Lawsuit alleges Alberta Motor Association victim of $8.2-million fraud
AMA lawyer tells Edmonton court there is 'no way' Jim Gladden could afford his lifestyle on his IT salary
Over the past three years, Edmonton resident Jim Gladden spent money like a multimillionaire businessman.
He bought a 2013 Porsche, sold it in 2015 and bought a 2016 model. He bought and sold a rare Italian-made Maserati. His insurance covers a 2014 Dodge Ram truck, a 2015 BMW and a $50,000 boat.
His new home in southwest Edmonton cost an estimated $1.6 million. He purchased his 3,000-square-foot vacation home in Scottsdale, Ariz., in March for $520,000 US. As an investment, he bought a $5-million office building in downtown Edmonton.
During this three-year spending spree, Gladden was working as vice-president of information technology for the Alberta Motor Association (AMA) and making about $210,000 a year.
"There is no way that he could be living this lifestyle without conducting what was a brazen and substantial fraud," Calgary lawyer Munaf Mohamed told a Court of Queen's Bench justice in Edmonton on Thursday.
There is no way that he could be living this lifestyle without conducting what was a brazen and substantial fraud.- Munaf Mohamed, lawyer
Mohamed, now representing the AMA, specializes in large-scale civil fraud cases and international asset recovery claims.
"There is a prima facie case of fraud made out," Justice Joanne Veit ruled, meaning there is sufficient initial evidence.
The ruling came after Mohamed's 90-minute dissection of how Gladden allegedly pulled off a scheme that involved fabricated invoices of between roughly $30,000 and $450,000 US and electronic transfers to American bank accounts.
The AMA alleges Gladden and his associated companies defrauded it of at least $8.2 million Cdn between January 2013 and June 2016.
Veit granted several orders — with no notice to Gladden — that effectively froze all his assets and bank accounts in Canada and the U.S. while the AMA's lawyers conduct an investigation on both sides of the border.
In an emailed statement to CBC News, the AMA said there was no breach of "confidentiality of member or customer information," and external insurance will cover any losses.
"In addition, AMA has reviewed its financial processes and has put in place additional controls to prevent any future incidents of this type," the statement said.
Alleged fraud unravels
The AMA has filed an $8.2-million lawsuit against Gladden and several of his associated companies. No statement of defence has been filed and the allegations contained in the lawsuit, and affidavits in support of the orders, have not been proven in court.
But the documents — obtained exclusively by CBC News — provide a window into what is alleged to have been a large-scale corporate fraud and how it unravelled.
If the allegations are proven, the unravelling of what the AMA's lawyer called a "brazen fraud" will have been started by an injured leg.
Gladden has worked at the AMA for nearly eight years, and has been vice-president of information technology for about the last 18 months.
In August 2015, Gladden told the AMA he hurt his leg and he was allowed to work more hours from home, according to an affidavit sworn by AMA chief operations officer Michelle Chimko.
But Chimko said that by January 2016, she had to speak with Gladden "because he was working less and failing to show up at meetings."
Chimko said the situation deteriorated and on June 22, she told Gladden he was required to go on disability leave so someone else could fill in on an interim basis.
"Gladden was visibly upset at our meeting and advised me that he did not want to be put on disability leave," Chimko's affidavit states.
On July 12, the AMA's financial controller discovered two odd invoices — for the purchase of 1,142 "CRM licences" from Chicago-based ComboApp Inc., totalling more than $570,000 US, documents show.
A week-long investigation uncovered no explanation for why the AMA needed so many licences, or how the invoices came to be approved.
On July 20, Chimko contacted ComboApp and was told it had not issued the licence and was not even in the business of selling CRM licences.
Chimko also learned ComboApp had not billed AMA since February 2014. When she got the invoices from the company, the AMA realized it had not received the services for which it had paid.
Alleged access to executive email
That was not the only surprise. A day earlier, the AMA suspended Gladden's email account and disabled his remote access. While doing that, a network security analyst discovered Gladden had given himself access to the email accounts of several senior AMA executives.
"This 'full access' would have allowed Gladden to review email correspondence that had been sent or received by various members of senior management within the AMA, including myself," Chimko said in her affidavit.
"As a result, I believe that Gladden was aware that the AMA was in the process of conducting an investigation into his misconduct."
The AMA decided it would immediately terminate Gladden's employment. But first, Chimko had to get him to respond to her text messages and phone calls.
The documents detail several frustrated attempts on July 21 to arrange a meeting with Chimko and AMA chief executive officer Don Smitten. Chimko finally threatened to go to Gladden's house.
Gladden finally agreed to meet in the lobby at the Misericordia Hospital in Edmonton's west end at 11:30 a.m., saying he would be there after an appointment for his injured leg.
The AMA sent an employee to watch his house. Shortly after 11 a.m., the time when Gladden was supposed to be in an appointment at the hospital, the employee saw Gladden leave his house and he followed him to the Misericordia.
Within minutes of Gladden arriving for the meeting, he was fired.
Gladden appeared prepared. He handed over both sets of keys to his AMA vehicle and his company phone, with the memory wiped clean.
Sole payment authority
The court documents detail an alleged fraudulent scheme that was surprisingly simple and easy to sustain because the AMA appears to have trusted Gladden. It had given him sole authority to approve the payment of invoices for goods or services used by the AMA's information technology department.
In its lawsuit, the AMA alleges that between Jan. 8, 2013, and June 17, 2016, Gladden authorized payment by the AMA for a number of invoices "that were either fraudulently prepared by Mr. Gladden or were for payment on invoices issued by a third party for services rendered to, or for the benefit of, one or more of the defendants."
Through access to Gladden's AMA email account, the AMA learned Gladden owned a company called Sprockit Apps Inc., which created and marketed applications for mobile phones.
The court documents show the AMA made payments to ComboApp for work the AMA claims was done for Sprockit.
The AMA also claims Gladden fabricated invoices from several U.S. companies, including ComboApp, and authorized their payment through an electronic transfer to bank accounts in the United States that the AMA alleges Gladden either directly controlled, or benefited from.
The AMA conducted a search of its internal accounting records for all invoices approved by Gladden that had been paid by a wire transfer. The search uncovered several companies that had no contract with the AMA to provide any goods or services. One never even had a website.
"None of these vendors provided any goods or services to the AMA," AMA general counsel Geoff Edgar swore in an affidavit.
Edgar, in his affidavit, draws a direct line between fabricated invoices and several personal purchases, including a new Porsche.
Edgar's affidavit alleges Gladden created an email account — Datavox3@gmail.com — for wire transfers to an online escrow account in California. On June 23, 2016, an email from Datavox3@gmail.com detailed two transactions confirming payment of $109,001.
Less than two weeks earlier, on June 12, Gladden approved an invoice on ComboApp letterhead for $110,025 bearing the same transaction and escrow numbers.
"The other email in the Datavox3@gmail.com account was a confirmation of a wire transfer to Pfaff Porsche (of Toronto) in the amount of $109,001," Edgar's affidavit states.
Edgar said that on July 29, eight days after the AMA fired Gladden, he was contacted by Edmonton criminal defence lawyer Deborah Hatch.
"Ms. Hatch advised me that she was not calling about employment matters and that, given her practice area, I should know what she was calling about," Edgar states in his affidavit.
"I believe that she has been retained by Gladden in respect of any criminal liability that he might face and not in respect of any civil proceedings."
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