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Clay Riddell’s charitable foundation paid its penalty as a charitable donation. , chairman of Paramount Resources and the country's 13th richest pauses for a photograph in his Calgary office Thursday, Aug. 30, 2007.(Jeff McIntosh/Globe and Mail) CANADAJeff McIntosh/The Globe and Mail

Calgary billionaire Clayton Riddell has numerous accolades to his name, including an Order of Canada, for his charitable contributions, which have included donating $25-million to two Canadian universities. But his charitable foundation has now run into trouble with the Canada Revenue Agency, which is cracking down on private foundations.

The CRA has sanctioned the Riddell Family Charitable Foundation for breaking regulations concerning the amount of stock that foundations can hold in a single company.

The infraction was relatively minor and the penalty small, only $9,500, but the case demonstrates a new effort by the CRA to scrutinize private foundations, which have soared in popularity and hold $13-billion in total assets.

A few months ago, the agency imposed a $174,000 penalty on private foundation run by the Reimer family in Winnipeg.

The CRA "is going to be paying closer attention to private foundations on many different levels because there [are] more of them, the amounts involved are greater and there is, to some degree, a certain amount of suspicion," said Mark Blumberg, a Toronto lawyer who advises charities.

Private foundations are typically set up and run by families, unlike public foundations which are controlled by unrelated people.

The board of the Riddell foundation consists of Mr. Riddell, his wife and four children. Together they administer the foundation's roughly $144-million in assets.

The number of Canadian foundations has increased in recent years, thanks in part to an aging population and a relatively decent investment climate.

Since 2000, the number of private foundations has jumped to 5,166 from 3,724, or by about 38 per cent. That is faster growth rate than of any other type of charity.

Federal officials have long been leery about private foundations, fearing they could be open to abuse.

As a result, when Ottawa eased the tax rules on donations of publicly traded securities, it excluded gifts of stock to private foundations.

The government relented a year later and included private foundations.

But it also introduced new restrictions on the amount of shares private foundations can hold.

Under those rules, private foundations must disclose any holding that exceeds 2 per cent of a company.

As well, the combined holding of a foundation and the principals behind the foundation cannot exceed 20 per cent of a company.

Those rules came into effect in 2008 and the agency has begun tracking compliance.

Mr. Riddell ran into trouble over his ownership in Alaris Royalty Corp., a Calgary-based alternative financing company.

He is a director of Alaris and its largest shareholder.

His foundation also held shares in Alaris, and together the ownership totalled 24 per cent of the company, according to CRA documents.

As a result, the CRA recently ordered the foundation to divest enough shares to bring the total to 20 per cent.

It also assessed a penalty.

"It has been sorted out," said Laurel Friesen, who works for Mr. Riddell at Calgary-based Paramount Resources Ltd., which he runs.

She said the foundation paid the penalty in the form of a donation to another charity.

The foundation will pay more attention to its stock holdings, she added.

"You just have to watch more carefully."

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