The Law Society of B.C. recently found Osoyoos lawyer Gerald Gordon guilty of professionial misconduct for failing to remit taxes to Canada Revenue Agency.

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OSOYOOS - A second partner in an Osoyoos law firm has received disciplinary action from the Law Society of B.C. over a failure to pay collected sales taxes over a period of years.

Gerald Anthony Gordon, 62, faced a Law Society hearing on Dec. 5 over disciplinary matters stemming from four allegations related to his failure to remit Provincial, Goods and Services and Harmonized Sales Taxes to the Canada Revenue Agency between 2009 and 2015.

His partner, James Peter Young, faced a disciplinary hearing over the matter on Nov. 28 and received a $2,000 fine for professional misconduct.

Gordon admitted to all four allegations and received a $12,000 fine for his part in the late payment of taxes.

The allegations included Gordon’s failure to remit taxes to the government between 2009 and 2015 as follows:

• GST and interest due for taxes collected from April 1, 2009 to June 30, 2010
• HST and interest due for taxes collected from July 1, 2010 to March 31, 2013
• GST and interest due for taxes collected from April 1, 2013 to Dec. 31, 2015
• PST collected from April 1, 2013 to Dec. 31, 2014.

Gordon was the partner in charge of financial management of a reorganized law firm that began operating on March 31, 2009 as a partnership between two law corporations.

When the firm restructured, it was required to obtain a new GST registration number from the Canada Revenue Agency. The new number was issued, but the CRA closed the new number in error sometime in 2009 or 2010.

The firm’s bookkeepers continued preparing GST remittance forms and cheques, providing them to Gordon, but he failed to remit them to the taxation agency. Gordon also took partnership draws in excess of his entitlement.

The Harmonized Sales Tax collected by the firm met a similar fate, in that Gordon received remittance forms and cheques from the firm’s bookkeepers, but did not send them in.

In January, 2011, partner James Young found out about the unpaid taxes and emailed his partner to advise him of the fact.

He also confronted Gordon several times between 2011 and 2012 on the issue, Gordon assuring him he would take care of them, but it was not done.

Between July 1, 2010 and March 31, 2013, Gordon continued to take partnership draws in excess of his entitlement.

PST and GST payments between April 1, 2013 and Dec. 31, 2015 met a similar fate, while Gordon continued to take partnership draws in excess of his entitlement.

The firm eventually paid back $98,982.09 in unpaid PST between March 10, 2015, and Dec. 8, 2015.

An additional $141,159.48 was also paid back between Jan. 4, 2016, and Feb. 17, 2016.

The firm’s returns from July 1, 2013 to July 1, 2014 were not more than a year overdue and were filed separately.

Gordon told the Law Society investigation the firm had been charging and collecting GST and PST on legal accounts and depositing the money into the general account, some of which was used to pay operating expenses.

He estimated the firm owed close to $320,000 but had only $125,000 on hand. He attempted to obtain funds from his personal resources by trying to sell his Apex Mountain ski cabin, but encountered difficulties obtaining the funds because of a depressed real estate market.

Gordon also told investigators he wasn’t able to get a new GST number because the new account had been closed, but could not contact the Canada Revenue Agency party responsible. He said he knew he could not register for a PST number unless the firm had an active HST number.

Gordon admitted to signing tax remittance cheques even when he knew the returns were not being filed before he became aware the GST number had been cancelled, but told investigators he hoped to “catch up “ with the GST once the number had been re-activated. He also admitted to using the collected taxes to fund the firm’s operating expenses and partner draws. 

Gordon said a declining real estate market reduced the firm’s income, causing financial difficulty at times. He dealt with financial matters by selling the Apex cabin and withdrawing RRSP funds.

In a May 25, 2016 letter to the Law Society he took responsibility for what took place, admitting he drew funds in excess of his entitlement.

“I ultimately obtained funds to satisfy the outstanding GST and PST obligations by borrowing and by withdrawing RRSP funds. In retrospect, I should have done that far sooner. My actions have caused considerable stress and frustration to Mr. Young, for which I apologize. My actions should not be attributed to him and should not affect his good reputation,” Gordon wrote.

The hearing found the arrears in GST and HST amounted to over $328,000 while the PST arrears came to $98,000.

It said Gordon’s action carried an “element of dishonesty” because he took the forms and cheques and put them away instead of submitting them, advising Young he would take care of the problem and speak with the accountant when he knew the cheques weren’t being cashed because he was filing them away.

The Law Society concluded Gordon did not take any meaningful steps to rectify the situation until they became involved.

They also found Gordon took advantage of the situation by taking partnership draws that exceeded his entitlement.

The panel concluded the case had serious aggravating factors that took it out of the low-fine range, assessing a $12,000 penalty on Gordon.  He’ll also have to pay the Law Society’s costs, which amount to $750.

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