Christian charity in B.C. used as 'vehicle' for directors' private gain, CRA alleges

Rev. Stephen Lee said in 2021 he had been unfairly targeted by the media, and his charitable organizations' work was “entirely beneficial to society.” Now, those charities have been revoked by the federal government following audits.

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Published Jan 07, 2025  •  Last updated 0 minutes ago  •  7 minute read

Stephen Lee, seen in 1995 when he was pastor of the Vancouver Chinese Mennonite Church. Photo by Les Bazso /PNG

The Canada Revenue Agency has revoked the charitable status of a prominent Vancouver-area pastor’s Christian charities after auditors alleged they uncovered serious non-compliance with tax rules, including an allegation the directors used a charitable organization “as a vehicle for their own private benefit.”

Grace Christian Chapel and Faith & Action Mission Society each had their charitable status revoked by the CRA in November following the audits.

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Both charities have told the revenue agency, known as the CRA, that they will appeal the revocations.

In past filings with the CRA, the charities say their mandates include providing housing for the needy and religious endeavours, such as preaching the Gospels.

Both organizations have for several years listed the same five-member board of directors and been led by Rev. Stephen Sai-Fung Lee, who made headlines in 2021 when he sold a long-term care home in Chinatown, leaving 70 seniors scrambling to find new accommodation. The Chinatown property was owned by a private company directed by Lee. Soon after Postmedia News reported on the pending displacement of 70 seniors, the B.C. government  bought the property, paying one of Lee’s companies $13.7 million and preventing any evictions.

Vancouver Grace Seniors Home at 333 East Pender St. in Vancouver. Photo by Arlen Redekop /PNG

Lee

at the time that 100 per cent of the proceeds would go to Faith & Action and the charity’s 2021 return filed with the CRA lists proceeds of $13.7 million from the sale of assets.

In subsequent stories, Postmedia dug into Lee’s history of real estate dealings through his network of companies and societies that bought and sold tens of millions of dollars of Metro Vancouver real estate over the years. Postmedia reported that, although Lee had a history of disputes over real estate and possessed an entrepreneurial streak described by associates as unusual for a religious leader, there was no suggestion he had broken any rules.

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At that time, Lee told Postmedia he felt he had been unfairly questioned and vilified by the media, and said the charitable organizations’ work over the years, including running seniors homes, was “entirely beneficial to society.”

In addition to both of the recently revoked charities, Lee has also been listed over the years as a director of B.C. companies, one of which still owns a seniors home in Richmond, assessed at $9.5 million. An employee who answered the phone there this month described Lee as “the boss” and said he was not there.

When contacted with a list of questions for this story, Lee did not answer any of the questions directly or agree to an interview, but sent copies of emails from his accountant to the CRA in November indicating the charities were in the process of filing formal objections to the revocations. Reached by phone Monday, the accountant said he could not discuss the matter without directions from his client.

A summary of the allegations against Lee’s charities was recently published on the CRA website, alleging “serious” and “repeat non-compliance.” Postmedia has requested further documentation and details from the CRA.

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The listed address for both charities is a six-bedroom house near Burnaby Mountain. Property records show the house is owned by Lee.

Faith & Action Mission Society, which was incorporated in 1995 and is listed as a seniors care home charity, was the subject of a previous audit more than a decade ago, the CRA website’s summary says, and the organization’s leaders signed a compliance agreement in 2013, agreeing to implement corrective measures to ensure it could remain a registered charity.

But the CRA alleges the organization failed to implement any of those corrective actions, devote resources to its own charitable activities, or maintain adequate books and records.

“Given the organization’s lack of response to our Jan. 4, 2023 letter, along with its failure to address the non-compliance addressed in our previous audit, it is our view that the organization has exhibited an unwillingness to become compliant with the requirements for its continued registration as a registered charity,” alleges the CRA website.

“In this regard, the audit found that the organization and its directors used the charity as a vehicle for their own private benefit and to offset expenses related to their for-profit companies.”

