FOOLS’ GOLD

In­side the off­shore tax scheme that left Olympic champ Dono­van Bai­ley ow­ing nearly $2.3M in un­paid taxes

StarMetro Vancouver - - FRONT PAGE - Jesse Mclean

Dono­van Bai­ley gave the char­ity $3.75 mil­lion, as­sured that one day a good chunk of the money would end up back in his pocket.

It was part of a tax plan the Olympic gold medal­list used to pro­tect the spon­sor­ship fees and prize money he had built up over years of com­pet­i­tive sprint­ing.

The funds had been shielded from taxes in an ath­letic trust, but once he re­tired, Bai­ley had to wind down the trust and wanted to min­i­mize the Canada Rev­enue Agency’s cut of his earn­ings.

Ac­cord­ing to the tax plan,

Bai­ley’s do­na­tion would flow through a com­pli­cated web of trans­ac­tions be­fore the bulk of the money would make its way back to the sprinter, tax free, through an off­shore trust.

The plan was ac­tu­ally a tax cheat scheme, the gov­ern­ment would later find, in which the char­i­ta­ble do­na­tion was just a mas­quer­ade to es­cape pay­ing taxes.

Once the world’s fastest man, Bai­ley would soon be left des­ti­tute.

The plan’s ar­chi­tect was Stu­art Bolle­fer, a Bay Street tax lawyer with the busi­ness law firm Aird & Berlis whose cor­po­rate bio de­scribes him as “a nat­u­ral prob­lem solver” who “has the abil­ity to find in­no­va­tive res­o­lu­tions to his clients’ tax is­sues.”

Bolle­fer pro­moted the tax strat­egy to Bai­ley and other clients, in­clud­ing at least one other prom­i­nent Olympic ath­lete, a world-champion skier.

The Cana­dian gov­ern­ment went af­ter Bai­ley and other Bolle­fer clients for un­paid taxes, threat­en­ing some with the pos­si­bil­ity of crim­i­nal prose­cu­tion.

Bai­ley owed nearly $2.3 mil­lion in taxes but owned just $3,000 worth of be­long­ings, plus a share in his re­cently de­ceased fa­ther’s prop­erty, a tear­down in Ja­maica, ac­cord­ing to records filed as part of his for­mal proposal to set­tle out­stand­ing debt un­der the Bank­ruptcy and In­sol­vency Act.

“He was wronged. He was put into some­thing if he’d re­ceived proper ad­vice, he would have done bet­ter,” said Gary Luftspring, a lawyer who rep­re­sented Bai­ley for his 2017 proposal to set­tle his tax debt.

“In this case ... the ad­vice was neg­li­gent,” said Luftspring, who said Bai­ley was em­barassed by the ex­pe­ri­ence and would not com­ment.

Bolle­fer said in an email that he would not dis­cuss Bai­ley or other clients’ cases. “As a lawyer, I am bound by the obli­ga­tions of main­tain­ing so­lic­i­tor-client con­fi­den­tial­ity so that I may not dis­close or dis­cuss any client mat­ters,” he said. His firm, Aird & Berlis, also re­fused to com­ment.

Bolle­fer de­nied his handling of money in­vested in the off­shore plan was neg­li­gent in a re­cent court case brought against him and his firm by Kate Pace Lind­say, an ac­com­plished

alpine skier who com­peted in three Olympics. In 2006, un­der Bolle­fer’s guid­ance, she do­nated $750,000 from her ath­letic trust to a Cana­dian off­shore char­ity, which then shep­herded the money through a chain of off­shore en­ti­ties.

“I be­lieved that I had re­tained a top-notch lawyer with ex­pe­ri­ence and ex­per­tise,” she said in an af­fi­davit filed in her law­suit. “I un­der­stood that it would re­duce my taxes but there had never

been any sug­ges­tion that it might be ques­tioned as il­le­gal.”

The CRA re-as­sessed her tax re­turns, de­ter­min­ing the do­na­tion was part of a “sham” ar­ran­age­ment “or­ches­trated and pro­moted for the sole pur­pose of avoid­ing Cana­dian tax.” She had to pay more than $430,000 to set­tle the tax re­assess­ments.

She sued Bolle­fer and his firm, al­leg­ing Bolle­fer had never pre­sented the off­shore tax plan as any­thing other

than rou­tine. She never wanted to par­tic­i­pate in any­thing that could be seen as tax eva­sion, ac­cord­ing to her court fil­ings (nei­ther Pace Lind­say nor her lawyer would com­ment on the case).

Bolle­fer tes­ti­fied that it was his prac­tice “al­ways to warn the peo­ple that this was a very ag­gres­sive plan,” but could not re­call specif­i­cally dis­cussing the risks with Pace Lind­say.

In Fe­bru­ary, an On­tario Su­pe­rior Court judge found Bolle­fer and his firm “breached their duty to pro­vide com­pe­tent le­gal ad­vice.” There was com­pelling ev­i­dence that Bolle­fer was neg­li­gent in his fail­ure to warn the skier about the tax plan’s risks, the judge said.

As for Dono­van Bai­ley, in late 2017 the CRA ac­cepted the iconic sprinter’s proposal to set­tle his out­stand­ing debt, in which he blamed his fi­nan­cial mis­for­tune on “sus­pi­cious tax plan­ning based on er­ro­neous pro­fes­sional ad­vice.” Un­der the deal, the CRA would get $750,000 — about 33 cents on the dol­lar of what Bai­ley owed — paid for by Bolle­fer and his firm’s li­a­bil­ity in­sur­ance.

“Bolle­fer is a nice guy. I think he was try­ing to do his job,” Bai­ley’s lawyer Luftspring said. “He blew it, in this case.”

Visit thes­tar.com to read the full in­ves­ti­ga­tion that ex­plores the cast of char­ac­ters who shut­tled the Cana­dian ath­letes’ money into off­shore trusts, in­clud­ing the Bay St. tax lawyer who came up with the plan, a Ba­hamas-based busi­ness­man ac­cused of steal­ing $20 mil­lion, and his for­mer part­ner, who was shot in the head out­side his Nas­sau office.

ED REINKE/THE AS­SO­CI­ATED PRESS FILE

Olympic gold medal sprinter Dono­van Bai­ley owed the CRA nearly $2.3 mil­lion in un­paid taxes stem­ming from his par­tic­i­pat­ing in an off­shore tax scheme.

COLIN MCCON­NELL/TORONTO STAR

Cana­dian alpine ski leg­end Kate Pace Lind­say suc­cess­fully sued Toronto lawyer Stu­art Bolle­fer for neg­li­gence and breach of trust af­ter the gov­ern­ment deemed his tax plan — which she in­vested in — to be a tax-avoid­ance scheme.

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