Law firm Fraser Milner Casgrain LLP, along with Trinity Capital Corporation, BDO Dunwoody LLP, and others are named in a $300-million class action claim filed over a leveraged charitable donation program.
The class action alleges that the defendants were negligent in designing, promoting, and operating the program, which had 118 participants and donations totalling more than $18 million.
The claim, filed in Ontario Superior Court last Friday, is on behalf of those who participated in the Donation Program for Medical Science and Technology offered by Trinity Capital Corp. in at least one of the taxation years of 2001, 2002 or 2003. The program was marketed as a tax shelter that permitted participants to make leveraged donations to charities. It allowed Trinity Capital to fund large charitable donations using borrowed money.
Representative plaintiff Marc Charette, of Pickering, Ont., claims he and others relied on tax opinions written by both FMC and BDO Dunwoody when he put $1.1-million into the program. Those who participated in the program used their own money for a portion of the minimum $100,000 donation and could finance the balance. Official charitable donation income tax receipts were provided to each donor for the full amount.
The Tax Court of Canada later disallowed the income tax credits claimed by the donors in a case brought by Miller Thomson LLP real estate partner F. Max E. Maréchaux. The decision was upheld on appeal. As a result, the donors lost tens of millions of dollars because of disallowed income tax credits and various other fees collected by some of the defendants.
“Had the donors known that they would not be entitled to income tax credits, they would not have participated in the program,” said the statement of claime filed by Sutts Strosberg LLP and Groia & Company Professional Corp.
None of the claims have been proven in court.
When contacted about the case, FMC released the following statement: “Fraser Milner Casgrain LLP has been named as a defendant in the case on the basis of the firm’s provision of legal advice to our client. Fraser Milner Casgrain has a well-earned reputation for consistently delivering the highest quality legal services and counsel to our clients and we firmly stand behind our lawyers and the quality of their counsel. We intend to vigorously defend this claim.”
As is customary with cases before the courts, the firm would not comment further.