A formal audit has found the former registrar at Ontario’s real estate regulator didn’t follow “standard process” when he made a deal with the founders of iPro Realty.
The report, based on interviews with RECO’s former registrar Joseph Richer, as well as employees and board members, documented a culture of secrecy and fear within RECO, where employees “did not feel empowered” to challenge Richer, who was described as “strong-willed, intimidating and protective of his authority.”
The Dentons Canada report, prepared for RECO’s board, said that on May 19, just 21 minutes after learning of iPro’s $10 million shortfall, Richer decided to handle the matter on his own. The deal he eventually brokered saw iPro’s co-founders lose their real estate licences, but did not include either fines or charges.
After reviewing the report, Stephen Crawford, minister of Public and Business Service Delivery of Ontario which oversees RECO, said the government is prepared to “assume control” of the regulator “to prevent serious harm to the public” unless the regulator can provide a compelling alternative within the next 15 days.
“Ultimately, the Dentons report raises concerns about RECO’s ability to restore public confidence in the real estate services sector and to protect consumers during one of the largest purchases of their lives,” he wrote in a letter sent to RECO’s board on Thursday afternoon.
“Given the severity of these concerns, I find it appropriate and necessary to consider appointing an administrator to assume control of and responsibility for RECO.”
A post to X by the Minister used stronger language, with Crawford stating he will take “decisive action” and “notified RECO’s Board of my intention to appoint an administrator to restore public confidence.”
It’s unclear why the statement on X and the letter do not convey the same message.
The report also reveals that an external party had concerns about iPro’s finances even before the scandal broke, but hesitated to file a complaint, believing RECO would not properly address it because Rui Alves, one of iPro’s co-founders, was a board member at the time.
Dentons represents RECO in the ongoing court case against iPro. Its report is based on interviews it conducted with Richer, who attended his interview with legal counsel, 14 RECO employees, all eight current members of the regulator’s board and its review of thousands of emails and documents.
The report provides 19 recommendations to improve transparency and governance.
RECO has faced intense public backlash for its actions in the iPro case, which allowed the brokerage to continue operating and conducting more than $700 million in transactions for three months after it discovered the financial breach in May.
RECO said it is “fully committed to implementing” all of Dentons’ 19 recommendations to reform the organization.
The recommendations include developing clear policies for the registrar’s powers, strengthening oversight, and completely redeveloping RECO’s “inadequate” whistleblower program.
In a statement posted to its website on Thursday night, RECO said it is “committed to working collaboratively with the Minister to understand the proposed process, scope, and next steps.”
Ultimately, Richer deviated from RECO’s standard approach when dealing with misappropriation of trust accounts, the report said.
While the registrar has the option to pursue an undertaking agreement, Richer chose to not adhere to RECO’s standard procedure of pursuing a suspension order, freeze order, and request to revoke registration — measures that could have been used as interim protections while Alves and his long-time business partner Fedele Colucci worked to recover millions of dollars in lost funds.
Alves served on RECO’s board from 2019 to 2023, and while it appears Alves and Richer did not have a personal relationship outside of work, the conflict of interest should have pushed Richer to adhere more strictly to protocol, the report added.
The undertaking agreement allowed iPro’s founders to “voluntarily terminate” their realty registrations and escape charges and fines.
Richer told RECO CEO Brenda Buchanan and the board chair of the undertaking agreement on Aug. 10 — almost three months after Richer first learned of iPro’s financial breach.
Richer left his post at the regulator on August 22.
