Condo owners allege former board members siphoned money, left them on hook for $750K
Toronto Police investigating alleged frauds at downtown condos
By John Lancaster
23 February 2018
left, Ray Blanchard, centre, and Darryl McGregor, right, are among the
people being sued by Five Condos owners. (LinkedIn)
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.
Condo clash: Court battles, forgery allegations and questions over who controls Toronto highrises
Angry owners take control of a condo board plagued by controversy
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.
Condo owners at
Five have been hit with a $750,000 assessment to cover money they
allege was diverted by their former board. (Google Maps)
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
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
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.