[OFFICIAL ENGLISH TRANSLATION]
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Citation: 2004TCC136
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Date: 20040818
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Docket: 2000-458(IT)G
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BETWEEN:
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GHASSAN KIWAN,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent,
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AND BETWEEN:
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Docket: 2000-956(IT)G
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ZIAD HANNA,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent,
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AND BETWEEN:
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Docket: 2000-964(IT)G
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RAMZI SALAMÉ,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent,
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AND BETWEEN:
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Docket: 2000-965(IT)G
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MAY NASSAR,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Dussault, J.
[1] These appeals were heard on
partially shared evidence only. They are appeals from assessments
disallowing the Appellants credits for charitable donations to
the Ordre antonien libanais des Maronites / Antonian Order of
Lebanese Maronites (the "A.O.L.M.") and imposing penalties on
them pursuant to subsection 163(2) of the Income Tax Act
(the "Act") for knowingly, or under circumstances amounting to
gross negligence, making false statements in their tax
returns. Further, some assessments were made outside the
normal reassessment period on the grounds that a
misrepresentation attributable to wilful default was made in
filing the relevant tax returns and providing information under
the Act.
[2] Mr. Ghassan Kiwan was disallowed
credits for $5,000, $20,700, $12,500, $9,500, $11,500 and
$6,000 in charitable donations for each year from 1990 to 1995
respectively. Assessments for the 1990 to 1993 taxation years
inclusive were made outside the normal reassessment period.
[3] Mr. Ziad Hanna was disallowed
credits for $5,500, $9,000, $5,100 and $5,500 in charitable
donations for each year from 1992 to 1995 respectively.
Taking into account the maximum allowed and credit carryovers,
credits of $5,500 in 1992, $6,672 in 1993, $7,348 in 1994 and
$5,580 in 1995 were claimed. The assessments for the 1992
and 1993 years were made outside the normal reassessment period.
[4] Mr. Ramzi Salamé was
disallowed credits for $9,600, $10,000, $5,000 and
$10,000 in charitable donations for each of the years from
1990 to 1993 respectively. The assessments for the four
years were made outside the normal reassessment period.
[5] Ms. May Nassar was disallowed
credits for $3,900 and $3,000 in charitable donations in the 1994
and 1995 taxation years respectively. A $3,831 credit was
claimed in 1994.
[6] Ms. May Nassar is Mr. Ziad Hanna's
spouse. None of the other Appellants are related.
[7] In the amended replies to the
Notice of Appeal, the Respondent alleges that the Minister of
National Revenue (the "Minister") based the assessments at issue
on the assumption that the Appellants had not donated the amounts
in question to the A.O.L.M. and had not provided valid receipts
containing the prescribed information because the donation
amounts indicated on them were false. It is therefore
alleged that the Appellants did not make the donations for which
they claim credits on their tax returns. Instead, they
participated in a scheme involving the A.O.L.M. either issuing a
receipt for an amount paid by cheque by a taxpayer and providing
this same taxpayer with an equivalent or similar amount of money
in cash or issuing a taxpayer a receipt on which a certain cash
donation is indicated when the taxpayer had not paid any amount
or paid a smaller amount in cash than that indicated on the
receipt.
[8] In the case of the four
Appellants, almost all of the donations mentioned were made by
cheque, meaning that the scheme involved the Order issuing a
receipt for an amount paid by cheque and the Appellant being
reimbursed in cash.
[9] Each of the Appellants testified.
Given the difficulties involved in being present in Montreal, Mr.
Ghassan Kiwan testified via videoconference from Saudi
Arabia.
[10] The following people testified for the
Respondent:
Ms. Isabelle Mercier;
Ms. Colette Langelier, a Revenue Canada auditor;
Mr. Gaétan Ouellette, a Revenue Canada
investigator;
Mr. Michel Yazbeck;
Mr. Elias Farhat;
Mr. Marcel Thibodeau.
[11] Counsel for the Appellants objected to
both the testimonial and documentary evidence submitted by the
Respondent. He first cited subsection 24(2) of the
Canadian Charter of Rights and Freedoms (the "Charter"),
section 40 of the Canada Evidence Act and section 2858 of
the Civil Code of Quebec (the "Civil Code") to exclude all
evidence the Minister obtained further to the information on the
scheme provided by Ms. Isabelle Mercier. According to counsel for
the Appellants, when the information was provided, the Minister
was involved in a criminal investigation, not a compliance audit
investigation, and the Minister did not obtain, but should have
obtained, the appropriate search warrants. The rights and
freedoms guaranteed by the Charter were therefore infringed such
that the admission of the evidence would bring the administration
of justice into disrepute.
[12] Counsel for the Appellants also
objected to the evidence submitted by the Respondent allegedly
showing that a significant number of people participated in the
scheme and obtained false receipts for charitable
donations. This objection was based on the assertion that
the Respondent was endeavouring to provide evidence of similar
activities, evidence which according to counsel was neither
admissible nor relevant to ruling on the appeals at hand.
While the evidence was being presented, counsel for the
Appellants frequently objected to specific evidence by citing the
hearsay rule and questioning the relevance.
[13] On the first issue, counsel for the
Respondent stated that the Minister first conducted a compliance
audit on the A.O.L.M. and it was not until later that a decision
was made to conduct a criminal investigation. From that
point on, all the appropriate search and seizure warrants were
obtained.
[14] On the second issue, counsel for the
Respondent pointed out that the evidence provided was
circumstantial, that such evidence was completely admissible and
that it allegedly showed not only that a scheme drawn up by the
A.O.L.M. existed, but also that it was an extensive scheme given
the large number of donors that had participated in it.
[15] Under the circumstances, and before
turning to each of the Appellants' cases, I feel it necessary to
refer to the evidence submitted with a view to situating
ourselves within the general context of this case, which resulted
in criminal proceedings being instituted against about fifteen
donors and assessments being made for more than one thousand
taxpayers.
The context
[16] On March 30, 1994, Ms.
Isabelle Mercier, a physician, and her accountant, Mr.
Gaétan Picard, met with Mr. Raymond Galimi, a
team leader at Revenue Canada (which has since become the Canada
Customs and Revenue Agency ("CCRA")), Ms. Colette Langelier,
an auditor, and Mr. Gaétan Ouellette, a special
investigations investigator. Mr. Picard requested the
meeting with Mr. Galimi, whom he knew, because his client wanted
to provide information on receipts being issued for fraudulent
charitable donations by what she described as the
St-Antoine-le-Grand order located at 1530 Ducharme Avenue in
Outremont, Quebec. The minutes of this meeting were
signed by Ms. Colette Langelier on March 31, 1994
(Exhibit I-7). During the meeting, Ms. Mercier said that two
priests, Father Antoine Sleiman and Father Youssef El-Kamar,
were involved in the scheme. Ms. Mercier also identified
her spouse, Mr. Samir El-Boustany, and Mr.
Fadi Basile, a physician, as organizers of this scheme with
the priests. Based on Ms. Mercier's statement, the scheme
consisted in receipts being issued for a larger amount than the
amount donated and the issuing of receipts for donations made by
cheque where the donor is given back a portion of the donation in
cash. According to Ms. Mercier, the organization involved
kept only 25% to 50%. Ms. Mercier also said that her
husband took a percentage of the cash amounts and she named
another person she knew at that time, Naji Abi Nader,
who, she said, had benefited from the scheme for a number of
years through her husband. She said that this person gave
her husband a cheque for $20,000 several times a year when
he was in Montreal. In return, this person received an envelope
from her husband containing bills that she said she had
personally counted. She said that the scheme involved the
Lebanese community and that many medical professionals benefited
from it. She admitted that she had benefited from it
personally until 1990, and her husband, until 1992. Ms.
Mercier also stated that she had always been against this way of
doing things and as a result she agreed to pay the tax and the
applicable penalties and interest.
[17] At the time that Ms. Mercier provided
this information, she was separated from her husband and was
involved in divorce proceedings. However, when she
testified, she stated that although she had enough problems
without adding more by facing criminal charges for making
fraudulent donations, she was not seeking revenge.
[18] According to Ms. Langelier, after the
meeting with Ms. Mercier and a discussion, Mr. Galimi decided to
have the organization audited and asked her to conduct the
audit. At that time, Ms. Langelier was a "senior" tax
avoidance officer.
[19] The first step Ms. Langelier took was
to obtain the A.O.L.M.'s file from the Charities Division in
Ottawa, specifically, the returns filed by the organization which
contained the list of donors. Ms. Langelier quickly learned
from that Division that the A.O.L.M. had already been audited in
1990 for the 1984 to 1987 taxation years and that a follow-up had
been conducted in late 1992 concerning the 1990 and 1991 taxation
years. An audit report had been prepared in January 1993. Some
problems had already been identified in connection with the dates
of the receipts issued and the A.O.L.M.'s method of accounting
for the money received because only cheques had been
deposited. Since the bulk of the amounts received had to be
sent to Lebanon, the Order had to be able to control how the
funds were actually used. The A.O.L.M. was asked to make
certain commitments and documents were also requested which had
not been submitted. It seems that the Charities Division
was about to suspend the A.O.L.M.'s registration.
Ms. Langelier said that the 1993 return had not been filed
as of May 1994. Given the facts discovered during previous
audits, including the fact that the A.O.L.M. did not deposit cash
donations, it was possible to establish links with Ms. Mercier's
information, such that it was decided that the organization would
be audited to see whether it had changed its way of doing
things.
[20] Therefore, after reading the A.O.L.M.'s
statements and previous audit reports, Ms. Langelier began the
audit of the 1989 to 1993 taxation years.
[21] On September 8, 1994, Ms. Langelier,
together with Mr. Galimi, met with Ms. Mercier and her accountant
again at her accountant's office with a view to asking Ms.
Mercier more questions about the documentation she had sent
further to the meeting on March 30, 1994.
[22] In late September 1994, after
telephoning the A.O.L.M. and making an appointment with the
organization's accountant, a Mr. Ralph Nahas, Ms. Langelier
went to the organization's premises and asked to examine all the
accounting documents, monthly bank statements, cheques, deposit
slips, invoices and official receipt books. Ms. Langelier
had asked that the A.O.L.M.'s 1993 return be submitted to her
directly, which was done at the beginning of the audit. The
on-site audit took about one month, until late October 1994,
during which she went to the premises seven or eight times, once
accompanied by Mr. Galimi, her team leader. Ms. Langelier
consulted all the documents available for the period beginning in
August 1994 and later completed her work for the rest of 1994 and
for 1995.
[23] Using the bank documents consulted and
the other documents already in her possession, such as lists of
donors included with the A.O.L.M.'s returns, Ms. Langelier
created two data bases with a view to reconciling the receipts
issued with the amounts deposited in bank accounts.
Therefore, the purpose of this reconciliation exercise was to
specifically identify the donor cheque number, the amount and
date of the cheque, the date the cheque was deposited, and the
number, date and amount of the receipt issued.
[24] Ms. Langelier stated that she was
checking whether the A.O.L.M. had in fact used 90% of the
donations collected each year for charitable purposes (Exhibit
I-11).
[25] Ms. Langelier's exhaustive analysis
enabled her to determine that, on the one hand, hardly any cash
deposits were made, and on the other, that the A.O.L.M. had in
large part withdrawn as cash the deposited cheque amounts shortly
after they were deposited (see Exhibits I-10, Vol. 1 and 2, and
I-12). The A.O.L.M. claimed that the amounts withdrawn in
Canadian funds were placed in a safe then sent to Lebanon in
suitcases carried by priests or nuns on their way through Canada.
According to Ms. Langelier, despite requests for proof of the
amount and date of each of these shipments of money to Lebanon or
even the date of exchange of the Canadian currency, the A.O.L.M.
was unable to provide the information requested and to
demonstrate that the amounts in its records had in fact been sent
to Lebanon.
[26] Ms. Langelier also tried to determine
the extent of untraceable cash donations. She said that she
was told that envelopes with donors' names on them were kept in
the safe so that the organization could issue a receipt at the
end of the year for cash donations made during the year.
During her October 1994 audit, Ms. Langelier not only found
that there was no cash in the safe, but there were not any
envelopes with donors' names on them either. In this
connection, she was allegedly sent in the spring of 1995 a
document in Arabic that she had translated. Ms. Langelier
said that this document showed only the end-of-year total of
official receipts issued for cash donations.
[27] Based on the A.O.L.M's cheques made out
to cash and the official receipts issued for cash donations that
were not usually deposited, Ms. Langelier found that there was no
trace of how almost all of the amounts received by the A.O.L.M.
were used. She stated that she was unable to trace 95% of
these amounts in 1991, 92% in 1992 and 84% in 1993. The amounts
entered in the A.O.L.M.'s records as being Lebanese donations
totalled $520,398, $964,950, $2,000,000, $2,000,000 and
$2,680,000 from 1989 to 1993 respectively (Exhibit I-11).
[28] Exhibit I-11 shows, among other things,
a significant number of cash withdrawals compared to the amounts
on official receipts issued and donations deposited. For
example, in 1991, the A.O.L.M. issued official receipts for a
total of $2,436,142 in donations and deposited a total of
$1,302,135, of which $1,152,741 in cash was withdrawn. In
1992, official receipts were issued for a total of $2,728,670. A
total of $1,173,685 in donations was deposited of which
$1,090,528 in cash was withdrawn.
[29] Ms. Langelier did not complete her
audit work until June 1995. She then made an appointment with the
Special Investigations Division with a view to referring the
matter to that section for investigation.
[30] According to Ms. Langelier, she was
able to identify three types of schemes through her audit and
analysis work:
1) official receipts were
issued for cheques of the same amount, the cheques were deposited
and then cheques were written out to cash by the A.O.L.M.;
2) back-dated receipts
were issued for payments made by cheque in a subsequent year for
only a fraction of the amount of the receipt;
3) official receipts were
issued but not supported by a payment by cheque.
[31] Ms. Langelier stated that certain
audits of donors' tax returns enabled her to confirm that the
first situation occurred primarily with professionals and the
second, mainly salaried workers and retirees.
