The Real Estate Council of Ontario (RECO) has issued an order to freeze the bank accounts of Oakville, Ont.-based Rexig Realty Investment Group. The regulator has also issued a proposal to revoke the registrations of both the brokerage and Broker Paul Poliszot, the brokerage’s director and president. 

The measures, announced Oct. 30 under the Trust in Real Estate Services Act, 2002 (TRESA), are intended to protect consumer deposits. RECO says the freeze order prevents funds from being withdrawn from the brokerage’s bank accounts. It uses freeze orders “when necessary” to ensure that money held in brokerage accounts is not at risk of being misused.

Rexig, which employs 10 agents according to the regulator, remains open. RECO says the broker of record will oversee remaining transactions and facilitate the transfer of agents and active listings to other brokerages.

Appeal process

A proposal to revoke registration is issued when the Registrar believes a brokerage or registrant is not entitled to registration. The decision can be appealed within 15 days. If no appeal is filed, Rexig and Poliszot’s registrations will be terminated, and they will no longer be permitted to trade in real estate.

Poliszot did not respond to Real Estate Magazine’s request for comment.

In a 2021 interview with REM, Poliszot described his firm as working “much like a real estate investment bank,” advising smaller investors — such as medical professionals, lawyers and entrepreneurs — on building real estate portfolios.

Province reviewing iPro audit

The enforcement action comes as the Ontario government confirms it has received Dentons Canada’s audit into RECO’s handling of the iPro Realty scandal, which involved the alleged misuse of millions in trust funds. Minister Stephen Crawford has said the findings will be made public once his review is complete, though no timeline has been given.

Consumers and agents affected by the Rexig freeze order are encouraged to contact RECO.

Editor’s note: Realty Executives has no affiliation with Rexig Realty Investment Group Ltd. A previous reference has been removed to avoid confusion.

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“The suggestion that millions of dollars was diverted for our personal use is false,” he said in a written statement, first reported on by the Toronto Star and obtained by Real Estate Magazine.

The co-founder of the collapsed brokerage admits to “serious mistakes” and says he has regrets for the “chaos” caused to industry peers, iPro’s former agents and consumers. 

He owns up to using trust account funds, calling it “misguided attempts to save the company,” which grew at warp speed over the last decade to 17 offices and 2,400 agents across Ontario.

“We failed everyone,” he wrote.

The statement was not signed by his business partner Fedele Colucci. 

Alves said iPro is not the only brokerage in Ontario that operates by moving trust account funds into its general accounts.

He called it a “vulnerability in the system,” and one that Real Estate Council of Ontario (RECO) should consider addressing.

RECO has been under fire by the industry and consumers for its handling of the iPro situation. It said it became aware of the trust account shortfall in May, leaving many to question why the public wasn’t notified until August. 

This week, RECO obtained several court orders, with one of them freezing Alves and Colucci’s assets. RECO is pursuing iPro for removing and misusing consumer deposits and agent commissions held in trust. 

RECO said in its original court application that it is seeking to trace the flow of trust funds that were diverted and return them to the trust accounts.

iPro’s offices shut down on Aug. 19. The total amount missing is now closer to $6.5 million, since the brokerage’s assets were sold to iCloud Realty for $3 million.

Police investigation in ‘early stages’

The Ontario Provincial Police (OPP) Anti-Rackets Branch is in the early stages of an investigation related to iPro.

OPP spokesperson Eric Cranton told Real Estate Magazine on Thursday that the police service cannot speculate on how long the investigation will take or what the outcome will be.

“We will take the time needed to conduct a complete and thorough investigation,” wrote Cranton.

Courtney Zwicker

Courtney Zwicker is a digital reporter and associate editor for REM. Based in Atlantic Canada, she has over a decade of experience covering daily business news.

The post Trust money used to ‘save’ struggling iPro, not for personal gain: Alves appeared first on REM.

Justice William Black of the Ontario Superior Court of Justice heard the matter virtually. RECO is pursuing iPro for removing and misusing consumer deposits and agent commissions held in trust. 

RECO said in its original court application that it is seeking to trace the flow of trust funds that were diverted and return them to the trust accounts from which they were taken.

iPro’s 17 offices shut down on Aug. 19, affecting 2,400 agents, following the discovery of  $10.5 million missing from the brokerage’s trust accounts. The total amount missing is now closer to $6.5 million, since the brokerage’s assets were sold to iCloud Realty for $3 million.

Justice Black’s orders specifically include a Mareva injunction, or a freezing order, which prevents the respondents from moving assets before the case is resolved.

 Under a separate order, iPro’s former principals may apply for an order specifying the amount of funds they are entitled to spend on “ordinary living expenses, and legal advice and representation.”

Norwich Relief was also ordered, which compels banks to deliver to RECO any and all records pertaining to the respondents’ assets and accounts. 

