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Bank of Montreal (Fernando Morales/Fernando Morales/The Globe and Mail)
Bank of Montreal (Fernando Morales/Fernando Morales/The Globe and Mail)

Police probe alleged Alberta mortgage fraud Add to ...

A criminal investigation has been launched into allegations of widespread mortgage fraud at the Bank of Montreal, the RCMP's commercial crimes section said Thursday.

BMO, which recently handed over thousands of pages of documents to police in Alberta, has filed a massive lawsuit against hundreds of people in connection with an alleged $69.5-million fraud scheme that the bank says cost it $30-million.

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RCMP and the Calgary Police Service are now working together on the file, which has been described by industry watchers as the biggest mortgage fraud case in Canadian history.

"There is a very large amount of documentation to examine and many interviews to complete. Therefore it should be recognized that this should be expected to be a lengthy investigation," RCMP Sergeant Patrick Webb said in a statement.

Conservative MP Devinder Shory, who represents Calgary Northeast, is among those named in the lawsuit, which names lawyers, mortgage brokers and bank employees.

BMO alleges it became a victim of the scam after Alberta's housing boom crumbled.

Its lawsuit alleges that 14 interconnected groups bought homes, sold them at artificially high prices to fake or "straw buyers," who in turn sought mortgages for thousands of dollars more than the property's market value. When mortgages linked to such a scheme go into default, the bank is left with a property that isn't worth as much as it thought.

The bank has not accused Mr. Shory or any of the other 17 lawyers named in the lawsuit of fraud, but instead of negligence in the course of their duties. Mr. Shory was working as a lawyer in Calgary at the time of the alleged scheme.

The Law Society of Alberta said it will also be investigating the lawyers named in the lawsuit and hold public hearings.

None of the accusations has been proven in court.

Prime Minister Stephen Harper has said that the accusations are related to Mr. Shory's life prior to becoming an MP and has declined to comment. The PMO declined comment when asked what impact the criminal investigation will have on Mr. Shory's status in the party.

 

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