RECO alleges iPro falsified real estate transactions and operated more than one accounting system in order to divert trust money.Chris Young/The Canadian Press
The Real Estate Council of Ontario is seeking a court order to trace and recover more than $10-million it says was removed from trust accounts by the owners of iPro Realty Ltd. in violation of their responsibilities as brokers and owners.
The court filing is the first legal action taken against iPro’s former owners Rui Alves and Fedele Colucci following the Aug. 14 announcement that there was a shortfall in the now-defunct firm’s consumer deposit trust and realtor commission trust accounts. The filing reveals previously unknown details of the alleged “trust scheme” at what was one of the largest real estate brokerages in Ontario.
In a notice of application filed on Friday with the Ontario Superior Court, RECO is asking that several business entities associated with Mr. Alves and Mr. Colucci be declared to “have engaged in knowing assistance of breach of statutory and fiduciary duties” and that those same entities be compelled to disgorge and repay “all funds wrongfully obtained, retained, or transferred in relation to the Trust Scheme.”
Mr. Alves and Mr. Colucci could not immediately be reached for comment.
According to the filing, there was $6.5-million missing from the consumer deposit account and $3.5-million missing from realtor commission accounts when iPro reported that money was missing on May 19, one day before a scheduled audit by RECO.
RECO now alleges iPro falsified real estate transactions and operated more than one accounting system in order to divert trust money to repay investors, fund operating expenses of iPro and make “transfers to entities related to the iPro Respondents.”
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The filing isn’t a civil lawsuit, but rather is a legal avenue that RECO can use under the Trust in Real Estate Services Act as part of its role as regulator of the profession. The act allows RECO to apply to the Ontario Superior Court for an order directing a person to comply with the regulations.
Among the companies RECO is looking into are iPro Realty Inc., IP Holding Realty Ltd., Hippo Holdings Corp., Sutton Group Professional Real Estate Services Inc., Alco Motors Ltd. and Alco Rent-A-Car Ltd.
The missing money represents the largest trust account misappropriation RECO has encountered since its founding in 1997. Despite that, there was no public announcement of issues at iPro until Aug. 14, when the regulator revealed that iPro would be closing by Aug. 19 as part of an agreement between RECO and Mr. Alves and Mr. Colucci.
On Aug. 21, RECO registrar Joseph Richer responded to questions from media to confirm that the iPro agreement – which Friday’s filing said was signed on Aug. 8 – would include no charges or further administrative action by RECO. A day later, on Aug. 22, RECO chief executive officer Brenda Buchanan issued a statement saying she and the board of directors had acted and that Mr. Richer had left RECO after 12 years in the job.
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The board and CEO have been under pressure to take a tougher line against iPro, and the Ministry of Public and Business Service Delivery and Procurement said earlier this month it’s directly overseeing the handling of the file in response to criticism of RECO’s management of the matter.
“Consumers and agents placed their trust in iPro, and that trust was violated,” RECO chair Katie Steinfeld said in a release Friday. “RECO is committed to seeking justice for affected agents and consumers by using all available remedies to recover the funds that should have remained in trust.”
RECO’s critics have decried what they call inaction on holding iPro accountable for the missing money and the agreement which would take no disciplinary measures as potentially favouring iPro and Mr. Alves, who was a member of RECO’s board of directors between 2019 and 2023.
“The deal should have been posted on the website when the deal was approved, and that’s what they do in every other case,” Nicole Koteff, a lawyer and realtor who worked on enforcement matters for RECO for seven years, said on Friday.
“It appears as though the individuals who [removed] the $10.5 [million] were let off without even a slap on the wrist which makes no sense, especially given the high fines RECO often gives out for minor mistakes where no one is harmed.”