$7 million in fines and jail after three sentenced for tax fraud scheme

Clients were given false receipts for charitable donation tax credits

Revenu Québec, the province’s tax-gathering agency, announced that two businesses and three people, one of whom was a financial consultant, were sentenced recently to pay fines of $7 million after being found guilty of taking part in a tax evasion scheme involving donations to charities.

Money-lending scheme

In addition to the fines, one of the three was sentenced to 90 days in jail to be served non-consecutively (probably on weekends). The charges had been pending since 2015 when they were first filed on behalf of the provincial tax ministry.

According to a statement issued by Revenu Québec, the perpetrators had worked out a money-lending strategy by which clients obtained false receipts for charitable donations for tax credits to which they were not entitled.

The following table identifies those found guilty along with other relevant information.

NameDate of judgementSentence
Luc Vallée 62 years Notre-Dame-de-l’Île-Perrot29 September 2021Fines totalling
$911,385.46 Prison sentence
of 90 days to be served non-consecutively
Daniel Duval 72 years Montreal13 November 2019Fines totalling $1,541,160.38
Jean-Claude Senécal 72 years Montreal13 November 2019Fines totalling
Foncière Agroterre13 November 2019Fines totalling
Fondation Agroterre13 November 2019Fines totalling

According to Revenu Québec, Duval and Senécal were the architects of the scheme, which allowed investors they drew in to declare claim tax deductions for charitable donations six to seven times what they had actually paid.

Luc Vallée was said to have been the enabler of the scheme, taking advantage of his position as a financial consultant to persuade his clients to take part. In all, says Revenu Québec, he led 93 people to take part and get a total of $724,468.36 in unfairly obtained sums.

Investors not charged

In addition to the three individuals, the court also found two companies, Foncière Agroterre and Fondation Agroterre, guilty as charged. However, no criminal charges were brought against the investors drawn into the scheme, although Revenu Québec reassessed their tax situations to reflect the new information confirmed by the court.

The inquiry leading to the convictions was launched after Quebec’s Autorité des marchés financiers (AMF) provided Revenu Québec with information on the scheme. This led to search warrants being executed at the homes of the accused, at the offices of several charitable organizations, and at an accountant’s office in Repentigny.

Weekend sentencing

In rendering the multiple-weekend jail sentence, Quebec Court Judge Salvatore Mascia quoted Canadian legal scholar Clayton Ruby (specializing in constitutional, criminal law and civil rights), who declared regarding the process of sentencing:

“One should not underestimate the impact of a weekend sentence as punishment. Forty-five weekends in prison … involves nearly all the weekends in an entire year and satisfies much of the need for exemplary sentences even in extremely serious cases.”

In his 56-page judgement, Mascia said the investors were led by the accused to believe that they were taking part in a legitimate tax shelter program, allowing them to reap enormous financial advantages through the two associated companies.

He said that documents created by the accused and given to the investors to ostensibly certify the scheme’s legitimacy had no actual legal meaning. He said their purpose was in fact to mislead the investors and ultimately also government tax collection authorities.

A baseless tax scheme

On Duval’s and Senécal’s culpability for masterminding the scheme, Mascia said they wrote the template for the contracts, payment schedules, information sessions and documentation for potential investors. He concluded that they must have known that their use of tax shelter registration numbers was no more than an administrative formality “which didn’t confer in any way a right to tax advantages ensuing from tax shelters.”

He continued, “The defendants decided to ignore the law and improvised a system for arranging donations founded on the abuse of documentation without purpose. While they had no authorization or decision from the AMF to issue financial titles and they didn’t even have enough money to rent a truck, they created from one day to the next a bank capable of issuing securities in the millions of dollars.”