Mr. McMillan,
As you know, for over a year I have been writing to inquire about the results of the audit of Tides Canada Foundation by the Canada Revenue Agency. In the absence of a reply from you, I am writing this open letter, as I did several years ago when I first began to inquire about Tides Canada's finances and activities.
In summary, this letter presents my concerns, questions and my opinions about what appears to me to be a lucrative tax scam that Tides Canada has been running through its Exchange Fund, and whether your recent decision to close this operation (quietly reported by Mark Blumberg on Boxing Day) is because you were caught by the Canada Revenue Agency.
My specific questions are outlined in the following post. First, some background.
Back in 2012, Tides Canada announced, with great objection, that it was under audit by the Canada Revenue Agency (CRA) and had been under audit since 2011. More than five years since then, the CRA's audit has no doubt been completed. If Tides Canada got an “all-clear” from the CRA, Tides Canada would definitely have a letter from the CRA that says so. Tides Canada should have no hesitation to make that letter public – or, come clean.
Over the past 15 years, Tides Canada Foundation has grown to become the largest funder and hub of environmental activism in Canada. With annual revenue of $40 million and a staff of over 200 (185 plus 53), Tides Canada is no small operation. Between 2006 and 2015, Tides Canada Foundation had total revenue of $285 million. Of that, at least $35 million came from other charitable foundations.
According to my calculations, roughly 40 percent of Tides Canada's total revenue is from foreign sources. This figure peaked at $24 million, fully 60 percent of total revenue for 2015. By my analysis, most of Tides Canada's foreign funding is from the United States, a total of more than US$100 million over the past decade.
The Tax Scam Run By Tides
According to the information that I explain below, some of the $35 million - but not all - that Tides Canada has received from another registered Canadian charity has been shuffled back into the hands of the original donor. As far as I can tell, this is a side-business of sorts that Tides has been running along side of its activism. This side-business has been conducted via an entity called Tides Canada Foundation Exchange Fund. By its own admission, Tides Canada has processed a total of $22.6 million via this fund "without money ever crossing the border."
In my opinion, based on the evidence that I present below, this side-business is a scam, a lucrative scam. The reason that I refer to this activity as a "scam" is that it enables other charities to issue tax receipts for millions of dollars worth of charitable activity in Canada that never happened.
As I understand, this scam pads Tide' revenues, making it look like it is funding more charitable activity than it actually is. This scam also makes money for Tides Canada. According to Mark Blumberg, Tides Canada charges a 10 percent fee for the funds that it has been processing via its "international grant matching system," AKA the Tides Canada Foundation Exchange Fund. Mr. Blumberg suggests that Tides has charged as much as $100,000 on a grant of $1 million. Big bucks, indeed.
Ineligible Organizations Outside Canada
Every year since 2010, Tides Canada Foundation has stated in Canadian tax returns that it does NOT fund organizations outside of Canada except for eligible recipients which are called “qualified donees” in the terminology of the Canada Revenue Agency. See line C4 in the links below:
On the basis of evidence that I’ve seen, it is clear to me that these statements are false in the sense that contrary to what is reported in Tides Canada's Canadian tax returns, through the Tides Canada Foundation Exchange Fund and the U.S. Tides Foundation, based in San Francisco, Tides Canada has been funding dozens of organizations in the U.S. and other countries.
Three Sources of Evidence
The evidence to which I refer comes from analyzing and comparing three sources of information:
1) Canadian and U.S. tax returns for Tides Canada Foundation and other registered charities
2) U.S. tax returns for The Tides Foundation, based in San Francisco (“Tides USA”)
3) A large series of covering letters on payments (more than 2,700 in total) made by The Tides Foundation during 2013. These were found on-line in late November of 2013.
The transactions that are evident in these tax returns and covering letters suggest to me that using the Tides Canada Foundation Exchange Fund in collaboration with The Tides Foundation in San Francisco, Tides Canada has 'acted as a conduit' of millions of dollars to ineligible organizations outside of Canada. Acting as a conduit is a serious violation of the Income Tax Act, and grounds for revocation of charitable status.
