http://www.vancouversun.com/business/Whiz+charity+scheme+loses+momentum+donations+plunge/1738698/story.html

‘Whiz Kid’s’ charity scheme loses momentum as donations plunge
By David Baines, Vancouver SunJune 27, 2009

The financial situation at GiveMeaning, a Vancouver organization that acts as a middleman for charities, is going from bad to worse. Donations are way down, expenses as a percentage of donations are way up, and the organization is growing deeper in debt.

GiveMeaning is a sort of craigslist for charities. People who are trying to raise money for specific projects can register on GiveMeaning’s website, and people wanting to donate to those projects can contribute through the website.

The business is the brainchild of Tom Williams, 30, a self-described former Silicon Valley whiz kid who claims to have turned his back on the material world and committed himself to philanthropy. As outlined in earlier columns, his story doesn’t stand up to scrutiny. In fact, he has stumbled from one business and personal failure to another, and generated a lot of ill will in the process.

It is also debatable as to whether Williams is motivated entirely by philanthropic ideals. In previous years, he has drawn $90,000 per year, plus expenses. His wife, Jesse Farrell, a part-time employee, has collected $30,000 per year. This has proved to be unsustainable.

Financial returns show the flow of charitable dollars through GiveMeaning is shrinking at a rapid rate. During the year ending Sept. 30, donations totalled $728,165, down 62 per cent from the prior year. Expenses totalled $442,346, down 49 per cent from the prior year.

Because donations fell more dramatically than expenses, the ratio of expenses to donations jumped from 45 per cent to 61 per cent — an extremely high percentage.

GiveMeaning promises that every cent of every dollar that is donated goes to the designated charity. How does it do this if an amount equal to 61 per cent of its total donations is consumed by expenses?

Williams originally hoped people would be so supportive of his business model that they would donate money to cover overhead costs, at least until the website attracted enough advertising revenue to sustain itself. But that didn’t happen, so he is borrowing the money.

As of Sept. 30, GiveMeaning’s liabilities totalled $554,259, consisting of $9,327 in trade credit, $244,932 owing to “non-arm’s length parties” and $300,000 categorized as “other liabilities.”

Who these lenders are is not known. They are not identified in the financial return and Williams did not return my calls.

As of Sept, 30, GiveMeaning had $166,280 in assets against $554,259 in liabilities, for an overall deficit of $387,979. That means that, if and when its loans come due, the whole ship will sink unless there is an infusion of new capital.

The overall impression I get is one of waning business. The website lists dozens of philanthropic projects that are coming nowhere close to their stated donation targets. Williams, once a prolific blogger, has gone quiet. He still tells the whiz kid story, but it’s getting very tired, and tiring.

dbaines@vancouversun.com

© Copyright (c) The Vancouver Sun

http://www.vancouversun.com/business/Taxman+goes+after+questionable+charitable+donation+schemes/1070600/story.html

Taxman goes after questionable charitable donation schemes

By David BainesDecember 13, 2008

Over the years, I have written more than a dozen stories warning people about charitable donation tax-shelter schemes that promise to turn philanthropy into profit. I don’t think they have done much good.

A few days ago, Canada Revenue Agency issued a press release saying it has reassessed more than 65,000 taxpayers and disallowed more than $2.5 billion in donations claimed under these schemes.

There’s more to come. CRA says it plans to audit every one of these something-for-nothing schemes, which means more taxpayer grief to come.

The amazing thing is, in the midst of this government-sponsored eradication program, these little time bombs are still being actively marketed in B.C. and elsewhere in Canada. Apparently, the fish are still biting.

One of these schemes is called the Universal Healthcare Trust Donation Program, which is still being promoted by the Destiny Group of Companies in Markham, Ont.

The Destiny Group is run by David Singh, who has had many run-ins with securities regulators in both B.C. and Ontario. In 2000, he was banned from the Ontario securities market for five years.

Incredibly, given his regulatory record, the Surrey Teachers Association invited him in May 2007 to make a presentation on retirement planning, which he used as an opportunity to market his donation scheme.

According to his promotional material, a taxpayer could donate $1,000 to a charity and get a tax receipt for that amount. A philanthropic trust, based in St. Lucia, would then give the taxpayer $5,000 worth of medical supplies, which he could donate to a charity and receive a tax receipt for that amount, too.

The bottom line is that, for a $1,000 cash donation, the taxpayer would get a $6,000 tax receipt, which would generate a $2,600 tax refund.

