Owners of Winnipeg's Mona Lisa Ristorante under investigation for tax evasion, court documents say
Revenue Canada audit began after media reports of $2M contract to provide snacks for 2011 flood evacuees
The Canada Revenue Agency is investigating Giuseppe and Alfina Grande, the owners of Winnipeg's Mona Lisa Ristorante, to determine if they cheated on their business and personal tax returns, alleging they failed to declare more than a million dollars in income in 2011 and 2012.
According to an information to obtain a search warrant filed in court Jan. 30, 2018 and obtained by CBC News, 21 revenue agency officers executed search warrants on Feb. 7, 2018, on the Grandes' home in the Tuxedo neighbourhood, their businesses and their accountant's home office, seizing financial documents related to the family's personal and business dealings.
The search warrant application includes interviews and allegations not tested in court.
"The things that we hope to seize will be used to determine if DNJ Enterprises Ltd. [the Grandes' company that operates as Mona Lisa Ristorante Italiano], Giuseppe Grande and Alfina Grande have paid the correct amount of income tax and Goods and Services Tax/Harmonized Sales Tax, and to determine whether they have wilfully understated their taxable income and net Goods and Services Tax/Harmonized Sales Tax Payable," a CRA investigator wrote in an information to obtain a search warrant filed in court.
No charges have been laid and a CRA spokesperson said the investigation is still ongoing.
"The CRA will continue to review the evidence gathered until a determination can be made as to whether charges are warranted," Canada Revenue Agency spokesperson Randy Westerman said in an email to CBC News.
$2M in charges for 'snacks'
In the information to obtain — the document officers provide to a judge to explain why they want a search warrant — the revenue agency said it conducted an audit into the Grandes and DNJ Enterprises Ltd. in October 2014, after seeing a media report that revealed DNJ had received a large contract from the Manitoba Association of Native Firefighters Inc. in 2011 and 2012.
The CRA said in the document that the audit revealed discrepancies between the income reported on the Grandes' tax returns and the money deposited in their bank accounts.
During the flood of 2011, the Manitoba Association of Native Firefighters — an organization which is no longer operating — was the aid agency responsible for the care of thousands of evacuees forced from their homes on Manitoba First Nations.
Mona Lisa Ristorante was hired by MANFF to provide "nighttime snacks" to evacuees staying in hotels where the kitchens were closed.
But in less than two years, the aid agency racked up $2.1 million in food charges.
Aboriginal Affairs and Northern Development Canada (now called Indigenous and Northern Affairs Canada) later hired the firm KPMG to audit the firefighters association after allegations of misspending surfaced in 2013.
The KPMG audit found Mona Lisa, which was initially thought to have billed more than $1 million in late-night snacks, had actually made more than $2 million and raised some of its food prices 100 per cent.
That audit prompted the federal government to strip MANFF of its funding and transferred the care of evacuees who still needed help to the Red Cross.
The reported household income of the family is not reflective of the lifestyle that the family is leading.- CRA information to obtain document
The information to obtain court documents show the revenue agency called for another audit to determine if Mona Lisa's owners had reported the earnings on their tax returns and paid the appropriate taxes.
A CRA auditor collected financial information from the family's personal accounts for the years 2011 to 2013 and from DNJ Enterprises for 2012 to 2014, which was compared to the documents from their financial institutions, according to the court documents.
Giuseppe Grande did not provide all the paperwork the auditor had requested. The auditor also found discrepancies between the money deposited into the Grandes' accounts and the income they declared, an auditor wrote in the court documents.
Lifestyle exceeded reported income: documents
The auditor said Giuseppe, Alfina and their three daughters declared a combined total income of $466,617 in 2011 and 2012, according to the search warrant documents.
That's less than a third of the $1,446,229 the investigator said had been deposited in the family's personal bank accounts. The Canada Revenue Agency said $979,612 of that came from "unidentified bank deposits."
"The reported household income of the family is not reflective of the lifestyle that the family is leading," the court document said.
The search warrant documents alleged the Grandes spent a total of $1,286,659 on personal expenses between Jan. 1, 2011, and December 31, 2013, including:
- $250,193 on remodeling the pool area and backyard of their home.
- $60,000 for down payments on three investment condos.
- $32,278 on personal restaurant meals.
- $62,904 in clothing purchases.
- $145,692 on home repairs and upgrades.
- $122,798 on recreation and entertainment.
In addition, $244,479 in cash was withdrawn from their personal accounts during the three-year period.
The CRA wrote that nearly a million dollars in income wasn't declared on either DNJ's or the Grandes' tax filings, and that approximately $35,576 in GST/HST was not paid.
CRA refers case to criminal investigators
In January 2016, the auditor referred the file to the CRA's Criminal Investigations Division, the documents show, adding the investigator in charge of the file said he found multiple errors in the Grandes' accounting records, as well as attempts to fix them at year end.
The auditor "made numerous requests for documentation to support a large credit to the shareholders account" and "no explanation and/or backup documents were provided," the investigator wrote.
The investigator added the auditor also identified a number of accounting errors that made it difficult to rely on DNJ's records.
"Tax cheating is a crime. Wilful failure to follow tax laws will result in serious consequences, including penalties, court fines and jail time," revenue agency spokesperson Westerman said in an email to CBC News.
He wouldn't comment on the case but said criminal investigations can be complex and require a significant amount of time to complete.
"In order for charges to be considered, there needs to be sufficient evidence to establish that a crime has been committed and that the individual did so with a guilty mind," he said.
Westerman said a person convicted of tax evasion will be fined 50 to 200 per cent of the evaded taxes and can be sentenced to up to five years in prison.
"If convicted of fraud under Section 380 of the Criminal Code, an individual can face up to 14 years in jail," said Westerman.
Guiseppe Grande said he could not comment.
None of the allegations in the application have been tested in court.
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