[32] The referral to Investigations was
officially approved on June 29, 1995. Ms. Langelier
stated that she had not had any contact with Mr. Ouellette or
anyone else from the Special Investigations Section between March
1994 and June 1995, which was further confirmed by Mr.
Ouellette.
[33] Mr. Gaétan Ouellette is
currently retired. He has 25 years of experience as an
investigator in the Special Investigations Section, where he held
positions at almost all levels.
[34] In March 1994, he was a liaison and
development officer in the Section, which was responsible, among
other things, for welcoming people who would like to provide
information. It was in this capacity that he was asked to
attend the meeting with Ms. Isabelle Mercier and her accountant.
According to Mr. Ouellette, during this meeting, which was
also attended by Ms. Langelier and Mr. Galimi, and
which was held in the latter's office, Ms. Mercier provided
information on what she claimed to be a receipt-selling scheme
that had been cooked up in a monastery; she provided the names of
a few people who were involved in the scheme; she mentioned that
she had been personally involved perhaps one or two years before;
and she explained a bit about how the scheme worked,
specifically, the percentage the people involved actually
paid.
[35] At the end of the meeting, and after
discussing the matter, it was decided that the case would be
handled by Audit and not be investigated. At this point, it is
important to recall Mr. Ouellette's response[1] to this decision:
[TRANSLATION]
Q. Why
didn't you request an investigation in this case?
R.
Well, I am not personally convinced that we had the grounds when
we met with Ms. Mercier to investigate the issue. Firstly,
we did not know... we were not aware of the scope of the
phenomenon; we were not very familiar with the organization; Ms.
Mercier had not really given us figures that were terribly
impressive. Based on all of that, we do not conduct an
investigation just to obtain that type of information.
[36] In his testimony,
Mr. Ouellette stated categorically that neither he nor
anyone else in the Special Investigations Section had had any
type of contact with Ms. Langelier, her team leader,
Mr. Galimi, or with anyone in the Audit Division between
March 30, 1994 and when the issue was referred to the Special
Investigations Section on June 29, 1995 or shortly before.
Similarly, he stated that he had not received any documents from
anyone during this same period. He also said that he had not had
any contact either with Ms. Isabelle Mercier or her
accountant before the investigation began. Mr. Ouellette
stated that he had simply not taken an interest in the matter or
enquired about it during the period from March 1994 to June
1995.
[37] Mr. Ouellette said that the
meeting about the referral to the Special Investigations Section
was probably held a few days before the referral form was
officially signed. Ms. Langelier and Mr. Galimi
attended the meeting. Mr. Ouellette was also there as well
as Mr. Ratté, the head of the Special Investigations
Section and perhaps a team leader from the Special Investigations
Section. Mr. Ouellette said that the decision to accept the
referral was made during this meeting.
[38] Mr. Ouellette stated that later,
after a number of discussions, the decision was initially made to
assign the case to one team and one investigator in particular.
However, the investigator declined the case allegedly because of
his workload. The case was eventually assigned to
Mr. Ouellette because of a shortage of investigators.
Further, he said that it was a very sensitive case which required
expertise. He was chosen because of his many years of
experience in the Special Investigations Section.
[39] Mr. Ouellette said that
after reviewing the tables prepared by Ms. Langelier which
consisted in a compilation of all the banking information and
receipts issued by the A.O.L.M., he was convinced that a scheme
was involved (Exhibit I-9).
[40] After returning from vacation,
Mr. Ouellette contacted Ms. Isabelle Mercier on August 23, 1995,
to set up a meeting, the purpose of which was to inform her that
there were grounds for an investigation and to have her sign an
affidavit, which he told her he would use for the
investigation. Mr. Ouellette said that Ms. Mercier
asked that Ms. Langelier, whom she knew, be at the meeting, which
he agreed to. The meeting was held in a Special
Investigations Section office.
[41] In late October or early November
1995, Mr. Ouellette laid down information about the A.O.L.M.
and its accountant Ralph Nahas, with a view to obtaining
warrants to search the A.O.L.M. monastery and the office of the
organization's accountant.
[42] The A.O.L.M. search warrant was
executed on November 8, 1995 in the presence of Father
Jean Slim, who was in charge of the monastery.
Mr. Ouellette said that he finally presented himself several
hours after the group of investigators had entered the premises
and the people present had refused to provide their names.
Father Slim was served the official warning as were Messrs.
Ralph Nahas and Samir El-Boustany, who had
arrived at the monastery a little earlier.
[43] Ms. Langelier, who had
attended the investigators' meeting before the search, was
present at the search with a view to obtaining information on
places where documents could be found.
[44] The search warrant for the
accountant, Ralph Nahas, could not be served because the
address provided, and even checked with his professional
association, was incorrect. A search warrant for the
residence of Mr. Nahas was finally executed on July 10,
1996. The residence of Mr. Samir El-Boustany,
the husband of Ms. Isabelle Mercier, was also searched on
that same date. Another warrant, for a Mr. Jamousse,
was not executed because he had left Canada and was in the United
States. Mr. El-Boustany was one of the heads of the A.O.L.M.
and Mr. Jamousse had been mentioned as a donor recruiter on
a document seized from the A.O.L.M. during the search on November
8, 1995.
[45] Mr. Ouellette said that four
types of tax avoidance schemes were discovered during the
investigation:
1) cheques were written for the
exact amount of the receipt issued by the A.O.L.M. and the donor
was reimbursed an amount in cash, most often 80% or 85% of the
amount of the receipt;
2) receipts were sold for 15% or
20% of the amount of the receipt;
3) cheques were written for 15%
or 20% of the amount of the receipt;
4) receipts were issued for no
consideration.
[46] Mr. Ouellette said that
about 20 donors who received receipts for a total of
$100,000 or more between 1989 and 1994 were the subject of a
criminal investigation. Finally, 16 charges were laid
and 12 people pleaded guilty. Three charges were withdrawn
and proceedings were stayed in one case.
[47] Forty to 50 boxes of documents
were seized during the November 8, 1995 search and they contained
mainly accounting and banking documents, including deposit slips
(Exhibit I-10, Vol. 1 and 2), cheques made out to cash by the
A.O.L.M. (Exhibit I-12) and cheque stubs (Exhibit A-8, Book 6)[2].
[48] The documents seized were in
Father Slim's office, the adjoining library and in the
basement.
[49] A diskette was among the
documents seized from the A.O.L.M. on November 8, 1995, and it
contained an electronic file entitled "Biblio-Reç"
(Exhibit I-21, Tab 3). This nine-page document
contains information on 354 receipts issued by the A.O.L.M. in
1993. The information on these receipts, which are listed in the
document sequentially, is provided in 15 columns. Among
other things, columns B to J first show in many cases the
percentage paid (generally 15% or 20%), then the receipt number,
the donor's first and last name, his or her telephone number, the
amount of the receipt, the amount "payable", the amount "paid",
and the "remaining amount payable". Mr. Ouellette said that
these last three columns show the amount the donor is to be paid,
has already paid or has left to pay. He also said that his
subsequent checks showed that the CA indicated in column K means
that the receipt was provided for cash. The amount
indicated in column L entitled "nôtre [ours]" is the amount
the A.O.L.M kept. In some cases, the entry in column M
entitled "via" means the person who recruited the donor. The name
of Mr. Jamousse, who has already been mentioned, is found.
Mr. Ouellette was able to justify his interpretation of
Biblio-Reç using information gathered from other documents
seized from the A.O.L.M., such as photocopies of donors' cheques,
envelopes, and other torn-up documents that were placed in a
waste basket.
[50] Other documents were seized later
from the residence of the accountant, Ralph Nahas, including
two printed electronic files, one entitled
"Biblio-Avant moi [Biblio before me]" (Exhibit
I-21, Tab 15), and the other, " Biblio-Reç
(Exhibit I-21, Tab 16). This latter file is not the same as
that seized from the A.O.L.M. on November 8, 1995. It
contains sequence numbers 355 to 495, which are not included
in the file seized from the A.O.L.M. on November 8, 1995
(Exhibit I-21, Tab 3). However, the two files seized from
the accountant are incomplete, as only the information in columns
A to E is included, that is, the receipt number, the donor's
first and last name, his or her telephone number and the amount
of the receipt. Mr. Ouellette hypothesized that a more
complete document had to have existed at one point.
Mr. Ouellette said that several donors in the
"Biblio-Avant moi" file pleaded guilty or confessed.
[51] Donors were questioned during the
investigation. Confessions were made in several cases
(Exhibit I-21, Tab 10). Mr. Ouellette said that more than 50
other people also confessed to the same lawyer.
[52] Mr. Ouellette said that
other donors confessed later after information on the scheme and
its terms and conditions were sent to the Audit Division with a
view to reassessing donors. Mr. Ouellette mentioned
that at that point he recommended that donors that had received
receipts for less than $1,000 (Exhibit I-21, Tab 11) not be
included in that reassessment.
[53] The names of certain people who
confessed to receiving a forged receipt for 1993 are included in
"Biblio-Reç", while the names of a number of others
are not (Exhibit I-21, Tabs 3, 10 and 11).
[54] Mr. Ouellette said that just
over 1,000 people were reassessed for the 1989 to 1995 years. Of
these, about one hundred appealed to this Court.
[55] Mr. Ouellette did not conduct any
investigations concerning the Appellants. I would also like
to point out that none of the Appellants were specifically
audited before the reassessments were made. However, the
names of three of the Appellants can be found in documents seized
from the A.O.L.M., and from Ralph Nahas. I will discuss them at
the appropriate time.
[56] At the Respondent's request, in
addition to Ms. Isabelle Mercier, three other donors
testified to receiving receipts for larger amounts than the
donations actually made.
[57] Mr. Michel Yazbeck is a dentist
originally from Lebanon. He moved to Canada in 1979. He
said he remembers hearing about the A.O.L.M. issuing tax receipts
in the Lebanese community, but not where. He said that he
received a receipt for $10,000 in 1990, for $10,000 in 1991,
and for $8,000 in 1992, by providing in each case the monastery's
priest with a cheque for the amount concerned. Two weeks
later, after the cheque had been cashed, he went back to the
monastery and was given $8,000 cash, for example, for the $10,000
cheque. He said it was the same procedure each time.
He said that he was issued the receipt dated December 22, 1992
for $8,000 in 1993 when he was preparing his tax return for 1992
(Exhibit I-5). Mr. Yazbeck confessed to Revenue Canada in
February 1997 to receiving 80% of the amount of the cheque in
cash (Exhibit I-6).
[58] Mr. Elias Farhat is an
engineer. He is also from Lebanon. For his part, he
said that he received a receipt for $10,000 in 1993 and two
receipts, one for $5,000 and the other for $4,500, in 1994
for paying only an amount in cash equivalent to 1/5 of the amount
of the receipts (Exhibit I-17). He said that at a
party in Montreal, a friend told him that he could make a
donation and receive a receipt for a larger amount than the
donation. He stated that this information travelled by word
of mouth in the Maronite community. However, the receipt
dated December 31, 1993 for $10,000 was allegedly received after
a visit to the monastery in January or February 1994; that time
he paid $2,000 in cash. He said that he was mailed the
receipt later because at that point he was working in
Sept-Îles. His name and the relevant information on
this donation are found in "Biblio-Reç" at number
92. The receipt number is 122 (Exhibit I-21, Tab 3).
[59] Mr. Marcel Thibodeau is now
retired. He used to be a teacher. He said his
accountant, Jean-Maurice Labelle, told him in March 1993
when he was preparing his 1992 tax return that it was possible to
obtain a receipt for five times more than the amount paid in
cash. Mr. Thibodeau said that he gave Mr. Labelle
$1,000 cash and was given an A.O.L.M. receipt dated December
31, 1992 for $5,000 (Exhibit I-19, Page 1).
[60] Mr. Thibodeau said that he
received a telephone call in December 1993 from a Mr.
Roger Antabli, who asked him if he wanted to "participate"
again in 1993. If he did, he had to go to Buffet Antabli on
Acadie Nord Boulevard before December 31.
Mr. Thibodeau said that Mr. Labelle had told him that Mr.
Antabli was the "contact" who would call him.
Mr. Thibodeau therefore went to the designated location and
gave the person who introduced himself as Mr. Antabli
$2,000 cash. In return, he was given a receipt for $8,000
that had already been filled out (Exhibit I-19, Page 2). Mr.
Thibodeau's name appears on the printout of the electronic file
entitled "Biblio-Reç" seized from the A.O.L.M.'s
accountant (Exhibit I-21, Tab 16). The number is 390, the
receipt number is 429 and the amount indicated for the receipt is
$8,000. As already mentioned, there is no other information in
this second part of "Biblio-Reç". Mr. Thibodeau
received another $8,000 receipt after the same procedure was
followed in late 1994 (Exhibit I-19, Page 3).
[61] Mr. Thibodeau's spouse also made a
donation to the A.O.L.M. and after she received a notice of
reassessment disallowing the tax credit, Mr. Thibodeau contacted
Mr. Gaétan Ouellette using the telephone number with
the notice of assessment, with a view to making a disclosure.
Since Mr. Ouellette had asked him to send a letter,
Mr. Thibodeau then sent him a letter of confession (Exhibit
I-20).
[62] Ms. Mercier told us during
her testimony what she personally knew about the scheme, which
her husband, Mr. El-Boustany, had organized. Father
Sleiman told Ms. Mercier about the scheme during a meeting
attended by her husband in the basement of the church. The
conversation allegedly continued a little later in the priests'
office. She said that her husband had also explained the
scheme to another person who came to the house. Ms. Mercier
stated that she had personally made donations from 1988 to 1990
by giving her husband cheques who then gave them to the priests,
specifically to Father Sleiman, Father Slim and Father
El-Kamar. Ms. Mercier stated that the latter and her
husband became friends and was the person with whom her husband
primarily dealt. Ms. Mercier received receipts for the
amount of the cheque issued (Exhibit I-18). However,
her husband allegedly received cash refunds of 50% to 80% of the
cheque amounts. He allegedly deposited these cash deposits
himself initially in a bank account for the mortgage on the house
and then in a joint account. Ms. Mercier, however, said she
was unaware of the total amount deposited in this way in these
accounts.
