University of Montreal won’t return Chinese businessmen’s 2016 donation, will divert money to democracy-building efforts

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The University of Montreal says it will keep a large donation pledged in 2016 to its faculty of law by two wealthy Chinese businessmen at the centre of an apparent attempt to influence Prime Minister Justin Trudeau’s government.

The Pierre Elliott Trudeau Foundation returned a $140,000 donation to the same Chinese benefactors last week. But University of Montreal rector Daniel Jutras said Thursday that what remains of the amount the university received from the men, Zhang Bin and Niu Gensheng, will be redirected to projects that fund international travel for students and contribute to “developing knowledge of democracy around the world.”

When the university announced the donation in 2016, it said the money was for a scholarship fund that would primarily support Quebec students wishing to study in China.

The university has said it received $550,000. The remaining unspent sum is $506,791.19.

In February, The Globe and Mail reported that, according to a national-security source, the Canadian Security Intelligence Service had intercepted a 2014 conversation between Mr. Zhang and an unnamed commercial attaché at one of China’s consulates in Canada. They discussed the federal election that was expected to take place in 2015, and the possibility that the Liberals would defeat Stephen Harper’s Conservatives and form the next government.

The diplomat told Mr. Zhang that Beijing would reimburse him for a $1-million donation to the Trudeau Foundation, according to the source. The Globe is not naming the source because they risk prosecution under the Security of Information Act.

In 2016, nine months after Justin Trudeau won a majority government, the Trudeau Foundation and the University of Montreal publicly identified Mr. Zhang and Mr. Niu as the donors behind a $1-million gift. The men pledged $200,000 to the foundation, which commemorates Mr. Trudeau’s father, former prime minister Pierre Trudeau. They also pledged $750,000 to the law school, where Pierre Trudeau studied and taught, and $50,000 for a statue of the former prime minister that was never built. The school and the foundation ultimately received most, but not all, of the promised amounts.

Mr. Trudeau has said, through his office, that he withdrew his involvement in the foundation after he was elected Liberal Leader in 2013.

On Thursday, Mr. Jutras told The Globe that he had received legal advice that it would be difficult to return the money, because doing so might run contrary to Canada’s Income Tax Act. He noted that CSIS has never confirmed or denied The Globe report.

“In order to return the money we need a judge to say the whole deal needs to be undone legally. And that really relies on evidence we don’t have,” he said. “We don’t really have a way to verify the allegation that relates to this.”

The Trudeau Foundation was not immediately able to explain how it was able to return its donation without running afoul of income tax laws.

Mr. Jutras defended the decision to accept the donation, saying it was “not unusual” at the time for universities, corporations and governments to sign agreements that strengthened ties between Canada and China.

“The way we look at some of these projects today is clearly very different, and if the University of Montreal was somehow led up the garden path to signing its agreement with the Chinese, an assumption that remains unverifiable, it was in spite of itself,” Mr. Jutras said.

The announcement of the donations in June, 2016, happened one month after Mr. Zhang attended a private fundraiser at the Toronto home of Chinese Canadian Chamber of Commerce president Benson Wong, where Mr. Trudeau was the guest of honour.

The donation agreements, obtained by The Globe under access-to-information legislation, said the gift would be in the names of Mr. Zhang and Mr. Niu. But the payments were made from Millennium Golden Eagle International (Canada), a company that lists Mr. Zhang as a director.

Inuit-Canadian sculptor Peter Boy Ittukalak made a prototype sculpture of Pierre Trudeau, but the university scrapped the idea after determining it would cost more than the $50,000 allotted for a final product.

Last Friday, the Trudeau Foundation asked the Auditor-General’s office to investigate the controversial donation to the non-profit organization, which was set up in 2002 with a $125-million endowment from the Liberal government of Jean Chrétien.

Ted Johnson, the interim chair of the foundation, said it will proceed with its own independent investigation, including a forensic audit. The organization’s board of directors and its president and chief executive, Pascale Fournier, resigned last week over the Beijing-linked donation.

Mr. Johnson, Bruce McNiven and Peter Sahlas – all Trudeau family friends – remain on the board on an interim basis until new directors are selected.

Conservative Leader Pierre Poilievre has asked Bob Hamilton, the commissioner of Revenue Canada, to request a “fulsome” audit of the charity “with a particular focus on the donation that has been subject to public reporting.”

The foundation announced in early March that it would return the money. But it was unable to deliver a $140,000 cheque, because no one was present at a large Montreal-area home registered to Mr. Zhang. The home is also the registered office address of Millennium Golden Eagle International (Canada).

An official at the foundation, whom The Globe is not naming because they were not authorized to speak publicly, said last Friday that a refund cheque for $140,000 was delivered to the company. The cheque, the official added, had been cashed.

The access-to-information documents include correspondence from an official with the China Cultural Industry Association, a state-backed group in Beijing, headed by Mr. Zhang, that aims to build “the soft power of Chinese culture” globally. At the time of the donation, the official instructed the Trudeau Foundation to send a tax receipt to an address in Hong Kong. Later, the Chinese cultural group asked that the tax receipt be reissued to its address in Beijing, not the address in Hong Kong.