Rethink Campaigns: October 2022

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October 2022

10/23/2022

Headwaters Foundation: REVOKED September 10, 2022 by CRA

Headwaters Foundation was a registered charity with designation as a public foundation. According to its application for registration, its founding directors were Christopher Richardson, Leslie Brandlmayr and Darian Kovacs. All three were employees/consultants to Blake Bromley.

Most of the Bromley charities have no outside directors and therefore, no independent oversight. In the case of Headwaters Foundation, along with Mr. Richardson, the other directors of Headwaters at the time that it lost its charitable status were Leslie Brandlmayr and Sheila Britton. Both are long-time employees of the Bromley charity business. Ms. Brandlmayr has been a director of 38 Bromley charities while Ms. Britton has been a director of at least 45. (Yes, forty five, not four or five). This is significant because it indicates that the individuals with whom Mr. Richardson has been a director for 12 years are part of a large web of charities that are under the direction of the same people, and run out of the same offices.

At Headwaters, here’s what happened, according to the CRA audit report:

In 2015, a private company donated shares to CHIMP. The same company also sold land to Paraklesis Foundation, another charity set up by Bromley. As payment for the land, the company took a mortgage from Paraklesis Foundation but it wasn’t a typical mortgage. Instead, the mortgage specified that it was to be paid with shares of a specific company and in series of transactions, the shares were transferred to CHIMP.

CRA found that ultimately, the shares “both started and ended in the hands of a private company” and that the purpose of the transactions was to allow the company to receive a tax credit for a donation to CHIMP that was eventually returned to the company. The “tax plan,” as CRA described it, kicked off on July 14, 2015 with payments to Headwaters via two charities, both set up by Bromley: $2.5 million from Timothy Foundation and $2,250,000 from Association for the Advancement of Scholarship (“AAS”).

The very next day, on July 15, 2015, Headwaters used the money to buy shares of a publicly traded company. Nine days later, Headwaters transferred the shares to Paraklesis Foundation as a “gift.” Six days after that, Paraklesis sent Headwaters a wire transfer for the exact cost of the shares (plus a $15 fee) and Headwaters then sent $4 million to CHIMP.

Since Headwaters only held the shares for 9 days, CRA concluded that it didn’t purchase them as an investment but rather, as part of pre-planned, circular transactions. Furthermore, CRA ruled that the transaction was a sale, not a gift.

Going back to 2014, CRA found that Blake Bromley was paid to “hatch this plan.” “I have foundations which are willing to front the cash,” Bromley wrote in an e-mail, cited in a letter from CRA, dated March 8, 2021.

CRA auditors also found that Bromley was behind the $2.5 million “donation” from Timothy Foundation. In fact, Bromley signed the cheque. And although he is neither a member nor a director of Headwaters, Blake Bromley also signed the two cheques for $4 million that Headwaters sent to CHIMP.

To understand the significance of these transactions, it helps to consider them in light of the total revenue of Headwaters Foundation. Since 2014, Headwaters received donations for a total of $16.7 million. These donations originated solely from other Bromley charities. Of the $16.7 million, only $15,000 remains, according to Headwaters' tax return for 2021. So what happened to the money? Headwaters wrote-off $7 million and made three gifts for a total of $9.8 million. However, not one cent went to a legitimate, hands-on, working charity. This is one of the reasons why Headwaters lost its charitable status.

The three gifts that Headwaters made were all to Bromley charities, as follows:

$4.7 million to Paraklesis Foundation
$4 million to CHIMP
$845,000 to Hope Springs Eternal Foundation

CRA deemed that the “gift” of $4.7 million to Paraklesis Foundation should have been characterized as a sale, not a gift. The gift for $4 million to CHIMP was also deemed by CRA to be an “artificial gift” since it was tantamount to the indirect re-payment of the funds that Headwaters received from Timothy Foundation and AAS at the beginning of the series of transactions. The gift for $845,000 fell outside the audit and was not assessed.

