A Toronto-based charitable foundation that gave out $208 million in tax receipts over the past six years was called a "sham" by the Canada Revenue Agency, tossing recipient charities into disarray and forcing donors to pay back close to $100 million to the government.
What's more, the Banyan Tree Foundation offered many of its clients loans to increase their donations, so donors are also on the hook for tens of millions in loans to a company now owned by Banyan Tree president Robert Thiessen.
In internal documents obtained by CBC News, the CRA claims no loans took place and no annuities were set up for the charities. It questions a $65-million donation to the University of the West Indies in Jamaica, and says that Banyan Tree was working with offshore entities not at arm's length from the foundation.
To the accusations, Thiessen simply said: "They're wrong."
This week, Thiessen said that several of his financial services clients had approached him about what he considered to be dubious tax avoidance schemes, and he said he could design a better product than what was on the market.
"I am turning human greed into philanthropic work, and I make no apologies about that. People will buy this, make this donation to Banyan Tree, where they never would have made a donation before, because of the structure that gave them a tax break."
As for his own remuneration, Thiessen refused to reveal how much he has made from Banyan Tree but said he would be shocked if he made $4 million over the last six years.
During that time, he purchased a home near Toronto's exclusive Bridle Path for $2.3 million in 2003, a $2.1-million cottage in 2005 and a $600,000 condo in Burlington at the end of 2007. He leases a 2008 Mercedes and a 2005 Ferrari, which he denied until presented with documents by the CBC.
'I'm out the donation amount'
The complicated structure was sold in some cases as follows: Buy a unit for $2,900 and get a $10,000 tax credit, which at the government's 46.4 per cent discount on charitable donations would lead to a $4,640 tax refund. About half of the $2,900 would go toward paying back the loan over 10 years, and the rest of the original donation would go for administrative costs.
Greg Madden, a pilot with Air Canada, decided to invest after discovering that a relative had successfully received a tax credit from donating to Banyan Tree. But after he bought five units, the program started to implode in 2006 following the first letter from the Canada Revenue Agency.
"I'm out the donation amount, $2,900 per unit, and I'm supposedly on the hook for the $10,000 per unit as well, so the out-of-pocket cost is outrageous, and in the end I've got nothing to show for it," said Madden, who lives outside of Hamilton.
"Where's the money? Were the donations actually paid to the charities? And if they were, why isn't CRA approving these donations?"
The CRA refuses to discuss the Banyan Tree with the CBC.
For two to four years, the money did go out to charities as disparate as the Canadian Red Cross in Calgary, hospitals in Charlottetown and Oakville, Ont., the Siloam Mission in Winnipeg and the Parkinson's Society in Halifax.
As well, some of the donations went to obscure projects like the Lake of Bays Museum to renovate a steamer in Ontario's cottage country, and successful innovative social programs like Families for a Secure Future, in Richmond Hill north of Toronto.
Wanted to help Toronto's homeless
The purpose of the Banyan Tree, said Thiessen, when first contacted by the CBC, was his dream to do something one day about the city's homeless.
"When I first moved to Toronto, I couldn't believe I was stepping over people sleeping on the street and, you know, people begging in every corner," said the 58-year-old businessman from Manitoba. "And I thought, you know, some time in my life, I'm going to try and do something to affect that thing."
For Judith McGill, the executive director of the Families for a Secure Future program, Thiessen and the Banyan Tree were saviours. The promise of $2 million over 25 years for her program — which helps families of developmentally delayed children when support ends for them after high school — allows the fledgling charity to incorporate and establish a proper staff.
"We're a small organization with three part-time staff, serving 80 families that are dealing with real complex needs," said McGill. "It's put those 80 families in crisis and in jeopardy of going into crisis. It's been a pretty severe impact.
"We don't have any end in sight."
Up until now, McGill said Thiessen "has been fantastic. He was very, very supportive. He's been dogged by CRA for so many years now, we don't know what to expect."
