On December 2, 2015, the Supreme Court of British Columbia released its decision in R. v. Raza, in which it convicted three individuals for defrauding the provincial and federal governments of tax revenue by way of a false charitable donation scheme. The three accused, Fareed Raza, Saheem Raza (collectively the “Razas”) and Faiz Kahn (with all three being the “Accused”) were convicted under section 380(1)(a) of the Criminal Code for defrauding the federal and provincial governments for amounts exceeding $5,000 for the periods of December 31, 2002 to June 24, 2011 for the Razas, and June 31, 2008 to June 24, 2011 for Mr. Kahn, respectively,.
The Razas were both directors in an accounting corporation where tax returns were prepared for clients who approached them on a referral basis hoping to receive better tax refunds for their respective businesses. The evidence provided by police and former client witnesses revealed that clients were told by the Accused that they would be able to collect refunds if they made donations to a registered charity named Mehfuz Children Welfare Trust (“Mehfuz”). In most cases, clients were told to donate $500 to Mehfuz, though amounts ranged from a few hundred dollars to several thousand. The said clients would then provide the Accused with these cash donations for each tax year and, in return, their tax returns were prepared reflecting charitable donations to Mehfuz that grossly exaggerated the amounts actually donated. The Razas also attached receipts from Mehfuz to their clients’ tax returns that they were not authorized to issue on behalf of Mehfuz.
The number of alleged false tax returns prepared by the Razas during the period in question was over 1,700. The total of false donations set out on the said fraudulent returns amounted to $11.4 million, and amounted to $4.909 million in lost revenue for the Crown. By comparison, the total amount of donation revenue reported by Mehfuz during the same period of time was $815,000.
The court found that the evidence against the Accused was sufficient to prove beyond a reasonable doubt that all of them were guilty of the charges. The Razas were convicted of fraud over $5,000 for generating false documentation that deprived the Crown of tax revenue. Since there was only evidence that Mr. Kahn prepared one false return, he was convicted of the lesser charge of attempted fraud under $5,000 for his role. Since he was not a director of the company and did not have his name on an office, he was not found to be implicated in the broader scheme, as with the case with the Razas.
This case serves as a reminder for organizations that proper records of cash donations to registered charities need to be maintained in order to avoid becoming an unwitting victim of charitable tax fraud schemes.