By law, charities are required to give a minimum amount per year, called the “Disbursement Quota” or “DQ.” Since the gifts that Headwaters made were deemed “artificial” by CRA, they don’t count towards the DQ. As a result, Headwaters did not meet its DQ.

CRA also found that Headwaters improperly paid fees to mining company, Archon Minerals Ltd. and another private company involved in the business of water turbines. These payments had nothing to do with the charitable purposes of Headwaters, CRA found.

Noting that the sole member of AAS is John Bromley, that he is also CHIMP’s CEO and that Bromley business is the employer of most of the directors of all five charities involved, CRA concluded that the transactions between the five charities were not at arms length. As such, the gifts between these charities don’t qualify towards meeting the DQ. Not only that, CRA found that Headwaters entered into these transactions in order to delay giving money to legitimate charities.

CRA informed Headwaters that it could be sanctioned 110% of the amount of the required disbursement that was avoided or delayed, a potential penalty of $5,183,750 under Subsection 188.1(12) of the Income Tax Act. CRA also told Headwaters that it may also be subject to a penalty equal to 110% of the gifts not made to an arm's length entity. Those gifts total $5,225,000. Thus, Headwaters could be subject to two potential penalties for a total of approximately $10.3 million. However, now that CRA has revoked the charitable status of Headwaters Foundation, it is not clear from publicly available information whether CRA will go ahead with the penalties.

Financial statements for Headwaters Foundation indicate that the $845,000 gifted to Hope Springs Eternal Foundation was precisely half of an investment. Headwaters wrote off $845,000 and gifted $845,000 to Hope Springs Eternal Foundation. Since one half of the investment was entirely written off, it stands to reason that the other half may also be entirely written off by Hope Spring Eternal Foundation.

Posted at 12:29 PM | Permalink | Comments (0)

10/17/2022

Canadian Football Federation for Amateur Soccer Throughout Canada: $28,175,655 (2005-2010)

One of the entities set up by Blake Bromley is the Canadian Football Federation ("CFF") , an amateur athletic association which operated from 2005 to 2010.

According to its application for registration, the CFF intended to promote amateur soccer in Canada on a nationwide basis for all ages and levels, from entry level to national and international levels. At the time when the CFF was initially set up, the founders envisioned running community clinics, soccer camps and a year-round academy for amateur players with potential. "Free community clinics for boys and girls throughout Canada," is what was envisioned.

The application for registration, signed by Blake Bromley and Greg Kerfoot, indicates that originally, the directors anticipated an annual budget of approximately $100,000. The first year’s budget was to be spent on clinics and summer camps ($95 000) and administration ($5 000).

Financial statements show that, in fact, CFF reported much higher revenue, $4.6 million per year, on average, for a total of $28 million over six years. Of that, 99.8 percent was reportedly spent on "program development." The financial statements to not include any specifics as to how the funds were spent.

Tax returns show that of the CCF's total revenue of $28 million, approximately $26.3 million was received via two charities set up by Blake Bromley and Greg Kerfoot: Loyalty Foundation contributed $24.7 million and C & R Foundation contributed $1.6 million.

The financial statements and tax returns for Canadian Football Federation raise a series of questions:

What did CFF actually accomplish? Did it promote amateur soccer in Canada, as promised?
Who got the $28 million?

Another question: Why, despite revenue of approximately $4.6 million each year, did the Canadian Football Federation never have any long-term investments? And why did it not report a single dollar of interest despite millions of dollars of revenue each year?

These and other questions were put to John Bromley and Blake Bromley in a letter sent October 3, 2022. In the absence of any reply from them, I sent a follow-up letter to Greg Kerfoot and Bob Lenarduzzi on October 17, 2022.

Posted at 12:58 PM | Permalink | Comments (0)

10/02/2022

Questions for Christopher Richardson UPDATED October 26, 2022

Christopher Richardson was re-elected to be a trustee of the Vancouver School Board on October 15, 2022.

In 2015, Richardson was chair of the Vancouver School Board before resigning abruptly, citing "deeply personal reasons." According to his LinkedIn profile, he aspires to become chairperson again. "Next time, hopefully," he said at Linkedin. And indeed, Richardson has been re-elected.

