publication date: Feb 15, 2012
Eight years after the Canadian Association of
placed the Banyan Tree Foundation
on its list of "buy low, sell high tax shelter donation arrangements" (Canadian Fundraiser, December 15, 2003
), the longest-running
"sham donation" arrangement in Canada launched what could be its
Settlement doesn't address liability
Along with the foundation, Rochester
, Promittere Capital Group
, Promittere Asset Management Inc.
and Fraser Milner Casgrain LLP
contribute $11,000,000 to settle a class action brought by Banyan donors. On
January 17 of this year, the Ontario Supreme Court of Justice approved the
settlement, which includes no admission of liability or wrongful conduct.
The related loan agreements and promissory notes that donors
had signed with Rochester Financial were declared unenforceable.
False receipts, miraculous fundraising claims
The case was launched early in 2008. Months later in
September, the CRA revoked Banyan's charitable registration after sending
letters to donors disallowing $208 million in tax receipts and describing the
foundation's donation arrangements as "a sham."
According to the foundation's T-3010 filings as analyzed by CharityCan
it appears to have raised over $220 million between 2002 and 2006 and spent
roughly $16 million on administration and fundraising - an almost unheard-of expense ratio to die for, thanks to
no paid staff members and a board composed only of its executive director and
one to two other members.
Promittere operated "in the shadows"
The Promittere companies appear to show little activity in
the financial sector beyond facilitating the Banyan-leveraged donation program. Despite
their outlier status, a mainstream financial institution was reluctant to
discuss the Banyan settlement on record with CF&P
An anonymous source within that institution commented that though he was uncertain that all of the investors
qualified as "victims", he was glad to see this kind of sham-donation tax
shelter arrangement shut down.
"When the investors rebel, there may be hope that the market
is turning against the promoters, which will protect charities and the tax
system," he noted. He described the promoters as operating in "the shadows of
the financial world."
More information on the settlement is available from
the donors' law firm, Scarfone Hawkins LLP