What happens in all these schemes is that the deemed market value of the donated product is far in excess of its actual cost. This creates an inflated tax receipt which, in turn, provides a big refund, courtesy of us taxpayers.

When Singh made his pitch, the scheme was being marketed in the Vancouver area by Gail Zuccolini, managing director of Afton Management Ltd.

She insisted the scheme posed no greater risk of reassessment than any other tax shelter, a rather specious remark considering these donation schemes were already under intense government scrutiny.

Sure enough. In April this year, the government sent reassessment notices to taxpayers who claimed deductions for the 2006 tax year on account of the Universal program.

“CRA has concluded that the trust purchased the property — purportedly having a fair market value of $115,205,056 Cdn — with $3,481,234 US in cash,” the notice stated, driving home the fishes-and-loaves aspect of this scheme.

CRA argued the primary motivation of donors was not to assist in humanitarian aid, “but rather through a series of transactions to make a profit from the tax credits so obtained.”

The agency said the donation was not a true gift, rather it depended on the philanthropic trust giving the taxpayer a supply of medical supplies valued at far more than the taxpayer’s cash contribution.

“Although it appears from the promotional material that beneficiaries had the option to keep the property rather than donate it, in reality the option was limited to such a degree as to be effectively non-existent,” CRA stated in its letter to taxpayers.

“Furthermore, we remain unconvinced that the title to the property was legally transferred to you to allow you to gift it to the charity. You cannot give what you do not own.”

The same month, I wrote another column about a similar scheme, the Canadian Humanitarian Trust Donation Program, based in Mississauga, Ont.

Taxpayers make a cash donation to a registered charity and receive a receipt for that amount. Then the donor applies to become a beneficiary of the Canadian Humanitarian Trust, domiciled in the British Virgin Islands.

The trust buys drugs at a bulk discount (it is not clear where the trust gets the money) and transfers them to the taxpayer at a value far exceeding the amount of his donation. The taxpayer then donates the drugs to a charity and receives a tax receipt for the full amount.

According to a marketing materials, a donation of $26,100 would generate a tax receipt worth $99,900 and a tax refund of $43,656, for a net return of $17,556, or 67 per cent.

“This has been set up strictly in compliance with the Income Tax Act,” Terence David, who markets the program in B.C., told me at the time.

“People are initially very skeptical, as you are. Fair enough. I expect people to think it’s too good to be true. But when they receive the tax refund, they are satisfied with the results and they tell their friends.”

Alas, a few months after my column, CRA started sending out notices of assessment to people who claimed deductions on account of this program from 2003 to 2006.

David is still marketing the program in B.C., but he says it has been altered to meet CRA objections. That doesn’t mean participants won’t be subject to further reassessments, though. The program was tweaked twice before, but that did not spare participants from CRA’s pogrom.

The puzzling aspect of these deals is that the gathering storm has been apparent to all, but it doesn’t seem to worry the promoters or the participants.

“I wouldn’t expect CRA to just roll over and say keep the money,” David said. “They would be derelict in their duty if they didn’t challenge it. We appreciate that is the nature of the beast.”

He insists that the reassessments are not the program’s fault. They are CRA’s fault: “CRA takes a diametrically opposed view of what the Income Tax Act allows,” he says.

The Canadian Humanitarian Trust, like many others, has established a legal defence fund to challenge any reassessments. Promoters use these funds as marketing tools, to instil confidence in consumers. For me, they highlight just how risky these deals are.

dbaines@vancouversun.com

© Copyright (c) The Vancouver Sun

http://www.canada.com/vancouversun/news/business/story.html?id=0403e438-92fd-418c-858d-24b375a24eff

Organization loses charity status
Pinnacle Foundation’s tax-shelter scheme fails to satisfy agency
David Baines, Vancouver Sun
Published: Tuesday, November 18, 2008
The Canada Revenue Agency has revoked the charitable status of Pinnacle Foundation, a Vancouver-based organization that has been running a charitable donation tax-shelter scheme.

In a release Monday, the revenue agency said the foundation issued tax receipts for $6.7 million in cash and property donations, but received only $20,253 in property rental income in 2004 and gifted only $18,000 to qualified recipients in 2005.

“The charity’s sole activity during the audit period was its participation in the donation arrangement; no charitable activities have been conducted by the charity prior to or after its participation aside from the gifting of approximately $18,000 to qualified donees,” CRA stated in a notice.

