The Real Estate Council of Ontario announced Aug. 26 it was freezing bank accounts related to iPro Realty and initiating an outside review of its own conduct.PATRICK DOYLE/The Canadian Press
Ontario realtors are demanding answers for the handling of the collapse of iPro Realty Ltd. even as the Real Estate Council of Ontario (RECO) takes dramatic steps to respond to the widening scandal.
“They are under so much pressure now,” said Steve Tabrizi, a broker/owner and chief operating officer for the Re/Max Hallmark Group of Companies. “I think RECO right now, it’s never seen in its entire history the real estate community and brokerages like us become so vocal on social media, literally pointing at them.”
Questions about who knew what and who did what and when have grown in volume in the weeks since Aug. 14 when RECO publicly announced more than $10-million had gone missing from trust fund accounts at iPro, which was one of the largest brokerages in the province with more than 2,400 realtors and brokers.
Regulator freezes iPro Realty bank accounts in wake of company’s collapse
As part of that announcement, then-registrar Joseph Richer, the top regulator of the 110,000 realtors and brokers in Ontario, said that iPro owners Rui Alves and Fedele Colucci had agreed to an undertaking to wind down the brokerage within five days.
In a Zoom call with iPro realtors that same day Mr. Alves, who has worked in the industry for more than 40 years, referred to the moves as a form of retirement. RECO later confirmed that the agreement would see Mr. Alves and his partner lose their licenses to be brokers or trade in real estate. But it also included assurances that RECO would not seek further disciplinary investigations or prosecutions based on the removal of millions of dollars in consumer deposits and realtor commissions.
On Friday, RECO CEO Brenda Buchanan announced that, effective immediately, Mr. Richer, who had been registrar for 12 years, was no longer in his job. In a published statement she said, “with the support of RECO’s board of directors, I have acted.” But she stopped short of saying whether Mr. Richer left on his own, was urged to resign or was fired. RECO has not responded to requests for follow-up interviews with Ms. Buchanan, and Mr. Richer could not be reached for comment.
On Monday, RECO released new statement from Katie Steinfeld, chair of RECO’s board of directors (and a realtor and broker of record for On The Block Realty Ltd.), that said the regulator had retained one of the country’s largest law firms, Dentons Canada LLP, to “conduct an independent and comprehensive audit into the iPro matter, including a review of the agreement undertaken by the previous registrar” and provide a report by Sept. 30.
Dentons will also be tasked with providing legal advice to the board on how it can “ensure greater oversight and governance going forward” under the governing legislation Trust in Real Estate Services Act, 2002, that guides how RECO functions.
Monday’s statement also said that RECO was freezing iPro’s bank accounts and that all claims on those funds would now be handled by RECO’s insurance program. That was almost a week after the brokerage formally lost its license and three months after RECO said it initially learned of the shortfalls.
Mr. Tabrizi said that according Toronto Regional Real Estate Board data, iPro transacted almost a billion dollars worth of real estate transactions between May and the end of July, before RECO told realtors or the public that $10-million of consumer deposits and realtor commissions were missing.
While iPro realtors do business outside of TRREB’s boundaries, Mr. Tabrizi counts at least 459 sales where an iPro agent represented sellers and another 556 sales where it represented buyers. By his calculation, those deals represent at least another $20-million that could have flowed into the trust accounts controlled by executives who had already admitted to RECO that they had moved money out of those accounts to repay investors in the brokerage’s holding company and cover operating expenses.
“The registrar maybe had a good intention of minimizing the damage or the loss, but it was a big risk to take,” said Mr. Tabrizi. He said it’s possible Mr. Richer was weighing whether the scale of iPro’s operation could have created major disruptions in the market if it were suddenly shut down in May.
Ontario brokerage collapse raises questions about oversight
Anger at RECO and iPro has been directed toward the provincial government as well.
“The failure to hold those responsible fully accountable erodes public confidence in RECO and the entire real estate industry. It is imperative that all who were complicit in this scheme are investigated and prosecuted to the fullest extent of the law,” said Gloria Valvasori, a realtor with Century 21 Signature Service who shared her concerns in a letter to The Globe and also to Ontario’s Minister of Public and Business Service Delivery, Stephen Crawford, who provides government oversight to RECO.
“The Ministry of Public and Business Service Delivery and Procurement was not involved in RECO’s decision regarding the iPro Realty matter. … Any questions about RECO’s enforcement actions or the status of any investigation should be directed to RECO or the appropriate authorities,” said a spokesperson for the ministry in response to questions from The Globe.
Monday’s announcement also said RECO would conduct a review of all its open compliance files.
“The entire board is deeply committed to the effective regulation of the sector and expects that rogue players be held to account for their actions,” Ms. Steinfeld said in the release.