On February 19 a story by Karen Howlett of the Globe and Mail detailed the contents of financial documents belonging to Patrick Brown that to anyone who read the story appeared completely bizarre.(Read Original Story Here) Everyone who read the story instantly knew something was not right but not necessarily what exactly the transgression was. The purpose of this post is to offer the only explanation that can possibly explain the fact situation that become public February 19th. It is my contention that no alternative explanation is possible but I also set out the minimum criteria required for an alternative explanation to be acceptable should Brown ever decide to attempt to offer one
tl;dr Cliff Notes:
Review the details of the transaction outlined in the affidavit and conclude that the only possible explanation is that the affidavit was created by Patrick Brown to circumvent anti-money laundering legislation. Any alternative explanation would require that Patrick Brown explain why he required a legal document that would explain why he received $375,000 -- any explanation that does not specifically address why the original affidavit was created is completely deficient.
Why Should I Care?
If the money were from his family, as he claimed on February 20th, it would be easily verified by the bank as legitimate. As Brown stated, families do this all the time, but without the need to conceal the source of the money by filing a false affidavit. How many families do that?
A sworn affidavit (view affidavit) attesting to a transaction in which a Brampton paralegal named Jass Johal paid Patrick Brown $375,000 in exchange for two million Aeroplan points and a 7% interest in a restaurant located in Barrie became public. Jass Johal would later become a candidate for the Ontario PC Party during the period when Patrick Brown was still the leader of the party. Shortly after the story broke Patrick Brown released a second affidavit dated a few days after the first, attesting that the transaction had not occurred. That the transaction never actually took place could also be inferred from the fact that Patrick Brown continued to own the interest in the Barrie restaurant.
The value of an Aeroplan mile varies between $0.007 and $0.02 depending on the method of redemption. Rate Hub has the average value at $0.012. Most point sites value Aeroplan points at under $0.015. That would make an optimistic redemption value of two million points roughly $30,000. To get a cash value for the two million Aeroplan points you would need to further discount the $30,000 to reflect the limited liquidity of travel points relative to cash.
With respect to the interest in the Barrie restaurant – Patrick Brown at the time owned a 7% stake in the restaurant. We don’t know if the business is profitable but we do know that Patrick Brown does not report any income from the business. We also know that the restaurant in 2016 had just recently switched formats having previously been a nightclub that closed in 2015. It is hard to come up with a valuation without knowing additional information but for a sake of context we are discussing a under a year-old business that has no disbursements – for a 7% to be worth $350,000 would mean the restaurant’s valuation was $5 million which is not even close to being realistic
If we use any reasonable valuation of the two assets we have to accept that Jass Johal was willing to pay at least six times what these assets were worth. The obvious question is why would anyone do that?
I think anyone who looks at the transaction described in the affidavit immediately knows that something is not right. This an an absurd transaction that nobody would ever agree to. With the knowledge that Mr Johal eventually was acclaimed in a nomination to run as a candidate for the party led by Patrick Brown it is easy to think that this was payment for that seat, does it make sense to pay $375,000 for the chance at a job that pays $116,000 per year?
So we know that the transaction was not about selling travel miles, and an illegal seat sale is implausible. So that leaves us with the question -- under what conditions might an individual create documentation for financial transactions that never happened but which document a payment to the individual? There is only one situation where it makes sense to do that and that is if the individual has a large sum of money or a source of funds that is illegitimate and they want to being those illegitimate funds into the legitimate financial system -- this is sometimes called money laundering.
In July of 2016 Patrick Brown purchased a $2.3MM house in Shanty Bay and public records show a $1,725,000 mortgage.
The mortgage payments and property tax would exceed Patrick Brown’s after-tax salary as an MPP. Brown claims he offsets the mortgage by renting the home to friends yet there is no disclosure of this rental income on his financial disclosures as would be required.
Patrick Brown also claims that his family helped him with the down payment providing $375,000. There is a deposit of $375,000 into Patrick Brown’s personal bank account on July 11, 2016.
Under anti-money laundering legislation potential homeowners are required to provide financial records showing the last 90 days worth of transactions. The individual is also required to document the source of any deposit greater than $1000 during that time period.
It is important to remember that the document provided to Globe and Mail was a sworn affidavit and not a normal document that would be created during a financial transaction. The purpose of an affidavit is to give legal weight to the content of the statement contained in the affidavit. The only reason someone would have a need for an affidavit attesting to a financial transaction would be to prove to a third-party that the transaction occurred.
The public understands by now that the purpose of the affidavit was to provide the documentation required for the $375,000 deposit so as to complete the purchase of the home without triggering a professional requirement to file a suspicious transaction with FINTRAC. There is absolutely no other explanation that makes any sense. The explanations Brown has offered are all nonsensical and avoid answering the only question that matters -- why was the original affidavit attesting to the transaction created? The only purpose of such a document is to provide proof to a third-party that a specific transaction occurred so if not to explain the $375,000 deposit made July 11 then what was the intended purpose? Simply saying that the transaction never occurred does not answer why the affidavit was created.
A sworn affidavit is not a normal document produced during a commercial transaction. When you bought your car you didn't then go to a notary to attest to the fact that you just purchased a vehicle. The only purpose for getting an affidavit is if one needs to provide evidence to a third-party that a commercial transaction occurred on a specific date and with specific details. As such any explanation must induce the following:
1) For what purpose was the affidavit created? Specifically why did Patrick Brown need a legal document that explained him coming into the receipt of $375,000?
2) Who was the affidavit created for?
Offering that his family was the source of the funds and discussing the second affidavit attesting to a breakdown of the deal are irrelevant: The original affidavit was created for a purpose and Patrick Brown must answer what that purpose was.