Two former car salesmen have been sentenced for a large fraud involving a New Minas, N.S., dealership, with one of them handed prison time and ordered to pay a fine of more than a half-million dollars.

Darren Bateman, a 60-year-old with a record for tax fraud, was sentenced to two years in prison Wednesday in Halifax provincial court, while the dealership’s former general manager, Orlando Smith, 65, was given a two-year conditional sentence that includes a year of house arrest.

“I can only infer that Mr. Bateman’s conduct was motivated by greed. Mr. Smith’s motive is more difficult to understand,” Judge Elizabeth Buckle said, noting Smith was a shareholder in the very company that was being defrauded.

The case involving Summit Hyundai was complex to both investigate and take to trial, and the prosecution pegged the total fraud at nearly $1 million.

It started with what Buckle previously called an “unethical and perhaps fraudulent” scheme to keep the bank that was financing the dealership in the dark about a growing inventory of used cars on the lot.

The number of used vehicles had swelled because Summit was overpaying for trade-ins as an enticement to get customers to buy new vehicles. However, the bank’s financing terms dictated that used cars had to be sold within a certain period.

To get around the terms, the dealership would reset the clock by selling used vehicles to a company operated by Bateman, which in turn sold different vehicles back to Summit.

Denial of wrongdoing

The scheme started in 2015, with the knowledge of Summit owner Ken Barrett. However, the fraud case that was prosecuted involved allegations that Bateman and Smith weren’t swapping cars of similar values, but instead making lopsided deals in favour of Bateman’s company and to the detriment of Summit.

Bateman’s company also sold the dealership vehicles that weren’t delivered, and fake documents were used to sell vehicles to Summit that Bateman’s company didn’t actually own, Buckle concluded following trial.

Outside the courtroom, Smith remained defiant. In an interview, he denied any wrongdoing and said he was examining whether to appeal his conviction. He continued to question why Barrett, the owner of Summit, was never charged in the case.

“I didn’t take the stand and that was the biggest mistake of my life,” he said of his decision not to testify at trial. “No, there’s no wrongdoing.”

In court, Buckle said Barrett filed a victim impact statement that said the fraud has had a “devastating” financial and emotional impact on him and his family. He said he’s been forced to sell his primary home and a cottage. He sold Summit Hyundai at a loss in 2017.

“He lost business relationships, including his relationship with the bank, his confidence, ambition and his ability to trust people,” Buckle said. “His reputation has been tarnished and he’s experienced years of stress and anxiety.”

Former Summit owner

Buckle said while there’s no question the fraud hurt Summit, the crime can’t be exclusively blamed for the company’s downturn. The fraudulent deals did not begin until after the dealership began to face financial troubles.

In a phone interview, Barrett said he’s not clear whether he’ll receive money from the fines handed down in the case.

Responding to Smith’s comments denying wrongdoing, Barrett said: “He’s a convicted felon and I don’t believe a word that he says. Nor should anyone else.”

Barrett, 59, now works in construction management.

“It’s affected us massively financially,” he said of the fraud. “I was 26 years in the car business, for this thief to take it away from me. He took away my retirement.”

In court, Buckle noted Smith had no criminal record, his reputation is now ruined and he lives on Canada Pension Plan payments. Smith’s house arrest will be followed by a six-month curfew. He was also sentenced to two years of probation.

Buckle said Smith benefited far less than Bateman from the fraud, calculating Smith’s proceeds from the crime, which came from Bateman’s company, at $53,500. She handed Smith a fine in that amount, to be paid off over the next 10 years.

Bateman, she said, benefited far more, to the tune of at least $543,196. Buckle fined him that amount and gave him 10 years to pay.

In sentencing him to prison, she noted a dated record. The court heard in the spring that Bateman still owes more than $1 million from a 2000 tax fraud involving car sales.