Guilt by association?

“I sit on a lot of boards and I know an awful lot of people.”

Those are the words of Mayor Joe Fontana in defense of his connection to a charity whose relationship to a tax shelter has come under scrutiny.

The tax shelter in question is Global Learning Gifting Initiative. It had been using a charity, Malvern Rouge Valley Youth Services, to issue tax receipts well in excess of the actual donations made. That organization had lost its charitable status after being investigated by the Canada Revenue Agency (CRA)  for simply enriching the promoters of the tax shelter and not providing the charitable services it had claimed.

That happened in November 2011. That same month, Global Learning Gifting Initiative took on the Mayor’s charity, Trinity Global Support Foundation. It was timely. Trinity Global had been partnered with Mission Life Financial, but sometime in the spring of 2012, Trinity Global was no longer identified as a partner on Mission Life’s website.

The mayor had joined the board of Trinity Global at the invitation of his long-time friend, Vincent Ciccone, in December 2008. The charity had been started by Ciccone a year and a half earlier. His own days there were numbered as his company, Medra Corp (aka Ciccone Group), an investment firm  involved in real estate in Mexico, fundraising, charities and tax shelters, was in trouble with the Ontario Securities Commission for fraud in the neighbourhood of about $19M.

Fontana’s response to his friend’s problems was, “What people do with their private lives is their own business.”

Perhaps. But Ciccone’s problems were not with his private life, but his financial dealings. And Fontana’s relationship with him was not just that of a friend, but as a business partner overseeing a charity that made claims to help the sick, the poor and the hungry at taxpayer’s expense. Fontana himself had spent a long career as an MP in Ottawa at taxpayer’s expense and had recently failed in a bid to become mayor of London. Surely he would have done due diligence in becoming involved in an endeavour of this type.

Not long after he joined the board, Fontana’s son, Ugo (aka Joe Junior) was also recruited as a board member. Then, as his legal problems became known, Vince Ciccone left the board over which he had presided for two years. Fontana senior became president for a few months, then relinquished that position to his son, settling for chairman of the board instead. In July 2010 Karen Thompson-Ciccone, who had been the charity’s treasurer since its inception, also left. Her departure, along with several others,  made way for other appointments including Fontana’s old friend and campaign worker, Dave Broostad.

The most recent new recruit joined in May of 2011. Loredana Onesan, a former French literature grad student from Romania, and now owner of FinCore Solutions which she had launched six months earlier, expressed in an interview with London Business Magazine her interest in starting a charitable foundation. With Trinity Global, she had one ready-made.

Under the chairmanship of Fontana, the foundation flourished. Joe Jr. was making videos promoting the donation of computers and software to disadvantaged youth, and there was also the opportunity to send antiretroviral drugs to third world countries. Tax receipts issued by the foundation went from $72K in 2008 to nearly $71M 2011. Another almost $1M was raised for which receipts were not issued.

So where did that money go?

There were a number of “donees” as they are known by the CRA. A Gospel Temple in Windsor got $17,000, the Street Connection received $2,000, a Baptist church in St. Thomas was the recipient of $4,000. There was also some money for the Essex Foodbank, a Greek Orthodox Church in Edmonton and a kitchen garden in Calgary. About $50,000 in all. So what about the rest of the 70 plus million?

Most of the dispersals were in the form of “gifts in kind” (i.e. pharmaceuticals) that were evaluated as having a “market value” of about $33M. These were purportedly shipped to a couple of diocese in Madagascar and Kenya. The remaining amount resided in inventories valued at about $53M in 2011.

In that same year, Trinity Global reported no spending on charitable programs despite the fact that it has created the “Show Kids You Care” program out of the ashes of the former Children’s Emergency Fund which had lost its charitable status in 2009 due to “a failure to devote resources to charitable activities”. The administrators of that program continued in the same capacity under the new name and direction.

In early 2012, the mayor introduced Loredana Onesan at the Chamber of Commerce’s mayor’s breakfast, not as a fellow board member for his charity, but as a $200M investor in the city who wanted to build an anti-aging complex on what we now know to be land belonging to the Upper Thames River Conservation Authority, the city and a few private homeowners in SoHo. When FinCore brought its proposal to the Investment and Economic Prosperity Committee a few months later, the mayor and other committee members urged staff to expedite their request for land, an official plan amendment, and a zoning change. Later, when they were reminded that there is a planning process to be considered, some members were aggrieved that their enthusiasm had been “misconstrued”.

That kind of reaction has been typical of the mayor and some of his strongest supporters. They are impatient. They want to do things in a hurry. The rules, even those of their own creation, are seen are as impediments, as bureaucratic barriers. They often prefer to use personal connections rather than authorized procedures.

Until recently, the Canada Revenue Agency preferred to audit the charities and their donors if they suspected that there was a disconnect between the tax receipts issued, the actual donations made and the spending on charitable endeavours. But in May, the CRA announced that its criminal investigations division was looking into seven tax shelters involved in promoting drug and computer software schemes. The tax shelters were not identified, but it is estimated that the federal government loses about $5B in revenues to these shelters through their relationship with charities, money that unsuspecting taxpayers have to make up.

When asked about his charity’s connection to a tax shelter, Fontana responded that it was not his job to determine whether the programs they offered were good or not, that was the job of the federal government. I don’t disagree that it is high time that those shelters were shut down, but surely the chairman of an organization would be doing due diligence with respect to its partnerships, especially if that chairman is someone who claims to represent the public interest, such as a mayor or an MP. The last three charities to work with Global Learning Gifting Initiatives had lost their charitable status. Surely, that raises a red flag.

Early in the mandate of this council, a couple of councillors had made a proposal, as part of an open and transparent government, to have elected officials file their interests and associations with the city clerk’s office as part of the code of conduct. That seemed to go nowhere, and I have been unable to locate information on the status of that proposal. But it seems to me that the very act of filing such a report would sensitize the elected official to the appearance of things. And, like it or not, in politics appearance is reality.

There is another matter, too. Apart from the losses to the taxpayers resulting from tax shelters, there is the loss of confidence in elected officials and in charities in general. As a volunteer with a number of charitable organizations, I assist with fundraising through phone calls, silent auctions, and bake sales. It’s hard to compete with organizations that claim to do good while offering inflated tax receipts.

And Trinity Global was identified as giving inflated tax receipts, as indicated in a Kijiji ad suggesting that one could receive a $27,000 tax receipt in return for a $500 donation to Trinity Global. The mayor claims not to have any knowledge of that ad, but as chairman of the board, he should do his due diligence and find out how that came about.

Yesterday, in response to the article in the London Free Press about the charity, the mayor issued a statement of rebuttal on his website. In it, he states that "I have been the Chair since 2009 when the private foundation became a public entity..." If so, the CRA has not been notified. It still lists it as a "private foundation".

That may be a minor point. The broader concern is the relationship with a tax shelter. There is no mention of that in the statement except to say that "[Trinity Global] operates under the guidelines and regulations of the Canadian Revenue Agency.  It will continue to do so. Its financial statements are audited and public."

Indeed they are. They can be found on the Canada Revenue Website .

Last night, at the end of a prolonged council meeting, Councillor Joni Baechler reissued her call for full disclosure by councillors. She was advised to resurrect that motion through normal council procedures. 

Will it resonate with council this time?