The group has funding until the fall "and then we're scuppered."
No stranger to Canada Revenue Agency
Thiessen has a history of taking on the Canada Revenue Agency.
He piloted a syndicated limited partnership investment, based on buying parts of an apartment building in London, Ont., through the courts against the CRA and won. Recently, he also promoted a Montreal-based mining firm as an investment, and it too is being reviewed by CRA for some of the deductions claimed by investors.
Al Rosen, a noted forensic auditor, saw many red flags when going through the Banyan Tree financials, especially the $65-million donation in shares to the University of the West Indies by West Point Resources, a company controlled by Hywel Jones, who also runs Hampton Insurance, the Bahamas-based company which supposedly maintains the annuities for Banyan Tree charities.
In a rollicking meeting between Rosen and Thiessen, arranged by the CBC, Rosen told Thiessen he should have known the Canada Revenue Agency was trying to shut down programs like his.
"I think it's unfair on your part to say that I'm as clean as a whistle when you knew you're into a zone that could go either way for you," said Rosen. "You may say I'm unlucky that it went against me so far. The thing is, it was a choice. You said: 'I can make a few bucks off of this thing by doing it, so why should I let my client base go and give this money to other people and get screwed.'"
Thiessen countered that the CRA hadn't assessed anybody until 2006.
"You knew it was coming," said Rosen.
"We're giving away cash," replied Thiessen. "How can giving away cash to Canadian charities be wrong?"
Has mortgages on properties
The Banyan Tree president said he has mortgages on his properties, and he admitted to being a car nut, but said his wealth is derived from being in business so long, and doing $1.5 billion in deals.
Asked if he always got a cut of those deals, he replied "always," and then added with emphasis: "Always."
For Clarence Keesman, who runs The Refuge, a drop-in centre for street youth in Oshawa, all the financial talk about Banyan Tree is a puzzle.
He can't understand why the annuity arranged for him by Banyan Tree isn't producing (Thiessen said the Caribbean lender has put a freeze on the money in the annuities until the CRA issue is resolved), which has forced him to lay off staff for his $200,000-a-year operation.
"It's not just a blow to the organization that is involved," said Keesman about the Banyan Tree charities. "It's a blow to the community, because we're out here doing the work and without this work being done, whether it's working with homeless and street kids, whether it's immigrants, whether it's whatever the organization is doing, it has an impact on the community.
"Who's going to pick up the work?"
Both the Caribbean lender and Hampton Insurance refused to respond to inquiries by the CBC.
As for the more than 3,000 donors, a class-action suit against Banyan Tree has been started by a Hamilton law firm.
Lawyer David Thompson of Scarfone Hawkins said the CRA should also take some responsibility.
"The CRA names this foundation as a registered charity and gives it a certain amount of credibility for many of these donors.
"But for the credibility that was built in this program, I'm sure many of these donors would never have participated at all."
Comment:
The only kind of taxpayer that would think that a $2,900 contribution would warrant a $10,000 charitable donation receipt is a greedy one willing to try and exploit gray areas of tax law. The airline pilot and others that were hoodwinked by this sham have no one to blame but themselves.Mr. Theissen was probably not doing anything illegal, but was clearly pushing the envelop.
It's simple. You make a donation for 2k - you get a receipt for 2k. How can anyone believe that getting a tax receipt indicating a higher amount than what they donated is right?
at 7:17 AM ET"Buy a unit for $2,900 and get a $10,000 tax credit, which at the government's 46.4 per cent discount on charitable donations, would lead to a $4,640 tax refund. About half of the $2,900 would go towards paying back the loan over 10 years, and the rest of the original donation would go for administrative costs." That's not just tax evasion, tha'ts outright fraud!
http://www.cbc.ca/canada/story/2008/05/30/f-banyancharity.html?ref=rss&loomia_si=t0:a16:g2:r4:c0.0958991
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