Vancouver School Board ("VSB") has the responsibility for more than 100 schools with almost 50,000 students. To meet the needs of these students, the trustees of VSB39 manage land and buildings with a total value of $1.2 billion. Last year, total revenue was $650 million.

Managing a $650 million budget requires a board of trustees that holds itself to the highest standards of fiduciary duty - and that's why I'm concerned about Richardson being re-elected to VSB39. As I'll explain below, Christopher Richardson has been deemed an "ineligible individual" by the Canada Revenue Agency and is banned from having a position of fiduciary duty at any charity in Canada. That includes VSB39 which is also a registered charity.

On October 26, 2022, I sent a letter to Mr. Richardson to address my concerns directly to him. Here's my letter and attachments:

Letter from Vivian Krause, October 26, 2022 (7 pages).
Backgrounder: Christopher Richardson & The Bromley Charities (13 pages).
Evidence: pages of tax returns showing the dates that Christopher Richardson resigned from 15 charities.
Candidate Nomination Package, signed by Christopher Richardson, August 22, 2022 (relevant text highlighted)
CRA Audit Report on Headwaters Foundation - CRA letter dated March 2, 2021, also included.

Richardson has also been a park board commissioner and he is also a Special Constable with the Vancouver Police. According to The Vancouver Sun, Richardson is Vancouver's longest serving traffic policeman.

On September 25, CBC reported that Richardson was dropped by ABC Vancouver, the municipal party he was running with. This was because of his involvement as a director of Headwaters Foundation which had its charitable status revoked by CRA as of September 10, 2022. Nevertheless, Richardson continued to campaign, tweeting and encouraging voters to support ABC Vancouver. Elections signs for Ken Sim were left on Richardson's lawn even after Sim's party had distanced itself from Richardson.

Headwaters Foundation

In the case of Headwaters Foundation, along with Mr. Richardson, the other directors of Headwaters are Leslie Brandlmayr and Sheila Britton. All three are long-time employees/consultants of the Bromley charity business. Ms. Brandlmayr has been a director of 38 Bromley charities while Ms. Britton has been a director of at least 45. (Yes, forty five, not four or five). This is significant because it indicates that the individuals with whom Mr. Richardson has been a director for many years are part of a large web of charities that are under the direction of the same people, run out of the same offices.

Richardson and Charitable Impact Foundation ("CHIMP")

In addition to his role with the Vancouver Police, Richardson is also Vice-President of Finance at Charitable Impact Foundation, a registered charity known as "CHIMP." He was also a director of CHIMP for nine years, ending in 2018.

Both CHIMP and Headwaters Foundation were set up by the office of Blake Bromley, a Vancouver lawyer known for sophisticated tax planning arrangements. Bromley claims that he has set up more than 650 charities that have handled $2 billion in donations. Richardson has been a director of at least 42 charities, by my count.

Headwaters Foundation is not the first of the Bromley charities to have its charitable status revoked by CRA. In July, Loyalty Foundation, another of the Bromley charities also lost its charitable status. Loyalty Foundation's sole director is Greg Kerfoot, co-owner of the Whitecaps soccer team. But that's another story ...

Back to Christopher Richardson but before I go any further, lets get one thing clear: This story talks about charities but the problem here isn't charities in general. The problem is that some tax accountants abuse the tax privileges of charities to get unwarranted tax benefits for their clients.

To date, at least eleven of the Bromley Charities have had their charitable status revoked by CRA. Of those 11, Christopher Richardson has been involved with at least six. According to CRA's audit reports, all six lost their charitable status for much the same reason: tax planning arrangements.

Four of the Bromley charities with which Richardson was involved have lost their charitable status because of a series of transactions to avoid paying capital gains taxes on the sale of a chicken farm. Bromley took that case to the Federal Court of Appeal and lost. The appeal court reminded Bromley that charities are to operate for purposes that are exclusively charitable and found that the Bromley charities broke that important rule in order to get undeserved tax benefits for private individuals and corporations.

