Warren Bradshaw - Another Fiscal Arbitrator Gets Stomped

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Warren Bradshaw - Another Fiscal Arbitrator Gets Stomped

Postby Burnaby49 » Wed Aug 02, 2017 10:08 am

I had originally planned to title this discussion;

Warren Bradshaw - Fiscal Arbitrator with Credibility Issues

But I know how much Observer loves my boot stompin' metaphor so I decided to use that instead. And the case really isn't about credibility anyhow because there was no way, no matter how credible Warren seemed, that he was going to win this disaster. But comments like this from the Tax Court judge certainly didn't help either;

[12] . . . . I did not find the Appellant to be a credible witness. In most instances, he either did not answer the question put to him by counsel for the Respondent or he provided a vague answer. On numerous occasions his answer to counsel’s question was “I don’t recall without reviewing it” or words to like effect.

. . . . . .

[15] This is one example of the numerous instances where the Appellant either did not answer counsel’s question with respect to his income tax filings or provided a vague answer. I do not accept that an intelligent person such as the Appellant could not remember the reason why he claimed an expense of approximately $954,000 in his tax returns. His conduct while being examined by counsel for the Respondent destroyed his credibility.


To be fair the $954,000 in claimed expenses was a somewhat sensitive topic for Bradshaw to discuss in any detail because they were completely false. On the advice of Fiscal Arbitrators, a tax scam operation, Bradshaw had claimed a total of $1,454,130 in tax deductible business losses over a four year period when he had no business, no expenses, and no losses. So it's understandable that he was not inclined to be entirely candid about them. Instead this was the way he chose to address awkward questions about his claimed losses;

[13] For example, during her examination of the Appellant, counsel for the Respondent took the Appellant to the Statement of Agent Activities that he had included with his 2008 income tax return. The statement shows revenue of $31,519.77 (including one item for $21,364.67) and two expense items: an expense of $954,119.77 identified as “Amount to principal in exchange for labour” and an expense of $23,878.61 identified as “Money Collected as Agent for Principal and reported by third parties”.

[14] The following exchange occurred between counsel and the Appellant with respect to the Statement of Agent Activities:

Q. Do you know where these numbers come from, the $21,364, et cetera?

A. I don't recall without reviewing it.

Q. Okay. I am just going to ask you about the large amount here. There is an amount for $954,119.77. It says "Amount to principal in exchange for labour". Do you understand what that means?

A. I don't recall without reviewing it.

Q. Okay. What this particular statement suggests is that there is a net loss of $949,000 and change. Did you lose $946,000 in 2008?

A. I don't recall that without reviewing it.

Q. It seems to be the kind of thing that one would recall if you lost almost a million dollars, wouldn't it?

A. Well, for some people, yes. But I don't-- well, I can't recall it without reviewing it. Eight years ago.


A million dollar loss is the kind of thing 'some people' would remember but not Bradshaw? Let's back up and review the basis of the claimed losses.

[4] The Appellant claimed the business losses after attending a seminar and receiving advice from a Mr. Larry Watts. The Appellant referred to Mr. Watts as being with an entity known as the Fiscal Arbitrators.

[5] The Appellant filed with his 2008 income tax return a signed request for loss carry-back. Specifically, it was requested that $922,600 of the business loss reported on his 2008 income tax return be carried back and applied against his 2005, 2006 and 2007 taxation years.

[6] Through a number of assessments and reassessments, the Minister denied all of the business losses claimed by the Appellant. She did not process the $922,600 loss carry-back request. The Minister also assessed gross negligence penalties.


In other words the Canadian equivalent of taking the fifth. It should be noted that Larry Watts, mentioned above, was convicted of fraud for his actions in establishing and promoting the Fiscal Arbitrator tax scheme and was sentenced to six years in prison.

R. v Watts
2016 ONSC 4843
http://canlii.ca/t/gsp3d

If something so basic and so obviously fraudulent as the Fiscal Arbitrator scam can be even called a 'scheme';

[1] Following a twenty-three-day jury trial, Lawrence Watts was found guilty of one count of fraud, in an amount exceeding $5,000, contrary to section 380(1)(a) of the Criminal Code. The charge arose from the preparation, by the offender, of one or more income tax returns for 241 Canadian taxpayers. In each case, a non-existent business loss, of a non-existent business, was reported which had the effect of extinguishing the taxpayer’s tax liability for the then current, and three previous years. This resulted in a claim for a refund of all of the tax paid in the three previous years, and of the money withheld at source by their employers for the then current year. The taxpayers who testified at trial gave evidence that they had not carried on a business, or incurred the losses reported on their returns, had not suggested to Watts that they had incurred losses, and did not know where the numbers on their returns had come from.


