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May 4, 2005
Guit Testimony Redacted On Personal Loan (Banned Testimony)

With the publication ban mostly lifted on Chuck Guit's testimony at the Gomery Inquiry after a dizzying series of judicial rulings this afternoon, the only question that remains is what has been withheld from the public. After spending a few hours working through the first two days of testimony, it appears that the only part of Guit's testimony still subject to the ban involves a personal loan given to the lobbyist by Groupaction and Jean Brault. In fact, although the repayment came due in April 2002, Guit never paid it back -- and he continued to invoice Groupaction for his work.

This strange arrangement caught the attention of the inquiry:

MR. ROY: Okay. On April 19, 2001, you borrowed a sum of $25,000 from a company owned by Groupaction, or a part of the Groupaction Group of Companies called Alexsim Inc. Socit Immobilire, and I am referring now to pages 293, 294 and 295. ...

This is a demand loan dated April 19, 2001 for $25,000 signed by you, which provides for reimbursement in one year, on/or before April 19, 2002. It carries a rate of interest or carries interest at the rate of 2 per cent a year -- 3 per cent, sorry. And at page -- the following page is the cheque payable to you for $25,000, dated April 19, and at page 295, the deposit slip in your bank account with CIBC on April 20 for $25,000. ...

Now, in April of 2001, you had already started to receive some fairly -- you had been paid by Groupaction $76,000, and I am at page 41. Between August '99 and July 2000, you had received $76,000.

In other words, Guit had already collected much more than the loan amount in fees charged to government contract work, pulling traceable cash out of Jean Brault's companies -- and taxable income. Guit makes it clear that he needed the cash for buying a new boat, and wanted to avoid any tax liability:

MR. GUIT: My boat had been sold the year before [to Paul Coffin -- CE]. So when we got back home after making the offer on this boat, this new boat, I had to have, I forget, $55,000 or $60,000 on May 3rd when they were going to deliver the boat and the rest we financed with our bank.

I could have taken $25,000 out of our company, but I was taking no revenue out of the company because of my pension and the amount of tax I would have paid. If I took $25,000 out of my company, our company, I would have probably paid half of it in income tax. If my wife would have taken out, it would have been the same because the money that I was making at that time with the company, I was paying my wife a salary, a fairly good salary. So taking another $25,000 out of the company, either on my income or her income, would not have been wise to do that.

Instead, he had Brault and his Groupaction act as a bridge financier, as Roy put it, and simply forgot to pay back the loan on time. Nor has Guit paid any interest at all on the loan, even at the modest 3% Brault charged him. His faulty memory, however, did not extend to the fees he continued to collect from Brault despite his default on the Groupaction loan:

MR. ROY: Okay. Now, am I correct in saying that this 20 loan has not been reimbursed?

MR. GUIT: It has not been reimbursed and we all know the reasons why. I cannot talk to Mr. Brault. My -- I wouldnt say my commitment -- my responsibility, once we can talk to each other, that loan has to be paid. It is a loan.

MR. ROY: And how come no interest has been paid? You can pay interest without talking to ---

MR. GUIT: Well, when I approach ---

MR. ROY: --- the lender?
MR. GUIT: --- Mr. Brault, whenever I can, Mr. Brault may say Look, it is $25,000, 3 per cent per annum. You are now a year a half overdue; it is $28,000, whatever it is. But I will respect that loan when the time permits.

MR. ROY: But you continued to, based on -- you continued to invoice Groupaction in 2001 and 2002. You sent a bill for $27,000 in October 2001 and a bill for $23,125 in January of 2002. Was there any reason why no interest was paid in the meantime on the loan?

MR. GUIT: I dont know. Those invoices have nothing to do with the loan [emphasis mine -- CE].

So let's make sure everyone is clear on this. Brault works through Chuck Guit in order to make sure that he gets as much access to government contracts through the former Liberal minister. He pays Guit hundreds of thousands of dollars, income liable for taxation. Suddenly Guit asks for a loan based on a deal closing that will result in large fees coming from Groupaction so that he can buy a boat without incurring some sort of capital-gains tax, and Brault gives him another $25,000 for a year at below-market interest. (Brault could have made more money opening a savings account.) Not only did Guit skip paying Brault even the interest due on the loan, however, he continued to demand fees from Groupaction far exceeding the amount of the loan.

Does it occur to anyone that this money not only avoided taxes, but also could easily have avoided scrutiny as a political payoff?

At any rate, the Canadian taxman will certainly take notice of this money now. It looks like Guit may need to file an amended tax return for 2001 sometime in the next few months.

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Posted by Ed Morrissey at May 4, 2005 9:12 PM

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