Monday, 4 April 2016

Charity Scams Part 1

If you’re thinking about donating your money to charities, conduct some research on the charities that have tweaked your heart strings to avoid being victimized by fraudsters who try to take advantage of your generosity. It is indeed a sad commentary of our times that there are real scumbags in our communities who are syphoning millions of dollars from decent people so that they can live as millionaires instead of using the victim`s money to further the interest of their so-called charities.

Many of us animal lovers really feel sorry for homeless animals roaming on our streets. Five years ago, my oldest daughter brought two very young kittens she found roaming on the street to our home. Later she took one to her own home and my wife and I kept the other one. We had them fixed and inoculated. We have never regretted accepting the kittens into our homes. Mind you, our new pet (now a full grown cat) is a real suck for attention. He follows me everywhere I go around in our home when my wife is out shopping or visiting friends. When I am in my studio, he jumps onto my desk and remains there until I leave the room. Do I love the attention our cat gives us? All of us animal lovers enjoy the attention we get from our pets just as our pets enjoy the attention we give them. At first our pet thought I was God as I fed him. Now our cat believes that he is God as I feed him.   

The so-called charitable organizations I am writing about are called, HUMANE SOCIETY OF CANADA FOR THE PROTECTION OF ANIMALS AND THE ENVIRONMENT. The scumbag I am writing about has several other phony firms. They are called, THE ARK ANGEL FUND and THE ARK ANGEL FOUNDATION and THE HUMANE SOCIETY OF CANADA FOUNDATION. The latter one is the one that collects the money from the scumbag’s victims. Incidentally, these organizations are not part of real Humane Societies in Canada. This scumbag who operates his scams in the City of Toronto in Canada is Michael O`Sullivan.

An investigation conducted by the Toronto Star (Canada’s biggest newspaper) published last October showed the four charities under O’Sullivan’s sole and direct control collected about $9 million in donations in the past 15 years and continued to operate under the nose of the federal regulator that had been trying to shut these organizations  down since 2010. The HUMANE SOCIETY OF CANADA FOUNDATION raises and collects the majority of the funds that was more than $697,000 in 2013 and $510,000 in 2014 and  then disperses most of it to its sister charities.       

In 2006 — the tax filing year audited by the Canada Revenue Agency (CRA) the HUMANE SOCIETY OF CANADA FOR THE PROTECTION OF ANIMALS AND THE ENVIRONMENT raked in more than $800,000 in donations.

Recently, bequests from people’s Wills have formed a significant part of the animal welfare charity’s income. If these deceased victims knew what this scumbag was doing with their bequests, they would be turning in their graves at the speed of a buzz saw. Over the past five years, O’Sullivan’s charities have collected nearly $680,000 in bequests, according to their year-end financial statements filed with the CRA.

O’Sullivan used the charity as his personal piggy bank and put tens of thousands of dollars in personal expenses through it. Items O’Sullivan claimed in the charity’s 2006 tax return as being legitimate business expenses included $4,000 in Costco purchases, movie and theatre tickets. A $454 Batman utility belt purchased from the Philippines that was one of more than 300 other PayPal transactions. It makes you wonder how many other self-serving purchases he made with his victim’s donations that were not stated in his tax return. 

 When this scumbag was questioned by CRA auditors. he told them that the comics and related paraphernalia were “investment assets” for his animal welfare charity.

CRA documents showed that O’Sullivan personally signed off on the financials for all four charities, including their tax returns. He blamed bookkeeping errors for his problems, a claim the CRA dismissed outright. The auditors said, The use of the organization’s resources to buy (more than 300 transactions) memorabilia and comic books is inappropriate.”

Much of his ill-gotten money was applied towards a large number of personal expenses flagged by the CRA auditors examining the charity’s 2006 income tax return. They were $27,000 in superhero-themed comic book purchases; $22,000 in meals eaten mainly in Toronto; a $4,000 O’Sullivan family trip to Disneyland in California; $1,800 in alcohol purchases; a $67 charge at LaSenza Girl lingerie store and tickets for a show in the UK. That is just what was spent in 2006 for his personal use and that of his family.