It was described in a bit more detail here;

http://www.vancouversun.com/news/david+baines+disallows+deduction+program+promoted+securities+offender+jeff+eshun/7987780/story.html

Note the statement;

Not surprisingly, CRA has rejected the Fiscal Arbitrators program. It has not only reassessed taxpayers for taxes owing, it has imposed “gross negligence” penalties equal to 50 per cent of the taxes they sought to evade.


'Sought to evade' not 'evaded'. This had very significant implications for Warren since he did not actually evade any tax, he just sought to evade it. However the CRA was wise to the Fiscal Arbitrator scheme by the time Warren tried to claim his fake loss based refunds so his refund request was denied. But the CRA calculated how much tax he would have had refunded in the four years at issue had they actually allowed his claim and hit him with a gross negligence penalty equal to 50% of that amount. They did this to all of Fiscal Arbitrator refund requests.

This is the section of the Income Tax Act that Warren was assessed under in respect to the penalty. And, no, I'm not going to try and explain it. Just accept that it cost Warren big bucks;

False statements or omissions

(2) Every person who, knowingly, or under circumstances amounting to gross negligence, has made or has participated in, assented to or acquiesced in the making of, a false statement or omission in a return, form, certificate, statement or answer (in this section referred to as a “return”) filed or made in respect of a taxation year for the purposes of this Act, is liable to a penalty of the greater of $100 and 50% of the total of

(a) the amount, if any, by which

(i) the amount, if any, by which

(A) the tax for the year that would be payable by the person under this Act

exceeds

(B) the amounts that would be deemed by subsections 120(2) and (2.2) to have been paid on account of the person’s tax for the year

if the person’s taxable income for the year were computed by adding to the taxable income reported by the person in the person’s return for the year that portion of the person’s understatement of income for the year that is reasonably attributable to the false statement or omission and if the person’s tax payable for the year were computed by subtracting from the deductions from the tax otherwise payable by the person for the year such portion of any such deduction as may reasonably be attributable to the false statement or omission

exceeds

(ii) the amount, if any, by which

(A) the tax for the year that would have been payable by the person under this Act
exceeds

(B) the amounts that would be deemed by subsections 120(2) and (2.2) to have been paid on account of the person’s tax for the year

had the person’s tax payable for the year been assessed on the basis of the information provided in the person’s return for the year,


As I've related elsewhere on Quatloos many, many of the Fiscal Arbitrator suckers appealed their assessments. But they didn't appeal the denial of the claimed losses, just the penalty. However Warren decided to go for the gusto and not only appealed the penalty but also appealed the disallowance of his claimed losses. This of course meant that, at a minimum, he'd have to explain what his business was and detail the expenses that triggered the losses. Since there was no business or expenses this presented a challenge.

Warren apparently did not want to take the stand at trial, probably since cross examination would be a problem for him but he did want to put in evidence. So he came up with the brilliant idea of trying to file an affidavit in court saying what he would have said had he taken the stand. Nice try, didn't work;

[19] In other words, he did not provide any evidence to rebut the Minister’s assumptions. He did attempt to file an affidavit. I did not allow the Appellant to file the affidavit since he was present at the hearing. It is well established that parties should provide their evidence by oral testimony. This allows the opposing party to cross-examine the witness and the judge to assess the credibility of the witness. This is certainly the case when, as in the current appeal, the Appellant’s credibility is at issue and the evidence is contentious.

[20] After the Respondent finished her examination of the Appellant, I allowed the Appellant to provide oral testimony by reading in his affidavit. I then provided counsel for the Respondent the opportunity to cross-examine on the Appellant’s oral testimony. I appreciate that it is unusual to allow the Appellant to provide oral evidence for the first time after the Respondent has presented her witnesses. However, I wanted to provide the Appellant with every opportunity to present his evidence, and there was no prejudice to the Respondent since I provided her the opportunity to cross-examine on the testimony.


So what was his affidavit evidence?

