A Langley man will have most of his assets frozen as his former employers sue him for allegedly embezzling $2.4 million over seven years.
Banner Carpets Ltd. is a family-run Vancouver firm that imports and sells carpets and floor coverings. They hired Cou Lai as the company bookkeeper in 2009.
A Jan. 23 ruling by Justice Warren Milman in New Westminster Supreme Court laid out the Banner Carpets allegations that Lai has for years been transferring money and writing cheques from the company to his own accounts.
None of the claims have been proven.
Lai’s duties at Banner Carpets included managing their accounting software, keeping track of accounts payable and receivable, and preparing, but not signing, cheques.
But on March 30, 2023, general manager Lynn Herberts discovered a company cheque that had been paid without having been signed by any of the core members of the Banner staff. She logged into the company’s accounting software and discovered 366 cancelled cheques.
She learned that a new cheque could be drawn, then cancelled, but the funds could still go out of the account without any corresponding record of the company’s debit in the system.
Further investigation turned up cancelled cheques going back to early 2016, totalling $1.2 million.
As they kept digging, the company’s management discovered electronic transfers of payments that should have come to Banner, but which had been transferred directly to a TD Canada Trust account held by Lai.
A Banner employee found $63,490.45 in e-transfers to the TD account in the month of March, 2023 alone.
Lai was fired on April 3, and the alleged fraud was reported to the Vancouver Police Department. According to Justice Milman’s ruling, Lai was arrested but was later released and told he was still under investigation. No criminal charges have been laid.
The company launched its lawsuit on April 17, 2023. It has continued bringing evidence to the court, and by October last year claimed that more than $2.4 million was missing.
“Of the $2.4 million alleged to have been stolen from BCL [Banner Carpets Ltd.], $1.3 million appears to have been fraudulently applied, through the cancelled cheques, to pay the defendants’ MBNA and Capital One credit card balances,” Justice Milman wrote.
According to an analysis by a Banner staff member, Lai was earning a salary of averaging $50,000 a year while the alleged thefts took place.
He was allegedly taking up to twice that much from Banner Carpets for credit card expenses.
In 2022 alone, $103,305.86 was charged to a single credit card held by Lai.
Lai told the court in a deposition that his family had $7,500 in monthly expenses, including medication for his children and himself. He was taking home a monthly salary of about $4,200, before taxes.
Milman also noted that money flowed into a bank account that was used to make mortgage and property tax payments. Much of the money was apparently transferred to a Questrade stock trading account, and a Coinbase account. Coinbase is a cryptocurrency trading platform.
The issue in Milman’s Jan. 23 ruling was whether or not a Mareva injunction could be placed on Lai and his now-separated wife.
A Mareva injunction is a court order that freezes some or all of a defendant’s assets to prevent them from being hidden. It’s used when a plaintiff has a clear apparent legal claim to those assets.
Much of Milman’s ruling concerned whether the Mareva injunction should apply to Lai’s now-separated wife as well as to him.
The judge noted that the family’s only significant assets seem to be the Langley home they bought in 2011, worth about $1.1 million once its remaining mortgage is paid off, and the investment and Coinbase accounts, which have about $75,000 at present, after $50,000 has already been spent on lawyers.
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“I have already observed that BCL is unlikely to recover anything close to the entire $2.4 million or more that appears to have been stolen,” wrote Milman. “The dissipation of the stolen funds has, in large part, already occurred.”
He ruled that the injunction would apply to most of the family’s assets, with up to $25,000 excluded for Lai and his former spouse each to use for day-to-day expenses and legal fees as the trial approaches.
Milman also noted in passing that Banner’s case against Lai was “overwhelming and essentially unanswered.”
The Vancouver Police Department confirmed a criminal investigation is still underway related to the Banner Carpets situation, but could not give further details.
– edited to add VPD confirmation of an ongoing investigation
