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Due diligence key for consumers as real estate frauds spike

By AdvocateDaily.com Staff

Real estate investors need to step up their due diligence on professional service providers following a spate of alleged frauds, says Toronto forensic accountant and investigator Dave Oswald.

CTV News recently reported on the arrest of a former real estate lawyer in Northern Ontario accused of misappropriating more than $1.5 million from clients.

In another case, CBC News reported that a number of properties were raided as part of an extensive RCMP investigation into alleged syndicated mortgage fraud.

“It’s happening far too often that people in positions of trust are able to defraud, and many people end up being affected,” Oswald, the founder and owner of Oakville-based white-collar crime investigation boutique Forensic Restitution, tells AdvocateDaily.com.

“You need to do a significant amount of homework, ask hard questions, and make sure you understand exactly what you’re getting into,” he adds. “You can’t just give someone money on a wish and a prayer.”

In many cases, Oswald says investors are more focused on the rate of return they can expect from a deal than the bona fides of those involved or the level of risk they could be taking on.

“Some people end up losing their life savings in these cases, which is tragic,” he says. “If you’re looking into land purchases, you should be getting copies of insurance policies of lawyers and others, so that you know you’re covered if the deal goes bad.”

Oswald says Canada’s lenient approach to white-collar crime, especially in comparison with our American counterparts, only adds to the importance of consumers looking out for their own best interests.

“They say crime doesn’t pay, but if you get caught running a multimillion-dollar Ponzi scheme you may get a year or two in jail," he says. "Assuming you stole $10 million, a $5 million salary per year is not bad for the inconvenience of spending time in jail. People are not always even prosecuted, and the prison sentences for individuals in positions of authority who commit fraud never match up with the amount of money they’ve taken.”

The real estate lawyer in the CTV story was due to appear in court in mid-June to face fraud charges after a police investigation uncovered a $1.5-million hole in the law firm’s trust account. According to the story, the money was attributed to 49 clients of the firm, which had offices several offices across the province, including in Kitchener, Ottawa, Toronto, Oakville, and Sudbury.

The syndicated mortgage raids, meanwhile, followed the Financial Services Commission of Ontario’s decision to levy fines totalling more than $1 million against four mortgage brokers linked to a major developer, reports CBC.

“If the investigation results in the laying of charges we will advise the nature of the charges and the identity of those involved,” an RCMP spokesperson told the news outlet. “As this is an ongoing investigation, no further details will be provided.”

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