Winnipeg real estate broker David Douglas is at the centre of an investigation by the Manitoba Securities Commission while more than 20 people are trying to recoup money in the millions from him and his companies.
“Some days you're sad, some days you're angry, some days you just want to scream out to the world there's an unfair person out there,” said Angela Zubrin, who got involved in a house-flipping venture with Douglas.
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Douglas has run full-page newspaper ads promoting his free seminar, “Building Wealth From Real Estate.” In the seminars, Douglas boasted that he had flipped 80 homes by the age of 25.
He’s been busy ever since, launching a number of companies including Homelife Village Realty, Abacus Mortgage Group, OHF Construction and Naked Design Homes, which offered prepackaged “wealth building opportunities” for clients wanting to try house flipping.
“David Douglas was referred to us by friends of ours. He came highly referred by them. They were doing business with him for quite a few years. They had great success,” Zubrin explained in an interview with the CBC News I-Team.
But Zubrin and others told the I-Team that the home renovations undertaken by companies that Douglas operated ended up costing far more than expected and taking much more time than planned.
Zubrin and her husband signed a contract with Douglas’s company to finance buying and renovating a house on Ash Street in Winnipeg's River Heights neighbourhood.
“We would front the cost for renovations, and in the end the amount of profit we would make would be good because the house was in River Heights and was a great area in Winnipeg, so we went ahead. It was all very exciting. We trusted him,” Zubrin said of Douglas.
The home was to remain the property of Douglas’s company until full payment of the mortgage was completed. Zubrin was to pay Douglas construction team for the renovations.
Remortgaged her own home
Zubrin remortgaged her own home for about $150,000 and gave the money to Douglas’s company.
“It’s not money that we had to play with. It was remortgaging our home and getting our RSPs involved,” said Zubrin.
She said she was also required pay some carrying costs, such as mortgage payments and utility bills.
Her renovations got underway in the spring of 2012 and continued for a few months before stopping.
The contract did not limit the renovation costs, but Zubrin said she was shocked when she later received a bill for more than $120,000 above what she had already spent.
She said the renovation work was still incomplete.
After months passed without further construction work, Zubrin stopped making payments on the advice of her lawyer. She said she was unable to get Douglas to meet with her to resolve the issues.
“This has left us kind of untrusting, bitter,” Zubrin said. “Emotionally, it's the sleepless nights and wondering what we did wrong. It just makes you feel really naïve.”
“No one will ever do this to us again. But it has caused such a change of lifestyle for us,” she added.
Zubrin and her husband have hired a lawyer to look at their options to try to get their money back.
One legal expert describes Douglas’s contracts as unconscionable and onerous for the clients.
If the matter is brought to court, it will be up to the court to decide on the validity of those contracts.
'How can this be?' says client
Another client of Douglas, Denis Jeannotte, attended one of Douglas’s real estate seminars at his office in October 2011.
“He had a big screen and he showed properties that his previous clients had bought off him and flipped and made their money, and he made it sound very doable and interesting,” Jeannotte said. “I had a good feeling about this.”
Jeannotte looked at a number of properties with Douglas and eventually decided to go ahead with a deal for a condominium on Wellington Crescent.
Jeannotte said he understood that he was to be responsible for paying the carrying costs, such as condo fees and the mortgage at more than $2,300 a month, plus the costs of the renovation, which he said Douglas estimated at about $35,000.
“Then one day he [Douglas] had an associate come over with the rest of the invoices that I had to sign, and by the end of it, it was over a hundred thousand dollars” for the renovations, Jeannotte said.
“I thought, 'How can this be? How do I make money here?' So then I really started to realize that something was not right,” he said.
Once the renovation was finished by Douglas’s companies, the condo went on the market.
But at a listing price of $420,000, it didn’t sell — and Jeannotte kept paying the carrying costs of more than $2,300 a month.
Jeannotte called that period a stressful time that left him feeling drained.
“I have two jobs. So essentially I would work 80 hours a week,” he said. “I felt like I was in jail.”
'How can he still be in business?'
Finally, after covering the mortgage for more than a year, Jeannotte said he followed his lawyer’s advice and stopped making payments last spring.
He was left with nothing to show for the more than $100,000 he had spent on the project.
The condo was recently listed for sale at $350,000.
“Ultimately I would like to get my money back,” said Jeannotte, who has hired a lawyer to look into his options.
“My big question is, how can he still be in business?” Jeannotte said of Douglas.
A securities commission spokesperson told CBC News he cannot comment on the nature of the ongoing investigation involving Douglas, who has had a real estate license since 1994.
The MSC is the regulatory body for real estate brokers and salespeople in Manitoba, as well as for mortgage brokers.
The I-Team has been unable to speak to Douglas despite repeated attempts. His offices in East St. Paul are empty.
Douglas has been registered as a mortgage broker since 2011 but that registration was suspended on May 31 when he failed to renew it, the securities commission said.