Update: Calgary MP Shory Accused in Giant Mortgage Fraud

[troutman]

Originally Posted by onetwo_threefour

Woohoo, I'm safe!!

Anyway, from what I have been reading most of the lawyers named are not being accused of being complicit in the fraud, but rather negligent in not reporting indicia of fraud that BMO feels they should have been aware of. So potentially more an indictment of competency rather than ethics.

Seeing some of the names on the list, it doesn't necessarily shock me. I wish I could tell my law school story about one of the named parties, but it might get someone else in trouble (who really shouldn't get in trouble because it was an accident we even found out) so I can't. Let's just say, for one of these Defendants, this isn't even the first time they've been implicated in a series of questionable dealings and had their competency scathingly questioned.

Have you seen a list?

What will the Law Society do about named lawyers?

[puckluck]

Originally Posted by Azure

Doesn't matter.

You still to compare taking people's money to molesting a child?

Post 83 is your friend.

[onetwo_threefour]

Originally Posted by troutman

Have you seen a list?

What will the Law Society do about named lawyers?

Yep, somebody's sending the style of cause around by email. I might be able to forward it to you if you're interested.

As far as the Law Society, I imagine they'll want to be seen as proactive and will commence an investigation, but I doubt if they take any disciplinary action that would potentially affect the outcome of the case.

But who knows...?

[WilsonFourTwo]

When I bought my last home, I had it independently appraised prior to putting in an offer. That appraisal ended up being used by the bank (not the one currently involved in this story) as proof of value for the home. It struck me as odd that they relied/accepted my documentation without any question....it would have been soooo easy to overstate the value by 20, 30, 40 thousand.

All in all, I'm not surprised somebody figured out how to abuse the banks' apathy in order to make money. Not that they should, but I'm not surprised.....

[mykalberta]

Originally Posted by troutman

It sounds like the lawyers named are not accused of fraud, but of negligence. In other words, they were not actively part of the scheme, but may not have done enough to protect BMO.

So BMO is upset that a lawyer not paid for by the bank didnt do enough to protect the bank?

When I look to what my lawyer did when I bought my place how would he even know home values in Calgary as he doesnt even live in this area code.

Everything was couriered and I drove up to sign the final papers in person. Is it his responsibility to tell me that I am overpaying for my home?

And I thought PC Financial was sketch to deal with.

[FlamesGirl]

Just received the list here at work...maybe the bank shouldn't have been so quick to lend out money...and of course housing prices are different now than they were back in 06/07. Now BMO's trying to point fingers at everyone else...

[chemgear]

Originally Posted by mykalberta

So BMO is upset that a lawyer not paid for by the bank didnt do enough to protect the bank?

I assume they refer to the public duty professionals have above and beyond their paid work to their employer. Similiar to an engineer being asked by an employer to signoff/build a bridge they know is dangerous/designed wrongly?

[troutman]

Originally Posted by mykalberta

So BMO is upset that a lawyer not paid for by the bank didnt do enough to protect the bank?

When I look to what my lawyer did when I bought my place how would he even know home values in Calgary as he doesnt even live in this area code.

Everything was couriered and I drove up to sign the final papers in person. Is it his responsibility to tell me that I am overpaying for my home?

And I thought PC Financial was sketch to deal with.

Usually, a lawyer is representing the purchasers and the lender at the same time, and has a duty to both parties. There are certain "red flags" the lenders ask that we watch for. The lender is also the lawyer's client.

[Wookie]

I hope to get emailed this list soon.

[Shazam]

Originally Posted by chemgear

I assume they refer to the public duty professionals have above and beyond their paid work to their employer. Similiar to an engineer being asked by an employer to signoff/build a bridge they know is dangerous/designed wrongly?

He's in IT, so he's accountable to no one, not even to himself.

[fundmark19]

Second I would love to be emailed this list. apparently I am not cool enough

[onetwo_threefour]

For those who are interested I heard down at the courthouse today that the Court issued what's called a Mareva Order against some or all of the Defendants, potentially freezing their assets for an indefinite period of time. For lawyers and realtors, that could effectively put them out of business if true and if it applies to trust accounts.

This is secondhand info, but very interesting that the Courts would give such a significant injunction to BMO at this stage.

[onetwo_threefour]

Update, found it online to save emailing:

http://www.scribd.com/doc/31038404/BMO-Style-of-Cause

[EddyBeers]

Originally Posted by troutman

Usually, a lawyer is representing the purchasers and the lender at the same time, and has a duty to both parties. There are certain "red flags" the lenders ask that we watch for. The lender is also the lawyer's client.