Richardson was also involved with Global Institute which also had its charitable status revoked by CRA, again, for abusing the tax receipting privileges of a registered charity. In the case of Global Institute, the arrangements were offshore and involved the issuance of donation receipts where no gift was made, according to CRA's audit report.

Now, about CHIMP.

CHIMP claims to be the fastest growing giving network and donor-advised fund in Canada. That sounds impressive but there are signs of trouble at CHIMP.

CHIMP reports that it has received $1.1 billion in donations. So why is it that despite $1.1 billion in revenue, two of CHIMP's biggest projects have ended up in deep debt and failed as charitable endeavours:

Fortius Sport & Health Centre ended up with liabilities of $94 million by 2017, long before COVID, and was sold to the City of Burnaby.
Quest University Canada was forced into foreclosure by Blake Bromley and was sold despite the fact that the Bromley charities involved in financing the university reported $425 million in tax-receipted donations, more than ten-fold the initial costs of building the university. From the proceeds of the university's sale, $24.5 million was gifted to CHIMP.

Below, here's a list of questions for Christopher Richardson given that he is CHIMP's V.P. Finance. These questions pertain to the extent, if any, that CHIMP has been involved in "artificial gifts" as they are called by CRA, and other violations of the Income Tax Act.

During the course of the 2022 municipal election campaign, the questions below were repeatedly put to Richardson via text, LinkedIn and via Twitter (Sept 24, Sept 26, Oct 4, Oct. 11 and Oct. 13). Mr. Richardson did not reply.

Fair Questions for Christopher Richardson

Headwaters Foundation

Revocation - For 12 years, Christopher Richardson has been a director of Headwaters Foundation (2010-2022). As of September 10, 2022, CRA revoked its charitable status because of Headwaters' involvement in a series of transactions with CHIMP and three more of the Bromley charities: Association for the Advancement of Scholarship ("AAS"), Timothy Foundation and Paraklesis Foundation. In addition to being a director of both Headwaters and CHIMP, Richardson has also been a director of AAS for 16 years (2004-2020). CRA found that Headwaters was involved in a tax plan involving "artificial gifts" to confer significant tax benefits on private persons. CRA concluded that Headwaters had wrongly enabled a private company to receive a tax credit for a donation to CHIMP for assets which were ultimately returned to the company as part of a pre-planned series of transactions. This raises a long series of questions. For starters, is Chimp also under CRA audit?
An "ineligible individual" - According to CRA correspondence in relation to Headwaters Foundation (January 8, 2020 and March 2, 2021), CRA has deemed Christopher Richardson to be an "ineligible individual" because he was a director of Theanon Charitable Foundation which also engaged in serious misconduct and had its charitable status revoked by CRA. This means that for five years, starting February 10, 2018, Richardson is not allowed to hold any position of fiduciary duty at any registered charity in Canada. In fact, CRA can revoke charitable status for having an ineligible person on the board of directors. In my opinion, given that the CRA has deemed him to be an "ineligible individual," Christopher Richardson should not be on the board of trustees to oversee nearly 50,000 students at 100 schools, and assets worth more than $1.2 billion? See CRA Policy and Guidance.
Resignation from 9 charities - In April of 2019, Christopher Richardson resigned as a director of nine of the Bromley charities. Why? Did he resign because he is deemed an "ineligible individual" by CRA?

