Item - 2024.EA7.4

The Compliance Audit Committee:

Has decided not to commence a legal proceeding against Run Ze Xie.

1. The Compliance Audit Committee met on March 5, 2024, to hear Item EA7.4 – Run Ze Xie - A contributor in the 2022 Municipal Election who appears to have contravened Contribution Limits under Section 88.9 of the Municipal Elections Act, 1996.

2. Section 88.34(2) of the Municipal Elections Act, 1996 requires the City Clerk to prepare a report identifying each contributor to a candidate for office on a council who appears to have contravened any of the contribution limits under Section 88.9.

3. Section 88.9(3) of the Municipal Elections Act, 1996 states that the maximum total contribution that a contributor may make to a candidate for the office of Mayor in the City of Toronto is $2,500.

4. The report dated February 13, 2024, from the City Clerk identified Run Ze Xie as a contributor that appeared to have exceeded the $2,500 contribution limit to the election campaign of Tony Luk. The report (February 13, 2024) from the City Clerk identified Run Ze Xie to have contributed $2,680.

5. The auditor, BDO Canada LLP, explained their February 12, 2024 report, attached as Attachment 1, to the report (February 13, 2024) from the City Clerk, setting out the audit process and the findings with respect to Run Ze Xie.

6. Neither the Contributor nor the Candidate attended. No written submissions were provided by the Contributor. Written submissions from the Candidate were received by the Committee. The failure of the Contributor to provide information to the Committee and the nature of the alleged breaches raises concerns. The participation of the Contributor or Candidate in this proceeding would have been very helpful to the process and would have assisted in ensuring transparency and openness in understanding the circumstances of the apparent contravention.  

7. For the reasons stated below, the Compliance Audit Committee has decided not to commence a legal proceeding against contributor Run Ze Xie for the contravention of Section 88.9 of the Municipal Elections Act, 1996.

8. There was a contravention of the contribution limit because the individual made a contribution of $2,680 which exceeded the applicable limit of $2,500.

9. After considering the entirety of the circumstances, the Committee has discretion to determine whether to commence a proceeding even in circumstances where there are reasonable grounds that a breach has occurred. This has been recognized by the courts in Lancaster v. Compliance Audit Committee et al., 2012 ONSC 5629. In that case, after consideration of the evidence provided, the Committee concluded that there were breaches of the Act but exercised discretion not to proceed.

10. In the Committee's view, the responsibility rests with the Candidate to fully understand their legal obligations with respect to the receipt of contributions and contribution limits. When a candidate chooses to seek office, they accept that they must understand and comply with the rules including campaign finance rules. A candidate should seek professional or legal advice in order to ensure that they meet their obligations in the Municipal Elections Act, 1996. The Candidate and their campaign staff should be aware of and comply with these rules.

11. Indeed, the Committee has a number of hearings arising from the Candidate’s failure to adequately and appropriately follow his obligations under the Municipal Elections Act, 1996.

12. In particular the Committee would like to remind the Candidate that s.88.9(3) of the Municipal Elections Act, 1996 imposes a maximum contribution limit of $2,500. For the purposes of this amount section 88.15(3) elaborates what are contributions.

88.15

(1) For the purposes of this Act, money, goods and services given to and accepted by a person for his or her election campaign, or given to and accepted by another person who is acting under the person’s direction, are contributions. 2016, c. 15, s. 53 (1).

(…)

Contributions

(3) Without restricting the generality of subsections (1) and (2), the following amounts are contributions:

1. An amount charged for admission to a fund-raising function.

2. If goods and services are sold for more than their market value at a fund-raising function, the difference between the amount paid and the market value.  However, if the amount received for the goods or services is $25 or less, the amount is not a contribution.

3. If goods and services used in the person’s election campaign or in relation to third party advertisements are purchased for less than their market value, the difference between the market value and the amount paid.

4. Any unpaid but guaranteed balance in respect of a loan under section 88.17. 2016, c. 15, s. 53 (3).

13. Despite the above, the Committee has determined it is not in the public interest to commence a proceeding against the Contributor.

Peter Hearn, BDO Canada LLP gave a presentation on Run Ze Xie - A contributor in the 2022 Municipal Election who appears to have contravened Contribution Limits under Section 88.9 of the Municipal Elections Act, 1996.

The Compliance Audit Committee recessed its public session to meet in closed session to deliberate in private on Item EA7.4 - Run Ze Xie - A contributor in the 2022 Municipal Election who appears to have contravened Contribution Limits under Section 88.9 of the Municipal Elections Act, 1996 and to receive advice that is subject to solicitor-client privilege.

This report transmits the external auditor's report for consideration. The external auditor completed its review of initial and supplementary financial statements filed for the 2022 municipal election and identified Run Ze Xie as a contributor who appears to have exceeded the contribution limits in the Municipal Elections Act, 1996. Within 30 days of receiving this report, the Compliance Audit Committee is required to decide whether to: (1) commence legal proceedings against the contributor for an apparent contravention; or (2) not to commence legal proceedings against the contributor for an apparent contravention. The Committee must also provide brief written reasons for its decision.

The Municipal Elections Act, 1996 requires the City Clerk to review all contributions reported in financial statements submitted by candidates and registered third party advertisers in the 2022 municipal election and to prepare a separate report for each contributor who appears to have exceeded any of the contribution limits. The City Clerk retained an external auditor, BDO Canada LLP, through a competitive procurement process, to review all candidates and registered third party advertisers' financial statements and to report on each apparent over-contribution.