The Palacio Files

The Palacio files - Entry for October 27, 2006 pm
Dignity of the Councillor

He will not dignify any such question with an answer.

This unseen entry is primarily for those outside of Toronto and not likely to know of this little fiasco enterring the latter stages of the Municipal election campaigns. One of the most interesting politicians, Cesare Palacio, to ever grace the confines of any City Hall; got caught in a fascinating furball. The following two excellent articles are from the Toronto Star yesterday, and today.

He's threatened to sue everybody in the world for saying anything about this. So remember if you read this, - forget it. You, or I, have never read these articles - or know of them. Or, you too will be visited by Palacio's lawyers.

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Article one.


Charity and the councillor
Ward 17's Palacio says critics are 'petty' and political
Oct. 26, 2006. 01:00 AM
JOHN DUNCANSON AND LAURIE MONSEBRAATEN
STAFF REPORTERS
A crime-fighting charity co-founded by Toronto councillor Cesar Palacio has been paying the mortgage on a building that houses his ward office, while drastically reducing its charitable donations, the Star has learned.
The main floor of the two-storey building, bought for the Police Community Partnership 12 Division (PCP) by a numbered company in 2002, was used by Palacio for his campaign office in the 2003 elections and has been his local ward office since.
Palacio and two members of the PCP's board are listed as directors of the numbered company that bought the building for $270,000. He was also a founding member of the PCP and chair of the board when the building was purchased. Palacio stepped down after he was elected but still attends its monthly meetings and remains active as the ward councillor.
The charity's most recent detailed filing to the Canada Revenue Agency shows that it had a revenue balance of $61,387.93 in 2005, but disbursed less than $11,000 to charitable causes, while allocating nearly $20,000 to the mortgage payments at 1697 St. Clair Ave. W., where Palacio has his storefront councillor's office in Ward 17 (Davenport).
The Police Community Partnership has no official connection to the Toronto police, but holds monthly meetings with area officers to report local crime and problem locations. Its charitable declaration to Ottawa describes its purpose as "crime prevention, public safety, preservation of law and order."
Despite the purchase of the building, the PCP has never operated from there because it has received free office space in a public housing building at 1884 Davenport Rd. since 1994.
After repeated requests for an interview, Palacio declined through a spokesperson to answer any questions yesterday. In a statement emailed to the Star last night, Palacio said:
"The Police Community Partnership 12 Division is an outstanding organization that I have been proud to work with for many, many years."
"It is extremely upsetting to see the Police Community Partnership as the target of a smear campaign by volunteers of other local political campaigns ... for extremely petty and selfish purposes simply to coincide with an election," he said, adding that he intends to sue anyone for spreading false or misleading accusations about the organization.
Pointed questions about the charity's ownership in the building caused a stir at an all-candidates' meeting last Wednesday, and the issue is expected to come up again at an election debate tonight as Palacio faces challengers Fred Dominelli and Alejandra Bravo in the hotly contested race for Ward 17.
Palacio has threatened to sue area resident John Sweeney, who raised the matter last Thursday at an all-candidates' meeting at Fairbank Community Centre. Sweeney, a former board member of the PCP, has been trying to find out why the charity is pouring money into ownership of the building even though it is not used for charity work.
A letter from Palacio's lawyer to Sweeney this month says the numbered company was formed specifically to buy the building for the benefit of the PCP and not for the board members' own gain. Palacio and the board members are simply "guarantors" on the purchase because the "financing was very difficult to obtain for the charitable organization," said the letter from lawyer Maurizio Vani.
The other two people named as directors of the numbered company are PCP chair Claire Andrews and secretary Heather Kilgour. In interviews both have denied any impropriety in the building purchase.
Mortgage documents on the building show that the numbered company paid $120,000 towards the purchase price, leaving a mortgage of $150,000. It's not clear where the $120,000 came from.
According to the PCP's 2005 filing to the Canada Revenue Agency's charity directorate, it paid $19,981 in mortgage payments on the building but brought in just $4,943 in rent last year. Meanwhile, records show that in 2005 less than 20 per cent of all its revenue went to charitable work in the community.
Sweeney, who was a PCP board member when the St. Clair Ave. W. building was bought four years ago, said the decision to buy the property was never brought before the board, nor were reasons for making the purchase ever discussed at official meetings.
The charity holds monthly meetings at the Davenport location and is open several days a week to take neighbourhood crime reports from the public. The Toronto Community Housing Corp. issued it another free five-year lease in 2004.
Since there has never been a written treasurer's report submitted to the board, Sweeney and others have no way of knowing how much of the charity's money has been invested in the building, he said.
"When are you going to explain to the PCP members what has happened?" he asked Palacio last week. "Explain to the people here tonight why you transferred these funds without their knowledge, especially when the PCP bylaws state that there must be a treasurer's report for spending on any amount over $200?"
Palacio didn't respond to Sweeney's questions last week, saying the issue is the subject of a lawyer's letter to Sweeney warning he will be served with a defamation suit if he doesn't retract his statements.
Palacio's campaign manager, Mike Foderick, said Sweeney, who is working on challenger Bravo's campaign, is trying to smear the councillor and the good work the charity has done in the community such as closing crack houses, supporting recreation programs for children and youth and making streets safer.
"I'll let the statement speak for itself," he said last night. "This is nothing more than a slander campaign and it can't be entertained at such a sensitive time (as an election.)"
The Star contacted the PCP's current chair, vice-chair, treasurer, and secretary this week to find out more about the building purchase.
All said there is nothing inappropriate. Two of the board members said they bought it because they were told they could lose their free space on Davenport Rd. Yet four years later, the charity still operates out of that location. A spokesperson for the Toronto Community Housing Corp. said the PCP's space in the building has never been in doubt and there are no plans to move the group when its existing lease is up in November 2009.
The board members all refused to comment on specifics of the charity's finances until they met to discuss the issue as a group.
However, they maintained the PCP is doing important anti-crime work in the neighbourhood even though the charity's financial records show a dramatic drop in spending on donations and community events since 2002 when the building was purchased.
A good charity should devote at least 60 per cent of its annual expenditures to "good works," leaving the rest for administrative and fundraising expenses, according to charity experts.
The Star found that in 2005 the PCP spent between just 10 and 20 per cent of its annual expenditures on good works (the charity gives two different "good works" amounts on two separate financial documents). Included in the activities are a volunteer appreciation gathering, donations to a local church and a school.
The largest portion of the charity's money, mainly raised through monthly bingos, went towards paying for the mortgage on the St. Clair Ave. W. building in 2005.
The detailed 2005 filing to Canada Revenue Agency's charity directorate shows the PCP spent $10,751.96 on community barbecues and a golf tournament as well as donations, even though it brought in $57,807 from the Delta Bingo on St. Clair Ave. W. and rent from its building nearby.
In total they spent nearly $20,000 paying down the $150,000 mortgage left on 1697 St. Clair Ave. W. Last year, the charity spent almost as much money — $9,617.50 — on administrative costs, including flyers and salaries, as it did on charitable events or donations within the community. In 2005, its only donation to a qualified charity was $100 to the Cancer Society, according to the Canada Revenue Agency documents.
In the two years prior to the building being purchased in 2002, most of the revenue raised through bingos went to charity work in the community. The amount of money spent on "good works" dropped dramatically in 2003 to $13,022 even though revenues topped $73,000, Canada Revenue Agency documents show.
Neither the board members nor Palacio's assistant would say how much rent is being paid on the St. Clair Ave. W. building, but the councillor is paying rent, Foderick said. There is also a two-bedroom rental unit upstairs. They refused to say how much the tenant is paying. The 2005 charity filings show the PCP only received $4,943.67 in rent last year, or about $412 a month. The two previous years, rent money received by the charity didn't exceed $7,000 or $633 a month.
Wilson Basantes Espinoza, David Faria, Cinzia Scalabrini and Gustavo Valdez are also candidates in Ward 17.
With files from Kevin Donovan

