Legal Feeds Blog

Tuesday, 17 July 2012 12:36

Charities must disclose to donors when they are being paid to solicit funds

A decision by a Barrie, Ont., Superior Court judge will change the way charities conduct themselves with the public in order to avoid fraud charges, says a Toronto criminal lawyer.

“Justice John McIsaac has expanded/changed the law of fraud by requiring a fundraiser to divulge information which they previously did not have to do,” says Sam Goldstein who represented Adam Gour.

On June 28, Gour was found guilty of defrauding the public in the wake of collecting almost $500,000 on behalf of sick children. He never told the donors that almost all of the cash went to secret commissions, bonuses, and his own bank account. Gour, of North Bay, Ont. will be sentenced Sept. 4.

Goldstein says McIsaac’s ruling means that when you are approached on the street by a fundraiser and asked to donate to a charity, the fundraiser must inform you that they are being compensated.”

According to the Barrie Examiner, in his ruling, McIsaac said it’s a crime for fundraisers to fail to disclose the percentage of commissions they take from donations.

“I am satisfied that this silence or failure to disclose is misleading . . . and amounts to a fraud,” he said.

“The decision required fundraisers to disclose to donors that they are being compensated,” says Goldstein. “He did not say when disclosure is to take place, what constitutes compensation (many charities give free coffee and doughnuts to people who volunteer at telethon weekends) or who is responsible for the disclosure — the charity or the third-party fundraiser?

Goldstein says McIsaac did not acknowledge that charities are already required by law to declare on their CRA Income Tax returns that they are using a third-party fundraiser, and CRA already regulates how much they can spend on these costs before a charity will be specifically audited.

The decision has ramifications for all charities.

“Right now just about every charity in Canada uses the services of third-party marketers and per this decision are committing fraud,” he says. “Just this morning, I received a call from the Toronto Police Services asking if I would donate to an event. The caller did not inform me that he was getting paid. I don’t see the Toronto Police Services being charged with fraud.”

Goldstein says the decision will be appealed.

Gour’s team of fundraisers, who operated under the name of Kare for Kids, or Northern Children’s Foundation, were collecting up to $650 each in cash per weekend, plus hotel and food expenses.