[21] The Appellant’s oral testimony was in the nature of argument. He stated that he believes he is allowed to arrange his affairs so as to pay less tax and asserted his right to operate a business and only be taxed on the net profit from such business.


And the judge had no problem with that, but;

[22] I agree with his comments. However, this is not the issue before the Court. The issue before the Court in respect of the 2009, 2010 and 2011 taxations years is whether, as a question of fact, the Appellant carried on a business. When assessing the Appellant, the Minister assumed that the Appellant did not carry on a business. The Appellant did not present the Court with any evidence to rebut this assumption.


Although I can't see how the judge could state that Warren did not provide any evidence to rebut. He had this;

[25] During his examination by counsel for the Respondent, the Appellant stated that he prepared the Statement of Agent Activities with the help of a Mr. Watts. He then noted the following with respect to the nature of the purported agency business:

Q. . . . Did you review-- so you say you prepared this statement of agent activities with Mr. Watts. Do you understand what this means? Like, if we look at that statement of agent activity, there is "business service agent". Do you know what that means?

A. The business service agent is me.

Q. You're an agent?

A. Yes.

Q. An agent for what?

A. A business. I am a business.

Q. You are a business? What do you do?

A. I am an agent. The Ontario government has given me permission to be one.

Q. How so?

A. Could I provide you with a document?

Q. No, just your explanation. What do you understand or how can you explain that?

A. For me, it is just to operate my affairs.

Q. Your personal affairs?

A. My personal affairs or business affairs.

[26] The Appellant provided the following explanation of this so-called agency in a letter to the Canada Revenue Agency dated May 31, 2010:

The terms of the private contract of agency between the free will man commonly called Warren, of the Bradshaw family, who is the principal, the contributing beneficiary and the true party in interest for the fictional entity/person/trust called WARREN BRADSHAW, which, by necessity, is the agent in commerce for the principal; is not subject to the scrutiny of a third party entity, and therefore; any private dealings between the principal and agent cannot be released to the Canada Revenue Agency (“CRA”) and or you Debbie Thorne (“DT”) and any and all agents of the CRA.

[27] The Appellant’s position is that, from 2008 to 2011 he carried on a business of acting as agent for himself and that, over the four years, he incurred losses of almost $1.5 million. The losses appear to be based on amounts he paid to himself. For example, included with the Appellant’s 2010 income tax return is a T5 summary issued by the Appellant, which purports to show that he paid $222,198.79 of interest to himself. This so-called interest is then deducted on his income tax return as a business loss.


Judge wasn't buying it;

[28] The Appellant’s argument that he carried on a business of providing agency services to himself is nonsense; no business existed. His claiming of almost $1.5 million of business losses in respect of a fictitious business was a rather weak attempt to avoid the payment of taxes.


So he obviously wasn't going to be allowed the claimed losses. But what about the gross negligence penalty?

[38] I must now determine if the Appellant made the false statements knowingly or under circumstances amounting to gross negligence. That determination must be made as at the time at which the Appellant signed his income tax returns and the request for the carry-back of the losses from the purported agency business.

[43] It is clear from the evidence before me that the Appellant is capable of understanding his duty not to make a false statement or an omission in a return. He is an intelligent person, and clearly knows his duty to file his tax returns and report his actual income.

[44] As a result, the Respondent must establish on a balance of probabilities facts that lead to the conclusion that the making by the Appellant of the false statements in his 2008, 2009, 2010 and 2011 income tax returns was such a marked and substantial departure from the conduct of a reasonable person in the same circumstances that it constituted gross negligence.

[45] The Respondent has established such facts.

[46] In my view, a reasonable person presented with a plan such as the one presented to the Appellant by the Fiscal Arbitrators would immediately realize that there was something seriously wrong with the plan. A reasonable person would realize that business losses do not materialize out of thin air and that he is not a “fictional entity/person/trust”.

[47] The description of the tax plan provided by Mr. Watts on behalf of the Fiscal Arbitrators prior to the Appellant filing his tax returns was patently absurd, and no reasonable person would accept such an explanation or file a return based on such an absurd explanation.

[48] This alone is sufficient for a finding of conduct that is such a marked and substantial departure from the conduct of a reasonable person that it constituted gross negligence.

[49] There are other factors that support such a conclusion.

[50] A reasonable person faced with such a scheme would have sought advice from a professional accountant or lawyer, especially when the amounts at issue were almost $1.5 million. The Appellant testified that he did not seek advice from his previous accountant or any other professional.

