Realtors say banks should have acted sooner to stop alleged fraud
West Island real estate agents want criminal charges laid in 'cheque-kiting' scheme
A group of real estate agents that worked for a Sutton Quebec franchise on Montreal's West Island want to know how the Toronto-Dominion Bank and the National Bank were allegedly defrauded of more than $2 million in 2012 by the agency's former owners.
The agents worked out of the Sutton Royal branch in Dollard-des-Ormeaux. They are now fighting to get back more than $600,000 in commissions that were seized after the franchise was forced into bankruptcy in December 2012.
"Up until now the whole story is not transparent," said Ge Lu, a former Sutton Royal agent who earned almost $300,000 in commissions after two huge sales in 2012, but has yet to see any of that money.
"What responsibility the bank should take and what responsibility Sutton Quebec should take, I really don't know ..... but I want to know," he said.
Victims of 'cheque-kiting'
In April 2012, Sutton Royal's accounts at the Toronto-Dominion Bank and National Bank were frozen, after an internal bank investigation determined one Toronto-Dominion account was missing more than $1.6 million, while a National Bank account had a deficit of more than $400,000.
That money is now being fought over by Sutton Royal's creditors — among them, the group of agents.
In documents filed in Quebec Superior Court, the Toronto-Dominion Bank and the National Bank allege they were the victims of a scheme called "cheque-kiting," run by Sutton Royal's former administrator, Corinna Susanne Groth, and its president, Dominic Mammarella.
Both Groth and Mammarella have recently filed for personal bankruptcy.
In court documents, Mammarella maintains he wasn't aware of the alleged cheque-kiting scheme.
No police investigation
Kiting is a type of cheque fraud, in which an account's balance is made to appear higher than it really is by exploiting the time it takes for the bank to process a cheque that has been deposited.
The float, or the money that's been credited to the account for the cheque but has not yet cleared, makes it appear as if there are sufficient funds in the account to cover subsequent cheques.
In court documents, the banks claim Groth deposited bogus cheques along with legitimate ones into at least three different bank accounts with at least two different banks. Even though the accounts didn't have enough money to cover the cheques, Groth withdrew the cash anyway and, before any cheques bounced, deposited another bogus cheque, ensuring the float would cover the first one.
Confronted at her home in a newly built condo complex in Vaudreuil, Groth refused to answer any questions about the alleged kiting scheme.
Although several of the agents did report the incident to police, there is no indication any kind of police investigation is being carried out.
That angers former Sutton Royal broker Mona Sheres.
"I would like criminal charges obviously to be laid," she said.
That's not likely to happen, because banks rarely file charges with police, according to Messaoud Abda, a financial crime expert and professor at l'Université de Sherbrooke.
"For financial institutions their biggest asset is not the money, it's their reputation," he said.
"So if people start seeing their bank is being fooled by whoever, you don't feel that you are in a good bank."
In an email exchange, Toronto-Dominion Bank spokeswoman Fiona Hirst said, "We have been in contact with law enforcement officials on this case. For security reasons, we cannot discuss the details of the measures we take publicly."
At least 2 people needed
Both the National Bank and the Toronto-Dominion Bank refused to be interviewed about the allegations, but in court documents, Toronto-Dominion states that initially it only became aware of a flurry of "unusual transactions" in April 2012. It goes on to to say it has very good reason to believe the alleged fraud started months before.
In another lawsuit filed by Sutton Royal before it was forced into bankruptcy, the agency accuses the banks of being negligent, saying there is ample evidence to show the cheque-kiting began as early as September 2009.
According to Abda, this kind of cheque fraud can be maintained for between 12 and 18 months on average, and more often than not, it involves a bank employee who facilitates the scheme.
"It's impossible, you need at least two people," he said. "Someone helping with the financial transaction inside the financial institution and someone helping to cover up the cheques."
"We disagree with your expert that a bank employee is usually involved," said the Canadian Bankers Association in a written statement.
"Generally, detection would start at the branch level. If someone at the branch suspects there is cheque fraud, then the branch would get in touch with the bank's centralized security department," the CBA statement continued.
Both the National Bank and the Toronto-Dominion Bank belong to the association.