Let me get one thing straight in my reader’s minds. This scumbag does not house dogs and cats and feed them and care for their medical needs like real Human Societies do. I have seen a picture of him sitting next to a baby elephant.  Are we to believe that he houses wild animals? This picture could have been photo shopped.

Where are his charities located? They are located where he lives. It is in an apartment in the Maples Apartment Building at 20 Carlton Street in downtown Toronto. However, the picture of him holding two dogs was taken at a house that he doesn’t live in.  The most he would pay in rent in a month for a two-bedroom apartment in the building he lives in is $1,750. So what did he do with the millions he scammed over the years from decent people? When I was practicing law, I had a home office and I was permitted to write off a great deal of my expenses pertaining to my home. Did he claim his expenses re his house and later the rental of apartment in his tax returns?

He has claimed in the Internet that he investigated cases of animal cruelty in 100 countries. If that is so, he could have claimed his expenses for those trips.  Did he really visit that many countries?

He filed an appeal on behalf of his organization, with the Federal Court of Appeal on behalf of his organization the HUMANE SOCIETY OF CANADA FOR THE PROTECTION OF ANIMALS AND THE ENVIRONMENT (from a decision of the Minister of National Revenue (the “Minister”), dated January 22, 2013 confirming the Minister’s proposal to revoke the O’Sullivan’s registration as a charitable organization.  
In 2007, the Canada Revenue Agency (the “CRA”) undertook an audit of O’Sullivan’s’s 2006 taxation year. In the course of the audit, the CRA identified the following concerns:
a)       a large portion of his resources did not seem to have been devoted to the charitable purposes for which it was registered;
b)      personal expenditures of Mr. O’Sullivan were being reimbursed by him; and
c)      the books and records of O’Sullivan did not separate O’Sullivan’s personal expenditures from the his charitable expenditures, and they did not demonstrate a direct linkage between hid expenditures and its charitable activities.
By correspondence dated March 11, 2009, and June 30, 2009, the CRA stated that O’Sullivan’s books and records were deficient in that they failed to adequately link his reported charitable expenditures to its charitable activities and they failed to separate his personal expenses from the his charitable expenditures.

Those letters also expressed concerns about a large amount that was over $250,000 of expense reimbursements made by O’Sullivan to to himself. While the CRA acknowledged that some of these reimbursements may have been the result of the apparent inability of O’Sullivan to obtain its own credit card, the CRA concluded that approximately $70,000 of that amount related to personal expenses of O’Sullivan. Included in that amount were a large number of personal meal expenses, the cost of comic books purchased through Paypal, liquor purchases from the LCBO, grocery purchases, tickets to entertainment events in the UK and the USA, and expenses of Mr. O’Sullivan and his family at Disneyland.

These concerns led CRA officials to advise O’Sullivan that the CRA was considering the issuance, pursuant to subsection 168(1), of a notice of intention to revoke O’Sullivan’s registration as a charitable organization. Such a revocation could create a great financial loss to this man. People who make donations to charitable organizations can write their donations off as a tax break.  The fact that an organization such as O’Sullivan’s can issue such tax breaks to those who would donate money to his organization would become suspicious as to why he doesn’t have anything in his advertisements stating that his organization is registered with the CRA as a registered charitable  organization. That is when their ears would perk up and their eyes widen.

  On August 31, 2009, O’Sullivan made submissions to the Minister in respect of the concerns that arose in the audit. These submissions, including numerous schedules, totaled 845 pages in length. While these submissions were fulsome and attempted to address the CRA’s concerns, they nonetheless contained two interesting and important acknowledgements or admissions. First, he acknowledged that approximately 5.64% of the total expenses for 2006” were mischaracterized as expenses of is organization. He then asserted that these were his own personal expenses.