[63] While she provided few details
about the information provided at the March 30, 1994
meeting, Ms. Mercier mentioned in her testimony the names of the
people she knew who had allegedly participated in the scheme at
that time. She explained, more specifically, that a friend
from outside Montreal, Mr. Naji Abi Nader, gave
her husband a cheque for $20,000 three times a year, and in
return, her husband gave him a receipt for the exact amount of
the cheque and $16,000 in cash. Each time, the receipt and
the cash, in $1,000 or $100 bills, were placed in an envelope
that her husband kept in a desk in their bedroom.
Ms. Mercier said she saw the receipt and counted the money
in the envelope three or four times, but was unsure in exactly
which year. She had also allegedly personally seen her
husband give the envelope to this person on one occasion.
She also mentioned in passing that even afterward she found a
receipt made out to Mr. Abi Nader in the truck her
husband often used.
[64] Ms. Mercier also mentioned,
without, however, being too clear, that after the meeting on
March 30, 1994, she had met with Mr. Gaétan Ouellette
from the Special Investigations Section a second time in 1994,
not in 1995, and at that meeting she gave him her own receipts
obtained for tax purposes for 1989 and 1990. The meeting was
allegedly held in the same office as the first meeting.
Ms. Mercier was, however, unable to confirm whether
Ms. Langelier or Mr. Galimi were at this meeting.
[65] I would like to simply point out
here that Ms. Langelier testified that she and
Mr. Galimi met with Ms. Mercier a second time on
September 8, in her accountant's office. For his part,
Mr. Gaétan Ouellette stated that he did not have
any contact with Ms. Mercier between the date of the first
meeting, March 31, 1994 and August 23, 1995, the date when he had
her sign an affidavit after the case was sent to the Special
Investigations Section. Mr. Ouellette stated that he had
contacted Ms. Mercier a few times after August 23, 1995, as
did investigators from Quebec who were looking after the case of
Mr. Abi Nader.
The Appellants
Ghassan Kiwan
[66] Appellant Ghassan Kiwan is
currently a consulting cardiologist for the Aramco oil company in
Saudi Arabia. He left Quebec in July 1997.
[67] Mr. Kiwan immigrated to
Canada in 1977 and obtained his licence to practice medicine in
Quebec in 1982. After specializing in internal medicine and
cardiology, he became an associate cardiologist and then head of
the cardiology department at the Lanaudière regional
hospital in Joliette. At that time, he was living in Repentigny
and did so until he moved to Saudi Arabia in July 1997.
[68] Mr. Kiwan testified that he
is a practicing Maronite Catholic and started attending mass at
the A.O.L.M. church on Ducharme Street in Outremont in 1983 or
1984.
[69] He said that from 1990 to 1995 in
particular, he attended mass about twice a month and various
parties to raise money for the hall and the monastery that the
A.O.L.M. had built. He also said he occasionally went to
other churches, such as in Repentigny, Joliette and Montreal.
[70] Mr. Kiwan mentioned that he
was also a member of the Maronite Union, which also raised money
for the same purposes as the A.O.L.M. He said that his brother,
Roger Kiwan, and Mr. Fadi Basile also belonged to this
civil charity organization which assisted Maronites and needy
people in general.
[71] Under cross-examination,
Mr. Kiwan said that he referred many patients to
Mr. Fadi Basile, a cardiologist who practiced in
Montreal, with whom he also had fairly frequent contact.
Mr. Basile was also a personal friend and a friend of his brother
Émile. Mr. Kiwan testified that he had always been
involved in charity work and knew the Maronite priests, including
the head of the monastery to whom he had provided sample
medications to be sent to Lebanon. Mr. Kiwan said that
he did not know Messrs. Nahas, Jamousse or Abi Nader, but
said that he knew Mr. Nabil Attié, a friend of
his brother Émile Kiwan.
[72] Under cross-examination,
Mr. Kiwan stated that he had always made his donations by
cheque and gave them to the accountant priest when he made short
visits to the monastery on Friday nights when he was not on call
and while his wife was shopping in Montreal. That was also when
he received the receipt. He said that he gave the father
superior a cheque after mass on Sunday only twice: once he was
with his brother Émile and the other, his wife.
[73] Mr. Kiwan stated that he
never received a cash refund from anyone and did not know of
anyone who made donations to the A.O.L.M. at that time. He
said that the subject was quite simply never discussed in
public. He said he had never personally encouraged anyone
to make donations, and that he had never discussed, even in his
family, and more specifically with his brother, Émile
Kiwan, the donations he made to the A.O.L.M. because it was a
personal, charitable gesture. He said that any discussions
he did have were general in nature and were limited to
acknowledging the need to assist the A.O.L.M. and its
works. Mr. Kiwan testified that he and his brother
Émile Kiwan discussed the issue of donations for the first
time in the summer of 2003.
[74] Mr. Kiwan said that he heard
about forged or fixed receipts in late 1996 or early 1997 when he
was in Joliette looking after transferring between 4,000 and
5,000 patient files to colleagues in preparation for his move to
Saudi Arabia. He said he was angry at the time and totally
disappointed and said that the question being asked was where the
money had gone because the A.O.L.M. was having financial
problems.
[75] Mr. Kiwan made his first
donation to the A.O.L.M. in 1990 and his last in 1995. He said
that in the late 1980s, people made donations to the collection
taken at Sunday masses. Then, at some point, the A.O.L.M.
was apparently given permission to issue tax receipts and the
priests from the monastery allegedly told him this either at mass
or during a meeting. Mr. Kiwan said that the priests
starting requesting donations themselves starting in 1990.
[76] The following is information from the
receipts Mr. Ghassan Kiwan received from the A.O.L.M. (Exhibit
I-15, Tab 8):
|
Year
|
Date of receipt
|
Receipt No
|
Amount of receipt
|
|
1990
|
Dec.18, 1990
|
1414
|
$5,000
|
|
1991
|
Feb. 20, 1991
|
1496
|
$200
|
|
|
May 29, 1991
|
1735
|
$7,000
|
|
|
July 10, 1991
|
1739
|
$10,000
|
|
|
Dec.15, 1991
|
1855
|
$3,500
|
|
1992
|
June 7, 1992
|
2359
|
$3,500
|
|
|
June 20, 1992
|
2364
|
$5,500
|
|
|
Dec. 6, 1992
|
2541
|
$3,500
|
|
1993
|
Nov. 9, 1993
|
2867
|
$6,000
|
|
|
Dec.13, 1993
|
0006
|
$3,500
|
|
1994
|
June 30, 1994
|
0936
|
$6,500
|
|
|
Dec. 26, 1994
|
0852
|
$5,000
|
|
1995
|
June 25, 1995
|
1301
|
$6,000
|
[77] Mr. Kiwan said that he did
not receive any receipts for donations to the A.O.L.M. before
1990 because he was starting to work, was already involved in a
Eucharistic centre in Lebanon, and was also making donations to
the hospital where he worked.
[78] Mr. Kiwan said that he
contributed more to the A.O.L.M. at the beginning because his
salary was increasing and then he decreased his donations because
of his family obligations after his children were born.
[79] Mr. Kiwan stopped making
donations to the A.O.L.M. in June 1995. The date of the last
receipt is June 25, 1995. When asked to explain why 1995 was the
only year since 1990 for which he did not obtain a receipt in
December, he said that he had numerous obligations at that time
and that his income had decreased 30% as a result of the salary
cuts imposed by the Government of Quebec starting in August
1995. He was allegedly forced to withdraw money from his
Registered Retirement Savings Plan (RRSP) to pay his taxes as a
result of this decrease in income. Since he did not mention his
financial problems in an examination for discovery on
February 6, 2003, Mr. Kiwan explained that he did not
think of it at the time. Under cross-examination, he also
mentioned that people in the Lebanese community had been talking
about forged receipts, though he had previously stated that he
had not read about the false receipt problem in the newspaper
until late 1996 or early 1997.
[80] Mr. Kiwan, who donated more
than $65,000 to the A.O.L.M. between 1990 and 1995, did not take
any special steps with the Order to endeavour to determine what
had become of the donated money. He said he did not see the
priests in Montreal again and, although he has been to Lebanon
since, he never discussed the issue with the heads of the
Order. However, after receiving a Notice of Reassessment in
1997, he contacted his accountant, and, after checking his cheque
book, attempted to obtain from his bank all the cheques he had
written and had been cashed by the A.O.L.M. (Exhibit A-9, Tab
14). Despite the request, Mr. Kiwan was able only to obtain
a photocopy of a few cheques (Exhibit A-9, Tab 15).
[81] As in the case of the other
Appellants, Ms. Langelier made out some calculations to determine
how much of the donations were reported in relation to the 20%
limit on net income and in relation to disposable income.
In the case of Mr. Kiwan, who had a high income from
professional activities, although they were sizeable, the
donations were well below the allowable limit and did not
represent a significant proportion of his disposable income
(Exhibit I-16).
[82] It is important to immediately
point out here some specific points in the case of
Mr. Ghassan Kiwan.
[83] First, Appellant Ghassan Kiwan's name
was found on a document in a waste basket seized from the
A.O.L.M. during the November 8, 1995 search (Exhibit I-21,
Tab 6, Page 1). The author of the sheet is unknown, but five
names are mentioned, including those of the Appellant and his
brother Émile Kiwan. Beside each name is the amount
of the receipt and
"déjà rendu [received]" and a
second amount which is 80% of the first amount. In the case
of Mr. Ghassan Kiwan, the amount indicated for the receipt
is $5,000, and the amount indicated as
"déjà rendu" is $4,000. Mr. Kiwan
received a receipt for $5,000 in 1994. Mr. Ouellette
testified that this proved that a scheme existed where a receipt
was issued for the total amount of a cheque and cash was
subsequently refunded for 80% of the cheque amount. He also
pointed out that Mr. Nabil Attié, whose name was also
found in this document, had pleaded guilty to two charges brought
against him.
[84] Then, Appellant Ghassan Kiwan
testified that he had handed most of the cheques to one of the
priests in the monastery during his short visits on Friday
evenings while his wife was shopping. He said that he was
issued receipts on the spot. He testified that two times at
the most he gave his cheque to the father superior at Sunday
masses.
[85] When the dates on the receipts
were checked, none of the dates on the receipts fell on a Friday
and four of the dates on the receipts, that is, December 15,
1991, June 7, 1992, December 6, 1992, and June 25, 1995, were
Sundays.
[86] Further, Mr. Kiwan testified
that donations were a personal matter, that he did not discuss it
with his family, except to acknowledge the need to assist the
A.O.L.M. He also testified that his brother Émile
was never with him when he went to the monastery, except perhaps
once after mass. He also testified that he had never discussed
his donations in detail with family members, particularly not
with his brother Émile Kiwan.
[87] When we look at the list of
donors the A.O.L.M. submitted with its tax returns on T3010 forms
from 1990 to 1994, we see that nine times out of twelve, the
number on the receipt issued to the Appellant either immediately
precedes or follows the receipt issued to his brother
Émile Kiwan. The receipts were issued the same day in
five cases, one day later in two cases, and a few days later on
two occasions. We can also see that in seven out of nine
cases, the receipts issued are for the same amount, that there is
a difference of only $100 in one case and a difference of $1,500
in the last case (Exhibit I-8, Tabs 7 to 11).
[88] In her testimony concerning
Mr. Kiwan's case, Ms. Langelier also pointed out that
most of the numbers on the receipts issued to this Appellant
immediately preceded or followed the numbers on the receipts
issued to his brother.
[89] During his testimony,
Mr. Kiwan also stated that in 1995, he did not make a
donation to the A.O.L.M. in December as he usually did in
previous years because his income had decreased significantly as
a result of cuts implemented by the Government of Quebec.
He even said that he had had to cash in some of his RRSPs to pay
his taxes.
[90] The figures from Mr. Kiwan's
tax returns show not only that his 1995 income from professional
activities did not decrease from 1994, but that it had increased
by nearly $25,000, and had increased by more than $50,000 from
1993. An $84,000 business loss was however claimed in 1995,
but no explanations were provided. Mr. Kiwan's income from
professional activities did not decrease substantially until 1996
and no funds were withdrawn from his RRSP in 1995 or 1996. In
1997, only $5,000 was withdrawn (Exhibit I-16, Page 2).
[91] I would like to immediately point
out that the above-mentioned circumstances did not occur by
accident. On the contrary, the only possible conclusion is
that the donations were not made in the way or at the times
described. We can also infer that the donations of the
Appellant and his brother were almost completely
coordinated. The Appellant's testimony to the effect that
his donations were confidential, and that he and his brother did
not discuss the issue, as well as the timing and the way in which
the donations were made is quite simply not credible.
Ramzi Salamé
[92] Mr. Salamé is currently the
Senior Program Specialist in Higher Education at the regional
UNESCO office in Beirut, Lebanon. He left Canada on January 8,
1994 to take up this UNESCO position first in Jordan, then in
Lebanon.
[93] Mr. Salamé is originally
from Lebanon and moved to Canada in 1970. After obtaining his
masters and doctoral degrees in Psychology, he held a lecturer
position at the University of Montreal from 1973 to 1977.
In 1977, he accepted a position as a professor at
Université Laval, where he taught until his departure in
1994.
[94] Mr. Salamé said that he
never had any close ties to the Lebanese communities in Montreal
or Quebec City.
[95] While he was on sabbatical during the
first part of 1992 and the first part of 1993, he traveled in
France and to Lebanon.
[96] Mr. Salamé was born a
Melkite Greek Catholic, but says he is an agnostic.
[97] Mr. Salamé stated that in
early October 1998, while he was at a conference in Paris, he
first heard about a problem involving his donations to the
A.O.L.M. During a telephone conversation with his wife, who was
living in Beirut, she told him that someone from the Caisse
populaire Desjardins at l'Université Laval, where he
held an account and had a line of credit, had called and said
that it was urgent that he speak with Mr. Salamé.
Mr. Salamé therefore telephoned the accounts manager
as soon as he could and was told that Revenue Canada had seized
between $13,000 and $16,000 from his account; this seizure was
made in connection with donations the tax authorities had not
recognized as such (Exhibit A-4).
