Nicole Koteff was the last one in her office at Yonge and St. Clair when her phone pinged with a message she didn’t expect at 7:34 on Thursday night.
The investigative report into Ontario’s biggest real estate scandal had finally dropped.
Koteff, a former in-house lawyer for the Real Estate Council of Ontario (RECO), grabbed her laptop to start reading.
“I knew people would be calling me with questions,” said Koteff, who now defends realtors in regulatory matters.
But the 53-page report, which is based on anonymized interviews with 14 RECO staff, board members, emails and documents supplied by the regulator, “raises more questions than answers,” Koteff said, and a lot of “red flags.”
The audit and the government’s response has unleashed a torrent of criticism from within the industry and beyond. Realtors, lawyers and governance experts are questioning the independence of an investigation into RECO’s handling of the iPro scandal that was directed and paid for by RECO. They say the report’s findings are “unbelievable” and want government to immediately fire RECO’s board, its executives, and not wait a moment longer to make good on its takeover threats.
In response to the audit, Stephen Crawford, minister of Public and Business Service Delivery and Procurement, which oversees RECO, has said he may appoint an administrator to assume control of the regulator but will give its leaders two weeks to plead their case before taking decisive action.
In late August, RECO tapped Dentons Canada to investigate the conduct of its own executives and staff in failing to alert the public for three months of an unprecedented financial breach at iPro Realty, which until August was one of the 10 biggest brokerages in Ontario, employing more than 2,400 realtors in 17 offices across the Greater Toronto Area.
Koteff, who is also a broker with Royal LePage, expected the report to answer important questions.
Why did the regulator allow iPro’s principles, Rui Alves and Fedele Colucci, to continue operating their company, business as usual, and conduct more than $700 million in real estate transactions for three months after learning more than $10 million in consumer deposits and agent commissions had gone missing from the brokerage’s trust accounts?
Why didn’t they freeze iPro’s accounts right away? Why did it allow the men time to sell their company and make a “semi-retirement” announcement instead of immediately suspending their realty licences? How could an organization that’s provincially mandated to protect the public fail so epically?
“The questions that everybody’s been asking,” Koteff said.
But the report doesn’t go that far.
It paints a picture of a dysfunctional organization and largely blamed a single man, RECO’s former registrar Joseph Richer, for its dysfunction and the secrecy surrounding the iPro matter. It said Richer, whom the RECO board “exited” shortly after the scandal broke, “unilaterally” planned and executed an unorthodox deal with iPro’s co-founders and asked the CEO to keep a lid on it so he could work with the men to try to recover the missing funds.
But the registrar wasn’t the only one who knew of iPro’s massive shortfall, a timeline in the middle of the Dentons Report shows.
On May 19, Colucci’s lawyer emailed a letter to “a member of RECO’s legal team” disclosing a $10-million shortfall in iPro’s trust accounts. Colucci’s lawyer also sent a second email to the registrar and a “member of RECO’s inspection” team requesting a postponement to a planned routine audit.
The report confirms Richer alerted CEO Brenda Buchanan and flagged that the case involved “a former RECO board director, ‘Rui.’
“Though the CEO did ask the Registrar for updates from time to time,” Dentons’ audit stated, “these reports were sporadic and not forthcoming.”
Koteff said it’s troubling Buchanan, as head of the organization, didn’t simply insist on receiving more information.
Richer, three times throughout the report, was described as “strong willed, intimidating and protective of his authority.”
Koteff said she worked with Richer and that wasn’t her experience.
She said she often discussed case files with him.
“I never felt there was any resistance to my view,” she told the Star in an email. “In fact, he usually ended up agreeing with my positions. It would be interesting to find out what employees were interviewed. Were they front-line registration or compliance employees, or were they the numerous lawyers (and two paralegals) who actually took instruction from Joe on disciplinary files?”
The report states the board chair was not notified of the issues at iPro until Aug. 10, two days after an “undertaking agreement” with iPro’s principles had been executed and despite an understanding within the organization that the board wanted “to be notified of matters involving significant organizational or reputational risk.”
Koteff noted the CEO reports directly to the board.
“Everybody is under her,” Koteff said. The registrar included.
“She has the ability to hire, fire, oversee, supervise.”
The board appointed Buchanan in July. She had been acting as interim CEO since February.
Neither RECO nor its CEO responded to the Star’s question about why Buchanan didn’t intervene in the iPro matter. Richer also did not respond to a request for comment.
Brandon Reay, an Ottawa realtor who writes about industry governance, said Dentons documented the symptoms of a “deep problem” with the regulator and how it functions.
However, he doesn’t agree with its conclusion that the sole responsibility lies with the registrar.
“We have a regulatory model that funnels almost all of its discretionary power through one office with no oversight, there’s no ability to distribute authority, there are no escalation pathways.”
Toronto-based mortgage broker Ron Butler called the report’s findings “unbelievable,” in the unflattering sense.
Butler said it’s “absolutely impossible” that an organization, which employs 170 staff, set up walls that kept executives and board members in the dark about the largest financial breach in its history.
“I don’t accept that, I just don’t,” he said. “There’s no one person hiding in an office who makes all the decisions. That’s ridiculous. There’s dozens of people involved in the examination of malfeasance.”
Butler says RECO’s board and executives should be fired and an administrator appointed to assume control immediately. He doesn’t understand why the minister is waiting 15 days.
Other provinces have taken decisive action against real estate regulators.
In 2019, the Alberta government fired the real estate regulator’s entire board noting it had become dysfunctional and plagued by internal infighting, following a KPMG audit. The government appointed an interim administrator to improve the regulator.
In B.C., the real estate regulator successfully changed from being self-governed by industry to being government-controlled, in 2016, after a scathing report found the regulator was not fulfilling its mandate to protect consumers.
In Ontario, government intervention may not be the solution, warns Karen Somerville, president of Canadians for Properly Built Homes, a consumer advocacy group. She said the ministry is part of this mess and must be examined for its own role in the scandal.
Since 2009, the ministry has collected millions from RECO in mandatory annual payments to cover the costs of overseeing the regulator. For the period of April 1, 2024 to March 31, 2026 alone, a ministry spokesperson confirmed the government received more than $873,000 in “oversight fees” from RECO.
“The RECO situation has taken your ministry’s ineffective oversight to a whole other level,” Somerville wrote in an email addressed to Minister Stephen Crawford today.
“With respect, your action is too little too late.”
