According to a November 8, 2017 Globe & Mail report the Guyanese-Canadian Raj Singh owned Tier 1 group of companies is under investigation into fraud allegations by the Ontario Provincial Police (OPP) involving the use of syndicated mortgage investment funds.
“The mortgage pools raised $119 million from 1500 investors to fund a development group planning to build condominiums and student residences.” The Globe & Mail’s report cited.
A report by accounting firm, Grant Thorton which has been appointed trustee for the mortgage investors, said the OPP’s anti-rackets branch is investigating a condominium project at 28 McMurray St. W. in Bracebridge, Ont. that was one of the developments funded by the syndicated mortgage loans.
The OPP sent a letter to investors in the McMurray project saying it is trying to identify victims and witnesses who will speak to the police.
Grant Thornton said it also contacted the RCMP about the case. The trustee’s report asks for court approval to give police the names of investors in the McMurray loans, and says it anticipates police will ask for names of investors in the other, related projects as the investigation continues.
Toronto lawyer David Franklin, who is representing investors who lost money in the Tier 1 mortgage pools, said he contacted the OPP about the case because he was concerned that investors appeared to have lost money due to wrongdoing.
‘They were told these are safe, secure investments, you’ll get 8 per cent on your money, it’s good for your retirement and it’s RRSP eligible,’ Mr. Franklin said.
Mr. Franklin said he believes the Financial Securities Commission of Ontario (FSCO) took too long to act on concerns about wrongdoing that stretched back for years, and most of the investors’ money has been lost as result.
According to court filings, FSCO suspended the two mortgage broker firms’ licenses in October, 2016, after an investigation concluded that they promoted and sold the mortgage investments in violation of mortgage lending rules. FSCO alleged it discovered numerous conflicts of interest involving Bhaktraj Singh, who was a senior executive at the mortgage broker companies that were marketing the syndicated loans.
FSCO said Mr. Singh was also a “director, officer, shareholder (either directly or indirectly) and/or profit participation interest holder” in most of the development groups that borrowed from the mortgage pools.
The regulator said investors were not told about Mr. Singh’s “clear conflict of interest” in marketing the syndicated mortgage investments without clearly disclosing he would also benefit from loans to entities in which he had a financial interest.”
The Globe and Mail further stated, “Grant Thornton, which is overseeing 11 companies that held mortgages issued using the investors’ funds, said in court filings it has concluded that most of the companies had loans outstanding for projects run by a group known as the Davies Developers headed by real estate developer John Davies. The group included Mr. Singh and others.
Earlier this year, the trustee asked the court to appoint a receiver – KSV Kofman Inc. – to take control of the eight Davies Developers properties.
In a report filed in court in June, KSV concluded only a small percentage of money borrowed from the investors appeared to have been used for its intended development purposes, while millions of dollars were paid to the Davies Developers group in management fees, consulting fees, dividends and loans.
Justice Meyers in his endorsement concerning these transactions wrote:
“This was apparent on day one. To answer the systemic cash drain built into the companies by design, Mr. Davies and Mr. Singh would have Tier 1 obtain further public investments. Tier 1 raised funds from real people on the basis than the funds would be lent to a developer on a secured basis to fund a building. But instead, Singh and Davies used new funds to pay accruing interest on earlier investments in other of the 11 companies. That is called a Ponzi scheme.
Individuals who invested in these mortgages are now being urged to contact the OPP anti-rackets branch to assist them in their investigation.