CHIMP

$193 million as unlisted securities - In 2020, Deloitte, CHIMP's independent auditor, was unable to vouch for $193 million of CHIMP's assets in the form of unlisted securities. Why? What happened?
Resignation of the entire board - Did CHIMP's entire board resign because of Deloitte's audit report on CHIMP's 2020 financial statements? If not, then why did the entire board resign within roughly six weeks of Deloitte's report? Deloitte's report was issued on January 29, 2021. CHIMP's board resigned between February 20 and March 20, 2021.
173,000 donors but only 24,000 gifts - CHIMP claims that 173 000 have made gifts via CHIMP. Tax returns show that CHIMP has reported only 24,000 gifts, not including those made in fiscal 2022. How is it possible that 173,000 people made gifts via CHIMP but only 24,000 gifts are reported in its tax returns? (The precise number is 24,145).When people use CHIMP's online giving platform to make a gift to a charity, how can people know that CHIMP actually forwards their money to the charity?
Very small gifts - As mentioned earlier, tax returns show that CHIMP has made roughly 24,000 gifts but 15,000 of these gifts were for $500 or less. In fact, more than 3,000 gifts were for $19 or less. For example, Missing Children's Society of Canada and the Ottawa Rape Crisis Centre were both funded via CHIMP but both got less than $5 (five dollars). Why does CHIMP make thousands of very small gifts?
Very large gifts - Some of CHIMP's gifts are very large, more than $1 million each. Most of these gifts are made to sister charities within the Bromley network. In fact, CHIMP has made 29 gifts to sister charities for a total of $210 million. But how many of these very large gifts are true gifts of true economic value? My research finds that many of these large gifts are loans and mortgages. Are these "artificial gifts" like the $4 million that Headwaters gifted to CHIMP? And what is the origin of that $210 million?

Chimp Technology Inc.

$54 million - Financial statements for Charitable Impact Foundation show that it has paid a total of $54 million to a Chimp Technology Inc., a private company run solely by Blake Bromley and John Bromley. Put plainly, CHIMP, the charity has paid $54 million to a private company run by the president of the charity and his father.
Origin of the $54 million - CHIMP's online giving platform is "free" to open and use, CHIMP says at its website. Even on large donations of $1 million or more, CHIMP charges (or charged) a fee of only 0.5 percent. If CHIMP had charged 0.5 percent on the entire $603 million that CHIMP has reported as tax-receipted donations since it began in 2011, that would be a total of only $3 million in fees. So where did CHIMP get the $54 million that it has paid to Chimp Technology Inc.?

Fortius Sport & Health Centre and Quest University Canada

The $74.7 million gift - In 2018, CHIMP made a gift of $74.7 million to Fortius Foundation. According to information provided by CRA, that was the single largest charitable gift made by any non-governmental organization in the history of British Columbia. Financial statements show that Fortius Foundation used the $74.7 million gift to pay "debts" to five sister charities which then made "gifts" to CHIMP for $76 million. In essence, CHIMP got back its huge, historic "gift." Is this another example of what CRA has referred to as an "artificial gift"?
$35 million, Almoner Foundation gifts to CHIMP - For 15 years, Christopher Richardson was a director of Almoner Foundation (2004-2019). During that time, as much as 99 percent of Almoner's revenue was from Quest University Canada. In 2011 and 2012, Almoner reported that it owned a Quest University student residence, valued at $21.8 million and between 2010 and 2018, Almoner collected nearly $10 million on lease payments from Quest. In 2018, Almoner sold the student residence and reported a gain of almost $12 million. Almoner Foundation also made a mortgage loan for Fortius sport centre. Over the same years that Almoner's revenue was derived almost entirely from Quest and Fortius, Almoner gifted $35 million to CHIMP. Why was all that money gifted to CHIMP and not to the university nor the sports centre?
$34 million - Foundation for Public Good ("FPG") - Christopher Richardson was never a director of FPG but he is director and V.P. Finance of CHIMP. FPG's main sources of revenue were its mortgage loans for Fortius & Quest, and the interest on those loans. FPG did not make any gifts to Quest nor to Fortius but FPG gave nearly $34 million to CHIMP. Again, why did Foundation for Public Good give millions to CHIMP and not to the university nor the sports centre?
$15.7 million - Royalty Income - For 16 years, Christopher Richardson was a director of Association for the Advancement of Scholarship ("AAS") (2004-2020). During 2015 and 2016, AAS received approximately $15.7 million as royalty income in conjunction with donations for Quest University. Why did AAS give the royalty income almost entirely to CHIMP rather than to the university?
$3 million Commission - As mentioned earlier, Richardson was a director of AAS for 16 years, from 2004 until 2020. In 2014, AAS paid a Commission for $3,000,000. To whom was that paid, and why? What charitable purpose was served by the payment of that Commission for $3 million on the nose?

