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Involvement of Foreign Foundations in Canada's Domestic Affairs—Inquiry

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Statement made on 15 May 2012 by Senator Robert Peterson (retired)

Hon. Robert W. Peterson:

Honourable senators, I rise before you today to speak on the inquiry launched by Senator Eaton on the interference of foreign foundations in Canada's domestic affairs and their abuse of Canada's existing Revenue Canada charitable status.

It is apparent that on the one hand the government is intent on cutting the legs out from charities that contribute to conservation and environment, while on the other hand the government warmly embraces foreign corporations, foreign lobbyists and foreign money that funds right-wing think tanks, the same right-wing think tanks sheltered under charitable status, which this government purports to be making transparent.

Let me be clear from the start. I agree, as most honourable senators in this chamber do, that funding for charities needs to be transparent and accountable. I agree that the public should have access to the identity of foreign donors, and I am in agreement that foreign donors should not infringe upon Canadian sovereignty. However, the amendments to the Income Tax Act are not intended to be universal applications of the law, so let us set the record straight, put all the cards on the table, and get to the bottom of issue.

The issue, as stated by the honourable senator opposite, was to call the attention of the Senate to the interference of foreign foundations in Canada's domestic affairs and their abuse of the existing Revenue Canada charitable status. I would add to this that the issue is any foreign influence in government affairs, full stop. This would also include think tanks, foreign lobby groups and foreign corporations.

However, it is clear that the government is far more concerned with anyone out of line with their own agenda than in actually determining the scope of political activities of all charities, nor is the government actually concerned about the infringement of Canadian sovereignty. Senator Larry Smith asked this question: What is sovereign about allowing an American foundation to use its money to harm our own fishing sector? That is a fair question, but I would ask this: What is sovereign about American tobacco and oil corporations funding special interest reports to groups like the Fraser Institute? Charitable think tanks are supposed to be apolitical; however, the Fraser Institute openly supports the government's agenda.

These are the same think tanks and corporations that benefit from tax exemptions which are being challenged for environmental groups. Compared to funding by big American tobacco and oil corporations, which lobby through groups like the Fraser Institute, money for environmental issues is minimal. Compared to the hundreds of millions of dollars pouring into Ottawa from industry and major corporations lobbying the government, "lobbying by the environmental sector is meagre."

The Income Tax Act clearly states that a charity must devote substantially all of their resources to a charitable purpose. Charities are, however, permitted to dedicate part of their resources to political activities, the so-called 10 per cent rule. This is true as long as the political activities are non-partisan and not directed at a specific political party or candidate for public office. Let me just note that reporting political activities has thus far been left to the discretion of the charity.

The Fraser Institute is a think tank registered as a charitable organization. Unlike the Suzuki Foundation and Sierra Club, the Fraser Institute claims it does not engage in any of the 10 per cent of political activity permitted for charitable organizations.

Honourable senators, is publicly calling on the government to change election spending laws considered political activity? Is pushing provinces to adopt right-to-work legislation considered political activity? Is producing unsubstantiated "scientific" reports attempting to delegitimize climate change after receiving funds from ExxonMobil considered political activity?

Not to be outdone in the 2011 federal election, the Fraser Institute's president criticized aspects of both Liberal and NDP budgets, calling them economically damaging, while at the same time pointing out the merits of the Conservative budget. Remember, honourable senators, this is a group that receives charitable status on the very basis that their research be politically neutral.

The institute has also been receiving funding from questionable foreign sources for some time. One group that funds the institute is the Koch brothers, two American billionaire brothers who own the second-largest privately held company in America. Their combined wealth of $35 billion is surpassed in the United States only by Bill Gates and Warren Buffett. The Kochs operate oil refineries in Alaska, Texas and Minnesota, and control over 4,000 miles of pipeline. They have given tens of millions of dollars to Republican candidates, as well as helped fund projects undermining work on climate change, destroying environmental legislation, taxes, trade unions, and anything related to health care reform.

