The chief financial officer of a century-old crane company forced into bankruptcy has pleaded guilty to defrauding it of more than $4 million.
Peter Ramdath, who was CFO of R. Litz and Sons, pleaded guilty to a single charge of fraud over $5,000 in provincial court earlier this week.
The Crown stayed several other fraud-related charges against Ramdath, as well as a charge against Justyna Ramdath, his wife.
Shiu-Yik Au, an assistant professor at the University of Manitoba's Asper School of Business, said on Thursday that cases of multi-million frauds against companies by employees are "not common, but are more super rare."
Au said the Securities and Exchange Commission in the United States has reported about three per cent of companies there experience some form of fiscal misconduct, but it isn't always criminal.
"Sometimes they make a mistake and they have to fix it, but for an executive to do this, it's pretty rare."
Au said there are usually two main reasons a fraud is not detected: either they have a bad auditor or the auditor is too cosy with the company’s administration. There could also be a third reason.
"He could have faked the documents really well," he said.
"This type of crime is usually rare. Usually it is a mistake they just don't correct."
Au said either way companies have to have financial controls in place to catch crimes or mistakes quicker.
"It doesn't matter if the person is trusted. It's like the expression "I trust the man, but I still cut the cards". You still need to watch what is happening."
Ramdath, 43, was arrested in January 2018 and originally charged with fraud, theft, falsification of books and documents, money laundering and possession of property obtained by crime.
At the time of Ramdath's arrest, he owned an East St. Paul house, another on Manitoba Avenue, luxury vehicles including a 2008 Aston Martin, BMW, and Maserati, jewelry, including a $43,000 ring, designer sunglasses, handbags and shoes, and cash in several bank accounts.
Ramdath created and entered fraudulent invoices into the company's accounting system to artificially inflate the credit available on the company's lines of credit, in order to redirect funds to his own personal line of credit and personal credit cards.
Ramdath's actions pushed the company, which was founded in 1904 and was into its third and fourth generation of ownership, into bankruptcy.
Last year, Litz launched a lawsuit against two auditing firms for $50 million, alleging they were negligent for not detecting the fraud.
Meanwhile, provincial court Judge Keith Eyrikson accepted the plea on Wednesday after ensuring that Ramdath understood what he was pleading to and the possible ramifications.
Earlier, Ramdath answered in the affirmative to each question defence counsel Richard Wolson asked him including whether he was pleading voluntarily, whether he realized he was giving up his right to have a trial, whether he had been an employee of Litz, whether he had been in a position of trust at that company, and whether he had defrauded the company of more than $4.2 million.
Wolson, who told the court there would be a joint Crown-defence recommendation at a sentencing hearing on June 11, also asked Ramdath if he understood the judge sentencing him could accept the plea bargain or could raise or decrease the proposed sentence.
"Yes," Ramdath said again.
Wolson told the court the plea came after many meetings with Crown counsel and as many as a dozen meetings he had with Ramdath.
"He is well informed of the allegations," the lawyer said.
Kevin Rollason is one of the more versatile reporters at the Winnipeg Free Press. Whether it is covering city hall, the law courts, or general reporting, Rollason can be counted on to not only answer the 5 Ws — Who, What, When, Where and Why — but to do it in an interesting and accessible way for readers.
Updated on Thursday, January 16, 2020 at 7:00 PM CST: Updates headline