Investors who lost millions in syndicated mortgages call for changes at law society
Lawyers failed to explain fine print, commission rates, investors allege
Dozens of investors who lost millions of dollars in syndicated mortgages say provincial regulators and the Law Society of Ontario failed to protect them from the predatory scheme.
The investors, who collectively go by the name Victims of Syndicated Mortgage Investments (VOSMI), rallied on Friday morning outside the law society's offices at Osgoode Hall in downtown Toronto.
"We feel they are partly responsible for this fiasco and for the loss, and we want them to take accountability," said Corrine Sutej, who helped organize the protest.
"Overall, we just feel very let down by the regulators and the law society."
VOSMI alleges that lawyers who worked on the mortgages deliberately withheld information about the riskiness of the projects, and failed to disclose commission rates as high as 35 per cent in the investments.
They are calling for thorough investigations into the lawyers and for those involved to be disbarred.
The majority of the protesters at Friday's event invested in syndicated mortgages at properties managed by Fortress Real Developments, a firm based in Richmond Hill, Ont.
The company is under investigation by the RCMP, and brokers associated with Fortress have been fined $1.1 million by the Financial Services Commission of Ontario (FSCO).
Syndicated mortgages are investments in which a developer finds more than one private lender to invest money in a property instead of going through a bank.
'You believe lawyers'
Some VOSMI members say they were promised returns of eight per cent annually, but have instead seen their money disappear.
"Our money is gone, our health is gone, we are totally, totally disappointed," said Teresa Mikolajczyk, who invested $100,000 in a syndicated mortgage.
She said the loss represents a major portion of her retirement savings, and that she's now struggling to pay for housing and basic necessities.
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"I am worried about what I can do to live on my very little CPP. I cannot even pay my own apartment," she told CBC Toronto while fighting back tears.
Mikolajczyk, 67, is now blaming the experts who promised the mortgages would be safe and strictly regulated.
"You believe lawyers, you believe brokers, because I am not a lawyer," she added.
"Who we can trust here in Canada, who? We don't have anybody right now. Everybody left us alone."
VOSMI members say the developers, brokers and lawyers targeted seniors who are poorly equipped to endure such major financial hardship.
"For people of my age, there is still some room, some time for recovery," said Nikolai Chekhmatov, who lost around $120,000.
"For these people pretty much it's the end of the story."
Did regulators do enough?
VOSMI alleges that the Law Society of Ontario and FSCO failed to investigate the syndicated mortgages scheme when complaints first began to surface.
In the case of the Fortress mortgages, Sutej said the law society was notified in 2016, but failed to take action for more than a year.
"People invested during that time, they may not have if there was more of a warning out there," she said.
In a statement to CBC Toronto, the law society said it could not provide details about ongoing investigations into its members, but a spokesperson said the organization is aware of the problem.
"The Law Society published a Notice to Lawyers Concerning Syndicated Mortgages in an effort to alert lawyers to potential pitfalls when acting for clients on [syndicated mortgages] and to highlight lawyers' obligations in such cases," wrote Gelek Badheytsang.
The province has replaced FSCO with the Financial Services Regulatory Authority of Ontario (FSRA) since the Fortress investments scandal, though it is not clear if the new body will have more resources than its predecessor.