The list of respondents includes companies that either Colucci, Alves, or both are directors of, including: IP Holding Realty Ltd., Hippo Holdings Corporation, Sutton Group Professional Real Estate Services Inc., Alco Motors Ltd., and Alco Rent-A-Car Ltd.

In total, roughly $30 million of funds that should have been held in trust were instead commingled with the firm’s general account or sent elsewhere, according to court filings.

For more details, find court documents related to the matter here.

Courtney Zwicker

Courtney Zwicker is a digital reporter and associate editor for REM. Based in Atlantic Canada, she has over a decade of experience covering daily business news.

The post RECO lands court order to freeze iPro founders’ assets appeared first on REM.

New evidence filed by the Real Estate Council of Ontario (RECO) last week in the ongoing court action against Colucci, Alves, and their companies reveals what appears to be a complex scheme of trust fund misappropriation by iPro’s former owners through a network of accounts and entities.

RECO, in the case filed with the Ontario Superior Court of Justice, argues that Colucci and Alves “systematically misused trust funds” by moving them into operating accounts and related companies, and, through direct payments, to themselves and their associates.

Findings from the 700 pages of affidavits of RECO CEO Brenda Buchanan and forensic accountant Alessandra Leggio Di Matteo show a massive diversion of funds siphoned from iPro’s legal trust accounts into regular operating accounts.

In total, roughly $30 million of funds that should have been held in trust were instead commingled with the firm’s general account or sent elsewhere.

At least $14.3 million was moved via electronic transfers and $10.1 million via cheques from the brokerage’s trust accounts into its general accounts, court documents show. An additional $2.63 million in trust cheques were made out to “iPro Realty Ltd.” but deposited into unknown destinations.

The documents, prepared by RECO’s counsel Dentons Canada, also show iPro Realty Inc. – a separate entity from the brokerage – transferred $3.4 million from its own trust accounts to its general account, and wrote hundreds of thousands in cheques from its trust to iPro’s other accounts.

In a statement, RECO said these affidavits set out to prove its assertion that a deliberate trust scheme was orchestrated by iPro’s former principals and related parties “to divert and misuse consumer deposits and agent commissions that were required to be held in trust on their behalf.”

“This scheme represents a serious breach of fiduciary, statutory, and ethical obligations, and has harmed consumers, registrants, and the broader real estate sector,” said RECO.

RECO’s proceeding seeks a freeze of assets and further requests a court order that will permit RECO to trace the flow of trust funds that were diverted and return them to the trust accounts from which they were taken.

The list of respondents includes companies that either Colucci, Alves, or both are directors of, including: IP Holding Realty Ltd., Hippo Holdings Corporation, Sutton Group Professional Real Estate Services Inc., Alco Motors Ltd., and Alco Rent-A-Car Ltd.

These companies have “knowingly assisted” iPro and its co-founders’ breaches of duties, reads the original application, “and have knowingly received funds impressed with a trust under the (Trust in Real Estate Services Act) and at common law.”

iPro’s 17 offices shut down on Aug. 19, affecting 2,400 agents, following the discovery of $10.5 million missing from the brokerage’s trust accounts. The total amount missing is now closer to $8 million, RECO has said.

Where did the funds go?

RECO is arguing that once funds were improperly in the general accounts, the money was used for a variety of unauthorized purposes, particularly to repay investors and lenders.

The forensic review found $870,158 in cheques issued from iPro’s general accounts to people listed on an internal “IPRO Loans List”.

Similarly, $1.05 million was paid out of Hippo Holdings’ account to names on a “Hippo Investors List,” documents show

Additionally, forensic analysis found Colucci received at least $172,864 via cheques from iPro Realty’s general account, plus $137,795 more via cheques out of Hippo’s account.

Rui Alves likewise received $108,145 in cheques drawn from iPro Ltd. and iPro Inc. general accounts, court documents show.

Moreover, Joselle Alves Personal Real Estate Corporation (owned by Alves’ spouse) received $41,000 in payments, and Meli Colucci (spouse of Colucci) received $42,893, both paid out of iPro’s general accounts.

In its statement to the media, RECO said the evidence demonstrates that the “true state” of the trust accounts was purposefully concealed by:

• Operating multiple accounting systems
• Falsifying records
• Delaying disclosure until immediately before a scheduled inspection

“In doing so, they not only betrayed the trust of thousands of Ontarians but also misled other parties who relied on their compliance,” said RECO.

RECO says it is continuing to cooperate with law enforcement in support of their investigations.

Courtney Zwicker

Courtney Zwicker is a digital reporter and associate editor for REM. Based in Atlantic Canada, she has over a decade of experience covering daily business news.

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RECO’s board announced Monday it had ordered an immediate freeze on iPro accounts, to “safeguard funds and secure business operations,” it said, while an independent audit into the matter by legal firm Dentons Canada LLP will begin immediately, according to a statement. 

Demands for action are getting louder after Ontario’s real estate regulator said last week that iPro Realty co-founders Rui Alves and Fedele Colucci will not face charges, despite $10.5 million going missing from the brokerage’s trust accounts.

