Fraud and the Banyan Tree

Under the shadow of the banyan tree

Two charities, one tree

Dana Lacey, Financial Post October 3, 2009

The banyan tree, a harmless fig plant found in Southeast Asia, has received lots of bad press this year. It forms part of the name and logo of a former Canadian charity accused of operating an illegal tax shelter.

But it’s also part of the name and logo of another Canadian charity that, while not associated with the accused, has been caught up in the crossfire.

The branches on a banyan tree send shoots down to the ground that root and grow to be indistinguishable from the original trunk. A single tree can cover acres of land, creating a forest under its canopy. The tree was adopted as a symbol of community and shelter by the two unrelated Canadian charities, and showed up in their company logos, websites and promotional materials.

Under the Banyan Tree runs a centre for the developmentally disabled in Markham, Ont. The now-defunct Banyan Tree Foundation (BTF) solicited donations for a wide range of charities out of its office in Toronto’s financial district.

Last year, the Canada Revenue Agency accused BTF of operating for “the non-charitable purpose of promoting a tax-shelter arrangement and for the private benefit of its directors.” It had allegedly issued more than $210-million in tax receipts for non-qualifying “gifts.” An amount of $10.1-million was allegedly paid to its directors or corporations owned by its directors.

BTF was stripped of its charitable status. A year earlier, it was ranked the third-largest charity in Canada by volume of money raised ($136-million since 2002).

The CRA sent notices to thousands of donors, informing them that their tax filings would be reassessed. The agency has been cracking down on charity tax shelters, which typically offer donors tax receipts for more than what a donation is worth.

BTF donors joined a class-action lawsuit for $50-million against the Banyan Tree Foundation, as well as Promittere Capital Group Inc., Promittere Asset Management Ltd., Rochester Financial and Toronto law firm Fraser Milner Casgrain LLP.

The couple leading the lawsuit, Kathryn and Rick Robinson of Oakville, Ont., participated in the gift program for three years. In 2003 alone, the couple say they pledged $90,000 to BTF. They put down $35,000 in cash as a donation and security deposit, and were issued a $103,000 loan by a related company. They were allegedly given a tax receipt worth $120,000.

When the CRA audited their 2003 tax filings, the couple found themselves liable for $21,000 in back taxes and interest. The CRA warned them reassessments were pending for other years as well.

Some donors, however, have confused BTF with the similarly named and fully operational charity Under the Banyan Tree and donations have suffered as result. The charity is hoping to get out from under the shadow of the banyan tree with its annual fundraiser gala in November.

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