Pair convicted in New Minas 'car-swapping' fraud face sentencing hearing

The reference letters for car dealer Darren Bateman are highly supportive, describing him as extremely generous, helping people with money and vehicles, paying for them to see shows or quickly stepping up to buy fundraising auction tickets.

While on its surface that financial benevolence might seem a good thing, a Halifax prosecutor pointed this week to a big problem. It came despite the 60-year-old owing more than $1 million in tax fines while also embroiled in a large-scale fraud involving a New Minas, N.S., car dealership.

"Generosity is also a quality that can be addictive," prosecutor Shauna MacDonald told a Halifax provincial courtroom. Bateman could feel good about his deeds, she said, even though he didn't have the means to pay for them.

Bateman, along with co-accused Orlando Smith, 65, faced a sentencing hearing Thursday for their roles in a complicated "car-swapping" scheme, nearly eight years after they were charged and following a trial where they were convicted of fraud and possession of proceeds of crime.

Both pleaded not guilty. They are seeking conditional sentences to avoid incarceration, while the prosecution wants Bateman handed three years behind bars and two years for Smith. Judge Elizabeth Buckle will issue her decision in September.

'Staggering amount of money'

All told, the fraud was repetitive, complex, motivated by greed and amounted to nearly $1 million, according to MacDonald, "a staggering amount of money, by any definition."

The dealership that was defrauded was Summit Hyundai, where Bateman worked under contract and where Smith was general manager and a shareholder.

Summit had a ballooning inventory of used cars because it was overpaying for trade-ins in an effort to convince customers to buy new vehicles. The problem was that terms of the dealership's bank financing meant the used cars had to be sold within a certain period.

As a workaround, Summit began in 2015 selling used vehicles to a company operated by Bateman, which in turn sold different vehicles back to Summit, allowing the dealership to reset the clock on its loans.

In her 2023 trial decision, Buckle called the scheme "unethical and perhaps fraudulent," and said the owner of Summit, Ken Barrett, likely came up with it to keep the bank at bay, although he was not charged in the case.

A crucial issue at trial, however, was the value of the vehicles. While the swapping deal was supposed to be revenue neutral, Buckle found it was "lopsided" by at least $440,000 in favour of Bateman's company and to the detriment of Summit.

Buckle also found that Summit paid Bateman's company for vehicles that weren't delivered to the dealership. In other cases, Bateman rented vehicles and then created false documents to make it seem like his company actually owned them and was selling them to Summit.

Support from family, friends

During sentencing, defence lawyer Stan MacDonald, who represents Bateman, said given the judge found Barrett complicit in or aware of some aspects of the car-swapping and rental schemes, "the significance of the fraud" committed by Bateman "is reduced."

It's not a case akin to that of an investment councillor who steals clients' money, he said, and the financial problems suffered by Summit cannot be solely pinned on his client, but were also the fault of Barrett, who ultimately sold Summit Hyundai in 2017 for a loss.

The defence lawyer urged the judge to sentence Bateman to two years of house arrest followed by three years of probation.

Bateman does have a record. In 2000, he was convicted in a car-selling scheme aimed at dodging sales tax. He was fined $1.1 million, but Buckle was told he's only paid off $16,000. His lawyer said he had been paying $100 a month, and there had apparently been no attempts to collect the rest.

Jeremiah Raining Bird, the lawyer for Smith, noted 25 reference letters supporting his client. He took issue with the characterization of Smith as "toxic" to Summit, and said he was a strong new-car salesman who made the business money.

And while the prosecution is seeking steep fines from the pair, Raining Bird said his client should only be on the hook for $58,000, the amount of money a financial analysis determined had flowed from Bateman's company to Smith and his wife.

Big regret? Not testifying

Smith addressed the court at Thursday's hearing, telling Buckle he respected her decision to convict him "based on the evidence presented" at trial, but said his biggest regret is not testifying in his own defence.

He said he was once the most sought-after general sales manager in Canada, and he made Summit millions of dollars by selling new cars. He said the used-car aspect was only a small portion of the business.

He questioned why Barrett was never charged, said he "shouldn't have listened to him" and regretted getting involved in something he didn't realize was fraud.

"I'm not a bad guy, I'm not a criminal," Smith told Buckle. "I don't know how the hell this happened. I lost everything. I can't work. I'm not a threat to society."

In court, Bateman apologized to his family and friends "for everything I put them through for the last eight years," thanked them for their support and said "it's been a long battle for them as well as myself."