Virtual Vancouver Foundation

Virtual Vancouver Foundation - For 13 years, Christopher Richardson was a director of Virtual Vancouver Foundation until he resigned last year (2008-2021). He is also a director of VVF Project Ltd which has received loans for $13.4 million from Virtual Vancouver Foundation, according to its financial statements. That included at least $8 million lent to a non-arms length person.
GeoSim Coverage - According to financial statements, VVF Project Ltd. is engaged in creating a 3D model of Vancouver that can be used for emergency preparedness, safety and security of the city, and other purposes. VVF Project Ltd. also has a project to expand GeoSim coverage in B.C. As of last year, the only Canadian director of GeoSim Cities Inc. is John Bromley who is also president & CEO of CHIMP.
Vancouver International Airport has a collaboration involving GeoSim Cities Inc. to produce a "digital twin" of the airport.
Intangible Asset - $15.7 million - In 2021, the Independent Auditor warned that it cannot vouch for VVF Project's "intangible asset" valued at $15.7 million.
$16 million - Tax returns show that Virtual Vancouver Foundation has received gifts from CHIMP & the Bromley Charities for a total of $16.4 million and Virtual Vancouver Foundation has made gifts back to CHIMP and other Bromley charities for a total of $10 million. Are these gifts of true economic value? Are these more examples of what CRA described as "artificial gifts?"
$4 million gift from CHIMP to Plentiville Foundation - According to its financial statements, Plentiville Foundation also has an "intangible asset" referred to as "GeoSim" and valued at $650,000. In 2021, CHIMP made a gift of $4 million to Plentiville Foundation which is under the sole direction of Blake Bromley, John Bromley and another member of the Bromley family. This raises a couple of questions for Christopher Richardson since he is Vice-President of Finance at CHIMP: Who is the donor who made possible its gift of $4 million to Plentiville? Was a tax-receipt issued for that gift? Why was that $4 million then used to make a make a loan, not a gift?
The relationships between CHIMP, Virtual Vancouver Foundation, VVF Project Ltd. and GeoSim Cities Inc. raise further questions:

Who is the non-arms length party to whom Virtual Vancouver Foundation made a loan for $8 million?
Is CHIMP involved in financing GeoSim Cities Inc.?
What is the "intangible asset" valued at $15.7 million that the auditors couldn't verify?

Since he has been director of CHIMP, Virtual Vancouver Foundation and VVF Project Ltd for many years, one would think that Christopher Richardson can answer these questions.

DISCLOSURE: Vivian Krause, the author of this blog, is being sued for defamation by Scott Cousens. He claims that he spent his sons' inheritance to make the single largest philanthropic gift in Canadian sports history, a donation of $23 million to fund Fortius Sport & Health Centre. For many reasons, I believe that Mr. Cousens claim is untrue. The most simple reason is that financial statements for Fortius Foundation show that Mr. Cousens' initial donation was used to make a loan not a gift, and that Mr. Cousens' private foundation charged interest on that loan, initially at 20 percent. I also notice that the financial statements for Mr. Cousens' private foundation, Imladris Foundation, reported a promissory note receivable (that's a form of "I.O.U.") for precisely $23 million. So far, Mr. Cousens declines to say who owed $23 million to his private foundation, in other words, whether he owed $23 million or someone else did. In May of 2022, my legal counsel, Dan Burnett, Q.C., filed a motion for dismissal of the claim against me, and a voluminous affidavit that I signed.

Photo credits: CTV News and The Vancouver Sun.

Posted at 04:11 PM | Permalink | Comments (0)

42 of the Bromley Charities Where Christopher Richardson Is/Was Director

For the list of 42 Bromley Charities where Christopher Richardson is/was a director, click here.

As of 2021, Christopher Richardson was a director of three of the Bromley Charities:

Here's the six charities of which Christopher Richardson has been a director, that have lost their charitable status following a CRA audit that found serious non-compliance: