Investors were allegedly defrauded through exaggerated property values and non-qualifying investments
Documents newly obtained by CBC News provided a clearer picture of just how thoroughly investors were defrauded in several syndicated mortgage schemes.
Among the most damning allegations were inflated property values and the promotion of non-qualifying investments as being RRSP-eligible, evidence of which was used by the RCMP in a search warrant application it filed to authorize a raid on six Toronto-area offices back in April.
Fortress Real Developments, its lead mortgage broker Building and Development Mortgages Canada (BDMC), and three other affiliated brokerages (including FDS Broker Services) were the subjects of the police search.
RCMP said that the inflated property values in the syndicated mortgages pushed loan-to-property values beyond 100%, which would have put the investments to non-RRSP-eligible status. This was the opposite of what investors were promised, according to Const. Martin Williamson of the RCMP’s Integrated Market Enforcement Team.
Investigators also alleged that the value of the land in a 45-story condo project in Winnipeg “was falsely represented” as $18 million in 2013. In fact, the “as is” value of the property at the time was between $4.4 million and $11 million, Williamson stated.
“As a result of the inflated current as-is land valuations, investigators believe that there are currently millions of investors dollars, including retirement savings, where the amount of mortgages on the property exceed the current value of the property. This is contrary to what was told to investors.”
Read more: Syndicated mortgage fraud litigation unlikely to recoup monies
More than $700 million has been invested by approximately 11,000 individuals, according to a recent court filing by the regulator of syndicated mortgages.
50-year old business manager Carole Skelhorne invested just over $100,000 from her pension payout into a syndicated mortgage in the SkyCity condo project in Winnipeg 3 years ago. She received regular interest payments up until January 2017.
“Honestly, in my mind, I just thought it was a project that had gone wrong,” she said. “It was the worst decision I made in my life. There is no doubt about it right now. To be honest with you, my fear is that I will never see a penny of it.”
“I’m devastated because you know I’ve always planned my retirement based on that money that I had. And now instead of thinking of retiring at 60 I know will not be able to retire until I’m 65.”
SkyCity was one of four Fortress Real Development projects indicated by the RCMP search warrant application, along with Collier Centre in Barrie, ON; Harmony Village Sheppard in Toronto; and Crates Landing in Keswick, ON.
Fortress was adamant that it will be vindicated.
“Fortress is cooperating with the current law enforcement inquiries regarding syndicate mortgages and has nothing to hide,” spokesperson Scott Davidson of Bayfield Strategy wrote in an emailed statement.
FDS Broker Services declined to comment on the matter. It told investors back in April that “no charges have been laid against FDS Broker Services Inc., its directors or any current staff. We are fully cooperating with this investigation.”
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