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Trudeau gov. contract for $912M student program was with WE Charity’s real estate holding foundation

WE Charity scandal: Global News story prompts heated debate in the House of Commons
WATCH: Global News story prompts heated debate in the House of Commons.

Prime Minister Justin Trudeau’s government awarded the contract to run the $912-million student volunteer program to a foundation that only received charity status last year and whose stated purpose was to “hold real estate,” newly released records show.

Both a government and charity official confirmed the controversial Canada Student Service Grant contract was not with WE Charity, as Trudeau announced.

Rather, the government gave the contract to the WE Charity Foundation, which is a distinct charity with no track record.

The WE Charity Foundation was incorporated as recently as January 2018. It was described by WE as inactive in August 2018 and only became a federally registered charity in April 2019.

Its stated purpose was to hold tens of millions worth of WE Charity real estate.

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How it became the vehicle for the government’s sole-source contract for the student volunteer program, which has embroiled the prime minister in an ethics scandal and triggered committee hearings, could raise fresh questions for the Liberals.

Read more: Trudeau and Morneau couldn’t have avoided being involved in WE deal, privy clerk tells MPs

In his statements on the CSSG, Trudeau said it was to be “administered by WE Charity.” But late Tuesday, Minister of Diversity and Inclusion and Youth Minister Bardish Chagger’s office confirmed the government had actually contracted the WE Charity Foundation.

“The contribution agreement for the Canada Student Service Grant is between the Government of Canada and WE Charity Foundation,” Dani Keenan said.

WE Charity and WE Charity Foundation are in fact different charities.

In Canada Revenue Agency documents, WE Charity Foundation said it was not a branch, section or division of any other charity. But the two organizations have the same Toronto address and phone number.

WE scandal: Morneau says signing final contract was ‘not my responsibility’
WE scandal: Morneau says signing final contract was ‘not my responsibility’

 

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WE Charity said it decided to make the Foundation the “contracting party” with the government on the advice of its lawyers due to concerns about legal liabilities stemming from the federal student program.

“The use of multiple corporate entities to isolate liabilities for particular projects is not uncommon. This action was done with on the advice of legal counsel and with the consent of the board of directors,” the statement said.

“WE Charity counsel proposed that WE Charity Foundation be the party to the funding agreement in part to protect WE Charity’s pre-existing charitable assets, which are needed to continue to deliver WE Charity’s longstanding charitable programs. The WE Charity Board of Directors is structured to provide governance and legal oversight over the WE Charity Foundation.”

But charity lawyer Mark Blumberg said it was “shocking” the Trudeau government provided the $912-million student service grant to the WE Charity Foundation and not WE Charity.

“This appears to completely different than what was said by a number of government officials in different forums,” said Blumberg, a partner at Blumberg Segal LLP.

“It is absolutely shocking that the government would say that they provided a grant to WE Charity when in fact they provided the grant or funds to WE Charity Foundation — a shell corporation with no assets, no history, no record of charitable work.”

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Blumberg said if WE Charity Foundation had been unable to complete the student volunteer program the government would have had little recourse to recover any funds.

“It is close to useless to obtain an indemnity from a charity with no assets,” he said. “I can understand why WE Charity would want this agreement with any potential exposure to be in the name of WE Charity Foundation, but I cannot understand, if the government was protecting the interests of Canadian taxpayers or citizens, why the government would either agree to this or incorrectly state who the correct party is to this very important agreement.”

Blumberg said WE Charity and WE Charity Foundation are two separate entities with different directors, different history, different assets.

“It would be like saying the Government of Ontario has given $100M to London, Ontario, to help fight the impact of COVID versus actually providing the funds to London, England,” he said.

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Read more: Trudeau government has announced at least $5.5M in funding to WE Charity since 2015

A youth-oriented international development organization formed in 1997, WE Charity owns $43.7 million worth of land and buildings in Canada, according to its income tax filings.

The WE Charity Foundation, meanwhile, was founded in 2018 by WE Charity executives Victor Li, Scott Baker and Dalal Al-Waheidi, CRA documents show.

WE’s own financial documents said the Foundation was created to provide and maintain facilities for charities “to house their operations,” but that it had “not yet begun operations.”

