Bank of Montreal has settled most of its long-standing lawsuits related to allegations of mortgage fraud in Alberta.
In 2010, the bank alleged that a group of mortgage brokers and lawyers, as well as BMO employees, concocted a scam that involved $69.5-million in mortgages and cost the bank as much as $30-million.
The allegations caught the attention of the Royal Canadian Mounted Police, which launched an investigation, and BMO launched lawsuits against more than 100 parties. The allegations have not been proven in court.
Most of those suits have now been settled, The Globe and Mail has learned. Specific details haven’t been disclosed in many cases, but the Alberta Lawyers Insurance Association will pay BMO $9.2-million as a settlement on behalf of 17 lawyers. There was no comment from the lawyers’ group.
BMO declined to comment on Tuesday.
The mortgage scheme was spotted by BMO in 2006, prompting the bank to hire forensic accountants to look into the matter.
BMO alleged the fraudsters would buy low-end homes in nice neighbourhoods and later convince the bank that the property was worth more than the purchase price. The alleged fraudsters would sell the homes at inflated values to immigrants to whom they gave documents that falsified their incomes.
Many of the new homeowners failed to pay their mortgages, resulting in many foreclosures that hurt BMO.
With files from the Canadian Press