Condo owners allege former board members siphoned money, left them on hook for $750K
Toronto Police investigating alleged frauds at downtown condos
Condo owners at a Toronto highrise are suing several former members of their board for $800,000, alleging those members conspired to divert hundreds of thousands of dollars from the building's operating budget for their own benefit.
The owners claim the building is deeply in debt, and they've been hit with a $750,000 special assessment.
The lawsuit, filed by owners at Five Condos on St Joseph Street, alleges a group of individuals posed as condo owners, forged ballots and managed to take control of their condo board in 2016. The owners are suing for $700,000, plus $100,000 in punitive damages.
They were turfed in 2017 after a CBC Toronto investigation revealed some members of the group had allegedly infiltrated the boards of as many as 12 other condominiums.
Condominiums often have multi-million-dollar budgets and it's up to their condo boards to decide how that money is spent.
Once elected, the lawsuit alleges, "the group would use their position of trust and power, authority and discretion to access the operating budgets of the condo corporations to bind the condo corporations to contracts with businesses that they, or their associates, controlled in order to insidiously divert funds for their own benefit."
For instance, the board signed energy contracts that forced residents at Five Condos to pay three times the market rate for hydro. Some members of the board allegedly received commissions or "kickbacks" from the contracts. The allegations have yet to be tested in court.
The men and women resigned from at least two condo boards: Five Condos and L Tower on the Esplanade, after the CBC Toronto investigation.
The lawsuit alleges a "trail of false invoices, pricing inflation schemes and self payments" has since been uncovered.
The group allegedly billed residents at The Five double the cost for security, concierge and property management services, keeping half the money for themselves. In other cases, condo owners were allegedly billed for services that were never provided.
Some condo owners worry their units have been devalued as they struggle to repair the building's finances. The owners say they've had an audit conducted, which has revealed the Five Condos operating budget account and reserve funds were depleted, leaving the group with $600,000 in unpaid bills.
Ryan Kerr, who owns a unit at Five Condos, says "security hadn't been paid, the cleaners hadn't been paid and we had minus 800 dollars in our bank accounts."
Kerr also says the building was about to lose its insurance, water and hydro because those bills hadn't been paid, either.
"We had to scramble to come up with some money quickly," he added. Condo owners have since been hit with a special assessment, meaning they have to collectively pay $750 000 to make up for the losses. There are 539 units in the 48- storey condo tower.
The individuals being sued include Darryl McGregor, Ray Blanchard, George Lazcko and Anastasia Mustafina. Some of them also allegedly infiltrated boards at the L Tower, The Icon on Wellington Street West and the Element condos on Blue Jays Way.
Residents of at least three of those condos have filed formal complaints with the Toronto Police financial crimes unit alleging similar losses and mismanagement. CBC Toronto has learned that police have launched a criminal investigation.
None of the defendants has filed a statement of defence yet, and none could be reached by CBC Toronto for comment regarding the lawsuit.