The Foundation claimed in CRA documents to have a budget of $150,000 and $37.5 million in assets — all of it “real estate held for use by other charities.”

“WE Charity Foundation will hold real estate for the use and benefit of WE Charity and other registered charities,” according to the CRA documents.

“Once registered as a charity, the following property will be transferred to WE Charity Foundation,” the directors wrote in their CRA paperwork.

The documents indicate that WE Charity was to transfer seven properties to the Foundation. An eighth property was to come from Vancouver-based WE Charity partner Imagine 1 Day, the government documents said. The CRA blacked out the details of the properties before releasing the documents.

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But the properties were never transferred to WE Charity Foundation.

WE scandal: Morneau says he repaid $41,000 to charity for unpaid travel bills
WE scandal: Morneau says he repaid $41,000 to charity for unpaid travel bills

WE Charity Foundation is not currently listed as the owner of any property in Ontario. Meanwhile, records list WE Charity as the owner of its Toronto headquarters and other properties.

“WE Charity Foundation does not hold WE Charity real estate assets,” WE Charity said in a statement Wednesday. “This is incorrect. In its initial application to the CRA, holding real estate was initially considered and proposed, but this never took place.”

“WE Charity Foundation never held any funds for any purpose, and was created in part to manage legal liability. The CSSG program was one which had significant potential liability.”

The federal government informed the WE Charity Foundation on April 3, 2019, it had been granted charity status.

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“Regarding your question about the WE Charity Foundation: It is a legal entity that never previously operated nor held any funds for any purpose, and was created in part to manage legal liability,” WE Charity said in its statement to Global News.

“For the CSSG legal agreement, it was established WE would indemnify the government of Canada from all losses related to the participation of the first 40,000 students as well as the non-profit partners who were engaging those students.”

“WE was therefore assuming significant possible legal liability for the program, especially considering the service work would be done during a global health pandemic. Such liability could overwhelm WE Charity, and counsel advised that the contracting party could preferably be WE Charity Foundation.’”

Conservative MP Michael Barrett said it was “extremely concerning” the Trudeau government awarded such a massive grant to a foundation that “is essentially a shell company for WE’s real estate holdings.”

“These new revelations continue to raise serious questions about whether Justin Trudeau’s actions were the result of corruption or incompetence,” Barrett said in an email.

Discussions with WE Charity about the CSSG began in April. On June 9, the Foundation filed documents amending its purpose, adding that it would also be handing out scholarships and promoting “public participation with volunteer and community organizations.”

The deal was announced by the prime minister on June 25 but was subsequently scrapped and the prime minister is now facing allegations of ethical lapses, partly over hefty speaking fees WE paid to members of his family.

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Finance Minister Bill Morneau, whose daughter works for WE Charity, is also facing an ethics investigation for failing to recuse himself from the decision to award the charity a contract.

Both Trudeau and Morneau have apologized.

Read more: A timeline of key events in the WE Charity, Trudeau controversy

Kate Bahen, managing director with Charity Intelligence Canada, called for the public release of the original CSSG agreement between the government and the WE organization.

“It’s very important to understand which party was dealing with who,” she said. “We need to see the contract.”

“It was the digging by the media that WE Charity would be administering this $912-million contract. The prime minister spoke and praised WE Charity and then his words changed to the WE Organization.”

Charity Intelligence, which evaluated charitable organizations, has said it is concerned that the organization blurs the line between WE Charity, which is required to publish its financial reports and the for-profit company ME to WE, which is not required to disclose its finances.

“I think there has been a lot of confusion about WE Charity, ME to WE and all the different entities with the WE Organization,”  Behan said.

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Bahen said one example of this blurring is that the charity’s chief financial officer holds the same position for WE Charity in Canada and the United States and for the ME to WE for-profit group. She has called for WE Charity to hire a Tier 1 auditing firm to ensure greater transparency and to add more independent directors.

WE Charity announced on July 15 it was launching an organization review with the aim of streamlining its operations and creating a “clearer separation of the social enterprise from the charitable entities.”

Stewart.Bell@globalnews.ca
andrew.russell@globalnews.ca

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