The Lighthouse: Sask. the manager of the shelter used funds for personal loans
An independent investigation found an “overarching culture” of mixing personal financial interests with those of one of Saskatoon’s most prominent nonprofits.
The court-ordered investigation, led by accounting firm MNP, was requested by three members of Lighthouse Supported Living’s board of directors after they became concerned about transactions uncovered during an internal audit.
The bulk of the transactions investigated by the accounting firm involved Lighthouse executive director and board member Don Windels.
In mid-January, Don Windels was furloughed and two board members, Twila Reddekopp and Jerome Hepfner, took over.
The upheaval came after the Saskatoon Fire Department revealed it had discovered dozens of problems at the shelter during inspections over the previous year.
Windels has been a director since 2003, directing the day-to-day operations of the organization.
In a ruling originally issued Dec. 6, largely based on investigators’ findings, Judge David Gerecke ordered Windels to be immediately removed from his post.
Windels appealed in December just as a publication ban, which related to MNP’s decision and findings, was set to expire.
A consortium of local news media, including CTV News, fought to overturn the ban.
On Monday, the Saskatchewan Court of Appeal released a decision that lifted the restriction on the public sharing of details related to the case.
The court said Windels’ future in the organization and other aspects of Gerecke’s decision would be dealt with separately.
However, due to the court ruling, the findings of the investigation can be shared publicly for the first time.
$287,000 IN PERSONAL LOANS
The MNP report describes how, by Windels’ own admission to investigators, a series of loans were made by the Lighthouse to his family’s company between 2008 and 2013, totaling $287,000.
Windels, his daughter Tiffany Klassen and son-in-law Cory Klassen were on The Lighthouse’s board of directors and signed the resolution authorizing one of the loans, worth $110,000, issued in 2009.
However, the authorization came after the funds had already been borrowed and repaid.
“Overall, it appears Lighthouse’s board was aware of and approved some of the loans,” the MNP report said.
However, in some cases, Windels does not appear to have “strictly adhered” to the authorized terms of the loan, according to investigators.
“For example, in one case the amount loaned exceeded the approved amount and in another case The Lighthouse did not receive interest as required by the agreement.”
In a sworn affidavit, Windels, who is also a chartered accountant, called MNP’s findings “misleading” and said all loans had been repaid.
“I deeply regret that I have failed in the past, on several occasions, to completely separate my personal interests from those of The Lighthouse,” Windels said.
Attempts by CTV News to contact Windels were unsuccessful.
Another major concern of investigators was a transaction that actually amounted to a $60,000 loan from the nonprofit to Windels so he could buy a house.
In 2017, the council approved the purchase of a house in the Caswell Hill area of the city, according to the MNP report.
The lighthouse retained ownership of the house, while Windels spent years renovating it with the intention of eventually moving his daughter there.
Windels then bought the house at the lighthouse in December 2020 for $81,671, an amount that covered the cost of the house and utilities, property taxes, insurance costs and interest on the original loan.
MNP found that the amount paid by Windels in interest was “understated” because it did not include amounts “actually borrowed” from the non-profit organization to cover other costs incurred by the lighthouse while acting in as the owner of the house.
“Mr Windels was essentially a tenant of the property for four years, rent-free,” the MNP report said.
Once he owned it, in January 2021, Windels borrowed $176,250 against the property which was valued at $230,000 – a $170,000 increase in market value since the lighthouse sold the house to him.
“Effectively both parties invested in the property, but only Mr. Windels benefited from any appreciation while the lighthouse bore any ownership risk.”
In an affidavit, Windels said his daughter was leaving an “unhappy relationship” in 2017 and he was unable to obtain financing through traditional channels to purchase her home.
In his decision, Gerecke wrote scathingly about the arrangement.
“The lighthouse spent $60,000 of its own money on a transaction that was to solely benefit Mr. Windels,” Gerecke said.
“For nearly four years, The Lighthouse did not have these funds available for programming or capital acquisitions and it also bore all shipping costs relating to (the house).”
Real estate also features prominently in another section of the MNP report.
Five houses belonging to members of Windels’ immediate family, including his wife, were rented by the lighthouse which in turn rented rooms in the houses to customers.
Monthly leases ranged from $1,100 to $1,425.
While the arrangement has ended for three of the houses, at the time of the investigation two of the houses were still rented by the nonprofit.
BLUE MOUNTAIN ADVENTURE PARK
Another area of interest to MNP investigators was the relationship between Blue Mountain Adventure Park, owned by Lighthouse, in North Battleford, and the Kowach Foundation for Advancing Education Inc., a company owned by Windels.
Blue Mountain is a not-for-profit company that operates a site where low-income people can participate in outdoor activities like camping and hiking.
Kowach applies for summer students under the federal Canada Summer Jobs program and the workers are used to staff the adventure park.
In turn, Blue Mountain reimburses Kowach for the portion of the student’s salary not covered by federal funding.
When asked by MNP investigators who prepared the report, Windels said the company’s goal was to allow Blue Mountain to hire more students at a subsidized rate than it otherwise could.
Based on information available to investigators, Kowach posted a surplus of $39,000 in its 2021 fiscal year, due to Canada Emergency Wage Subsidy payments that came on top of Blue Mountain’s routine payments. .
“We do not have sufficient information to confirm whether this amount was paid to benefit Blue Mountain after April 1, 2021,” investigators wrote in the report.
In his affidavit, Windels said he received “no financial benefit from Kowach’s relationship with Blue Mountain.”
Windels said if he transferred the surplus to Blue Mountain, it “could jeopardize its charitable status.”
THE BOARD ASSUMES CONTROL
In a sworn statement, Twila Reddekopp, who sits on the board of the Lighthouse and Blue Mountain, said “both companies are in crisis.”
“I remain hopeful that through this legal process and through the hard work and dedication of our boards, staff and community, we can get through to the other side,” Reddekopp said.
Redekopp, along with board members Jerome Hepfner and Ian Hamilton, demanded the court-ordered investigation after reaching an impasse with Windels and other members of the organization who support him.
Reddekopp and Hepfner effectively took on Windels’ role after he was furloughed in January.
Five members of Le Phare’s management team have been fired, less than a month after his dismissal by the board of directors.
“We have been working for more than a year to resolve serious governance, administrative and financial issues at the lighthouse,” Hepfner said in a statement sent to media Monday morning.
“This process was very painful and was made even more difficult as we were unable to communicate freely with our staff and supporters in the community due to the publication ban.”
–This is a developing story.