Toronto real estate lawyer Mark Morris, who has more than 20 years of experience in the field, told Real Estate Magazine he believes RECO’s latest moves are a response to pressure.

“RECO needs to take definitive action and be seen to be doing so to re-establish trust in the profession and amongst the public at large,” said Morris, who heads up Legalclosing.ca. “This was, at a bare minimum, what was required to show that RECO is approaching this seriously and with the intent of reform.”

The freeze of iPro’s accounts means that all transactions will now be processed through ClaimsPro LP, the insurance adjusters for the professional liability policy administered by RECO, said Monday’s statement. The freeze will ensure safeguards are in place while still permitting a process for closure of real estate transactions, said RECO. 

Advice for Realtors with client or commission money tied to iPro

Morris’ advice to anyone looking to recover a consumer deposit or commission through RECO’s insurance program is to “file early and file often.”

“The wording of Schedule A of the claims policy states that, as best I can read it, and with the caveat that I’m not an insurance lawyer, it’s first-come, first-served,” he said. “So you really want to get those claims in quickly.”

The total amount of insurance coverage for consumer deposits and commissions is up to $8 million in aggregate ($4 million for each) with an additional limit of $200,000 per individual, per claim (not per transaction). 

While the two buckets of insurance money are “virtually identical interms of coverage and effect,” consumers and Realtors will be treated “very different” from each other by RECO, Morris said.

‘Consumers will be made whole’

Morris, who, as the lawyer of record for bankrupt brokerage TheRedPin has seen first-hand how these situations can play out, said RECO “will not allow consumer deposits to be lost, or perceived as lost,” because of the immense breakdown of trust in the industry that would inevitably follow. 

“The job of RECO is to regulate on behalf of the public,” said Morris. “Self-regulation is a privilege, and if by virtue of their self-regulation, and the failure of their self-regulation, the consumers are hurt, meaning that they cannot depend on these deposits, then it’s hard to see how you can rebuild trust with the general public again.”

Could Realtors be on the hook?

Morris said he believes that if it comes to it, money owed to consumers could come out of Realtors’ pockets if any amount is outstanding beyond what insurance would cover. 

“All deals are being paid by iPro as they conclude from a consumer deposit perspective, and it is my belief that whatever the cost, it will be borne by the Realtors of this province, whether it be by a special assessment or anything else,” he said. 

“One way or the other, come hell or high water, the insurance coverage limit of $4 million will not stop RECO from affecting additional monies above and beyond because of the fundamental break in trust that will result,” he said.

How will commissions be paid?

“Technically, they’re supposed to pay it out on the first claims basis, but my guess is based on the way that they handled TheRedPin, it will be paid out on a pro rata basis,” said Morris.

The difference is that with first-come, claimants get 100 per cent until there’s nothing left in the pot. Pro rata means you “assemble the total amount of claims, figure the total amount of discrepancies after the insurance has fully paid it’s $4 million, and then from there you make everyone take an equal haircut,” said Morris.

How can Realtors protect themselves and their clients?

Morris advises Realtors to be vigilant about commission payments and the handling of funds through trust accounts.

He said that delays should never be ignored.

“If people are taking a while to pay your commissions or giving you excuses as to why it is you’re not getting your commissions on closed deals, be suspicious,” he said. “That’s a pretty good lesson from this.”

Also, the rules of which trust accounts can he used for consumer deposits, he said, are flexible. 

“There’s nothing that says that deposits have to be paid to any particular trust account. It can be paid to the buyer’s trust account, the seller’s trust account, the seller’s solicitor’s trust account, [or] the buyer’s solicitor’s trust account.” 

Morris emphasized the importance of insurance coverage on trust accounts, something people can ask about before handing over any money.

“All lawyers maintain sufficient coverage per transaction to account for most normal deposits,” he said. “If people are having problems or suspecting that something may be amiss, then just put it into a solicitor’s trust account, there is no difference,” he said.

Morris’s comments for this story are editorial opinion only, and are not to be taken as legal advice. 

RECO commits to releasing report by October

RECO said in Monday’s release that the legal auditor is to deliver an interim report to the board by Sept. 30, and then a final report by Oct. 30. RECO said it will release the final report’s recommendations.

An independent accounting firm is also being engaged to oversee iPro’s closure/wind up and will ensure oversight for remaining iPro transactions, as well as providing forensic audit services. 

Real Estate Magazine has made several attempts to arrange an interview with RECO. 

Editor’s note: This story was updated on the morning of Aug. 27 to clarify information about where consumer deposits can be held.

Courtney Zwicker

Courtney Zwicker is a digital reporter and associate editor for REM. Based in Atlantic Canada, she has over a decade of experience covering daily business news.

The post RECO moves to contain iPro crisis; lawyer breaks down consumer vs. Realtor payouts appeared first on REM.