[98] Mr. Salamé then obtained
leave from his principal and first went to the Caisse populaire
in Quebec City, then on Sunday, October 18, 1998, to the A.O.L.M.
monastery, the address he had for which was in Outremont. After
mass, he met with the priest who was officiating to find out what
was happening. After a few explanations, this priest
allegedly gave him the name of his counsel handling this matter,
Me Ouellette.
[99] Mr. Salamé then telephoned
Me Ouellette, who gave him an appointment the same day
at his office in Place Ville-Marie.
Mr. Salamé took an oath there confirming the truth
and accuracy of all the donations he had made to the A.O.L.M.
between 1989 and 1993 (Exhibit A-2).
[100] During his testimony, Mr. Salamé
categorically denied ever having had any meetings other than that
on October 18, 1998 with the A.O.L.M.'s priests. He stated that
he had never spoken to them either, because he had made all of
his donations by cheque, which he had mailed, and he had also
received his receipts by mail.
[101] Mr. Salamé wrote three cheques to the
A.O.L.M.: one for $9,600 dated December 23, 1990; another
for $10,000 dated December 9, 1991; and another for
$5,000 dated December 16, 1992 and received a receipt for
the donated amount for each year (Exhibit A-3).
[102] However, the donation in 1993 was allegedly made
differently. Mr. Salamé confirmed that he had
signed two cheques over to the A.O.L.M. that his two
brothers-in-law who lived in Atlanta, Georgia, United States had
made out to him for US$3,500 or US$3,600 each.
Mr. Salamé explained that his brothers-in-law owed
him money from purchasing the family home in Lebanon and they
repaid this debt by writing cheques on their account in the
United States. He said that partial payments such as these
were frequently made. When he visited his brothers-in-law, they
might give him cheques made out to him and signed in advance, but
he filled in the date and amount later after they telephoned him
to advise him that the money was available.
Mr. Salamé said that the US currency account he held
shows that this is how his brothers-in-law made payments.
[103] Mr. Salamé said that after he
sent these two cheques, he received a receipt from the A.O.L.M.
for $10,000 in the mail. He said that this amount was
justified because it was pretty much equal to the amounts of the
US dollar cheques he had sent.
[104] Mr. Salamé stated that before he
made donations to the A.O.L.M., he donated many times to the
victims of the war in Lebanon when he visited a few times each
year in the 1970s and 1980s.
[105] During one of his visits to Lebanon in 1988
or 1989, a childhood friend, a retired colonel named
Hélou, asked for direct assistance and allegedly told him
about the A.O.L.M. in Montreal and the colonel allegedly gave him
the address of the monastery. Mr. Salamé said that he
was the one who had first explained to this friend the benefit,
for Canadians of Lebanese and other origins, of being able to
make donations to an organization in Canada instead of making
direct donations on the spot, because they could receive tax
credits. In this way, he said that the donations could be
larger and the funds collected could be sent to Lebanon or used
for local work. This was when this friend allegedly gave
him the name and address of the A.O.L.M. in Outremont, nothing
more.
[106] Mr. Salamé therefore confirmed
that this was how he found out about the A.O.L.M., of which he
knew nothing before, and started making donations to this
organization in 1990, simply by mail, when he did not even know
the name of the people in charge, who he simply described later
as priests or monks (Exhibit I-3). He allegedly attached a
note to his first cheque dated December 23, 1990 for $9,600,
requesting that the assistance he was providing be directed to
charitable work in the area he grew up in Lebanon. Further,
he said that he later heard through his brother that the A.O.L.M.
had in fact distributed funds to a charitable group working in
that part of the country. No further details were, however,
provided in this regard.
[107] Mr. Salamé admitted that he could
make larger donations than in previous years because he received
a tax credit and that he had in fact calculated each year, albeit
in an approximate manner, the amount of the possible donation to
obtain the credit and took the allowable limit into account.
[108] Although he donated $9,600 in 1990 and
$10,000 in 1991, Mr. Salamé sent only one cheque to
the A.O.L.M. in 1992 for $5,000. The explanation provided
was that his father had passed away in July 1992, and at a
de requiem mass in memory of his father,
celebrated by the priest from the Melkite Greek Catholic parish
in Quebec City who ran the Université Laval chapel, he
made a large donation of $7,500 to the Melkite mission. He made
another $3,000 donation to the same organization in
1993.
[109] Under cross-examination,
Mr. Salamé said that he did not know anyone who had
made donations to the A.O.L.M. and that he was never told
personally between 1990 and 1993, about any scheme involving the
A.O.L.M. issuing false receipts. However, although he earlier
said that he had found out that there was a problem with his
receipts for charitable donations in October 1998 after funds had
been seized from his account, he later admitted that Revenue
Canada had informed him of it in a letter dated January
9, 1997, which he had responded to on February 2, 1997
(Exhibits I-2 and I-3). Mr. Salamé said that he had
completely forgotten about that letter and even that he had
responded to it.
[110] I will point out here that mention is simply
made in the Revenue Canada letter that an audit of the A.O.L.M.'s
books and records had shown that a tax avoidance scheme existed
involving the issuance of receipts for charitable donations and a
proposal had been made to disallow all donations made to this
organization. However, in his response,
Mr. Salamé pointed out that if the organization had
been able to misappropriate funds, he did not see why, as a
taxpayer, he should be held responsible for the actions of
unknown third parties with whom he had contact solely through the
mail.
[111] Mr. Salamé was unable to explain
why he had mentioned misappropriation of funds when there was no
mention of this in the Revenue Canada letter. He was also
unable to explain what he understood "tax evasion" to mean; it
seemed that he was completely unaware of this expression.
[112] Although he did not take any steps
personally with the A.O.L.M. in Lebanon or Canada after he
received the letter from Revenue Canada to determine what had
become of the $34,600 he had donated, Mr. Salamé
nonetheless stated that he had obtained information from Lebanon
to the effect that the bulk of the money he had donated had been
transferred to a charity in his old neighbourhood. Here,
again, no details were provided in this regard.
[113] Under cross-examination,
Mr. Salamé was asked to explain certain deposits made
without his bankbook and at the ABM to his Caisse populaire
Desjardins account at the Université Laval on dates close
to the dates the A.O.L.M. cheques were deposited (Exhibit
A-3).
[114] First, the December 23, 1990 cheque for
$9,600 was not cashed until March 15, 1991. The
corresponding receipt, number 1527, is dated
December 31, 1990. Mr. Salamé hypothesized
that the A.O.L.M. had perhaps delayed cashing it because he had
attached a note to the cheque requesting that his contribution be
made to an organization in a specific area of Lebanon and the
A.O.L.M. may have wanted to consider this possibility.
Mr. Salamé did not mention any names or provide any
other details.
[115] Further, Mr. Salamé's account
statement shows that $8,657 was deposited without his bankbook on
March 22, 1991. Mr. Salamé did not hesitate to
explain that it was a transfer from an inactive account he held
at the Caisse populaire Saint-Sacrement in Quebec City and that
this transfer was made with a view to purchasing a house.
Bank statements from this latter account were not submitted as
evidence.
[116] The account statement also shows that $7,987
was deposited without bankbook on May 2, 1991 and
Mr. Salamé was unable to explain this along with
several other deposits without bankbook shown.
[117] On December 18, 1991, the
$10,000 cheque dated December 9, 1991 made out to the
A.O.L.M. was debited from Mr. Salamé's bank account.
Mr. Salamé's account statement shows that three ABM
deposits were made on December 19, 1991: $3,000, $2,300 and
$3,000 (Exhibit A-3).
[118] Mr. Salamé explained that he was in
Montreal on December 19, 1991, and was taking a flight that night
to Europe with his wife and two children for the first part of
his sabbatical, the first six months of 1992. He said that
he personally had $10,000 cash in Canadian and US dollars that he
had planned to take for the trip and one of his brothers-in-law
had given him $2,600 or $2,300 cash before he
left. Mr. Salamé explained that his two
brothers-in-law were living in the United States at the time, but
had lived in Montreal and then Toronto before they moved to the
United States. Since they owed him money from the purchase of the
family home in Lebanon, when he met them, one of them had
allegedly given him the amount in question in funds withdrawn
from a bank account he still had in Toronto.
[119] Mr. Salamé explained that the
previous summer a Mr. Abdallah Akiki had borrowed $6,000
from Mr. Salamé's brother in Lebanon to start a business
in Montreal. Since this Mr. Akiki had already demonstrated
an interest on several occasions in repaying the amount in
question because he had changed his mind, Mr. Salamé
stated that he had had a meeting before he left in a café
or a gas station in Montreal and that Mr. Akiki had
allegedly given him the $6,000 in bills, in Canadian dollars
which he had taken to Lebanon and kept until then. Since he
then had too much money on him, Mr. Salamé stated
that he had then made the three deposits in question at the
Caisse populaire in Côte-Vertu on his way to the Montreal
airport. Mr. Salamé said that he made the first
deposit, the $3,000, because he wanted to keep the other $3,000
from the $6,000 Mr. Akiki had given him. Then, he deposited
what he said was the $2,300 from his brother-in-law so that
he would have a record of it. Finally, the second $3,000 deposit
was allegedly made after he returned to the car and told his
wife, who was waiting, that he had deposited only $3,000 of the
$6,000 Mr. Akiki had given him. She then allegedly
told him to deposit it all because they already had enough money
and he was coming back to Quebec City himself in February. That
explains the second $3,000 deposit. The entries in the
bankbook show that the first two deposits, the $3,000 and the
$2,300, were made at 8:29 p.m. and the last, the $3,000, at 8:30
p.m. Mr. Salamé explained that he remembered
situations and clearly remembered those deposits because they
were made under special circumstances. He also remembered
when his bank account was seized in 1998, but not the letter he
received from Revenue Canada in 1997.
[120] Mr. Salamé said that there were a
number of deposits without bankbook on his account and that after
he left, his sister-in-law was able to make these deposits.
A $4,200 deposit was made on January 3, 1992.
[121] The $5,000 cheque dated December 16, 1992 to
the order of the A.O.L.M. was debited from Mr. Salamé's
bank account on December 22, 1992. The account statement shows a
$4,000 deposit without bankbook on January 5, 1993 (Exhibit A-3).
Mr. Salamé was unable to explain this deposit because he
had already stated that he had left the country on sabbatical.
However, he pointed out that there had been other deposits
without bankbook over the years and he had not been asked to
explain where the deposited funds came from. Another
deposit without bankbook, $4,200, was made on January 6,
1993.
[122] I must point out here that further to a
close review of bank statements, it is possible to note that
there are indeed a considerable number of deposits without
bankbook, more than 70 in fact, between 1990 and 1994, not
counting those in a second US currency account (Exhibit A-3). The
reconciliation exercise is clearly incomplete. We can
nonetheless see that shortly after the A.O.L.M. cashes his
cheque, Mr. Salamé always deposits between 80% and
90% of the cheque amount.
[123] Mr. Salamé stated that he
continued making donations after he left the country in January
1994. He said that these donations were made directly in cash,
particularly to people and families in Lebanon. Mr. Salamé
said that that he no longer asks for tax receipts because his
salary is not taxable.
[124] Mr. Salamé stated that he did
not attempt to contact an A.O.L.M. representative to obtain
additional proof of his donations. He said that he had only
gone to the A.O.L.M. monastery once, and that was on October 18,
1998.
[125] During her testimony involving
Mr. Salamé's case, Ms. Langelier, the auditor,
explained that the A.O.L.M. used books of 25 receipts until
1993. After 1993, there were only 10 receipts in each
book. She said that receipt number 1527 issued to
Mr. Salamé, a receipt dated December 31, 1990 for
$9,600, was from a receipt book with receipts numbered from 1526
to 1550, a number of which were also dated December 31, 1990, but
matched, according to the information on deposit slips, cheques
deposited on March 14, 1991, totalling $25,300
(Exhibit I-10, Vol. 1, Tab 4, Page 44
and Exhibit I-9, Page 17). Ms. Langelier concluded that
the receipt issued to Mr. Salamé had been antedated.
However, Ms. Langelier admitted that she had never had the
donors' cheques in her possession, more specifically,
Mr. Salamé's cheque.
[126] I would like to comment here that I do not
see how being in possession of the cheque could have changed this
conclusion. We now know the date of the cheque, the date it
was deposited and the date of the receipt. Exhibit I-9
shows that the A.O.L.M. deposited cheques in its possession if
not relatively quickly, then very quickly, and these deposits
were often followed by cash withdrawals. We can count here
about fifteen deposits of a number of cheques at once for
significant amounts; these deposits were made between January and
April 1991. A number of the receipts are, however, dated
December 31, 1990 (Exhibit I-9, Pages 15 to 18).
The same thing happens year after year and we see that a
significant percentage of cheques are deposited in February,
March and April of one year and the receipts are dated December
31 of the previous year or another date in December.
Although the receipts do not seem to have always been issued in
sequence, this is a constant factor from one year to the next
(Exhibit I-9, Pages 8, 15 to 18, 26 to 28, 35, 36, 42, 43
to 48). Messrs. Thibodeau, Yazbeck and Farhat testified that
in their cases, antedated receipts were issued for payments made
by cheque or in cash during the first few months of the following
year.
[127] In my opinion, there is not simply a
possibility, but a strong probability that the deposits made
during the first few months of a year are for payments made by
cheque or in cash shortly before the date of deposit, even if the
receipts are dated in December, particularly December 31, of the
previous year.
[128] Although Ms. Langelier found that the
dates the cheques for the $10,000 and $5,000 donations
in 1991 and 1992 respectively were deposited are the same or
within a few days of the date of the receipts, she did not find
any deposits made in 1993, a year for which receipt number 349
dated December 31, 1993 was issued for a $10,000
donation. She explained that she was also unable to find any
deposits corresponding to the ten receipts from this book in
particular. She said, however, that a receipt from a
previous book, number 340, and receipts from a subsequent book
numbered 363, 365 and 367, correspond to deposits made between
March 25 and 29, 1994 (Exhibit I-9,
Page 43).Ms. Langelier concluded that they were cash
donations for which receipts had been antedated. Under
cross-examination, Ms. Langelier admitted, however, that certain
deposit slips were sometimes missing. Mr. Ouellette said
that the receipts were not always issued in sequence.
