Redeemer Responds to Claim
Legal claim stems from 2001-02 FLP donations
2 min. read
May 30, 2011

On May 28, the Hamilton Spectator reported on a $6 million lawsuit that has been launched against Redeemer by a plaintiff being represented by the Hamilton law firm Scarfone Hawkins. The article describes some of the allegations that are contained in the claim against Redeemer, none of which have yet been verified or considered by the court in that proceeding. Redeemer denies the allegations and is preparing its defense. Accordingly, it would be inappropriate to comment in detail in that regard. However, we believe that providing some background information would be reasonable and fair. The former Redeemer Foundation’s Forgivable Loan Program (FLP) was established in 1987 in order to help students meet the high cost of university education. The Foundation believed that the FLP was set up in compliance with Canada Revenue Agency (CRA) guidelines, as they then existed. The FLP operated to the benefit of participating students and their families for many years. In the early years, donations were accepted from anyone, including former employers, friends, churches and frequently relatives. As a result of revised CRA guidelines issued in December 2002, the Foundation in its ongoing efforts to be fully compliant with the law, responded by ceasing to accept donations from persons defined by the CRA as “related persons” (parents, grandparents and siblings). A CRA audit conducted in 2006 confirmed that gifts to the program for the audited years 2003 and 2004 were legitimate donations. However, an earlier audit conducted by the CRA with respect to the 2001 and 2002 tax years determined that, with respect to those particular tax years, the FLP was not compliant with CRA’s requirements. Accordingly, CRA reassessed donors who supported the FLP during those years. During the next few years, the case was publicized, as the Foundation made considerable effort to defend and represent its donors’ interests, right to the Supreme Court of Canada. Redeemer, the Foundation, and the donors were understandably disappointed when the case was concluded in CRA’s favour, with a 4-3 decision by the Supreme Court of Canada in 2008. The majority of donors impacted by the audit of the 2001 and 2002 tax years have voiced their gratitude for efforts that the Foundation and Redeemer undertook on their behalf and have remained steadfastly loyal and supportive of Redeemer. In addition, many donors have expressed appreciation for subsequent efforts by Redeemer that have resulted in many of them receiving reductions or partial rebates from CRA for the amounts that they ended up owing after reassessment. We are disappointed that certification of a class action court proceeding is being pursued against Redeemer and we, along with our legal partners, will be mounting a vigorous defence to the action. Because this action is now before the courts, Redeemer will not be commenting further on the lawsuit.

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