[51] The magnitude of the losses claimed by the Appellant compared to the Appellant’s historic income would raise significant suspicion in a reasonable person. Exhibit R-19 shows that the loss claimed by the Appellant on his 2008 income tax return would have eliminated the tax he would otherwise have paid for 2008 and all or most of the tax he had paid in 2005, 2006 and 2007.

[52] In my view, on the evidence before me, the Appellant’s signing and filing of his 2008, 2009, 2010 and 2011 income tax returns and the request for loss carry-back represents such a marked and substantial departure from the conduct of a reasonable person in the same circumstances that it constitutes gross negligence as described in Venne.

[53] As a result, the false statements made by the Appellant in his 2008, 2009, 2010 and 2011 income tax returns in respect of fictitious business losses and in the request for loss carry-back were made in circumstances amounting to gross negligence.


You can read it all here;

Bradshaw v. The Queen
2017 TCC 123
http://canlii.ca/t/h50g1
"Yes Burnaby49, I do in fact believe all process servers are peace officers. I've good reason to believe so." Robert Menard in his May 28, 2015 video "Process Servers".

https://www.youtube.com/watch?v=XeI-J2PhdGs

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Re: Warren Bradshaw - Another Fiscal Arbitrator Gets Stomped

Postby The Observer » Wed Aug 02, 2017 4:03 pm

Burnaby49 wrote:But I know how much Observer loves my boot stompin' metaphor so I decided to use that instead.


Yes, it seems to be appropriate in these types of cases for the court to be described as handing out a stompin' instead of indulging the miscreants with reasoned legal discourse. I have great deal of respect and admiration for the dean of stompers, Judge Rourke.

In fact, I am finishing a write-up on another US idjit sovrun close to border of Canada where I will be using the same metaphor to describe his miserable attempts to overthrow the corrupt judiciary - and he is a bona fide attorney! I am sure you will appreciate the level of legal stomping that is required when an attorney dips his toes into sovruness.

Another great write-up and a pleasant surprise that there is still one or two of these windmill tilters out there.
"I could be dead wrong on this" - Irwin Schiff

"Do you realize I may even be delusional with respect to my income tax beliefs? " - Irwin Schiff

Burnaby49
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Re: Warren Bradshaw - Another Fiscal Arbitrator Gets Stomped

Postby Burnaby49 » Wed Aug 02, 2017 5:25 pm

Yes, it seems to be appropriate in these types of cases for the court to be described as handing out a stompin' instead of indulging the miscreants with reasoned legal discourse. I have great deal of respect and admiration for the dean of stompers, Judge Rourke.


If you ever have the misfortune to stand in front of him at Alberta Queen's Bench better not call him by that name. It's the Honourable J.D. Rooke Associate Chief Justice.
"Yes Burnaby49, I do in fact believe all process servers are peace officers. I've good reason to believe so." Robert Menard in his May 28, 2015 video "Process Servers".

https://www.youtube.com/watch?v=XeI-J2PhdGs

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Re: Warren Bradshaw - Another Fiscal Arbitrator Gets Stomped

Postby The Observer » Wed Aug 02, 2017 6:46 pm

My bad. I first got it in my head that his name was O'Rourke, but then figured it could not be that, so dropped the "O'" and moved on. I wanted to doublecheck, but ran out of time and just posted it anyways. I will use a mnemonic to remember in the future: Rook: Raven. But then you will nail me for leaving off the "e."
"I could be dead wrong on this" - Irwin Schiff

"Do you realize I may even be delusional with respect to my income tax beliefs? " - Irwin Schiff

Burnaby49
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Re: Warren Bradshaw - Another Fiscal Arbitrator Gets Stomped

Postby Burnaby49 » Wed Aug 02, 2017 7:49 pm

What I find impressive about this case is that all that Bradshaw did was send in a reassessment request and ended up with hundreds of thousands of dollars in fines. He didn't actively hide income or go to the trouble of actually trying to set up fake losses to establish at least some bare-bones backstory. He just sent the CRA a letter. The Fiscal Arbitrator suckers were just fat stationary targets virtually pleading to be penalized.
"Yes Burnaby49, I do in fact believe all process servers are peace officers. I've good reason to believe so." Robert Menard in his May 28, 2015 video "Process Servers".

https://www.youtube.com/watch?v=XeI-J2PhdGs


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