Charity tax fraud to cost brothers their freedom
Murky scheme relied on false donation receipts from charity started to build hospital in Bangladesh
A pair of tax consultant brothers will spend more than four years in jail for running a murky scheme which defrauded Canadian taxpayers of millions by issuing fake receipts from a charity started to build a hospital in Bangladesh.
Fareed Mohammed Raza, 42, and Saheem Mohammed Raza, 35, have been sentenced to 51 months each after being found guilty of using a real charity as a vehicle to help their clients avoid paying nearly $5 million in taxes.
Their 34-year-old nephew, who Justice Elliot Myers said "may have been led down the garden path" by his uncles, was also convicted of fraud, but given an absolute discharge because of his minor role in the operation.
A dream of building a hospital
The sentencing happened in May, but the ruling only appeared on the B.C. Supreme Court's website this week.
A series of court decisions detail the scheme, which saw a small charitable trust started by a janitor in the Razas' F&A Accounting office issue donation receipts to the brothers' customers totaling $11.4 million over a number of years.
Mashud Miah told a Tax Court hearing he started the Mehfuz Trust to honour his son, who was born prematurely in a Vancouver hospital; inspired by the wonder of Western medicine, Miah claimed he wanted to raise money to operate a medical clinic for poor and handicapped children in Bangladesh.
Fareed Raza helped him start the charity.
But the janitor claimed things fell apart when he stumbled across Saheem Raza forging charitable donation receipts in the name of the Mehfuz Trust while cleaning his office.
After consulting with a lawyer, Miah reported the Raza Brothers to the Canada Revenue Agency in 2008.
'Abnormal' donation pattern
At about the same time, an eagle-eyed CRA tax inspector attended a training session in Toronto where a colleague was talking about schemes used by tax preparers to sell forged charitable donation receipts.
The inspector, Jane Yang, came back to Vancouver, only to discover that a number of the Raza brothers' clients had made large donations to the Mehfuz Trust.
"The donation pattern appeared to be abnormal," Tax Court judge Robert Hogan noted.
"The taxpayers were donating a significant portion of their net income to the Mehfuz Trust."
The RCMP sent an undercover officer to the accounting office, posing as a single mother looking to save some money on her tax return. She claimed a customer at the casino where she worked had told her about the charity.
The woman ultimately made a $500 cash donation — for which she received a refund of $3,750.
At trial, a number of the Razas' clients testified about the cash donations they handed the brothers and the amazing returns they received come tax time.
A BCIT instructor recalled giving $1,500 in a year. His tax returns showed charitable claims of $18,185.
An ICBC claims assistant made cash donations of $500 each year and got credited for amounts ranging up to $6,350.
And a woman who worked in loans and mortgage at RBC said she gave Fareed Raza $800 in cash and claimed a donation of $7,300 on her tax return.
Whether or not the clients knew what was going on, their testimony matched documentary evidence which showed the Raza brothers were perpetrating a fraud.
To that end, Justice Myers said he also found Mashud Miah's evidence to be "unsatisfactory and not credible."
The Mehfuz Trust was dissolved in 2006 and the hospital was never completed. Miah claimed he wired the money he did collect to Bangladesh, but records showed him and his family taking $10,000 in cash on several occasions.
And he claimed not to understand English well, but Myers noted that he had taken two computer courses in English and answered several questions on the stand before they were translated.
Regardless, Myers wrote that the evidence the Raza brothers were involved in an "industrial scale" fraud was overwhelming: "whether Mr. Miah was also involved is not important."
The total number of false claims over the life of the scheme was more than 1,700 for a purported $11.4 million of alleged donations.
By contrast, the Mehfuz Trust's tax returns for the same time showed donation revenue of $815,000.
The Crown had asked for a $570,000 fine against the Razas, but Myers declined. The Crown also asked for an order to reimburse the clients who benefited from the scheme the cash they put up front.
The judge also refused saying "they were willing participants to the scheme and not victims."