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Only a few months ago, it was a charity powerhouse reaping more and more money from donors and governments, with big plans to expand. Then political controversy hurt those plans and exposed weaknesses in a complicated corporate structure that took years to put together

London, 2019: WE Charity co-founders Craig Kielburger, left, and Marc Kielburger, right, gather on the WE Day UK stage with Prince Harry and Meghan, Duchess of Sussex.Matt Dunham/The Associated Press/The Associated Press

Prince Harry could hardly be heard over the cheers of the 12,000 young people packed into London’s SSE Arena last year for WE Day UK.

“You guys know if you don’t stand for something, you’ll fall for anything,” Harry told the screaming audience. “Be braver, be stronger … be honest.” Then he pulled his wife, Meghan, onto the stage and shook hands with WE co-founder Craig Kielburger. “You continue to inspire the WE Day audience,” Mr. Kielburger told the Prince.

As he stood beaming next to the Duke and Duchess of Sussex, Mr. Kielburger had no idea what lay ahead. It had been one of the most successful WE Days ever, and when the event returned to the SSE Arena this March, the star-studded lineup included actor Idris Elba, Formula One champion Lewis Hamilton and Prime Minister Justin Trudeau’s wife, Sophie Grégoire Trudeau, and his mother, Margaret.

Within months the WE organization, once touted as the largest children’s charity in the world, would be mired in controversy and facing questions about its future.

It’s stunning how far WE has fallen. Back in March, Mr. Kielburger could boast that WE’s operations spanned the globe, involved 18,000 schools and had pulled one million people out of poverty through programs that offered better education and improved health care. Money from governments, donors and sponsors was pouring in so fast that WE Charity’s revenue hit a record $66-million last year, up 53 per cent in five years. It had a property portfolio worth at least $40-million and a sparkling new, 43,000-square-foot facility called the WE Global Learning Centre in downtown Toronto.

Its for-profit arm, Me to We Social Enterprises Inc., was also set to expand. Government filings show the company took out trademarks last year for a multitude of products, including snack bars, lip gloss, backpacks and baby accessories. The company, which says it hands over at least 50 per cent of its profits to WE Charity, already has a lucrative travel service and offers trips to places such as Kenya for about US$6,000. It also sells a line of chocolate, coffee and bracelets.

Now WE is struggling to survive. The pandemic has slashed donations and forced the organization to lay off more than 200 staff in March. That caused so much internal dissension that Michelle Douglas, chair of the WE Charity board in Canada, was forced out by Mr. Kielburger in late March after she raised the issue of financial accountability. Other directors soon followed, including the chair of WE Charity in the United States.

Then came the debacle over the Canada Student Service Grant. The CSSG looked like a lifeline for WE when it was awarded the contract to run the program, which included as much as $543.5-million in funding and would have paid students up to $5,000 for a summer of volunteer work. The government would cover up to $43.5-million in program costs – enough for WE to hire hundreds of staff and extend its reach to as many as 100,000 students.

But WE’s involvement soon became toxic after revelations surfaced about the charity’s close relationship with the Trudeau family. The contract was abruptly cancelled. The lifeline vanished.

“This has had a devastating impact on our charity,” Mr. Kielburger, 37, told a parliamentary committee this week. “This has been something that may destroy 25 years of work to build a national charity in this country, partially because of mistakes that we made.”

Craig Kielburger speaks to journalists and supporters at Toronto's airport in 1996, when he was just getting started in his role as an anti-child-labour activist.Moe Doiron/The Canadian Press/The Canadian Press

It’s a long way from the spring of 1995 when a 12-year-old Craig Kielburger spotted a newspaper story about another 12-year-old boy, Iqbal Masih. Iqbal had been sold into slavery in Pakistan and killed for speaking out about child labour. Craig was so touched by the article, he began a letter-writing campaign, urging Canadian politicians and world leaders to stop child exploitation. He named his cause Free the Children and quickly gained national and global attention.

He was soon speaking at conferences and travelling the world to drum up support. With help from his parents, Theresa and Fred Kielburger, who were both teachers, he turned the cause into a charitable organization and later renamed it WE Charity. His brother Marc, who is five years older and a Rhodes scholar, joined the endeavour and eventually took over the administrative duties from Craig.