104 Payments for US$1.6 Million
According to the covering letters on payments that I have seen, in 2013 Tides USA made at least 104 payments involving Tides Canada Foundation and the Tides Canada Foundation Exchange Fund. Totalling US$1.6 million, all 104 payments went to organizations outside Canada. This post presents information regarding two of the largest of these 104 payments. Both of these payments were made to the Collette charities in Pawtucket, Rhode Island.
Tides and Collette Travel, Pawtucket, Rhode Island
Below, I outline what appears to me to be one case of Tides Canada Foundation acting as a conduit. This case involves roughly $3.1 million over six years.
In the case presented here, three charities are involved: two that are based in Pawtucket, Rhode Island, (The Collette Foundation and the Alice I. Sullivan Foundation), and Collette Foundation Canada, based in Mississauga, Ontario. All three of these charities are operated by Collette Vacations (also known as Collette Travel), a tour company, also based in Pawtucket. Collette Vacations has call centres in Surrey, B.C. and in Mississauga, Ontario.
As far as I can tell, Tides Canada receives funds from the Mississauga charity and transfers the same funds to the Collette charities in Pawtucket via the Vancouver and San Francisco offices of Tides. In the process, the donor(s) to Collette Foundation Canada have received receipts for tax deductions for roughly $3 million dollars worth of charitable activity in Canada that never happened.
Payments From Tides to the Collette Charities in Pawtucket
According to covering letters on two payments made by The Tides Foundation, on July 26 of 2013, Tides in San Francisco paid US$278,000 to the two Collette charities in Pawtucket, Rhode Island. Both payments were made at the recommendation of Tides Canada Foundation, the letters say. Here are excerpts of these two covering letters:
The reason that these payments caught my eye is because they were made to the same person on the same day at the same address, but to two different charities. Both payments were made to Mr. John Galvin, Chief Financial Officer of Collette Travel Services. Mr. Galvin was the CFO of Collette Travel for 25 years (before stepping down in January of 2015).
Between 2010 and 2015, the total amount granted from the Collette charity in Canada to Tides Canada Foundation was CAN$3.1 million, Canadian tax returns say:
If Tides Canada spent the $3.1 million from Collette Foundation Canada on charitable activity in Canada, or granted it to eligible recipients (called "qualified donees" in CRA terminology), that would be fine. But that's not what Tides Canada did. As far as I can tell, most of the money that Tides Canada Foundation received from Collette Foundation Canada has gone straight back into the hands of Collette Travel and the Collette charities in Pawtucket.
Here are excerpts of U.S. tax returns showing payments from the Tides Foundation in San Francisco to the Collette charities in Pawtucket, Rhode Island:
On the basis of the above, it is fair to ask whether Tides Canada was breaking the law by acting as a conduit, and was caught by the Canada Revenue Agency. Is this the real reason that Tides Canada has closed its so-called "international grant matching system?"
More questions are posted here.
WHY THIS MATTERS
For Collette Foundation Canada, the problem here is that tax-deductible receipts appear to have been issued for millions of dollars worth of charitable activity in Canada that never happened. The end recipients of more than 98 percent of the grants from the Collette charities in Pawtucket are U.S.-based and international organizations. Many of them support worthy causes but they are not qualified donees. This fact gets hidden when they money goes through Tides Canada.
In this case, the charity that appears to have wrongly issued tax-deductible receipts for millions of dollars is Collette Foundation Canada. This would not have been possible, however, without the involvement of Tides/Tides Canada as a vehicle for forwarding funds back to the U.S. via the Vancouver and San Francisco offices of Tides.
If the millions of tax-receipted dollars had been spent by either Collette Foundation Canada or Tides Canada on charitable activity in Canada, that would have been within the rules. But that does not appear to be what happened. By forwarding the money back to the Collette charities in the U.S., Tides Canada appears to have funded ineligible organizations outside of Canada and has enabled Collette Foundation Canada to flout the law.