[129] Further, still in connection with this 1993
donation, which was allegedly made by means of two US currency
cheques sent to the A.O.L.M., Ms. Langelier said that she
did not find any deposits of US dollars and that to her
knowledge, the A.O.L.M. did not have a US currency account.
[130] Finally, Ms. Langelier explained the
calculations she had done for the hearing to demonstrate the size
of the donations in relation to the allowable 20% limit on net
income and in relation to Mr. Salamé's disposable
income. She calculated that Mr. Salamé's donations to
the A.O.L.M. were 73% to 82% of the allowable 20% limit on net
income and that they represented 23%, 24%, 14% and 30% of his
disposable income (including source deductions) for each of the
years between 1990 and 1993 respectively (Exhibit I-13). Between
1990 and 1993, Mr. Salamé's total annual income was
between $72,000 and $75,000.
[131] One last point that should be mentioned in
Mr. Salamé's case is that his name appears in
Biblio-Reç (Exhibit I-21, Tab 3, Page 8).
It appears in Biblio-Reç as sequence number 319 in
relation to receipt number 349 for $10,000 obtained in
1993. As opposed to what is done in the case of most donors
whose name is included in this file, there is no other mention
than the first and last names and the amount of the receipt,
$10,000. In his testimony, Mr. Ouellette stated that he had been
unable to find when this amount was deposited and hypothesized
that no payment had been made.
Ziad Hanna
[132] Mr. Ziad Hanna is an engineer and
project manager. He is originally from Lebanon and moved to
Montreal in 1990. He was born a Melkite Greek Catholic and is
practicing. In 1994, he married May Nassar, who is a
Maronite Catholic.
[133] Mr. Hanna explained that quite soon after he
moved to Montreal, people with whom he had been in contact showed
him the main landmarks in the Lebanese community, such as
churches, grocery stores and restaurants. This was when he heard
about the A.O.L.M. church, another Maronite church, the
Saint-Maron church on Henri-Bourassa Boulevard in Montreal, and
about the Melkite church, which at the time was located downtown
and then north of the city of Montreal on Gouin Boulevard.
He said that at first, he mainly went to mass at the Saint-Maron
church. However, when a priest at the A.O.L.M. church asked for
donations to cover the cost of a specific surgical procedure, he
was told by the person collecting the donations after mass that
he could obtain a tax receipt. After he read some Revenue
Canada brochures on the topic and with the dual purpose of
assisting victims of the war in Lebanon and obtaining tax
deductions, he decided to make donations to the A.O.L.M. in 1992.
He explained that he had at that time a better salary and had
savings. He admitted that he had in fact calculated, albeit
roughly, the maximum contribution he could make within the
allowable limit.
[134] Mr. Hanna said that he preferred this type
of tax shelter to buying flow-through shares because he could
help people and obtain a tax refund. Although he did in fact
purchase flow-through shares starting in 1996, he did not fail to
point out that the value of the shares usually changed quickly
and drastically.
[135] Mr. Hanna explained that he donated to
the A.O.L.M. instead of the Melkite church because a larger
percentage of Lebanese Christians are Maronites and Melkites are
primarily Christians from, among other places, Egypt, Syria and
Jordan. Therefore, he said there was no guarantee that a
donation to the Melkites would be used to assist people in
Lebanon. To further explain his donations to the A.O.L.M. rather
than the Saint-Maron church, he said that the A.O.L.M. was
in some ways a backbone for Christians in Lebanon. He did not try
to obtain information on whether the Saint-Maron church also
issued tax receipts for donations.
[136] Mr. Hanna said that he subsequently went to
mass more frequently at the A.O.L.M. because it was closer to his
home. He explained, however, that he initially did not go
to the A.O.L.M. church just for mass, but also to meet people he
knew after mass in the church basement or to participate in
social activities, mainly political discussions. He said
that he occasionally spoke to the priests and those he knew over
the years were Father El-Kamar and Father Claude Nadras.
[137] Mr. Hanna said that before 1992, his
donations to the Sunday collection would have been no more than
$500 or $600 a year. After he discovered that he could make
donations and obtain a tax deduction, Mr. Hanna said that he
started donating to the A.O.L.M. in 1992. Mr. Hanna
explained that at the time, he made an appointment by telephone
with a priest at the monastery, went to the monastery, wrote the
$5,500 cheque in the monastery and a receipt was filled out,
while he waited, for the same amount and dated the same
day. He said, however, that it was probably that first
time, in 1992, rather than 1993, as he had indicated during the
discovery phase, that the priest was somewhat reluctant, perhaps
because he saw that Mr. Hanna was young, and perhaps did not
think that he had the money required.
[138] We were unable to trace the cheque, despite Mr.
Hanna's request, because the National Bank of Canada had
destroyed it. However, a bank representative testified that
the cheque had cleared the account between August 20 and
September 30, 1992 (Exhibit A-5, Tab 17). I will point
out immediately here that the receipt obtained was dated
September 2, 1992. I will discuss this issue later in
connection with Ms. Langelier's findings during her
testimony.
[139] In 1993, Mr. Hanna followed the same
procedure and provided a cheque for $9,000 dated November 24,
1993 (Exhibit A-5, Tab 14). The cheque was, however,
cashed on November 23, 1993. Mr. Hanna categorically stated
that when he went to the monastery to make his donations, he
wrote out the cheque on the spot and put that day's date on it
and never wrote postdated cheques. He said it was just a
banking error, which was in fact corrected when the bank reversed
the transaction and debited the account on November 24, 1993
(Exhibit A-5, Tab 19). It is clear, however, that the cheque
was in the A.O.L.M.'s possession on November 23 and that it
was deposited on that date because it was stamped by two
different banks on that date: the National Bank of Canada, where
Mr. Hanna had his account, and the Bank of Montreal, where
the cheque was deposited (Exhibits A-5, Tab 14, and
I-10, Vol. 2, Tab 3, Page 9).
[140] Mr. Hanna also said that the priest had
always filled out the receipt in front of him when he gave him
his cheque and put that day's date on it. In the case at
hand, the receipt is dated December 2, 1993, not November 23 or
24, 1993 (Exhibits A-5, Tab 23, and I-8, Tab 10,
Page 219).
[141] Mr. Hanna wrote a cheque for $5,100 and dated
it December 12, 1994 and followed the same procedure and
allegedly donated it to the monastery (Exhibit A-5,
Tab 15). It is strange that a National Bank of Canada
representative was able to confirm that this cheque had been
destroyed, since a photocopy was submitted as evidence (Exhibit
A-5, Tab 17). The receipt obtained for the same amount is dated
the same day (Exhibit A-5, Tab 24).
[142] In 1995, Mr. Hanna gave the A.O.L.M. a cheque
for $5,500 dated November 14, 1995 (Exhibit A-5, Tab 16).
The receipt for the same amount is dated the same day (Exhibit
A-5, Tab 25). However, the cheque was not deposited until
December 5, 1995 (Exhibits A-5, Tab 21, and
A-6). Although his bank account shows a balance of only
$1,122.74 as at November 14, 1995, Mr. Hanna said that
he never asked the A.O.L.M. to delay depositing his cheque.
He said the line of credit associated with the account could
cover the amount of the cheque. He stated that he had never
used this line of credit to make donations and had not borrowed
either. Further, among the transactions on his account,
$11,000 was transferred on November 29, 1995.
Mr. Hanna explained that a term investment that had become
due had been transferred.
[143] Mr. Hanna's name is in the "Biblio-Avant
Moi" file seized from the A.O.L.M.'s accountant. As we know,
this file contains the name of certain donors and the amount of
the receipt issued in 1993 to each. His name appears at
sequence number 77. The receipt issued was number 2861 and was
for $9,000. As with all the other people, the file does not
contain any further information (Exhibit I-21, Tab 15,
Page 2).
[144] During her testimony concerning Mr. Hanna's case,
Ms. Langelier showed that the $5,500 cheque issued in 1992
had in fact been deposited on August 25 (Exhibit I-9,
Page 30). As I mentioned earlier, the corresponding receipt,
number 2426, is dated September 2, 1992 (Exhibit A-5,
Tab 22).
[145] According to Ms. Langelier, Mr. Hanna's
cheque for $9,000 was deposited on November 23, 1993 (Exhibit
I-9, Page 40). The corresponding receipt, number 2861,
is dated December 2, 1993 (Exhibit A-5,
Tab 23).
[146] For the purposes of the hearing,
Ms. Langelier also calculated the receipt amounts received
from the A.O.L.M. in relation to the 20% limit on net income and
also in relation to Mr. Hanna's disposable income for each of the
years at issue (Exhibit I-14). In 1992, the $5,500 is
below the 20% limit on net income. In 1993, the
$9,000 donation is well above the limit. Taking into
account the carryover of a portion of the 1993 and 1994
donations, the limit is reached for 1994. In 1995, the
donation is below the allowable limit.
[147] Regarding the amounts of the receipts obtained in
relation to Mr. Hanna's disposable income, Ms. Langelier
calculated the percentages to be 22%, 44%, 22% and 27% for each
of the years from 1992 to 1995 respectively.
[148] Mr. Hanna's tax returns submitted as evidence show
a total income of $37,282, $45,288, $44,781 and $43,311 for
each of the years from 1992 to 1995 respectively. Contributions
of $10,119, $7,838 and $7,959 were also made to an RRSP for
each of the 1993, 1994 and 1995 years respectively (Exhibit
A-5, Tabs 1 to 4).
[149] During his testimony, Mr. Hanna reported paying
only about $475 in rent a month in 1992 and 1993, and about $600
a month in 1994 and 1995. He said that he had credit cards at the
time, but always paid off the balance, except in the case of the
credit card from the Ordre des ingénieurs, which he used
for business traveling expenses. He said that his expenses,
including interest on the credit card, were covered by his
employer.
[150] Under cross-examination concerning his personal
finances, Mr. Hanna also said that he gave his parents money
starting at least in 1994 on a fairly regular basis. He usually
gave them $125 a month. He said that it was to recognize
what his parents had done for him, among other things, allowing
him to study in the United States before he moved to Canada
(Exhibit I-4). Mr. Hanna also said that he was repaying $50
a month on a student loan. Exhibit I-4 shows,
however, that larger amounts were repaid in 1994, and varied, but
were usually between $75 and $125 a month. The payments
were occasionally higher.
[151] Mr. Hanna categorically stated that he had
never personally encouraged anyone to donate to the A.O.L.M.,
except his wife in 1994 and in 1995, and that he did not know
anyone else at that time who donated or could have donated to the
Order.
[152] During his testimony, Mr. Hanna stated that
he had not heard anything about the false receipt scheme until he
read an article about it in The Gazette at most a few
months before he received the notices of reassessment. This is
clearly an error because the initial articles were published in
newspapers in January 1996, and the reassessments were not made
until June 2, 1997 (Exhibit A-5, Tabs 5 to 8).
[153] When he heard about the scheme, Mr. Hanna
said that he was worried because the scheme could tarnish the
reputation of the Lebanese community. He did not, however,
discuss it with the priests at the monastery, saying that he
preferred keeping it to himself. As soon as Revenue Canada
informed him that it was considering disallowing his donations,
Mr. Hanna said he quickly responded and took the necessary
steps with his bank to obtain copies of his cheques (Exhibit
A-5, Tabs 26 and 27). He said that no further steps with
the A.O.L.M. were required because Revenue Canada, not the
A.O.L.M., intervened and he felt the cheques and receipts were
sufficient proof.
[154] After he responded to the Revenue Canada letter
and sent his documents, Mr. Hanna said he never received any
acknowledgement or heard from anyone at Revenue Canada until he
received the notices of reassessment.
[155] He said he then asked a colleague to try to find a
lawyer or tax professional, but did not tell him why. A few
days later, this colleague allegedly gave him a the number of a
lawyer, a Me Gagnon, who represented him at the
objection stage. Mr. Hanna's case was then transferred
to Me Ouellette, his counsel in the case at
hand.
[156] Mr. Hanna said that he did not make any
sizeable donations to the A.O.L.M. after 1995, but said he
continued to contribute on Sundays, attend parties and purchase
lottery tickets for a total he estimated to be less than $1,000 a
year. No additional evidence was provided in this
regard.
May Nassar
[157] Ms. Nassar is originally from Lebanon and
moved to Canada in 1992. She has been a nurse since 1993. She
married Mr. Ziad Hanna in August 1994. They first met at a
party in the basement of the A.O.L.M. church.
[158] Ms. Hanna is a Maronite Catholic. She
is practicing and said that does not mean that she just goes to
church, she also attends religious and social meetings.
In 1994 and 1995, Ms. Nassar went to mass at the
A.O.L.M. church about four times a month, but at that point more
frequently attended mass at the Saint-Maron church on
Henri-Bourassa Boulevard in Montreal. This was also where
meetings on Saturday nights were often held.
Ms. Nassar said that starting in 1996, after she had her
first child, she more often went to mass at the A.O.L.M.
church.
[159] Ms. Nassar said that she had personally heard
a priest solicit donations for a specific cause, such as, to
cover the cost of an operation in the United States for a person
from Lebanon or to assist the needy. She said that these
requests were not, however, a regular occurrence, but were made
perhaps every six months. She said that such a request was
made only once in her presence and that was when she allegedly
heard for the first time about receipts being issued for
donations.
[160] However, Mr. Hanna allegedly did not tell her
about the large donations he had made in the past until after
they were married. He allegedly encouraged her to do the
same. Ms. Nassar said that her husband calculated the
maximum amount she could contribute and she agreed to donate
these amounts. She allegedly made the donations with a view
to assisting the needy recover from the war in Lebanon although
she was aware that she could also obtain a tax credit for the
donated amounts.