He admitted that through inadvertence on his part, they were mischaracterized as proper expenses of his organization. Secondly, these submissions contained the following paragraph:

“The following lists contain 42 major programs the Charity conducted in 2006. The lists do not include every activity in which the Charity was engaged in 2006. It does reflect the activities that consumed the majority of the Charities resources. Work product for all 42 programs can be found in the Charity’s submission. Direct expenses from the Charity’s accounting system have been identified in programs 1 through 12. There is not sufficient detail in the Charity’s accounting system to assign direct costs to Items 13 through 42.” unquote

This paragraph acknowledges that O’Sullivan’s amateurish accounting system was unable to directly assign its allegedly charitable expenditures in 30 of its 42 major programs. This is why one must use the services of an experienced tax accountant when preparing one’s business tax returns. When I was practicing law, I used a tax accountant to do my firm’s annual returns. Not once in my twenty years of practice did I have a problem with the Canada Revenue Agency. That is because I was honest with my claims for expenses—something that cannot be said about O’Sullivan.

 After having reviewed O’Sullivan’s submissions, the CRA considered whether it would be appropriate to assess a penalty, pursuant to subsection 188.1(4), on the basis that he had conferred an undue benefit, within the meaning of subsection 188.1(5) (an “undue benefit”), on himself. In a Sanction Recommendation Report, dated in early November of 2009, the CRA decided to proceed with revocation of his charity rather than monetary penalization. The CRA stated that the amount of the undue benefit could not be readily ascertained because of the large number of receipts for the approximately $251,500 worth of expense reimbursements that O’Sullivan had received.

If the CRA had chosen to penalize him, they would double his $70,000 to $140,000 as his financial penalty. Of course they could have penalized him and revoked his charitable status as a double wammy.

Unpersuaded by O’Sullivan’s submissions, the CRA issued a NIR on February 17, 2010. In it, the CRA stated that the revocation was proposed for the following reasons:
a)      O’Sullivan had not devoted all of its resources to the charitable activities for which it was formed;
b)      O’Sullivan had conferred an undue benefit on a member of its governing board; (himself)
c)      O’Sullivan improperly completed an information return that was required to be filed with the Minister; and
d)     O’Sullivan failed to maintain adequate books and records to support its activities.

  On May 14, 2010, O’Sullivan filed a notice of objection to the Confirmation Decision with the CRA Appeals Directorate. Accompanying the Objection was a book of documents that included O’Sullivan’s  submissions of August 31, 2009.

The Appeals Directorate acknowledged receipt of several bundles of documents that were apparently intended to demonstrate that the expenses reimbursed to Mr. O’Sullivan were not of a personal nature. However, after considering those documents, the Appeals Directorate remained of the view that at least $69,343.81 of the reimbursements did not relate to charitable expenditures of O’Sullivan and as such were personal expenses of Mr. O’Sullivan. The Appeals Directorate recognized that while many of the documents established that costs had been incurred, however such documents contained no basis to establish that those costs had been incurred in furtherance of O’Sullivan’s charitable activities. Finally, the Appeals Directorate did not accept the assertion that the comic books were “investment assets ”because there was no support for that assertion in O’Sullivan’s financial statements to that effect.

The Appeals Directorate also indicated that the amounts disbursed by O’Sullivan for the personal benefit of him could not be said to be amounts used by the him for its charitable activities.

 On February 21, 2013, O’Sullivan filed a notice of appeal  to the Court of Appeal seeking to have the Confirmation Decision overturned. In his Notice of Appeal, he requested that the Confirmation Decision be quashed or alternatively that the revocation of the Appellant’s status as a charitable organization be declared not to have been made “for cause”.

I am not going to go through the lengthy details of that despicable man’s grounds of appeal and instead go the decision of the Court of Appeal.

Mr. Justice Ryer spoke for the other two justices of the court hearing O’Sullivan’s appeal when he wrote in the court’s decision; “In my view, it was within a range of justifiable outcomes for the Appeals Directorate to conclude that the provision of personal benefits to Mr. O’Sullivan, of even the lower amount recognized by the Appellant, constituted serious non-compliance with the applicable provisions of the Act.                                

O’Sullivan appealed that court’s decision to the Supreme Court of Canada. That court’s response to his appeal was “The application for leave to appeal is dismissed with costs.”

Now it is going to be interesting to see how the Canada Revenue Agency is going to deal with O’Sullivan’s other expenses that his so-called charities incurred are from 2007 through to 2015. 

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