NOVEMBER 19, 2002
PATIENT TAXMAN MAKES TV PIRATE WALK PLANK (James Daw, Toronto Star)
Nelson Lance could afford a Mercedes Benz when he sold devices for stealing pay television signals. He was paying no taxes. Customers he met in mall parking lots paid lower cable bills, and they, too, made life more expensive for the rest of us taxpayers. But the taxman is watching. As Lance has just discovered, penalties for evading taxes on illicit income can be harsher than the fines for the crime itself.
Lance's bumper trade in contraband electronics first came under scrutiny in 1995. That was a simpler time for the cable, film and broadcast industries, before an estimated 700,000 scofflaw Canadians acquired illegal satellite dishes, anything not served by Bell ExpressVu or Star Choice.
Private investigators from Advocate Investigation Services Ltd. of Mississauga had been snooping around on behalf of cable companies for years. They videotaped Lance, 48, and his brother Joseph, making sales in the parking lots of Mississauga plazas. They overheard conservations in a local restaurant. With Peel Regional Police officers watching, they posed as equipment buyers — all this coming at the expense of cable viewers who pay their bills.
Acting on the information supplied by Advocate Investigation, Peel police obtained search warrants. They found 145 descramblers from LAB Electronics Co. Ltd. of Taiwan in Lance's car and his home at the time on Council Ring Rd. in Mississauga.
The evidence was overwhelming. Lance pleaded guilty in 1997 to possession of unlawful devices for obtaining telecommunication services, a criminal offence.
Harry Davies, vice-president of Advocate, says smalls fines were levied against Lance and dozens of others who were convicted over the years, none of the fines more than about $30,000 for a Windsor man after his third offence.
But that wasn't the end of it for Lance. Peel police passed on information to the tax authorities.
Investigators for Canada Customs and Revenue Agency discovered that Lance had not reported any business or employment income from 1994 to 1996, and paid virtually no taxes.
He had paid $2,132 in taxes on $15,736 of investment income earned in 1995, but then claimed a refund of $2,006 for 1996 when he reported $8,927.66 of investment income. It took until June, 2000, for investigators to establish that Lance was living well beyond his declared income.
Investigators searched Lance's new residence on Deer Run Court in Mississauga, and the offices of his tax preparers. They found that Lance had several different business cards. The cards identified him as sales manager for Ontario Video Exchange in Mississauga, as a business consultant working from his home address, as Summit Travel of Toronto and as someone dealing in "private investments," with no address, just a cellphone and pager number.
Lance also had records showing that he had purchased properties and made investments in securities while claiming to have little income. Not documented were his cash receipts for descramblers and pirated Nintendo games.
But the revenue agency estimated his net worth had increased by $182,306 from 1994 to 1995, and by $212,355 from 1995 to 1996. This so-called lifestyle audit suggested that Lance should have reported income of $193,222 for 1995 and $190,222 for 1996.
Again faced with compelling evidence, Lance pleaded guilty to owing $104,833 in taxes, before interest and late-payment penalties, and to the set of facts about his case that were read into the court record in Brampton on Nov. 7. He was ordered to pay a fine of $52,279, half of the taxes owed. Sources said he was able to pay the fine that day, and go on his way.
Too bad Lance's story took so long to reach a satisfactory conclusion, and that dozens of others convicted of the same offences may not have been investigated for tax evasion. "This is the only case that I had where Revenue Canada ever came along and got involved with non-declaration of income," said Davies. He said he has all the records to help tax authorities get started if they ever choose.
One final stroke of justice would be to see Lance's customers and those hundreds of thousands of satellite-signal pirates charged with theft of a telecommunication, which ultimately deprives public coffers of tax revenue.
But Davies and Sgt. Steve Saunders of the Royal Canadian Mounted Police say law enforcement agencies tend to focus on the manufacturers, sellers and distributors of the illegal devices used for stealing telecommunication signals.
This week, the RCMP in Winnipeg charged a company called XGEN Technologies with selling devices for stealing satellite signals. The principals of the company are now under investigation. If convictions are imposed, the next call should be to the revenue agency. We taxpayers need all the help we can get.