[161] Ms. Nassar said that in 1994 and 1995, she went to
the monastery with her husband to personally give a priest the
cheques and to receive in return a receipt for the cheque
amount. She does not remember whether it was her or her
husband who had made an appointment and does not remember the
name of the priest or priests she met. However, she said
that she knew some priests who came and went over the years, such
as Father El-Kamar and Father Claude Nadras.
[162] In 1994, a $3,900 cheque dated December 12, 1994
was written on the joint bank account she held with
Mr. Ziad Hanna for the donation to the A.O.L.M.
(Exhibit A-7, Tab 8). Ms. Nassar received a receipt for
the same amount and with that day's date on it (Exhibit A-7,
Tab 12). In 1995, a $3,000 cheque dated November 14, 1995,
was also written on the joint bank account (Exhibit A-7, Tab 9).
The receipt issued by the A.O.L.M. had that day's date on it
(Exhibit A-7, Tab 13).
[163] Ms. Nassar stated that she did not make any
donations before 1994 because she did not have the means to do
so. She explained that she was able to make donations to the
A.O.L.M. in 1994 and 1995 because she had a joint bank account
with Mr. Hanna. After 1995, she made only minimal
donations of $10 or $20.
[164] During her testimony concerning Ms. Nassar,
Ms. Langelier stated that the receipt amounts reached the
20% limit on net income for each of 1994 and 1995 (Exhibit I-14).
In fact, the limit was exceeded somewhat in 1994 and was 75% of
the limit in 1995.
[165] Ms. Nassar testified that she never
personally encouraged anyone to donate to the A.O.L.M., did not
know anyone else who donated to the A.O.L.M., and never spoke to
anyone, not family members or anyone else in Montreal or Lebanon,
about her donations. She said it was a very personal issue
for her. She said that she never heard anyone say at mass
or at meetings that receipts for larger amounts than the amounts
actually donated could be obtained from the A.O.L.M. She said
that, after she read reports in the newspapers about the scandal,
she realized she knew a number of people who had made
donations. Ms. Nassar said she was shocked by the
articles in The Gazette and La Presse
newspapers and that it had an impact on her professional life
because people asked her a lot of questions at work.
[166] The articles at issue actually appeared for the
first time in The Gazette on January 11, 1996 and in
the La Presse newspaper on January 14, 1996, and
Ms. Nassar subsequently agreed with these dates because she
did not initially remember them.
[167] Following the lead of her husband,
Mr. Ziad Hanna, Ms. Nassar did not take any steps
with the A.O.L.M. to obtain information or verify the accuracy of
the newspaper articles. The only steps she took were in the
summer of 1997 in response to the Revenue Canada letter.
Ms. Nassar's response, like that of Mr. Hanna, was to
the effect that she had proof, which consisted in her cheques and
her receipts for her donations (Exhibit A-7, Tab 15).
The issue of excluding evidence
[168] It was clearly established, particularly
during the testimony of Mr. Gaétan Ouellette,
that the Appellants were not investigated with a view to
establishing their penal liability. Revenue Canada simply made
reassessments disallowing the tax credits claimed for charitable
donations. It was also shown that these reassessments were
made without any of the individual Appellants being audited.
[169] However, counsel for the Appellants maintains that
all the evidence submitted by the Respondent and obtained during
the audit of the A.O.L.M., and subsequently when the search and
seizure warrants were executed, should be excluded for the
purposes of the appeals at hand pursuant to subsection 24(2) of
the Charter, section 40 of the Canada Evidence Act
and the first paragraph of section 2858 of the Civil Code.
These provisions read as follows:
Canadian Charter of Rights and Freedoms
24(2)
Where, in proceedings under subsection (1), a court concludes
that evidence was obtained in a manner that infringed or denied
any rights or freedoms guaranteed by this Charter, the evidence
shall be excluded if it is established that, having regard to all
the circumstances, the admission of it in the proceedings would
bring the administration of justice into disrepute.
Canada Evidence Act
40. In all proceedings over which Parliament has
legislative authority, the laws of evidence in force in the
province in which those proceedings are taken, including the laws
of proof of service of any warrant, summons, subpoena or other
document, subject to this Act and other Acts of Parliament, apply
to those proceedings.
Civil Code of Quebec
Sec. 2858. The court shall, even of its own motion,
reject any evidence obtained under such circumstances that
fundamental rights and freedoms are breached and that its use
would tend to bring the administration of justice into
disrepute.
The latter criterion is not taken into account in the case of
violation of the right of professional privilege.
[170] Counsel for the Appellants claims that the
A.O.L.M. audit conducted by Ms. Colette Langelier, Revenue
Canada, further to the information provided by Ms. Isabelle
Mercier on March 30, 1994 was in effect, from the beginning, a
criminal investigation, not a compliance audit. He
maintains that Ms. Langelier conducted this investigation on
behalf of the Special Investigations Section and she consequently
should have obtained a proper search and seizure warrant from the
outset, which she did not do. Specific mention in this
regard was made of the status of Ms. Langelier and of
Mr. Ouellette within the same overall Audit Division, their
presence at various meetings and their role throughout the
process, from the information provided by Ms. Mercier to the
searches and seizures executed at the A.O.L.M. and the
accountant's office.
[171] According to counsel for the Appellants,
Exhibit I-7, which consists of Ms. Mercier's
information, contained enough information to launch a criminal
investigation. He said that the Appellants were the
individuals involved in this investigation and in this capacity
they can invoke subsection 24(2) of the Charter, section
40 of the Canada Evidence Act and section 2858 of the
Civil Code with a view to excluding any evidence obtained
after the information provided on March 30, 1994, because
this evidence was obtained illegally.
[172] Counsel for the Appellants cites primarily
the Supreme Court of Canada decision in
Q. v. Jarvis, [2002] 3 S.C.R. 757, 2002
SCC 73. He also cites more specifically, the decisions in
Ruby v. Canada (Solicitor General), [2000] 3
F.C. 589, Q. v. Dyment, [1988] 2 S.C.R. 417, Q.
v. Edwards, [1996] 1 S.C.R. 128 (reference is made
to Justice Laforest's dissenting opinion in paragraphs 58 to 69)
and Michaud v. Quebec (A.G.),
[1996] 3 S.C.R. 3, to support his argument that
the Appellants, as the individuals concerned, have the necessary
interest and standing to have the evidence illegally obtained by
the federal authorities excluded.
[173] Counsel for the Respondent in turn maintain
that none of the Appellants' rights and freedoms were infringed,
meaning that subsection 24(2) of the Charter is
inapplicable in the case at hand.
[174] Counsel for the Respondent point out in
connection with section 7 of the Charter, first, that no
criminal charges were laid against the Appellants and, second,
that making reassessments does not interfere with the life,
liberty or security of a taxpayer.
[175] As for section 8 of the Charter in
which provision is made that everyone has the right to be secure
against unreasonable search or seizure, counsel for the
Respondent pointed out that this is a personal right and that the
Appellants did not demonstrate in any way that they had any
reasonable expectation of confidentiality where the documents
seized from the A.O.L.M. or from the home of the Order's
accountant, Ralph Nahas, were concerned. They point out that
there is little reasonable expectation of confidentiality
involved in documents subject to audits to ensure compliance with
the Act. They also pointed out that Appellants claiming a
credit for this type of charitable donation have to expect to
provide their cheques and other documents involved in receipts
for donations such as these. Finally, they maintain that when a
non-profit organization subject to specific regulations is
involved, one must expect this organization to be subject to a
number of audits. In support of their arguments, counsel
for the Respondent refer in particular to the decisions rendered
in Edwards (supra), Mathew v. Canada, 2003 F.C.A
371, [2003] F.C.J. No. 1470 (Q.L.), Jarvis (supra)
and Q. v. Pheasant, [2000] O.J. No. 4237
(Ont. Court of Justice) (Q.L.).
[176] Counsel for the Respondent nonetheless maintain
that Ms. Langelier's audit of the A.O.L.M. was a
compliance audit the main goal of which was not to determine
whether there was any penal liability. In this connection,
they point out the similarity between the facts in the case at
hand and those reported in Jarvis, supra, particularly the
methods used by the tax authorities. Counsel for the
Respondent maintain that the application of the criteria
developed by the Supreme Court of Canada in this case do not
allow one to conclude that a criminal investigation began when
the decision was made to conduct an audit further to the March
30, 1994 meeting during which Ms. Mercier provided a tip about a
scheme whereby false receipts were issued.
[177] I agree with the position of counsel for the
Respondent. Counsel for the Appellants cites first subsection
24(2) of the Charter on the grounds that evidence was
obtained in violation of the A.O.L.M.'s rights and freedoms and
that hence the Appellants may rely on this violation in order to
have the evidence thereby obtained excluded.
[178] In this regard and assuming that there was a
violation, which I definitely do not recognize, it is important
to point out that specific mention is made in the introduction to
subsection 24(2) of the Charter of proceedings in
subsection (1) of the same section, proceedings brought by a
person whose rights or freedoms guaranteed under the
Charter have been infringed or denied. This position
was in fact adopted by the majority of the Supreme Court of
Canada in Edwards, supra. The Appellants never
demonstrated that any of their rights or freedoms guaranteed by
the Charter had been infringed. More specifically, in connection
with section 7 of the Charter, it is important to
reiterate that no charges were brought against the Appellants nor
were they even the subject of a criminal investigation.
[179] As for the protection provided under section 8 of
the Charter against unreasonable search or seizure, it was
never established that the Appellants could have a reasonable
expectation of privacy in relation to the documents seized from
the A.O.L.M. or from the home of the accountant,
Ralph Nahas.
[180] Further, the purpose of section 2858 of the
Civil Code is to exclude from any civil proceeding any
evidence obtained illegally, that is, under such circumstances
that fundamental rights and freedoms are breached and that its
use would tend to bring the administration of justice into
disrepute.
[181] Fundamental rights and freedoms are not defined,
but at the very least must mean those guaranteed by the
Charter, as shown by the comment made by the Quebec
Minister of Justice in connection with section 2858. The
following is an excerpt from the Code civil du
Québec, Commentaires du Ministre de la
Justice [Quebec Civil Code, comments by the Minister of
Justice], Les Publications du Québec, tome II, at
pages 1789 and 1790:
Sec. 2858.
[...]
[TRANSLATION]
Comment
Except for cases falling under subsection 24(2) of the
Canadian Charter of Rights and Freedoms, the fact that
evidence was obtained illegally had no bearing on whether it was
admissible; evidence had only to be relevant and otherwise
admissible.
Section 2858 extends the application of the section 24
principle to include all civil cases involving fundamental rights
and freedoms, except when the right to professional secrecy has
been violated, in accordance with section 9 of the Quebec
Charter of Human Rights and Freedoms (R.S.Q., Chapter C-12).
In this case, the evidence is inadmissible, without the court
having to take into consideration the criterion whereby the use
of such evidence would tend to bring the administration of
justice into disrepute.
Further, since it is a matter of infringement of fundamental
rights, the court can ex officio raise the inadmissibility
of the evidence contrary to the general principle provided for in
section 2859.
[182] If the Court must ex officio reject
evidence obtained illegally whose use would tend to bring the
administration of justice into disrepute, the issue obviously is
to determine who can be protected by section 2858 in civil
cases. While it is clear that someone whose fundamental
rights and freedoms have been infringed or denied may avail him
or herself of this provision, one could also claim that third
parties could as well, since there is no limitation similar to
that found at the very beginning of subsection 24(2) of the
Charter.
[183] In L'admissibilité de la preuve
obtenue en violation des droits et libertés
fondamentaux en matière civile [the admissibility
of evidence obtained in violation of fundamental civil rights and
freedoms], Montréal, Wilson & Lafleur,
1996, the author, Guylaine Couture, explains this opinion as
follows on pages 53 and 54:
[TRANSLATION]
In our opinion, the solution should be different for the
evidence exclusion rule provided for in section 2858 of the
Quebec Civil Code. This provision does not limit recourse
solely to the "victim" of the violation, and there are grounds to
allow persons with sufficient interest to rely on this provision
in order to exclude evidence obtained in violation of rights and
freedoms. In practice, this special feature has significant
repercussions because it could be to a party's advantage to cite
section 2858 of the Quebec Civil Code instead of
subsection 24(2) of the Canadian Charter.
[184] No authority is cited to support this
statement. Further, it should be noted that if subsection
24(2) were extended to civil cases, the protection would be well
above and beyond that provided to accused persons in criminal
cases whose rights and freedoms have not, however, been infringed
directly. The Supreme Court decision in Edwards
(supra) can be cited in this regard. Nonetheless, it would still
have to be established in the case at hand that the evidence was
obtained illegally. This was not done, in my opinion, and I
therefore need not examine the issue further.
[185] In terms of taxation, in its decision in
Jarvis (supra), the Supreme Court of Canada distinguished
between Revenue Canada's audit and investigation functions and
provided some factors to be considered in applying this
distinction. The repercussions of the distinction are set
out in paragraph 88 of the decision as follows:
88 In our view, where the predominant purpose of a
particular inquiry is the determination of penal liability, CCRA
officials must relinquish the [page804] authority to use the
inspection and requirement powers under ss. 231.1(1) and
231.2(1). In essence, officials "cross the Rubicon"
when the inquiry in question engages the adversarial relationship
between the taxpayer and the state. There is no clear formula
that can answer whether or not this is the case. Rather, to
determine whether the predominant purpose of the inquiry in
question is the determination of penal liability, one must look
to all factors that bear upon the nature of that inquiry
[186] In Jarvis (supra), the Court details the
various steps the tax authorities followed in the procedure, from
the tip from a third party, through the auditors' communications
with the taxpayer, the audit of books and records and the
referral of the case to investigation, up to, finally, the point
where search and seizure warrants were obtained. It must be
acknowledged that the steps themselves are very similar to those
in the case at hand, that is, the audit and the subsequent
investigation to which the A.O.L.M. was subject.
[187] In Jarvis (supra), the Supreme Court of
Canada stresses the importance of establishing, given the context
and all relevant factors, the predominant purpose of an inquiry
conducted by the tax authorities. It cautions, however,
that it may not always be true that the predominant purpose of an
inquiry is the determination of the penal liability of a
taxpayer. The following is an excerpt from paragraphs 89
and 90 of the Supreme Court of Canada decision:
89 To begin with, the mere existence of
reasonable grounds that an offence may have occurred is by itself
insufficient to support the conclusion that the predominant
purpose of an inquiry is the determination of penal liability.