As heads of the oil-and-gas-based Koch Industries empire, the brothers have poured hundreds of millions of charitable dollars into lobby groups, advocacy organizations, education institutes and conservative campaigns across North America, including in Canada. They have also been called the financial engine behind the Tea Party movement, a group whose radical libertarian roots they can easily relate to.

A recent lawsuit in the United States filed against the Cato Institute by the founders of the institute, the Koch brothers, reveals the group's ambitions in think tank culture. The Koch brothers filed their complaints because the Cato Institute was attempting to sell the group. Cato's president and co-founder released a short written statement in response, saying that he sees the lawsuit as an attempt at a hostile takeover by Charles Koch and an effort to transform Cato from an independent, non-partisan research organization into a political entity that might better support his partisan agenda.

These allegations have prompted officials to urge the IRS to look into these questionable practices. It is interesting that since 2007 the Koch brothers have donated over half a million dollars to the Fraser Institute, and prior to 2008, the institute received funding from the Claude R. Lambe Foundation, an umbrella Koch family foundation. Add this to the fact that the foundation's tax records show that grants to the Fraser Institute are among the highest amounts donated, and the pattern begins to develop.

In fact, funding from foreign sources amounted to nearly 16 per cent, according to the Fraser Institute's 2010 tax return. These foreign donations, totalling more than $1.7 million in 2010, are significantly higher than both the David Suzuki Foundation and the Sierra Club of Canada's foreign funding put together. I say again, that foreign funding was $1.7 million in 2010 and $2.9 million in 2009 alone. Compare that with $550,000 for the David Suzuki Foundation and $140,000 for the Sierra Club.

When federal statistics show that only 2 per cent of the country's charities receive funds from outside Canada, funding from political operatives like the Koch brothers actually make up a big chunk of that foreign funding, not money for environmental lobbying, as this government is suggesting.

Documents released from the Legacy Tobacco Documents Library at the University of the California in San Francisco also list no less than 209 documents involving the Fraser Institute. They reveal years of lobbying and donations totalling in the hundreds of thousands of dollars. While the Fraser Institute claims their funding is not tied to work they produce, it is interesting that after receiving funding from big tobacco the institute published a report questioning conclusive evidence between second-hand smoke and lung cancer. They also railed against anti-smoking legislation in Canada. Letters released from the library also show correspondence from the president of the institute indicating that Imperial Tobacco, JTI-Macdonald and Benson & Hedges were all aboard the Fraser gravy train.

Yes, I am in favour of making charitable funders transparent. I would even go a step further and suggest that the institute release all of its documents from the last 10 years. As I said before, let us put all the cards on the table. Let us let the public decide who is truly attempting to influence our government.

The real losers in this matter could be the international development charities, religious organizations, universities and environmental charitable organizations, all of whom receive legitimate donations from international donors. These groups should be worried that their funding could be cut off because of a ruthless, misguided agenda. They should be worried that their charitable activities could be labelled as "political activities" or, worse yet, "money laundering," and axed by a government that chooses winners and losers. They should be worried that their group could be the next on the Conservative cutting block.

Will church groups be able to discuss health choices? Will a grassroots environmental organization trying to protect local wetlands be squeezed out of the charitable sector? Who knows.

Notable charitable experts commented on the government's action in this week's Standing Committee on Finance, stating that the government measures would most likely backfire on charitable organizations conducting legitimate activities. At a minimum, the experts noted that there would most likely be a chill on charitable giving as both donors and recipients across all charitable sectors will be worried that their funding will be implicated in legitimate political activity.

Most recently, comments from charities have indicated that the chill has turned into a deep-freeze. When funding for charities is at an all-time low, a slowdown in funding can be catastrophic, especially for small- and medium-sized charities.

Last week my colleague Senator Cowan put forward the following inquiry:

That the Standing Senate Committee on National Finance be authorized to examine and report on the tax consequences of various public and private advocacy activities undertaken by charitable and non-charitable entities in Canada and abroad . . .

This will provide a fullsome opportunity to study this matter in great detail and determine what is defined as political activity and charitable donations.

I would strongly support the Senate granting approval for this study to proceed. It could hopefully resolve the uncertainties beginning to surround this issue.

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