A man who almost defrauded Revenue Canada of more than $40 million had his prison sentence increased on Wednesday but won’t have to serve any more time.

In a written ruling, the Ontario Court of Appeal said the 18-month term handed to Kevin Plange was far too little for the crime and upped it to three years.

“The sentence imposed by the trial judge was demonstrably unfit when compared to other large-scale frauds,” the Appeal Court said. “The sentencing judge understated the moral blameworthiness of the respondent.”

At the same time, the higher court decided that Plange, who has already served the initial sentence, needn’t return to prison. Plange’s rehabilitation, the court said, showed he did not require going back to jail.

Separately, the Appeal Court upheld the validity of the mandatory minimum two-year sentence for fraud over $1 million, saying Plange’s trial judge had engaged in an unacceptable hypothetical exercise in striking down the provision as unconstitutional.

Court records show Plange, a University of Toronto arts grad, had been earning well but developed a gambling problem and had racked up huge debts. He admitted at trial to a year-long scam that began in August 2013 in which he prepared and submitted 28 bogus direct-deposit information forms to Canada Revenue Agency.

The agency then deposited millions of dollars in various tax rebates and refunds owed to 12 large corporations into bank accounts Plange controlled.

By the time the scam unravelled, court records show, the taxman had paid almost $42 million into those accounts but, due to bank diligence, he had only managed to withdraw $15,000. Still, because the value of the fraud exceeded $1 million, a two-year mandatory minimum sentence enacted by the Conservative government of Stephen Harper in 2011 was in play.

In March 2018, Superior Court Justice Shaun Nakatsuru struck down the mandatory minimum as cruel and unusual punishment — although he said the minimum was not out of line for Plange’s crime.

Nakatsuru, who accepted Plange was remorseful and had taken responsibility, went on to sentence him to 18 months — reduced to 13 months for time served and pre-sentence bail conditions.

The Crown appealed on both counts. It argued the mandatory minimum was indeed valid. It also argued the sentence actually imposed on Plange was “manifestly unfit.”

The Appeal Court agreed on both counts. Nakatsuru wrongly engaged in speculation when he came up with three hypothetical situations in which the mandatory minimum could be seen as excessive, the appellate court said.

At the same time, the Appeal Court said, it was not its role to construct a hypothetical situation of its own. Any future attempt to overturn the mandatory minimum would need to be fully argued based on the facts at that time, the Appeal Court said.

On the sentence handed Plange, the Appeal Court found Nakatsuru had swallowed Plange’s excuses that the fraud was simple, spontaneous and a one-time aberration.

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“This characterization is incomplete and understates the sustained effort made by the respondent to execute the fraud,” the Appeal Court said.

In a separate opinion, Justice David Doherty agreed Plange deserved a three-year sentence. However, Doherty said he would have struck down the two-year mandatory minimum given that it would, in some cases, be “grossly disproportionate.”