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Lee’s other charity, Grace Christian Chapel, was incorporated in 2001 and lists its purpose as the “advancement of religion” and says it works to “plant Chinese churches across Canada.”

The website for Grace Christian Chapel says the organization has helped build schools and mission centres in Thailand.

The charity’s most recent CRA filings, for 2023, show it owns $2.6 million in Canadian real estate and another $2 million in long-term investments as well as $260,660 cash. In recent years, the organization has had no full-time or part-time employees.

The CRA alleges that following audits, it believed Grace Christian was not operated “exclusively for charitable purposes and activities, including allocating over $3,000,000 to non-charitable activities during the audit period under review.”

This type of enforcement action by the CRA is relatively rare, said Mark Blumberg, a Toronto lawyer who specializes in charity law. Blumberg wouldn’t comment on the two recent Vancouver-area cases. But he said that, in general, the CRA only seeks to revoke charities in cases where it has found “serious non-compliance that unfortunately cannot be rectified by lesser actions such as a penalty, or suspension, or what they usually start off with, which is education.”

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Over the past five years, the CRA has completed an average of 206 audits of Canadian charities annually. Although the agency has shifted more of its efforts in recent years to education and what it calls “non-audit interventions,” Blumberg believes the number of audits is too low to ensure compliance in the sector.

“With a lot of non-compliance, unless CRA actually looks at it carefully in an audit, they won’t be able to see the non-compliance,” he said.

In 2024, only 20 charities across Canada had their status revoked by the CRA for non-compliance following audits, including Lee’s two organizations.

Considering that Canada has about 40 million residents and about 86,000 registered charities, the number of audits and revocations each year is “not a lot, if you think about it,” Blumberg said.

No one replied to emails sent to addresses connected with Grace Christian Chapel and Faith & Action.

A man who answered the phone at the number listed on the Grace Christian Chapel website said Friday that Lee was on a business trip in Thailand for two or three weeks, and he could not be reached.

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Lee was the founding pastor of the Vancouver Chinese Mennonite Church in Chinatown, which he led for decades starting in the 1970s. In a 1995 profile of Lee, The Province described how he came to Canada as a refugee from China and had helped other refugees, including those from Vietnam and the former Yugoslavia.

But Lee left the Chinatown church in 2013, after an internal dispute over real estate dealings. His falling out with the Mennonite Church British Columbia led to the termination of his status as an ordained Mennonite minister.

Lee then started a new church in Burnaby. His charity, Grace Christian Chapel purchased the church property in 2013 for $2.4 million.

That North Burnaby church property became the subject of a lawsuit in 2023, when another congregation called Heaven Bridge Church sued Grace Christian Chapel in B.C. Supreme Court. Heaven Bridge alleged Grace Christian breached the agreement between the two congregations by publicly listing the property for sale for $7.49 million after Heaven Bridge had already forwarded $2 million to Grace as part of an agreement to share the property.

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Grace Christian denied the claims in court.

Heaven Bridge’s lawyer, Christopher Chen, recalled he was set to interview Lee for the case, but before that happened, the parties reached an out-of-court settlement last year. The lawsuit was discontinued in April 2024.

“It wasn’t easy to settle,” Chen said.

Property records show that Grace Christian Chapel sold the Burnaby church property in March 2024 for $6.1 million to another Christian congregation.

The CRA says that promoting accountability and transparency of registered charities is a priority because, through tax benefits, “the charitable sector is supported by all Canadian taxpayers.”

In cases where the CRA decides its audits have uncovered non-compliance, it can revoke a charity’s status. Revoked charities can appeal to the CRA’s appeals department. If unsuccessful there, they can appeal to the courts. Charity law experts say the CRA’s auditors sometimes make mistakes in their interpretation of law or policy, and the CRA’s allegations are not always upheld.

With files from Joanne Lee-Young and Gordon Hoekstra

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