From the start, the brothers took a different approach to philanthropy.

Rather than soliciting donations by phone, knocking on doors or letter writing, the Kielburgers focused on students. They figured that while individual schoolchildren might not be able to give that much, small donations from hundreds of schools would quickly add up. As a bonus, they would be building a network of enthusiastic young volunteers who could capture the attention of politicians and corporate sponsors.

WE’s breakthrough came in 1999 when the Ontario government mandated that all high-school students had to complete 40 hours of volunteer work in order to graduate. Other provinces soon followed suit to varying degrees. Suddenly, a huge opportunity opened up for two charity pioneers.

The Kielburgers responded by creating “Volunteer Now,” a school program that instructed students about philanthropy and encouraged them to join the charity’s “Brick by Brick” campaign. That involved raising $6,000 for WE to build a school somewhere in Africa, Asia or Latin America. For every $100 raised, the school received a paper brick so students could track the progress of the WE project.

Canadian Olympian Penny Oleksiak plays netball with students at the WE Villages Kisaruni school in Kenya.

The initiative, now called WE Schools, has been modified and expanded over time but remains the backbone of the WE movement. Today it’s entwined with dozens of school boards across Canada, the U.S. and Britain, and students learn about volunteer work and how to raise money for charities. They can also earn points to attend WE Day events, the annual gatherings the organization stages to celebrate its volunteers and their accomplishments.

Governments have embraced the program, and every year Ontario’s Ministry of Education pays WE about $550,000 to run it, according to public accounts records. The federal government has also given WE more than $5-million in grants since 2017 to promote volunteerism among young people.

Businesses have also rushed in, eager to be associated with such a youthful movement. WE’s partners include corporate giants such as Walgreens, Unilever, Royal Bank of Canada, Allstate Insurance, KPMG and Telus Corp. Billionaires such as Jeff Skoll and Holly Branson, the daughter of Virgin Group founder Richard Branson, have also given their time to the group.

Matthew Cimone became so enamoured with WE’s school program that he put his university studies on hold in 2007 to join the organization. He’d just returned to Toronto from Sierra Leone, where he helped schoolchildren become more active in sports, and was eager to stay involved in international development. “And so when I saw the speaking engagement opportunity with [WE Charity], that seemed like a dream job,” Mr. Cimone recalled.

He spent months travelling to schools, talking about his time in Africa and encouraging classes to join “Brick by Brick.” When a few teachers asked where the money was going, Mr. Cimone couldn’t answer and asked WE officials how to respond. “I felt quite a bit of resistance [from WE] about giving real tangible details to youth about where the schools were that they had built and who was building them,” he said. When he pushed a little harder, he was summoned to a meeting and told: “Clearly you have an issue with the organization.”

The final straw for Mr. Cimone came in the fall of 2007 when he volunteered to help out at the first WE Day in Toronto’s Ricoh Coliseum. He felt uncomfortable with the overwhelming presence of corporate sponsors and the overexcited atmosphere. “That’s when I was, like, ‘I don’t know what I’ve signed up for any more,’” he said. “I don’t even know what this is.” He quit a few months later and took a job in Vancouver teaching kids about space. He also started his own non-profit organization to raise money for a school in Sierra Leone.

Young people raise their phones at the 2009 WE Day at the Air Canada Centre.Fred Lum/The Globe and Mail/The Globe and Mail

Speakers at 2020's WE Day UK event in London included chef Jamie Oliver, actor Idris Elba and Sophie Gregoire Trudeau, Prime Minister Justin Trudeau's wife.Gareth Cattermole/Getty Images/Getty Images

As WE kept growing, its activities went beyond the schools program and into an array of other ventures. Canadian law restricts how much for-profit activity charities can do, but it’s not entirely uncommon. Many hospitals raise millions of dollars every year from their parking lots and there’s a growing number of social enterprises, which plow the profits back into a social mission. But the Kielburgers have taken the concept much further.

They’ve created nine different charities and more than a dozen related companies. WE’s structure has become so complex that Ms. Douglas told the parliamentary committee this week that she had no idea how many entities the group contained, even though she had been a director of WE Charity for 15 years.

