On June 28, 2012, in Barrie, Ontario, a fundraiser named Adam Gour was convicted by McIsaac, J. of fraud for failing to disclose commissions to donors and deceiving donors. The decision may be appealed. The Gour case is important because it shows the effective use of criminal law in regulating inappropriate activities involving charities or fundraisers. Also it highlights the importance of charities being transparent about fundraising solicitations. In this case failure to disclose a commission arrangement to the public constitutes fraud under criminal law. Will this result in more criminal prosecutions? We will see. I have been arguing for a while that expecting the Charities Directorate to deal with major abuse affecting the sector with their very limited tools is unfair and that police forces and prosecutors need to take more initiative and use the criminal code.
The decision notes in part:
“Accordingly, based upon this review of the evidence, I am satisfied beyond a reasonable doubt that the accused had instructed his canvassers to tell potential contributors to keep secret the commission arrangement between himself and these fundraisers and that when inquiries were made about it, all of them except Jeff McKnight, lied about the true arrangement. In addition, I am satisfied to the same degree that this misinformation was material in the sense that if it had been properly disclosed to its full extent, any further contributions would have dried up as Mr. McKnight said was the case once he advised the public of the fact he was being paid for his efforts. ...
No contributor has testified that he or she was actually told that the canvassers were unpaid. Although I am satisfied that some such contributors were actively deceived, the record does not disclose how many of them were so treated.
That drives me to the ultimate conclusion that the vast majority of contributions were generated in circumstances where there was non-disclosure as opposed to incidents of active deceit. Does the failure to disclose a commission arrangement of between 14-35% constitute fraud in Canadian criminal law? My conclusion is that it does.
Applying those criteria to the facts as found by me, I am satisfied beyond a reasonable doubt of the following:
1. the failure to disclose the handsome commissions being paid to these apparent “volunteers” constituted the hiding of a fundamental and essential element of this fundraiser-contributor relationship; and
2. this failure to disclose was such as to mislead the reasonable contributor.
In coming to this conclusion, I reject Mr. Goldstein’s suggestions that the commissions described in this case are an unfortunate “fact-of-life” given the prevailing competition in the charity industry of present-day Canadian society. In responding to this submission, I want to make it clear that I am not ruling that charities cannot employ the necessary evil of third party fundraisers. They can do so and even allow them to charge 95% of their collections so long as they give the potential contributor an informed and transparent choice. If the donor is prepared to opt for a high-commission charity as opposed to a low or no-commission option, that is his or her choice. But, at least it is a choice that is fully informed.
Mr. Goldstein also emphasizes that CRA “permits” a revenue/expenditure ratio of up to 35% as being “unlikely to generate questions or concerns”: see Exhibit 72. This Guideline has nothing whatsoever to do with the fundraiser’s obligation to disclose important circumstances such as a system of handsome fundraiser commissions to potential contributors. It is totally irrelevant to the task at hand.
I am similarly unimpressed with the submission that the alleged misconduct canvassed in this case would be better dealt with under the Charities Accounting Act, R.S.O. 1990, Chapter C.10 instead of being policed under the heavy hand of the Criminal Code. There is no question that the allegation herein could have formed the basis for civil proceedings under that legislation: see Ontario (Public Guardian and Trustee) v. AIDS Society for Children (Ontario)  O.J. No. 2170 (Sup. Ct. of Justice). However, I do not see the Crown’s choice to proceed under the Criminal Code as being in any way inappropriate.
In conclusion, for these reasons, the accused is found guilty as charged. Mr. Goldstein conceded that these fundraising campaigns generated contributions in excess of $5000 from the public of Ontario. I will defer a determination of the total amount defrauded to the sentencing phase of these proceedings.”
The full case is at R.v .Adam Gour
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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.