The red flags on the Law Society site came out in an advisory in May, 2009. Not exactly helpful for the lawyer practicing in 2006. Plus you would think a sophisticated businessman like BMO would explicitly put in their trust conditions what they expected you to do. I have never seen a trust condition that states that you have to advise the bank if it is a straw buyer. I am not even sure how you would know that. What happens when you advise a bank that it is a straw buyer and it is not and they lose their 20K deposit? Does the purchaser sue you for interference in contractual relations?

As someone who got called in 2008, I am glad that I am in all likelihood clear on this thing. Although they do name the unknown defendants of Jane and John Doe in their Amended Statement of Claim, so nobody can be "sure" they are not named. But I feel for these guys who were practicing in 2006, real estate was moving fast and quick, with values going up over 50% a year on average in some neighborhoods. The banks were pushing these things out because the guys there are paid on commission and the only way a bank makes money is if it loans money. And now that the music has stopped everyone is looking for a chair.

[PyramidsofMars]

another Conservative MP that does more than appear to be a shifty right-winger.

[onetwo_threefour]

I agree that the bank is overreaching on this stuff in terms of the professional duty they are trying impose on certain industry professionals, but ultimately it will be for the court to determine the standard of care in these cases.

CMHC published a list of fraud signs back in 2000 or 2001, I think troutman linked it, so I don't know whether the list last year is of much importance. Also, regardless of whether there was any notice sent out by the Law Society, the arguments would be that we should be able to recognize signs of fraud.

[Wookie]

Damn, only knew four. Any idea what will happen to some of these people? A few I've seens around looking quite well off and wondered what exactly they did as I don't recall them working lol.

[Slava]

Originally Posted by troutman

The important thing for BMO is lawyers have negligence insurance.

There must be some onus on BMO too, in not appraising these properties?

I don't what kind of coverage lawyers have to carry (in terms of limits), but I'm assuming that this gets split into joint and several liability and the bank gets their money from the insurers and then leaves them to chase around all of the others for their shares?

That list is long and varied. I recognize a few names on their who I never would've expected to be involved...but then again who would one expect I suppose.

[mykalberta]

I know 2 of the people on that list.

I love how the one guy has over 20 aliases aka, aka, aka - hahaha.

[EddyBeers]

Originally Posted by onetwo_threefour

I agree that the bank is overreaching on this stuff in terms of the professional duty they are trying impose on certain industry professionals, but ultimately it will be for the court to determine the standard of care in these cases.

CMHC published a list of fraud signs back in 2000 or 2001, I think troutman linked it, so I don't know whether the list last year is of much importance. Also, regardless of whether there was any notice sent out by the Law Society, the arguments would be that we should be able to recognize signs of fraud.

Fair enough on the fraud argument, I just think that it is not as easy as the Bank says it is to recognize fraud. What happens if Party A purchases a place from a distressed buyer for 500K and has a closing date 90 days after the offer to purchase with the purpose being that they want to find a buyer at 550K in the intervening 3 months. In 06 the market was moving so quickly (38%) a year on average according to Century 21, that a person could conceivably enter into a country on March 1st, 2006 for a closing of June 1, 2006 for 500K, actually have 500K be the exact fair market value, but due to the increase in housing prices the place might be worth 550K by June 1, 2006. If they decide on May 1, 2010 to sell the place for 540K with the consent of the original vendor, you would perform a skip transfer because the middle guy was never actually going to own the property and they would want to avoid Land Titles fees. That situation would involve absolutely no fraud, but you would allegedly have to report the transaction to the bank, but I am pretty sure that is what their fancy computer system with the postal codes is for. Afterall, BMO's PR guy stated that they conduct the upmost diligence on these matters, which includes and is basically exclusive to, putting 100 houses in a postal code in a database, coming up with the median and stating that that is the number that they will fund.

The new trust conditions state that you have to advise them if the property has been transferred in the last 6 months, if you are a fraudster that is fine. You purchase the property throw a mortgage on it and wait 8 months to be safe and then you proceed with your original plan. Is the next lawsuit going to say that there was an implied condition to tell them of any transfers in the previous 12 months? 18 months? Until the Banks and CMHC tighten up their protocols, this will continue to occur. Why do you only need to show a bank an employment letter to get a mortgage? How easy are those to forge? Why not force individuals to show a T4 or a T1? That would at least prove income for the previous year and would reduce black market income as you would be in a position that you need to report income in order to get a mortgage. This is a huge public policy issue that I hope Harper addresses and as a liberal I hope the Grits actively try to assist him with.

I personally hope the Law Society defends this vigorously. I do not think it is the interest of the general public nor the lawyers to expand the role of lawyers. Lawyers should advise on your legal obligations, not on whether the home you are buying is a good price or whether you should buy an A&W or whatever. This article really sums up my opinion of where the fault lies, as a general rule, on real estate fraud. http://www.canadianbusiness.com/mark...2357121&page=1