The dividing line between the charitable side and the business side has also become murky. It’s not always clear how money flows between the charity and the businesses, as WE Charity’s financial statements are public while Me to We’s are not.

There’s also plenty of overlap among officials, which adds to the confusion. For example, Victor Li is the chief financial officer for WE Charity and Me to We. Regulatory filings note that Mr. Li also sits on the boards of four WE charities and at least four Me to We companies. Scott Baker is WE Charity’s chief operations officer and a director of WE Education Ltd., a related British business. Mr. Baker has also been executive director of WE Charity in the U.S.

In a statement, WE said that the organization had “developed sub-entities to serve various purposes” and that each is “legally incorporated as a stand-alone entity to minimize liability.” Mr. Li’s role on the various boards, WE added, was as a signing officer. “He is acting in accordance to all proper laws and regulations.”

Theresa and Fred Kielburger have been involved in real estate deals with WE Charity and let the organization use space in one Toronto building rent-free for 14 years. They saved WE more than $5.4-million in rent and did not receive a charitable tax receipt for the in-kind donation, according to retired judge Stephen Goudge, who was hired by WE to assess the transactions. Mr. Goudge said there was nothing wrong with the arrangement and concluded: “Like many parents who have the means to do so, Fred and Theresa Kielburger have provided financial support for their children; in this case, they have financially supported their children’s work.”

Craig’s mother-in-law, Kelly Hall-Holland, also has ties to the Kielburger’s operations. Records show she incorporated 5004595 Ont. Ltd. in 2018. It owns a property on Toronto’s Lake Shore Boulevard that has belonged to the family. The house is also listed as the address for Global Impact Fund Group Inc., an entity set up last year by the brothers.

Ms. Hall-Holland also sits on the board of the WaterStone Foundation, a Toronto charity founded in 2014 that focuses on eating disorders. In 2018, WaterStone gave WE Charity $100,000, by far its largest gift that year. Kim Duffy, the foundation’s co-founder and chair, said WE provided a platform to reach students and teachers. She added that Ms. Hall-Holland was not on the committee that reviewed the grant and recused herself from the board’s final decision. The foundation has not made further grants to WE.

The Kielburgers testify via videoconference at a House finance committee meeting.Sean Kilpatrick/The Canadian Press/The Canadian Press

The Kielburgers’ role in the empire has also come into question. They don’t hold any official titles with the charities and are paid by Me to We – $125,000 each, according to the organization. Ms. Douglas said they still hold enormous sway. “WE is a founder-led organization, and Marc and Craig Kielburger hold significant power in the organization,” she told the finance committee.

“It’s not like any charity that I’ve ever seen,” said Toronto lawyer Mark Blumberg, who specializes in advising charities. “So I wouldn’t draw too many conclusions about the charity sector from this group. But I think what makes it clear to me is that we need more transparency in the charity sector.”

During the parliamentary hearing, the brothers acknowledged they’d created a labyrinth and promised changes. But Craig Kielburger also insisted that Canadian charity laws were too rigid to accommodate their ambitions. “You’re right, sir, that our operation is complex, because, in our heart, we’re entrepreneurs. We create new systems,” he told Liberal MP Michael McLeod. Marc Kielburger compared the growth of the WE structure to building a house. “You have a small little house, you add a wing, then you add a skylight and then you add a little makeshift swimming pool for your kids,” he told the committee.

Lynn DeCaro has been watching the rise of WE for years and wonders why questions weren’t asked sooner. Ms. DeCaro did her master’s thesis on WE in 2011 at Brock University and is now the executive director of the Muskoka Community Foundation, where she occasionally deals with students seeking funding for WE trips. “There was lots of concern [about WE] especially within the education field amongst educators, but nothing ever really came of it,” she said. Ms. DeCaro said people were mesmerized by the brothers, which allowed them to escape much scrutiny. “They really do have this way of drawing people in,” she said. “I can only describe it as evangelical.”

The Globe and Mail has a sponsorship agreement with WE Charity. It expires Aug. 31 and will not be renewed.

Fred Lum/The Globe and Mail/the Globe and Mail

Editor’s note: (Aug. 19, 2020) An earlier version of this story incorrectly said Scott Baker served on the board of WE Charity in the U.S.

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