Even where reasonable grounds to suspect an offence exist, it
will not always be true that the predominant purpose of an
inquiry is the determination of penal liability. In this
regard, courts must guard against creating procedural shackles on
regulatory officials; it would be undesirable to "force the
regulatory hand" by removing the possibility of seeking the
lesser administrative penalties on every occasion in which
reasonable grounds existed of more culpable conduct. This point
was clearly stated in McKinlay Transport, supra, at p.
648, where Wilson J. wrote: "The Minister must be capable of
exercising these [broad supervisory] powers whether or not he has
reasonable grounds for believing that a particular taxpayer has
breached the Act." While reasonable grounds indeed
constitute a necessary condition for the issuance of a search
warrant to further a criminal investigation (s. 231.3 of the ITA;
Criminal Code, s. 487), and might in certain cases serve
to indicate that the audit powers were misused, their existence
is not a sufficient indicator that the CCRA is conducting a de
facto investigation. In most cases, if all ingredients of
an offence are reasonably thought to have occurred, it is likely
that the investigation function is triggered.
90 All the more, the test cannot be set at
the level of mere suspicion that an offence has occurred.
Auditors may, during the course of their inspections, suspect all
manner of taxpayer wrongdoing, but it certainly cannot be the
case that, from the moment such suspicion is formed, an
investigation has begun. On what evidence could investigators
ever obtain a search warrant if the whiff of suspicion were
enough to freeze auditorial fact-finding? The state interest in
prosecuting those who wilfully evade their taxes is of great
importance, and we should be careful to avoid rendering nugatory
the state's ability to investigate and obtain evidence of
these offences.
(My emphasis.)
[188] The Court set out a non-exhaustive series of
factors to be examined in paragraph 94 of the decision:
In this connection, the trial judge will look at all factors,
including but not limited to such questions as:
|
(a)
|
|
Did the authorities have reasonable grounds to lay
charges? Does it appear from the record that a decision to
proceed with a criminal investigation could have
been made?
|
|
|
(b)
|
|
Was the general conduct of the authorities such that it
was consistent with the pursuit of a criminal
investigation?
|
|
|
(c)
|
|
Had the auditor transferred his or her files and
materials to the investigators?
|
|
|
(d)
|
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Was the conduct of the auditor such that he or she was
effectively acting as an agent for the investigators?
|
|
|
(e)
|
|
Does it appear that the investigators intended to use
the auditor as their agent in the collection of
evidence?
|
|
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(f)
|
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Is the evidence sought relevant to taxpayer liability
generally? Or, as is the case with evidence as to the
taxpayer's mens rea, is the evidence relevant
only to the taxpayer's penal liability?
|
|
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(g)
|
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Are there any other circumstances or factors that can
lead the trial judge to the conclusion that the compliance
audit had in reality become a criminal investigation?
|
|
[189]Counsel for the Appellants maintain that after Ms.
Mercier provided her tip (Exhibit I-7), the authorities could
have decided to conduct a criminal investigation. I
disagree, although one could suspect, or even have reasonable
grounds for believing that offences had been committed. As
Mr. Ouellette noted in his testimony, Ms. Mercier named only
a few people, the people present did not know the organization,
and the figures Ms. Mercier provided were not terribly
impressive. As Mr. Ouellette said, they do not decide to
conduct an investigation at the outset when they receive this
type of information. The authorities decided to conduct
first and foremost a compliance audit and I do not feel that the
predominant purpose of any of the components of the audit
conducted by Ms. Langelier was at that point to determine
anyone's penal liability. The organization and the people running
it were unknown. Ms. Mercier had provided the name of
some priests and a religious organization. I do not feel
that the authorities had, when the tip was provided, reasonable
grounds to bring charges or launch an inquiry immediately to this
end. Ms. Langelier's audit was, in my opinion,
conducted in accordance with the decision made to conduct an
audit and there is nothing to show that her predominant objective
was to determine the penal liability of the A.O.L.M., one of its
many priests or even the heads of the Order. No evidence
was provided to show that a criminal investigation was being
conducted instead of an audit or that Ms. Langelier was
acting as an agent of the Special Investigations Section or of
Mr. Ouellette in collecting evidence of penal
liability. The fully independent audit was conducted in
order to determine whether the A.O.L.M. had in fact complied with
the stringent requirements of the Act governing how the funds
collected from its donors were used and for which official
receipts had been issued. Her work consisted first and
foremost of an accounting reconciliation exercise, as
demonstrated by the results provided (Exhibits
I-9 and I-11). Ms. Langelier's
analysis is part and parcel of a compliance audit and all the
documents consulted on site were documents the A.O.L.M. had to
keep for the purposes of the Act. There is no proof that
she tried to obtain or look for other evidence with a view to
determining anyone's penal liability. We cannot say that
Ms. Langelier was Mr. Ouellette's agent because he subsequently
used her reconciliation work and that the predominant purpose of
her audit was to determine several people's penal
liability. We cannot say that because an audit ends up
being referred for an investigation and the investigators base
their investigation on the results of Ms. Langelier's audit, that
the audit becomes retroactively an ab initio
investigation. Further, this technique was recognized in
Jarvis (supra). In the case at hand, during the
entire audit period, that is, from late March 1994 to late June
1995, Ms. Langelier had absolutely no contact of any kind
with an investigator from the Special Investigations Section,
including with Mr. Ouellette. The latter further
pointed out that he was neither interested in nor aware of the
case during that entire period.
[190] To argue that it was a criminal investigation from
the start, Counsel for the Appellants pointed out that, at that
time, the Special Investigations Section was ultimately part of
the Audit Division. He also claims that the meeting with
Ms. Mercier should have been held in a Special
Investigations Section office, not in the office of Ms.
Langelier's team leader, Mr. Galimi. I do not see how
it can be inferred from these facts that the audit was a criminal
investigation from the start.
[191] Further, once Ms. Langelier decided to refer
the case for an investigation, I do not feel that it is
significant that Mr. Ouellette was at the referral meeting
and was subsequently selected as the investigator for the case
because it is clear that the investigation began when the
referral to the Special Investigations Section was
approved.
[192] Ms. Langelier went to the A.O.L.M.'s premises
six or seven times in October 1994, including once with her team
leader, to examine the books, records, banking and other relevant
documents for the main purpose of establishing whether the
A.O.L.M. was complying with the requirements of the Act,
particularly with respect to the provisions governing the use of
funds obtained from donors. Ms. Langelier therefore
attempted to trace the donations received. After the
on-site audit in October 1994, Ms. Langelier carried out
extensive analysis work that lasted several months and enabled
her to uncover a fake receipt issuing scheme; it was a sizeable
scheme, hence the referral to the Special Investigations Section
in June 1995. Between October 1994 and June 1995, Ms. Langelier
had no further contact with the A.O.L.M., other than when she
received in the spring of 1995 a document the Order had
previously agreed to send her. This document was in Arabic.
Ms. Langelier had it translated and found that it showed the
year-end total of receipts issued for cash donations.
[193] Under the circumstances, I feel that Ms.
Langelier's audit was what it should have been, that is, first
and foremost a compliance audit. In my opinion, the
investigation itself began when the case was referred to the
Special Investigations Section on June 29, 1995 (Exhibit
I-22).
[194] I therefore conclude that the fundamental rights
and freedoms of the A.O.L.M. or any other individual were not
infringed or denied and that there was absolutely no infringement
of those of the Appellants, meaning that section 2858 of the
Civil Code cannot be cited or applied in the case at hand
to exclude evidence.
The scheme and its scope
[195] I have already described in detail the evidence
the Respondent submitted concerning the A.O.L.M.'s fake receipt
issuing scheme. We know, too, that charges were laid
against some donors who received receipts for amounts over
$100,000 between 1989 and 1995 and that most of them pleaded
guilty. We also know that more than one thousand taxpayers
were reassessed and that few of them appealed from these
reassessments. The decisions rendered are public.
Some taxpayers won, others lost. The "Biblio-Reç"
file seized from the A.O.L.M. for 1993 provides a fairly good
idea not only of the scope of the scheme, but also the methods
used. Four taxpayers testified as to the procedure for
obtaining their receipts. Some dealt directly with the
A.O.L.M. priests and others dealt with an intermediary. We
also know that the scheme lasted for a number of years and that
the A.O.L.M. had extremely large amounts of cash, which could not
be traced, to make the scheme work. This was all within a
context that is impossible to ignore. It does not, however,
mean that all donors were issued fake receipts. As counsel
for the Appellants maintained, we cannot blame the Appellants nor
other taxpayers, for that matter, for the reprehensible
activities of third parties and conclude that they too were
involved in the scheme. We need not refer to many decisions
to recognize that the evidence of the activities of third parties
is neither admissible nor relevant to decisions concerning the
activities of the Appellants. However, in my opinion,
evidence of the state of affairs or the context, such as, in the
case at hand, the existence of a large-scale scheme carried out
over a number of years, is both admissible and relevant.
[196] Thus, there are at least two undeniable facts that
are not totally irrelevant. We were able to see that fake
receipts were not issued on an isolated, occasional or even
episodic basis by one individual to a few donors, but rather it
was a major and systematic fraud scheme involving, on the one
hand, the priests running the A.O.L.M. and, on the other, several
hundred taxpayers. The existence of the electronic files
seized speaks volumes in this regard. It is impossible,
however, not to take into account the fact that the Appellants
dealt with the same people in the A.O.L.M. to make their
donations and obtain receipts.
[197] If we base ourselves solely on the four
taxpayers who testified to having obtained fake receipts from the
A.O.L.M., that is, Ms. Isabelle Mercier and
Messrs. Farhat, Yazbeck and Thibodeau, almost all of the
receipts issued to these people were signed by Fathers Sleiman,
El-Kamar and Nadras (Exhibits I-5, I-17, I-18 and I-19). The four
Appellants obtained receipts bearing the same signatures
(Mr. Salamé, Exhibit I-1, Tab 6; Mr. Kiwan,
Exhibit I-15, Tab 8; Mr. Hanna, Exhibit A-5, Tabs 22
to 25; Ms. Nassar, Exhibit A-7, Tab 12).
[198] The second fact involves the very knowledge of the
scheme. We definitely cannot conclude after reviewing the
"Biblio-Reçu" file containing the names of hundreds of
donors that the scheme involved only a few people who allegedly
kept it a secret. It is hard to believe that a secret
shared by hundreds of people can remain a secret for long,
particularly for a number of years. Based on the testimony
of Messrs. Farhat and Yazbeck, the scheme was common
knowledge and was spread by word of mouth in the Lebanese
community. It is therefore surprising to note that some of
the Appellants, who attended mass, meetings or other events at
the A.O.L.M. church, testified that they had never heard about
the scheme before reading about it in the newspaper. This is true
for all the Appellants except Mr. Salamé.
Evidence
[199] The parties recognize that the burden of proof
with respect to demonstrating participation in the scheme, on the
balance of probabilities, is on the Respondent with regard to
Mr. Salamé from 1990 to 1993, Mr. Kiwan, 1990 to
1993, and Mr. Hanna, 1992 and 1993. Similarly, the burden of
proof is on the Respondent to demonstrate in the same manner the
facts that justify the imposition of penalties pursuant to
subsection 163(2) of the Act.
[200] The Respondent provided circumstantial evidence to
demonstrate that the Appellants had participated in the scheme
primarily by receiving cash refunds. The Respondent said
that in cases where the cheques issued by the Appellants were
traced, the amount of the cheque and the receipt are the same.
The allegation is that cash refunds were made. The
Appellants responded to the evidence submitted by the Respondent,
among other things, through their testimony and by submitting a
certain number of documents, such as bank statements. It
goes without saying that the credibility of such testimony is
crucial in these cases.
[201] Provision is made in section 2804 of the Civil
Code for the level of proof required in civil cases as
follows:
Evidence is sufficient if it renders the existence of a fact more
probable than its non-existence, unless the law requires more
convincing proof.
[202] In his textbook entitled La preuve civile
[civil evidence] 3rd edition, Les Éditions
Yvon Blais Inc., 2003, writer Jean-Claude Royer points out
in paragraph 174 on page 113 that "the requisite degree of
evidence is a matter of quality, not quantity" and that "evidence
is not assessed in terms of the number of instances of testimony;
rather, it is based on the persuasiveness."
[203] In paragraph 175 on the same page, he points out
that direct evidence directly involving the fact in dispute is
generally preferable to indirect evidence or proof by
circumstantial evidence consisting of relevant facts that allow
the existence of litigious facts to be inferred, but adds that
under certain circumstances, the court may prefer circumstantial
evidence to direct evidence.
[204] In paragraph 178 on page 116, Jean-Claude Royer
also points out that the testimony of one person may be enough to
discharge the burden of persuasion. He also points out that
a judge is not required to believe a witness who is not
contradicted. In this connection, he cites the Quebec Court of
Appeal decision in Légaré v. The Shawinigan
Water and Power Co. Ltd., [1972] A.C. 372. In this case, the
court wrote the following on pages 373 and 374:
[TRANSLATION]
[...] However, tribunals are not required to believe witnesses,
even if they are not contradicted by other witnesses. Their
version may be unlikely because of circumstances shown in the
evidence or as a result of good common sense [...]
Facts concerning the Appellants
General comment
[205] It is surprising that none of the Appellants tried
to obtain any evidence from the A.O.L.M. to support their
statements about their actual donations. No one was called
to testify to confirm that the Appellants were, like other
taxpayers could also have been, exceptions and not involved in
the widespread scheme that was established and known throughout
the Lebanese community as some taxpayers came to confirm.
However, what is even more surprising is that none of the
Appellants even tried to obtain any information from the A.O.L.M.
or to contact anyone in charge at the A.O.L.M., although they
said they were shocked when they heard about the scandal.
