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CRA deploys new weapons against tax evasion: Freezing assets, seizing property

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The Canada Revenue Agency is using a new tool in its battle against tax evasion — one that experts say could radically change the way it pursues tax cheats.

For the first time, the agency has used proceeds-of-crime provisions in the law to freeze the assets of individuals charged with tax evasion.

Up to now, those provisions have been used only in cases involving suspected terrorist financing or money laundering.

« That is a tool that we have not used in the past, » said Stéphane Bonin of CRA’s criminal investigations division.

« I can say that this is indeed the first time, but I can promise you that this is not the last time that we [will use] those provisions of the Criminal Code to restrain or seize assets that tax evaders have acquired through their illegal behaviours. »

Sending a message

Marc Tassé, a professor with the University of Ottawa’s Telfer School of Management, said CRA’s decision to use proceeds-of-crime powers to go after tax dodgers will send a message.

« People who might have done some tax evasion already will see it as a game-changer, » he said.

University of Ottawa professor Marc Tassé says using proceeds of crime provisions in cases of alleged tax evasion is a ‘game-changer.’ (CBC)

Tassé said the proceeds-of-crime provisions can also be used to seize property outside of Canada. For example, if the CRA believes that someone has engaged in offshore tax evasion and used the proceeds to buy a vacation home or a yacht, the CRA could freeze or seize those assets.

Using the proceeds-of-crime provisions also can block tactics used by some tax evaders, such as declaring corporate bankruptcy to avoid paying the taxes, said Tassé.

« If they were to file for bankruptcy, the government wouldn’t be able to recover anything, » he said.

« But on the other hand, if they’re using proceeds-of-crime provisions of the Criminal Code, then at that point they are able to seize it immediately so it protects the assets. »

Tassé said the move may prompt some tax scofflaws to quickly take advantage of the CRA’s voluntary disclosure program. A taxpayer who comes forward to CRA and makes a voluntary disclosure about tax evasion still has to pay the taxes owed, but can usually avoid prosecution and penalties.

The case at the heart of the CRA’s initiative pits the agency against an Ottawa couple — Chi Van Ho, 52, and Thanh Ha Thi Nguyen, 49 — who own a number of rental properties.

Case involving rental property income

They are accused of under-reporting their income between January 2008 and December 2013 by $3.1 million, evading $523,532 in taxes.

The CRA said that Ho and Nguyen are « the listed shareholders, directors and/or corporate officers in multiple corporations in the business of residential and commercial real estate rentals and property renovation and development. »

« The criminal charges against Ho and Nguyen allege that, from 2008 to 2013, multiple schemes were utilized to under-report their taxable income, » said the CRA. « The schemes included appropriating funds from multiple corporations under their control for personal purposes, appropriating corporate rental income and manipulation of supplier invoices. »

The agency described the investigation that led to the charges as « serious and complex. »

Ho and Nguyen were charged in late October. The CRA has seized or restrained six rental properties and an automobile belonging to the couple.

The CRA has been crossing swords with Ho and Nguyen and three of their companies, which operate under the name Golden Dragon Ho, in the Tax Court of Canada since 2015.

Golden Dragon Ho Properties made headlines in June 2017 when tenants in some of its properties complained that the natural gas that heated their homes and powered their hot water tanks had been cut off because the landlord hadn’t paid the bills.

Leonard Shore, the lawyer representing the couple in the criminal tax evasion case, said he recently received « voluminous » disclosure materials from the prosecution and is now reviewing them.

Shore said the charges came after a lengthy investigation.

« This has been going on for at least a couple of years … A couple of years ago they conducted several searches into their companies, into their home, into their place of business. »

The case returns to court in January.

Elizabeth Thompson can be reached at elizabeth.thompson@cbc.ca

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‘Business as usual’ for Dorel Industries after terminating go-private deal

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MONTREAL — Dorel Industries Inc. says it will continue to pursue its business strategy going forward after terminating an agreement to go private after discussions with shareholders.

« Moving ahead. Business as usual, » a spokesman for the company said in an email on Monday.

A group led by Cerberus Capital Management had previously agreed to buy outstanding shares of Dorel for $16 apiece, except for shares owned by the family that controls the company’s multiple-voting shares.

But Dorel chief executive Martin Schwartz said the Montreal-based maker of car seats, strollers, bicycles and home furniture pulled the plug on a deal on the eve of Tuesday’s special meeting after reviewing votes from shareholders.

