Crown, Sir, as we understand it.
¶ 69 THE COURT: An international corporation, I mean
¶ 70 MR. DAVIDSON: No, it's not international, Sir. No.
¶ 71 THE COURT: Well, it operates in the United States and Canada. That is two countries.
¶ 72 MR. DAVIDSON: No, it has no operations in the United States, Your Honour. It's situate here and just extra provincially registered in other provinces in Canada where it carries on business.
¶ 73 THE COURT: So again, who is Earl Parker?
¶ 74 MR. DAVIDSON: Mr. Parker? Mr. Parker is --
¶ 75 THE COURT: Where is he --
¶ 76 MR. DAVIDSON: -- the corporate solicitor with Witten and Company here in the City of Edmonton.
¶ 77 THE COURT: All right. I am sorry. I got the impression leafing through this quickly that I was talking of an Earl Parker from San Francisco, the city of. That is not so.
¶ 78 MR. DAVIDSON: No, Your Honour. Mr. Parker is present in the body of the courtroom and he's from the law firm of -
¶ 79 THE COURT: All right.
¶ 80 MR. DAVIDSON: -- Witten and Company in the City of Edmonton.
¶ 81 THE COURT: All right. All right.
¶ 82 MR. DAVIDSON: I apologize for any confusion.
¶ 83 THE COURT: I know another Earl Parker who happens to be a solicitor in San Francisco and that may have misled me.
¶ 84 MR. DAVIDSON: No, it's not that Earl Parker, Your Honour.
*Sentence
¶ 85 THE COURT: Okay. All right. I have heard your submissions. Quite frankly, this is and should be described as nothing else than a despicable fraud on the public. Not only not insignificant but bordering on a massive scale company, stores, all of these places that we have been told they had stores. And while it can be said that you get what you pay for if you are the public and you go to San Francisco and you see something which turns out to be a knockoff made in China or wherever with a fraudulent label on it and you get it for a real good deal, you go home and you are happy even though you find out or are now finding out that it is not what you thought you were paying for, maybe you should have known.
¶ 86 What I am most concerned about is the counterfeit, essentially, safety stickers. That is despicable because what ends up in the public's hands or may is something that is frankly going to be dangerous, we are talking about electrical appliances that cause fires bought by somebody who whether they really relied on the UL certificate or not it had a certificate on it and to go into the exercise of getting cheap stuff somewhere and then dressing it up with false labels and false safety certificates causes me great pause, such pause that if it was an individual who pled guilty before me today my starting point would be a term of imprisonment in a federal penitentiary, without a doubt.
¶ 87 I am going to accept the pleas as the Crown has for good reason, I take it, and the joint submission. On Counts 1, 2, and 3, and each of them, there will be a fine in the amount of $25,000. Count 4 there will be a fine in the amount of $12,500. Count 5 a fine in the amount of $25,000. Count 6, $12,500. Counts 7 and 8, $10,000 each. Count 9, $5,000. In addition there will be an order, a forfeiture of all material seized in the course of this widespread investigation.
¶ 88 I give credit, I suppose, not I suppose, I do, for the professional way in which this has been handled, both by the investigators, by counsel, and by Mr. Davidson. It has been professionally packaged up and put together so it could all be resolved and there is a saving of significant expense to the taxpayers of this country. Having said that, I am still left with a very bad taste in my mouth from what I have heard here today- However, the joint submission is acceptable. I am bound to accept it unless I find it to be totally unacceptable.
¶ 89 The other charges, I take it, against all the -- the corporation and any charges against the individuals arising out of this are withdrawn by the Crown and dismissed. Time to pay, Mr. Davidson?
¶ 90 MR. DAVIDSON: Your Honour, it's agreed that this fine will be paid forthwith.
¶ 91 THE COURT: Good. Does that deal with the matter?
¶ 92 MR. DAVIDSON: It does, Your Honour.
¶ 93 THE COURT: Thank you.
¶ 94 THE COURT CLERK: Is there a victim fine surcharge on these?
¶ 95 THE COURT: I take it that these fines are inclusive.
¶ 96 MR. NIBLOCK: It's the intent I think, Sir.
¶ 97 THE COURT: I think there will not be victim -- I mean for a corporation that is just trivializing something that should not be trivialized, in my view.
¶ 98 MR. DAVIDSON: Thank you very much, Your Honour.
¶ 99 THE COURT: Thank you, Mr. Davidson.
¶ 100 MR. NIBLOCK: If I could ask, Sir, that the agreed statement of facts you have be made an exhibit?
¶ 101 THE COURT: The agreed statement of facts and also material filed by Mr. Davidson will be respectively Exhibits S-1 and S-2 for the court record.
¶ 102 THE COURT CLERK: Thank you.
*EXHIBIT S-1 - Agreed Statement of Facts
*EXHIBIT S-2 - Correspondence and Attachments
¶ 103 MR. DAVIDSON: Thank you, Sir.
¶ 104 MR. NIBLOCK: Thank you very much, Your Honour.
¶ 105 THE COURT: Thank you.
STEVENS-GUILLE PROV. CT. J.
QL UPDATE: 20050317
cp/s/ln/qlmmm