Academic Success
Located in Squamish, B.C., the now defunct Quest university (“Quest”) was Canada’s first, independent university, similar to the Liberal Arts colleges across the U.S.
Quest began as a legacy project of the late Dr. David Strangway, a geophysicist who was referred to affectionately as "the moon rocks guy" because of his role in research on the surface of the moon. Strangway was the Chief Geophysicist at NASA, responsible for the Apollo 17 Missions that put men on the moon. Strangway is also a former president of both the University of Toronto and UBC.
As part of his legacy, Strangway wanted to create a new, alternative type of university that specialized in top calibre, undergraduate education. In this regard, Quest became a great success, consistently ranking higher than any other Canadian University in terms of student engagement.
Quest's faculty, hired initially by Strangway, was excellent. Glen van Brummelen and Richard Hoshino, for example, won prestigious prizes for teaching math.
But behind the scenes, Strangway's plucky, promising university was in trouble from the start because of financial shenanigans.
Strangway left Quest's Board of Governors shortly after the university opened in 2007. He wrote about his disappointments, especially with Quest's fundraiser, in an oped published by Macleans magazine.
Quest's Birthright: 240 Acres
Quest began in 2001 with the purchase of 240 acres of land which The District of Squamish re-zoned to allow the construction of 960 housing units. According to a Covenant put on the land, real estate development was to support and endow the university.
By 2006, about 100 acres had been sold to developers for approximately $35 million. This appears to have been put towards the costs of campus construction.
One of the crucial issues in Quest's financial history is the true cost of the construction of Quest's original campus and how this was paid for. From publicly available information, this is not entirely clear. Financial statements for Quest indicate that initial campus construction costs appear to have been somewhere between $21 million and $31 million, possibly as high as $47 million. This is significant because it means that most or perhaps all of the initial construction costs may have been covered by the proceeds from land sales. Put another way, the construction of Quest's campus appears to have been paid for with funds raised mostly from selling Quest's land, not from charitable donations.
Dubious Donations
Fundraising for Quest's start-up was handled by Blake Bromley, a lawyer with a reputation for tax planning arrangements that involve dubious charitable donations. In 2004, in a matter unrelated to Quest, Bromley was charged with 23 counts of tax evasion and making false of deceptive statements. While Bromley was acquitted, the judge found that Bromley had set up an elaborate series of transactions where no real money changed hands.
Bromley was a member of Quest's Board of Governors and so he had fiduciary duty to the university. A CRA audit report found that Bromley and others failed to fulfill their fiduciary responsibility with regards to one of the charities that Bromley set up in support of Quest, Association for the Advancement of Scholarship. CRA revoked its charitable status in 2023 following an audit that was completed 11 years earlier, in 2012.
Only now, years after Quest's campus was sold in 2020, Bromley's shenanigans, and those of others, are finally coming to light. One of the reasons this has taken so long is because the release of the CRA audit reports that reveal the truth has been delayed by an average of ten years. In one case, there was a delay of 21 years between the issuance of a tax receipt for $30 million and the closure of one of the charities involved, HSEF Renaissance Academy, in 2022.
Stewart Blusson
In addition to funds raised via land sales, Quest was to benefit from a gift of $100 million from Stewart Blusson, a pioneer of diamond mining in northern Canada. Blusson was a client of Bromley. Blusson's mining companies received tax receipts for at least $195 million. Sad to say, CRA audits eventually found that most or all of Blusson’s so-called gifts were not true charitable gifts.
For a gift to be a true charitable gift, worthy of a tax receipt, specific criteria must be met. Firstly, there must be a genuine intent to benefit the recipient ("donative intent"). Secondly, there must be a true transfer of property which generally impoverishes the donor. Thirdly, the gift must be made without the expectation of something in return.
CRA audit reports, not released until after years Quest was sold, reveal that Blusson’s gifts to Quest do not meet these criteria. Instead, via a complex series of pre-planned transactions, Blusson got back the shares that he claimed to have "donated." In one case, Blusson got back shares of his mining company, valued at $30 million, via a series of transactions that spanned five years. In another case, one of the charities that was supposed to support Quest lost nearly $8 million by buying shares of Blusson's mining company, according to CRA.
CRA audit reports and other sources indicate that Blusson’s purported gifts were part of a tax plan that ran afoul of CRA. This fatally flawed tax plan involved tax receipts issued by four of Bromley's charities for $195 million. But since these transactions were not true charitable gifts, Blusson got in trouble with CRA, resulting in a CRA judgement against Blusson’s personal residence for $8.6 million. But none of this became publicly known. Instead, it was all kept quiet.