“Independent shareholders have clearly expressed their confidence in Dorel’s future and the greater potential for Dorel as a public entity, » he said in a news release.

Dorel’s board of directors, with Martin Schwartz, Alan Schwartz, Jeffrey Schwartz and Jeff Segel recused, unanimously approved the deal’s termination upon the recommendation of a special committee.

The transaction required approval by two-thirds of the votes cast, and more than 50 per cent of the votes cast by non-family shareholders.

Schwartz said enhancing shareholder value remains a top priority while it stays focused on growing its brands, which include Schwinn and Mongoose bikes, Safety 1st-brand car seats and DHP Furniture.

Dorel said the move to end the go-private deal was mutual, despite the funds’ increased purchase price offer earlier this year.

It said there is no break fee applicable in this case.

Montreal-based investment firm Letko, Brosseau & Associates Inc. and San Diego’s Brandes Investment Partners LP, which together control more than 19 per cent of Dorel’s outstanding class B subordinate shares voiced their opposition to the amended offer, which was increased from the initial Nov. 2 offer of $14.50 per share.

« We believe that several minority shareholders shared our opinion, » said Letko vice-president Stephane Lebrun, during a phone interview.

« We are confident of the long-term potential of the company and we have confidence in the managers in place.”

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Pandemic funds helping Montreal businesses build for a better tomorrow

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Many entrepreneurs have had to tap into government loans during the pandemic, at first just to survive, but now some are using the money to better prepare their businesses for the post-COVID future.

One of those businesses is Del Friscos, a popular family restaurant in Dollard-des-Ormeaux that, like many Montreal-area restaurants, has had to adapt from a sit-down establishment to one that takes orders online for takeout or delivery.

“It was hard going from totally in-house seating,” said Del Friscos co-owner Terry Konstas. “We didn’t have an in-house delivery system, which we quickly added. There were so many of our employees that were laid off that wanted to work so we adapted to a delivery system and added platforms like Uber and DoorDash.”

Helping them through the transition were emergency grants and low-interest loans from the federal and provincial governments, some of which are directly administered by PME MTL, a non-profit business-development organization established to assist the island’s small and medium-sized businesses.

Konstas said he had never even heard of PME MTL until a customer told him about them and when he got in touch, he discovered there were many government programs available to help his business get through the downturn and build for the future. “They’ve been very helpful right from day one,” said Konstas.

“We used some of the funds to catch up on our suppliers and our rents, the part that wasn’t covered from the federal side, and we used some of it for our new virtual concepts,” he said, referring to a virtual kitchen model which the restaurant has since adopted.

The virtual kitchen lets them create completely different menu items from the casual American Italian dishes that Del Friscos is known for and market them under different restaurant brand names. Under the Prasinó Soup & Salad banner, they sell healthy Greek options and their Stallone’s Sub Shop brand offers hearty sandwiches, yet the food from both is created in the same Del Friscos kitchen.

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Downtown Montreal office, retail vacancies continue to rise

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Some of downtown Montreal’s key economic indicators are heading in the wrong direction.

Office and retail vacancies in the city’s central core continued to climb in the fourth quarter of 2020, according to a quarterly report released Thursday by the Urban Development Institute of Quebec and the Montréal Centre-Ville merchants association. The report, whose first edition was published in October, aims to paint a socio-economic picture of the downtown area.

The survey also found office space available for sublet had increased during the fourth quarter, which may foreshadow even more vacancies when leases expire. On the residential front, condo sales fell as new listings soared — a sign that the downtown area may be losing some of its appeal to homeowners.

“It’s impossible not to be preoccupied by the rapid increase in office vacancies,” Jean-Marc Fournier, the former Quebec politician who now heads the UDI, said Thursday in an interview.

Still, with COVID-19 vaccinations set to accelerate in the coming months, “the economic picture is bound to improve,” he said. “People will start returning downtown. It’s much too early to say the office market is going to disappear.”

Public health measures implemented since the start of the pandemic almost a year ago — such as caps on office capacity — have deprived downtown Montreal of more than 500,000 workers and students. A mere 4,163 university and CEGEP students attended in-person classes in the second quarter, the most recent period for which figures are available. Border closures and travel restrictions have also brought tourism to a standstill, hurting hotels and thousands of local businesses.

Seventy per cent of downtown workers carried out their professional activities at home more than three days a week during the fourth quarter, the report said, citing an online survey of 1,000 Montreal-area residents conducted last month.

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