Quest University, Canada's first independent, secular university, has closed. In April, owing to financial trouble, Quest held what may well be its last commencement ceremony.
From 40 countries around the world, students came to Quest for its unique, undergraduate degree in both arts and sciences at a state-of-the-art campus in the spectacularly beautiful mountains of Squamish, B.C.
As the hopes for a world-class, independent university come crashing down, it is important to look back at what happened, and why.
Having done detailed research on Quest’s early financial history, it is clear to me that CRA’s lax oversight of charities had a role in the university’s unnecessary demise.
Blake Bromley
Early fundraising for Quest was handled by Blake Bromley, a retired Vancouver lawyer who specialized in tax planning. Over his 30-year career, Bromley set up 650 charities that processed approximately $2 billion in donations, he says. Bromley was also a director/trustee of Quest from 2003 until 2011. This means that Bromley had fiduciary duty towards the university during its early years.
Since last summer, CRA has revoked the charitable status of 17 charities set up by Bromley. Lifting the lid on secrets kept for more than 20 years, the CRA audits confirm the conclusion of a 2018 investigation by The Globe & Mail which found that Bromley's charity network helped wealthy donors get big tax breaks - and their donations back.
The timeline on these audits is appalling.
On average, there was a delay of ten years between the audited transactions and revocation.
In the case of HSEF Renaissance Academy (HSEF), the delay was 21 years between a discredited, $30-million donation towards Quest and revocation as of November 19, 2022.
CRA's audit report on HSEF was sent to its directors on October 25, 2018, one day after The Globe's investigation was published. Coincidence? Hmmm ....
In the case of the Association for the Advancement of Scholarship (AAS), the CRA audit was completed in 2012. The notice of intent to revoke was sent to AAS in 2013 but then it took ten years before the charitable status of AAS was revoked as of March 25, 2023.
Bromley disputes CRA rulings, calling them "unfortunate and unjustified,” according to Dan Fumano who reported on the revocations for The Vancouver Sun.
Stewart Blusson & Archon Minerals Ltd.
According to CRA, 12 charities set up by Bromley were involved in transactions with Archon Minerals Ltd. owned by Stewart Blusson. Six of the 12 have been revoked (HSEF, AAS, Howe Sound Samaritans, Homestead on the Hill, Headwaters and Theanon).
A geologist by training, Blusson was inducted into the Mining Hall of Fame for his role in the discovery of Canadian diamonds and a presumed $100 million donation towards Quest. CRA audits, however, tell a dramatically different story about Blusson's philanthropy.
CRA found that HSEF gave Blusson an official donation receipt for $30 million on New Years Eve of 2001. That was Blusson’s initial gift towards Quest. But not until 21 years later did CRA determine that Blusson’s gift wasn’t true.
A true gift does not result in any benefit or advantage to the donor. When a gift flows back to the donor, it's not a true gift.
CRA auditors found that eight days after Blusson got a tax receipt for $30 million, he signed an agreement to get back his Archon shares - but without paying cash to buy them back. On July 1 2005, that's what happened. Blusson's shares were returned to him as part of a "Debt Offset Agreement" between Blusson and HSEF. As part of this agreement, HSEF was to purchase a $31.3 million royalty interest, the promise of future revenue from Blusson’s diamond mine. But HSEF didn't pay cash to purchase the royalty interest from Blusson. Instead, in what CRA called "a wash," HSEF and Blusson traded the royalty agreement for the Archon shares. Then, in the final step of this series of transactions that spanned five years, on August 17 2005, HSEF donated the $31.3 million royalty agreement to Blusson's private foundation which subsequently wrote it off entirely. In fact, Blusson’s foundation wrote off $205 million.
An important point to note is that CRA found no independent appraisal for the value of the royalty interest, raising doubt as to its fair market value.
All in all, Blusson got a tax-receipt for $30 million without making a true gift. That's not all. On September 9, 2005, just 23 days after he got back his purported donation to Quest, Blusson was invested into the Order of Canada.
In terms of revenue from donations, Stewart & Marilyn Blusson Foundation issued tax receipts for $123 million but gave away only $342,200 to charities that are not part of the Bromley network.
AAS, another charity set up by Bromley, was also involved in the start-up of Quest. As of March 25, 2023, AAS was revoked over a second donation of shares for which a tax receipt was issued, also for $30 million. Again, CRA found that the shares were sold to purchase a royalty agreement and again, CRA found no proper appraisal.
The revocation of AAS raises a series of questions that I put to Mr. Bromley in a letter, April 18, 2023. In particular, I asked why AAS made gifts to Bromley's charities for $16.3 million (including $12.1 million gifted to CHIMP, run by Bromley's sons), meanwhile Quest was allowed to sink into deep debt, put into foreclosure and sold.
$425 Million in Tax-Receipted Donations
By my detailed analysis of tax returns and financial statements going back 20 years, the start-up of Quest was financed by ten charities that reported a combined, total of $425 million in tax-receipted donations. All ten charities were registered by Bromley's office, according to their applications for registration. Funding Quest was officially stated as the purpose of only four of these charities (Sea to Sky, QUCF, HSEF & AAS) but for all ten, by my analysis, Quest was their sole or major focus. Of the ten, only two remain active:
In short, virtually nothing remains of the $425 million.
How Quest Was Sold
Quest opened debt-free in 2007 but with no endowment so the university took loans from a daisy chain of Bromley charities: Global Charity Fund, Foundation for Public Good, CHIMP and finally, Vanchorverve Foundation.
By 2019, Quest’s debt had soared to to $19 million. At 7 percent, interest accrued for as much as $4,793 per day, a total of $8 million. That's charity? Sounds more like loan-sharking to me.
Unable to pay when its mortgage loan from Vanchorverve came due, Quest went into creditor protection and was sold, resulting in payment of $25 million to Vanchorverve.
During the proceedings, I filed an affidavit and testified, urging the court to pause Quest’s sale and ask CRA to investigate.
Justice Shelley Fitzpatrick, who officiated, asked me whether any CRA investigation was underway. "Are they even looking at it?" she asked.
"I can't answer that question,” I replied. The privacy restrictions of the Income Tax Act disallow CRA from providing any information to the public about a charity under audit.
As for my request that the court postpone payment to Vanchorverve and give CRA the chance to investigate, Justice Fitzpatrick said no, "... nothing is apparently even under way at this time, as far as I'm aware," she said. But not only CRA audits were underway, three had been completed (HSEF, AAS & Howe Sound Samaritans). One was finalized in 2012, eight years earlier, and two were completed in October of 2018, more than two years earlier.
How different the fate of a promising university might have been if only the $100 million donation from Stewart Blusson had been true and CRA hadn’t taken 21 years to reveal the truth.