72 Acres: Parcel A & Lot 12
Quest's campus accounts for 60 acres of the original 240 acres. After the initial land sales of about 100 acres, roughly 80 acres remained.
Over the same years that the Bromley's tax plan for Blusson ran afoul of CRA, Blusson obtained the ownership of nearly all of Quest’s undeveloped land, a total of 72 acres. This was only discovered in December of 2023. The 72 acres consists of two sections of land known as Parcel A (60 acres) and Lot 12 (12 acres).
A CRA audit found that the transfer of Lot 12 to one of Blusson's companies, 1012986 B.C. Ltd., was not a proper sale. As a result, the charity involved lost its charitable status - but not until five years after the sale took place.
Parcel A was transferred from Quest to Blusson's private foundation and then to Global Charity Fund which remains the registered owner. The problem, is Parcel A was transferred from Quest to Blusson's private foundation for only $1 and the "forgiveness" of a questionable debt. In the absence of any explanation from Blusson or his lawyer despite repeated requests for more than a year, this calls for investigation.
Quest's $75 Million "Debt"
Early on, another problem that Quest faced is that as soon as campus construction was completed, Bromley and another member of Quest’s Board of Governors, Peter Ufford, signed a mortgage loan which indebted Quest to the tune of $75 million to one of Bromley's charities. In hindsight, it seems highly unlikely that the $75 million debt could ever have been paid without selling Quest. This raises concern that from the outset, plans were laid to sell the university before it had even opened. Indeed, as far back as 2011, tentative plans were already in writing to close Quest if ambitious enrolment and financial criteria were not met. This gives the impression that from the beginning, Bromley appears to have set Quest up to be sold and to benefit from Quest's eventual sale. And as we now know, this appears to be exactly what eventually occurred, as explained in detail at this blog.
To most of us, it wouldn't even cross our minds to sign a mortgage and then not get any cash but that appears to be exactly what happened in Quest's case. Quest's financial statements do not appear to show any loan proceeds received as a result of the $75 million mortgage. So what was the point?
The $75 million mortgage that Bromley put on Quest was secured against Quest’s entire campus. This meant that if Quest defaulted, Bromley could force the sale of the entire university. The $75 million mortgage also meant that effectively, Quest had negative equity even though its campus had been paid for by the sale of much of Quest’s land. Also, Quest could not get loans through normal banking channels because the $75 million mortgage hung around Quest’s neck like a millstone.
Quest grew quickly but as to be expected, the university needed supplementary funding while enrolment grew. Unable to borrow from anywhere else, Quest was effectively cornered into taking loans from Bromley’s charities at high interest rates that he set.
According to the terms of a Funding Agreement, the funds initially advanced via Bromley’s charities were supposed to be gifts, not loans. But ultimately, these terms were not followed. In circumstances that are not entirely clear, Quest ended up in deep debt to Bromley’s charities, the same charities that received hundreds of millions of dollars in tax-receipted donations ostensibly in the name of supporting the university. Two of Bromley's charities that made loans to Quest issued tax receipts for $100 million.
In 2014, Quest’s loans were bundled into another mortgage loan secured against the entire campus (not part of the $75 million mortgage but a separate mortgage loan). When Quest defaulted, Bromley forced Quest into creditor protection and Quest was sold to pay a debt to one of Bromley's charities, Vanchorverve Foundation. Then, as soon as Vanchorverve received $25 million from Quest's sale, Vanchorverve transferred $24.5 million to a charity run by Bromley's son, Charitable Impact Foundation, known as "CHIMP."
The $24.5 million that CHIMP received from Quest's sale is part of a larger picture of $145 million that CHIMP has received over the past 20 years from a dozen charities involved in Quest's financial history. The $145 million includes the proceeds of the sale of Quest's land as well as the proceeds from land sales, the lease and sale of a student residence, royalty income, interest on loans and more. Over the same years, CHIMP has paid $79 million to a private company owned by Blake Bromley and John Bromley.
Under the shocking financial circumstances described here, Quest nonetheless delivered an extraordinary undergraduate education to approximately 1,000 students from across Canada and around the world. That's the Quest legacy of which David Strangway and all involved can be very proud. It is an outrage that such a worthy endeavour to improve post-secondary education was brought down by a few unscrupulous tax lawyers running circles around CRA.
Ralph Sultan Letter 2024-12-24