Ghassan Kiwan
[206] I already described earlier, in paragraphs 84 and
85, the extent to which the testimony of Mr. Kiwan as to
when he made his alleged donations and obtained his receipts,
that is, in most cases, during brief visits to the A.O.L.M.
monastery on Friday evenings, was completely untrue, given the
dates on the cheques and receipts which are easy to verify by
consulting a calendar for the years involved.
[207] Mr. Kiwan's testimony to the effect that his
donations were strictly a personal and confidential issue and
that there was absolutely no discussion in the family, and more
specifically with his brother, Émile Kiwan, also
completely contradicts the evidence submitted. The receipts
provided instead demonstrate that the two brothers' donations to
the A.O.L.M. were almost completely coordinated.
[208] The explanations, such as the decrease in income,
provided for the lack of a donation in December 1995 are also
totally inconsistent with the details submitted by the Respondent
on his income during the years at issue.
[209] This information alone is enough for me to reject
all of his testimony, which is absolutely not credible.
Further, when faced with that sort of testimony, I am more
inclined to think that if someone starts systematically lying
about certain secondary facts, he or she is trying to cover up
more important facts.
[210] Mr. Kiwan also stated that in late 1996 or early
1997, when he was preparing to move to Saudi Arabia, he heard
about the A.O.L.M.'s scheme. However, we know that articles had
already started appearing in newspapers in January 1996.
[211] Finally, I will reiterate the fact that
Mr. Kiwan's name appears among the names of other donors in
a document seized from the A.O.L.M. on
November 8, 1995. In the document, "déjà
rendu [received]" and $4,000 is indicated along with mention that
Mr. Kiwan is to be provided a $5,000 receipt.
[212] All of the foregoing is more than enough to
convince me that it is more than simply probable that Mr. Kiwan
participated in the A.O.L.M.'s scheme during the years at
issue.
Ramzi Salamé
[213] Mr. Salamé obtained receipts totalling over
$34,600 from the A.O.L.M. between 1990 and 1993. In his case, the
most surprising statements are that he knew absolutely nothing
about the A.O.L.M. other than its address, that he did not even
know the priests' names, that he never communicated with anyone
at the A.O.L.M. during all those years, that he simply mailed all
his donations and that his receipts arrived by mail.
Further, he did not hear about the A.O.L.M. until he was in
Lebanon explaining to a friend that the benefit of donating to a
Canadian organization instead of making direct donations in
Lebanon was that he received tax credits. Although he was
well informed about this benefit, it is surprising to note that
he did not seek out an admissible organization personally because
he had nonetheless been living in Quebec for a number of
years.
[214] When Revenue Canada informed him in 1997 that his
donations had been disallowed, he suggested himself that the
A.O.L.M. may have misappropriated funds. He nonetheless
never took any steps whatsoever either in Lebanon or Canada to
find out what had actually happened. In his testimony, he
simply stated in an extremely vague and general manner that he
had been told that his donations had in fact been sent to a
charitable organization in the area where he grew up. It
was not until 1998 when he learned that his bank account had been
seized that he really reacted, went to the A.O.L.M. church in
Outremont, asked a priest a few questions after mass, obtained
the name of a lawyer and signed a solemn declaration that his
donations had in fact been made.
[215] However, the evidence submitted by the Respondent
tends to show that there were in fact some problems involving the
actual date of the cheques Mr. Salamé provided the
A.O.L.M. and the date the receipts for 1990 and 1993 were
issued. Based on Ms. Langelier's audit described in
paragraphs 125 to 129 above, it was concluded that there was a
very great possibility that the receipts were not issued for
these two years until the following year. Further, it is
surprising that the cheque dated December 23, 1990 was not cashed
until March 15, 1991, when we know that the A.O.L.M. deposited
donors' cheques very frequently and usually shortly after
receiving them. As for the US dollar cheques endorsed by
Mr. Salamé that he allegedly sent to the A.O.L.M. in
1993 and for which he received a $10,000 receipt dated December
31, 1993, I agree first of all that this is a surprising way to
make a donation and that Mr. Salamé was never able to
trace these cheques afterward. It could not be shown that
these cheques had been cashed or deposited. The issue is
whether these cheques actually existed. The total lack of
information on the $10,000 receipt dated December 31, 1993
Mr. Salamé was provided is quite simply perplexing
and open to any and all hypotheses.
[216] However, the most important information to be
noted is the deposits into Mr. Salamé's bank account
shortly after his cheques were cashed in 1990, 1991 and 1992 and
the explanations provided for this under cross-examination.
This information is provided in paragraphs 113 to 122
above. There were definitely many deposits into
Mr. Salamé's bank account that he was not asked to
justify. However, on three different occasions, three years
in a row, deposits were made representing 80% or more of the
amount of cheques cashed by the A.O.L.M. shortly before. Three
coincidences? It is hard to believe. Mr. Salamé
quickly explained one deposit, dated March 22, 1991, as being a
transfer from an inactive account for the purpose of purchasing a
house. How was he able to so easily recall a simple
transfer from one account to another on a specific date when he
was unable to explain the deposit of a roughly equivalent amount
a little later? The $4,000 deposit on January 5, 1993 was
never explained because Mr. Salamé stated that he had
already left the country on his sabbatical.
[217] I am most interested in the explanations provided
by Mr. Salamé concerning the three successive cash
deposits dated December 19, 1991. They are both the most
surprising and the least credible. These cash deposits were
made in Montreal while he was on his way to the airport. At
a meeting with one of his brothers-in-law before his departure,
Mr. Salamé was allegedly first given $2,600, which
was subsequently changed to $2,300 in bills from a bank in
Toronto where this brother-in-law who had emigrated to the United
States still held an account. The money was allegedly given
to Mr. Salamé in repayment of a debt related to the
purchase of the family home in Lebanon. We were wondering first
why this amount of money was being handled in cash. Mr.
Salamé stated that his brothers-in-law gave him US dollar
cheques when they repaid him the money they owed. These
were the cheques Mr. Salamé received and allegedly
endorsed to make his donation in 1993. Finally, the explanation
is, in my opinion, far from satisfactory. It however
becomes absolutely unbelievable when Mr. Salamé said that
a Mr. Akiki gave him $6,000 in cash at a meeting in a
café or gas station immediately before he left the
country. To begin with, Mr. Salamé, who said he
had a very good memory of situations and particularly
circumstances surrounding the deposits at issue, should have
remembered if the meeting had been held in a café or in a
gas station. The difference is nonetheless not
negligible. Then Mr. Salamé explained that
Mr. Akiki wanted to give back this amount that he had
borrowed in bills from Mr. Salamé's brother in
Lebanon. However, Mr. Salamé was leaving that evening
for Europe and was to travel to Lebanon. One wonders therefore
why he would have first decided to deposit $3,000 in his own
bank account, since this money was supposed to go to his
brother. The second $3,000 deposit is just as
incomprehensible since, once again, it was, according to
Mr. Salamé, money Mr. Akiki wanted to return to his
brother. In short, I feel that the explanations provided
under the circumstances are far-fetched and therefore not fully
credible. This can only affect his testimony as a
whole.
[218] Among the other information to be retained, there
is definitely the size of the amounts involved, particularly in
relation to Mr. Salamé's disposable income.
Mr. Salamé did make sizeable donations to another
organization in 1992 and 1993. I am, however, swayed more
by the evidence submitted by the Respondent and described above
in detail.
[219] In short, all of the evidence submitted in the
case at hand, the most important elements of which I have just
reviewed, lead me to conclude, not, however, without some
hesitation, that Mr. Salamé was probably involved in
the A.O.L.M.'s scheme during the years at issue.
[220] In my opinion, the penalties stand as a result of
this probability because these steps could have only been taken
wilfully and knowingly.
Ziad Hanna
[221] The facts in Mr. Hanna's case are described in
paragraphs 132 to 156 above.
[222] The information that I found the most significant
is the fact that despite his categorical statements,
Mr. Hanna did not submit his cheques and obtain receipts at
the same time and dated the same day in both 1992 and 1993.
The evidence is clear in this regard. As in
Mr. Kiwan's case, it tarnishes his testimony as a whole and
tends to show that there is in fact something to hide and that
the events did not occur as he described.
[223] I also bore in mind the date his $9,000 cheque was
submitted to the A.O.L.M. in 1993. The cheque is dated November
24, 1993. However, despite Mr. Hanna's repeated
statement to the effect that the cheque was made out and given to
an A.O.L.M. priest on the same day, it is clear that the A.O.L.M.
had already had it in its possession since at least November 23,
1993. There is incontestable proof that the cheque was deposited
on that date. It is clearly not a simple banking error,
contrary to what Mr. Hanna tried to explain. Further,
his continued insistence in the face of the evidence of this
version of the facts also compromises the credibility of his
testimony.
[224] Based on the evidence submitted, Mr. Hanna
was clearly looking for a way to decrease his taxes and he
calculated the maximum allowable for his income to establish the
amount of his donations. Most surprising, however, is that
he considered his donations to be a form of tax shelter and
compared the amounts supposedly donated over the years at issue
to amounts he subsequently invested in flow-through shares.
The comparison seems inconsistent to say the
least.
[225] The amounts for which Mr. Hanna in fact
obtained receipts from the A.O.L.M. between 1992 and 1995 are of
such magnitude in relation to his disposable income that there is
very little probability in my opinion that they were actual
donations. This is all the more striking when we consider
the level of income, personal obligations and sizeable amounts
invested in RRSPs during the years at issue. A person who
donates 22%, 44%, 22% and 27% of his or her disposable income to
charity, as Mr. Hanna claims to have done during the years
at issue, surpasses by a great deal the usual standards of
generosity and common sense. The fact that Mr. Hanna
was unable to demonstrate, other than by a simple statement, any
sizeable donation made in the years before or after the years at
issue strengthens the view whereby donations of such magnitude to
the A.O.L.M. cannot reasonably be considered to be realistic for
a person who has only been working for a few years, who has
average income and has other obligations, such as current
expenditures, parental assistance and repayment of a student
loan. Mention was also made of the relatively large
contributions to his RRSPs.
[226] Counsel for the Appellants cited, among other
things, the Budget Speech delivered by the Honourable Paul
Martin, Minister of Finance, on February 22, 1994, and the
document entitled Tax Measures: Supplementary Information,
to stress the importance the Government placed on charitable
donations in Canadian society and, more specifically, to
highlight the incentive provided by means of a credit
corresponding to the maximum tax rate with a view to placing more
emphasis on the donation rather than the donor's income.
Please note that this statement was made to explain the fact that
the credit had been changed and applied to amounts over $200,
rather than $250. Having said this, I do not see how this would
have affected the Appellants, who all obtained receipts for large
amounts, and particularly in the case of Mr. Hanna, very
large amounts compared to income. I will add here the
comment that the 20% limit on net income provided for in the Act
is certainly not within the reach of everyone's budget and the
value of tax credits alone cannot explain donations of this size
by a taxpayer whose financial capacity is far from unlimited,
more like average, or relatively limited.
[227] Finally, another important fact that I noted is
that Mr. Hanna did not take any steps with the A.O.L.M. and,
after he claims to have heard about the scheme, never tried to
obtain any information from anyone on how the significant amounts
he was supposed to have donated were used. On the contrary,
he continued to attend mass at the A.O.L.M. church regularly
after 1995 as if nothing had happened. That is fairly revealing
in Mr. Hanna's case because it shows that he probably knew about
the scheme beforehand and had been involved in it.
May Nassar
[228] The facts in Ms. Nassar's case are set out in
paragraphs 157 to 167 above. Shortly after they were
married in August 1994, Mr. Ziad Hanna encouraged Ms. Nassar
to donate to the A.O.L.M.
[229] Ms. Nassar had not made any significant donations
before 1994, because she did not have the means to do so. She
explained that she was able to make donations in 1994 and 1995
because she and Mr. Hanna had a joint bank account and she
therefore had more means for making donations. She made only
minimal donations after 1995. Ms. Nassar's explanation as
to how she found out about the possibility of obtaining receipts
seems like a virtual copy of Mr. Hanna's explanations in this
regard. However, several years passed between the two
events and Ms. Nassar was not even in the country when
Mr. Hanna says he heard about it for the first time.
[230] Ms. Nassar's total income was $20,626 in 1994 and
$21,376 in 1995. She obtained receipts from the A.O.L.M.
for $3,900 in 1994 and $3,000 in 1995, which represented 19% of
her total income in 1994 and 28% of her disposable income, that
is, after source deductions, and 14% and 19% respectively in
1995.
[231] Ms. Nassar admitted that her husband had used
her income to calculate the amounts she could donate and stated
that she had agreed. Under the circumstances, it is
difficult to say that Ms. Hanna's motivation was any different
than her husband's. I would add here, however, that it is
difficult to believe that someone who had not been working very
long and had just gotten married could be this generous.
[232] Like her husband, and although she continued going
to mass at the A.O.L.M. church after she heard about the scandal
in 1996, Ms. Nassar admitted that she never took any steps
to attempt to find out what had really happened and what became
of the amounts donated.
[233] Finally, I will add that the little credibility
Mr. Hanna's testimony has obviously influences my assessment of
Ms. Nassar's testimony because immediately after they were
married in 1994, Mr. Hanna encouraged her to donate to the
A.O.L.M.
[234] As in Mr. Hanna's case, I conclude that Ms. Nassar
was probably also involved in the A.O.L.M.'s fake receipt scheme
for donations during the years at issue.
Final comment and decision
[235] Having found that the Appellants were likely
involved in the A.O.L.M.'s fake receipt issuing scheme and
therefore that the receipts obtained are not likely for the
amounts actually donated to the A.O. L. M., I must uphold the
assessments disallowing the credits claimed, including those for
the years for which assessments were made outside the normal
reassessment period.
[236] This finding obviously includes upholding the
penalties imposed under subsection 163(2) of the Act since, under
the circumstances, tax credits were probably claimed that should
not have been, using fake receipts obtained from the A.O.L.M.,
and these steps can therefore only have been taken wilfully and
knowingly.
[237] Consequently, the appeals are dismissed, with
costs to the Respondent.
Signed at Ottawa, Canada, this 18th day of August,
2004.
Dussault, J.
Certified true translation
Colette Beaulne
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