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Article two

Palacio alleges 'smear campaign' Councillor grilled for renting in building bought by his charity

Group responds, saying no improprieties in arrangement Oct. 27, 2006. 06:06 AM PHINJO GOMBU STAFF REPORTER
A Toronto councillor under attack for renting a ward office in a building where the mortgage is paid by a charity he co-founded says he is being targeted by an election opponent.

"This is nothing more than a smear campaign," Cesar Palacio said last night to the cheers of supporters, pointing a finger at his opponent, Alejandra Bravo, during a candidates' debate in Ward 17, Davenport.

Later, asked by audience member David Rapaport why only 15 per cent of the funds raised by the charity went toward crime-fighting initiatives, Palacio said he would not dignify the question with an answer.

Instead Palacio said any comment would come from the charity — the Police Community Partnership 12 Division — which released a statement yesterday saying there was nothing wrong with the arrangement made to rent space to Palacio. The group did not say how much Palacio was paying in rent.
Bravo told the crowd she would not comment.

None of the other candidates at the debate spoke directly on the matter. Candidate Fred Dominelli, however, said he believed Palacio had been set up by Bravo and her supporters.

Also running are Wilson Basantes Espinoza, David Faria, Cinzia Scalabrini and Gustavo Valdez.

A story in yesterday's Toronto Star described how the charity Palacio co-founded has been paying the mortgage of the building where he has his constituency office — while reducing its charitable donations.

The building at 1697 St. Clair Ave. W. was bought for the PCP by a numbered company and used by Palacio for his campaign office in 2003, and as his local ward office. The group uses free space at a Toronto Community Housing Corp. building on Davenport Rd.

The charity's most recent detailed filing to the Canada Revenue Agency shows a revenue balance of $61,387.93 in 2005, but the group disbursed less than $11,000 to charitable causes, while allocating nearly $20,000 to the mortgage payments for the building.

Those councillors with constituency offices often represent wards that are far from city hall. Rent is usually paid from their office budgets.

Late yesterday, the group issued a statement signed by PCP chair Claire Andrews that said it bought the building on St. Clair Ave. W. because it was fearful of losing its free office space on Davenport Rd.

But housing officials contacted by the Star earlier this week said the organization is in no danger of losing its space or facing a rent increase. In fact, the group signed a lease for another four years in 2004 on Davenport Rd.

Andrews said the money for the $120,000 down payment on the $270,000 St. Clair Ave. building was raised by volunteers and hours of community fundraising — mainly bingos. He said no government grants or taxpayer money was used. Group members had to act as guarantors because of their limited financial resources, he said.

Andrews said the group didn't move into the building it bought because the fear of the rent increase later subsided.

"The decision was made to rent it out (to Palacio and others) as a means to get revenue and pay off the mortgage, so that when the PCP moved in we would be completely debt free," Andrews said.

The only reason why Palacio was approached was because the group knew he "would be flexible in the event we needed to vacate our current space," said Andrews.

Palacio's campaign manager, Mike Foderick, said John Sweeney, who raised the issue at a recent all-candidates meeting, is working on Bravo's campaign.
Mayoral candidate Jane Pitfield said she had no comment.