Class action certified for "sham" charitable donation tax scheme

Participating taxpayers paid more than $500 million in what they believed were charitable donations

Class action certified for "sham" charitable donation tax scheme

A class proceeding has been certified against the parties who operated a tax scheme called the Global Learning Gifting Initiative Charitable Donation Program.

On Jan. 16, Waddell Phillips Professional Corporation and Klein & Schonblum Associates, acting on behalf of the representative plaintiffs, announced that the class action suit had been certified against Global Learning Group Inc., as well as other legal, accounting and administrative professionals involved in the program.

The defendants include prominent law firms such as Morris, Kepes, Winters LLP; Fasken Martineau DuMoulin LLP and Cassels Brock & Blackwell LLP.

The action alleged that the defendants had led the plaintiffs to make donations in the belief that the program was a legitimate charitable enterprise, which would support underserved communities, and which would entitle the plaintiffs to tax credits. In actuality, the plaintiffs claimed, the program had no genuine charitable purpose, and had only meant to enrich the defendants to the detriment of the plaintiffs.

The action is brought on behalf of a class of around 50,000 to 60,000 Canadian taxpayers who participated in the program between 2004 to 2014, suffering damages as a result. In all, the participating taxpayers had paid more than $500 million in what they believed were charitable donations.

The issue first arose when, in 2007, the Canada Revenue Agency began to reassess the tax returns of participants to the program, eventually disallowing the tax credits claimed and charging interest and penalties. In 2015, the Tax Court of Canada held that the program was a “sham,” with about 90 per cent of cash donations going into the defendants’ pockets. On June 26, 2019, the Ontario Superior Court of Justice certified the class action as a class proceeding.

Reliefs sought in the action include the recovery of the money given by the plaintiffs to the program, as well as any interests or penalties charged against the plaintiffs by the Canada Revenue Agency.

Since the action is funded by the Ontario Class Proceedings Fund, class members need not pay costs or charges, nor can they be held responsible for any adverse costs of the proceeding. Lawyers for the plaintiffs are working on a contingency fee basis, which means that they will only receive payment if the action succeeds in recovering money for the class members.

More information may be found on the websites of Waddell Phillips Professional Corporation and Klein & Schonblum Associates.

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