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