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Garbo, Gable and Casablanca, touted as dream yachts to beat the tax man, were nothing more than paper dreams.

But it was enough to ensnare 613 people, including some high-profile Canadians, in the largest tax fraud in Canadian history.

Yesterday, at the end of a five-year prosecution, a Toronto judge handed out the toughest sentences for tax fraud in Canadian history -- including a 10-year jail term and a $1-million fine for the scheme's chief architect.

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The fraud victims included financial consultant and broadcaster Brian Costello, Barry Sherman, CEO of pharmaceutical maker Apotex Inc., and Michael Bregman, chairman of the Second Cup coffee chain.

The fraud was built on the idea that investors could own part of 36 luxury yachts, including Garbo, Gable and Casablanca, and write off their huge construction costs. But the yachts were never built.

And officials at Canadian Customs and Revenue, formerly Revenue Canada, refused to allow any of the tax breaks once they caught on to the scheme. Investors never recovered the $22.8-million they put into limited partnerships, and the government lost the $2-million it had allowed in tax cuts.

Had the tax auditors not been tipped off and begun their investigation in 1986, the investors would have written off a total of $118-million in losses.

Einar Bellfield, 50, masterminded the elaborate plan in 1984 to take advantage of a booming economy. The dummy company he set up, Overseas Credit and Guaranty Corp., folded in 1991 when investors, scared off by the investigation, stopped making payments on their partnerships.

Mr. Bellfield was arrested in November, 1994, and Osvaldo Minchella, described as Mr. Bellfield's right-hand man, two months later. Both were charged with defrauding the investors and the government, and with uttering forged documents.

Yesterday, Mr. Bellfield was sentenced to 10 years in prison and ordered to pay the Canadian government $1-million within three years. Madam Justice Sandra Chapnik of the Ontario Superior Court also sentenced Mr. Minchella to seven years.

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Neither man showed any emotion when the sentences were read out, although Mr. Bellfield's wife cried. Both men have been in custody since a jury convicted them two months ago.

Mr. Bellfield, whose real name is Einar Sellander Bjellebo, told Judge Chapnik through his lawyer that he would need several years after his release to earn enough money to pay the fine.

But Judge Chapnik didn't buy his story, pointing out that he had pocketed millions of dollars and had set up elaborate structures to conceal his assets in tax-haven countries, including Switzerland and the Cayman Islands. She gave him 36 months to pay up. If he defaults, he will spend an additional two years in jail.

Mr. Bellfield, who was born in Norway and came to Canada at the age of 22 with a degree in civil engineering, enjoyed a lavish lifestyle. It included expensive hotels when travelling, a $1-million gift to a New Brunswick company managed by relatives, the purchase of two condominiums for relatives, and a six-figure salary for himself.

Judge Chapnik described him as suave, intelligent and articulate, and said he could have had great success if he had applied his managerial skills to a legal enterprise.

But he was also strident, argumentative and lacked credibility during his 22 days in the witness box, she said.

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"You're totally incapable of telling the difference between reality and fiction," she told him.

His obvious lack of remorse led her to conclude that there is little hope for his rehabilitation. "He must be made to realize that he can't put the blame on others," something she said he did throughout his testimony.

She said there were no mitigating factors that would lead her to reduce the sentence. "It's the worse offence by the worst offender."

Mr. Bellfield had nothing to say when asked if he wanted to address the court before being sentenced.

Judge Chapnik said both men had been lured by greed and a desire to get rich quickly. Neither has apologized to the hundreds of bilked investors.


The brochures trumpeted part-ownership in a flotilla of 25-metre yachts sailing around the Mediterranean and the Caribbean, as well as huge tax write-offs.

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A total of 613 investors could not resist the lure of the pitch and anted up in what has become the largest tax-fraud case in Canadian history.

Over a seven-year period beginning in 1984, investors could join one of 36 limited partnerships, each having 24 investors who bought a share of that group's yacht. The scheme promised that Revenue Canada would allow investors to deduct the huge costs of building the boats: a write-off of $4 or $5 for every dollar invested.

As tax losses dwindled in the future, investors were assured they would enjoy the net profits realized from the yachts' charter businesses.

Each investor signed a promisory note to a company called Overseas Credit and Guaranty Corp., agreeing to invest whatever he or she could afford. A down payment was not necessary in most cases.

At the end of each year, investors received statements outlining their losses resulting from the construction costs. The statements were used to save money on income taxes.

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