Bank of Montreal sues hundreds over alleged $120 M mortgage fraud

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By Stephane Massinon and Tamara Gignac, Calgary Herald May 5, 2010 9:34 PM

Bank of Montreal is suing lawyers, brokers and some of its own employees for an alleged $140-million mortgage scam that may have involved hundreds of people.Photograph by: Reuters, ReutersCALGARY — The Bank of Montreal is suing hundreds of people — lawyers, mortgage brokers, its own employees and even a member of Parliament — over what the bank says is a mortgage fraud involving $120 million in property.

In a lawsuit filed by BMO, the bank said it lost over $30 million during the real estate boom in fraudulent mortgages given to properties all around southern Alberta.

"This one is horrendous," said Al Rosen, a Toronto-based forensic accountant who has investigated a number of high-profile fraud cases. "There's just so many people involved in the thing. It's not a small-time operation."

No criminal charges have been laid in the case, but the RCMP has received a complaint and is weighing the evidence before deciding whether to launch a criminal investigation.

The court documents allege that various businesses, in some cases working with BMO employees, set up a "strawbuyer" fraud.

According to those documents, the scheme worked through finding houses with lower values than others in their communities. The strawbuyers, people who were paid $3,000 to $8,000, were the mortgage holders of record and were paid to sign paperwork.

In some cases, their incomes were distorted to make them look more likely to be approved for the mortgages, BMO is alleging.

The house prices were inflated and the excess proceeds of $40,000 to $60,000 were paid to the alleged perpetrators, the bank claims.
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