Guyanese man facing probe in Canada over mortgages fraud
Canada-based Guyanese businessman, Bhaktraj Singh is one of a number of mortgage brokers who have come under investigation in Ontario for syndicated mortgages that have left small investors with huge losses and questions being asked about what the regulator has been doing.
According to a November 8, 2017 Globe & Mail report, Singh’s Tier 1 group of companies is under investigation by the Ontario Provincial Police (OPP) over fraud allegations involving the use of syndicated mortgage investment funds.
“The mortgage pools raised Cdn$119 million from 1500 investors to fund a development group planning to build condominiums and student residences,” the Globe & Mail’s report stated.
A report by accounting firm Grant Thorton, which was appointed trustee for the mortgage investors, said the OPP’s anti-rackets branch is probing a condominium project at 28 McMurray St. W. in Bracebridge, Ontario that was one of the developments funded by the syndicated mortgage loans.
The report said that the OPP sent a letter to investors in the McMurray project, saying it is trying to identify victims and witnesses who will speak to the police.
Grant Thornton said it also contacted the Royal Canadian Mounted Police (RCMP) about the case. The trustee’s report asks for court approval to give police the names of investors in the McMurray loans, and says it expects police will ask for names of investors in the other, related projects as the investigation continues.
Toronto lawyer David Franklin, who is representing investors who lost money in the Tier 1 mortgage pools, said he contacted the OPP about the case because he was of the belief that investors appeared to have lost money due to wrongdoing.
Franklin said he believes the Financial Securities Commission of Ontario (FSCO) took too long to act on concerns about wrongdoing that stretched back for years, and most of the investors’ money has been lost as result.
According to court filings, FSCO suspended the two mortgage broker firms’ licenses in question in October, 2016, after an investigation found that they promoted and sold the mortgage investments in violation of mortgage lending rules. FSCO alleged it discovered numerous conflicts of interest involving Singh, who was a senior executive at the mortgage broker companies that were marketing the syndicated loans.
FSCO said, “Mr. Singh fills several roles in respect of both the development projects and the syndicated mortgage transactions. He is a director, officer and sole shareholder of Tier 1 Transaction, which is engaged in unlicensed activity including the solicitation of borrowers and lenders on the security of real property, the provision of information about a prospective borrower to a prospective lender, the assessment a prospective borrower on behalf of a prospective lender and the negotiation or arrangement of a mortgage. Mr. Singh is also a licensed mortgage agent authorised to deal or trade in mortgages for First Commonwealth, a shareholder of several of the borrower development companies in the syndicated mortgage transactions. He is the sole director, officer and shareholder of the special purpose trustee corporations incorporated to hold and administer the mortgage on behalf of the investors. Finally, Mr. Singh has an ownership interest in the borrower companies. In contravention of the Act, these conflicts of interest and interrelationships were not disclosed to investors and give rise to significant risks to investors because Mr. Singh, through the special purpose trustee corporations, is required to administer and enforce the mortgages on behalf of the investor as against the entities in which he enjoys an economic interest”.
The Globe and Mail report further said that, “Grant Thornton, which is overseeing 11 companies that held mortgages issued using the investors’ funds, said in court filings it has concluded that most of the companies had loans outstanding for projects run by a group known as the Davies Developers headed by real estate developer John Davies. The group included Singh and others.
Earlier this year, the trustee asked the court to appoint a receiver – KSV Kofman Inc. – to take control of the eight Davies Developers properties.
In a report filed in court in June, KSV concluded only a small percentage of money borrowed from the investors appeared to have been used for its intended development purposes, while millions of dollars were remitted to the Davies Developers group in management fees, consulting fees, dividends and loans.
Reuters on Thursday said questions are being asked about the FSCO did about concerns about syndicated mortgages.
It said that in June 2014, regulators were probing syndicated mortgages linked to Fortress Real Developments, a major force in Canada’s multibillion-dollar market for the risky investments.
It said that compliance officers at FSCO had evidence that syndicated mortgages were being marketed and sold in ways that broke the law, putting the savings of thousands of Canadian small investors in danger.
Reuters said that the compliance officers had found that brokers affiliated with Fortress were telling clients they could put their investments in retirement savings accounts administered by a trust company not licensed to do business in Ontario. The activity, the team determined, was a breach of provincial law - by brokers for recommending Olympia Trust Co, and by Olympia for operating without an Ontario licence.
The compliance officers sent their findings to FSCO investigators and later recommended that Olympia be ordered to stop operating in Canada’s most populous province, according to the sources and documents.
Reuters said that FSCO’s investigators did nothing. Their boss, Executive Director for Licensing and Market Conduct Anatol Monid, decided in May 2015 that there was not enough evidence to proceed, the
documents show.
Reuters said that decision was part of a larger, more troubling pattern. From 2011 to 2015, Reuters said it has found, senior FSCO investigators rejected or ignored compliance officers’ multiple recommendations that the agency investigate or take action to rein in the marketing and sales of Fortress syndicated mortgages.
Since then, Reuters said that growing investor outcry about the products has focused public and government attention on FSCO’s lax regulation of the market. In the past decade, more than 20,000 retail investors have put as much as Cdn$1.5 billion (US$1.17 billion) into syndicated mortgages, mostly in Ontario, according to regulatory sources. Roughly 90 percent of those investments, the Reuters sources said, have ended in a loss or are at risk of doing so, and Fortress projects make up more than half of the investments.