According to annual financial returns filed with the agency, the foundation’s directors during the period in question were: Gerry Worden, an Abbotsford certified management accountant; Richard Widden, a Winnipeg lawyer and Queen’s counsel; and James Vancoughnett, whose residence and occupation are not known.

The foundation’s website lists the directors as Worden, Widden and Fred Schneider, a Vancouver insurance broker. Schneider is also listed as the contact person on the foundation’s financial returns, although he said in an interview he has not been involved with the foundation for about five years.

The foundation’s address on its financial returns is Suite 1555, 1500 West Georgia St. in Vancouver, which is the address of The Benefic Group, a consulting firm that provides legal and tax advice to charities. It is run by Vancouver tax lawyer Blake Bromley.

According to the foundation’s website, “Pinnacle will accept donations of property, receive net proceeds from the rental and/or sale of the property and make distributions from these receipts to other Canadian charitable organizations.”

Here’s how the scheme works, as described on its website:

An unidentified Bahamian resident donates the right to use condominium units at the Regattas of Abaco, a resort in the Bahamas, to a Canadian trust called the Regattas Trust.

The trust then identifies “suitable beneficiaries” to whom it donates the property. The beneficiary, however, must promise to repay a loan for $8,000.

The beneficiary then donates the property to Pinnacle at its fair market value, which is said to be $26,560. This generates a tax refund of about $12,000 which, after repaying the $8,000 loan, leaves the donor with a $4,000 profit.

These charitable tax schemes, which almost invariably contain an offshore component and an “independent” appraisal generating a tax refund that exceeds the donor’s out-of-pocket costs, have come under attack by CRA.

During the past year, the agency has announced it is reassessing thousands of taxpayers because of donations that have resulted in the issuance of hundreds of millions of dollars worth of tax receipts.

Although not mentioned in the CRA notice, it is likely that taxpayers who participated in the Pinnacle scheme will also be reassessed.

dbaines@vancouversun.com

© The Vancouver Sun 2008

http://www.cbc.ca/canada/story/2008/09/20/banyan-tax.html

The federal government has revoked the charitable status of the Toronto-based Banyan Tree Foundation.

In a notice published in the Canada Gazette Saturday, the Canada Revenue Agency (CRA) said Banyan failed to meet requirements in the Tax Act.

In June, CBC News reported that CRA had called the charitable foundation a “sham,” and was forcing donors to pay back close to $100 million to the government.

The foundation has said it distributed more than $200 million to charities, such as the Calgary Red Cross and Parkinson’s Society of the Maritimes. But the figure was nowhere near $200 million.

Banyan gave clients a tax receipt for donations, and also offered many of its clients loans to increase their donations.

But the government has refused to honour the charitable receipts the foundation gave to those donors, requiring them to repay the tax avoided.

Banyan Tree president Robert Thiessen has denied the government’s allegations, saying in June “they’re wrong.”

“I am turning human greed into philanthropic work, and I make no apologies about that,” he said.

Its financials are interesting, showing amounts receivable from non-arm’s length parties of $2,179,783 and $1,509,665 in cash and short-term investments, and other liabilities of $4,117,260.

The only charitable thing which it seems to have done in 2007 is to hand over another $150,000 to GiveMeaning, and the charity’s assets at line 4110 (amounts receivable from non-arm’s length parties) have increased by $2,097,209, and other liabilities at line 4330 have increased by $2,117,260.

INDEPENDENT WORLD TELEVISION FOUNDATION
2007-10-31
815799671RR0001
(604) 683-7006 (this is Benefic’s telephone number)
Total gifts to qualified donees, excluding enduring property 5050 $ 150,000

Qualified donees
1 Name of Qualified Donee: GiveMeaning Foundation
Location: Vancouver, BC
BN/Registration Number: 868487307 RR 0001
Total Amount of Gifts: $ 150,000
Amount of Specified Gifts: $ 0
Associated Charity: No

http://www.canada.com/vancouversun/news/business/story.html?id=40c97404-2157-47fc-8edb-63e499354804

David Baines

• “…In 2006, the television foundation donated $150,000 to GiveMeaning to help pay overhead. This struck me as unusual, as GiveMeaning has nothing to do with the television business…
“… later learned that the television foundation had been funded by a $2-million loan from an unidentified party. Foundation president Paul Jay said that, for confidentiality reasons, he could not disclose the name of the lender, but he said the lender had been introduced by Bromley.
Whomever the lender was, he or she clearly had a soft spot for GiveMeaning. Jay said a condition of the loan was that the television foundation donate $150,000 to GiveMeaning to help finance overhead…