Property management company defrauded clients, securities commission finds

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This article was published 23/04/2024 (845 days ago), so information in it may no longer be current.

A now-defunct property management company defrauded clients of nearly $150,000 over the course of one year in undelivered services and accounting sleight of hand, a Manitoba Securities Commission investigation has found.

Lead Property Management Inc. was dissolved in August 2012. An investigation into the company’s misdealings began in 2011, one year after the death of one of the company’s two shareholders, Kevin Dell. Sharon Conway was the other shareholder.

In a resolution repeatedly delayed by changes to commission staff, hearing panel members and relevant legislation, the commission has ordered that Lead’s defrauded clients be fully compensated for their losses.

Lead Property Management “through its shareholders and staff, committed numerous fraudulent acts, which included acts of deceptive dealings and wrongful takings, and which all related to trades in real estate,” the commission said in a recently issued written decision.

“When the fraudulent acts occurred, Lead was acting in its capacity as a property manager and the reliance on Lead by the property owners was evident in their contracting with it to take care of their properties,” the commission said.

Between September 2011 and September 2012, the period under investigation, Lead Property Management managed one or more properties for 106 clients. Lead was responsible for collecting rent payments, which were to be held in a bank as trust funds, from which Lead could withdraw funds for maintenance, repairs, and other eligible expenses. In a second account, Lead collected security deposits, which were also to be held under trust conditions.

A forensic audit revealed a second company — Delcon Developments — operated out of Lead’s office, with its own bank account. Delcon, said the commission, “appeared to be providing construction and other services at some of the properties,” billing property owners with an invoice that included “upcharges” of up to 20 per cent.

“The ownership of Delcon and the fact that an upcharge was being added to their bills was not disclosed to the property owners,” the commission said.

Another company — Achievers — was listed in Lead documents as a purported provider of repair work on some of the properties, but no invoices or receipts could be produced to show the company actually existed or that the repair work was performed.

The investigation uncovered an individual not named in the commission report who received transfers from the trust accounts to which he was not entitled, including $40,000 he used for repairs to his own properties, as well as a $23,645 payment from Conway that should have been deposited into the rent account.

In several instances, Lead took money that was to be held in trust for its own use, including payroll expenses and covering overdrafts in its own accounts.

Internal emails showed Conway and Lead’s accountant were aware property owners had been led to believe their property expenses were being paid when they were not, including $19,000 to Manitoba Hydro and $32,000 to the City of Winnipeg.

Property owners will be compensated from money in the company’s frozen bank accounts and a reimbursement fund created to repay victims defrauded by members of the Manitoba Real Estate Association.

Property owners are not identified in the decision.

“Confirmed property owners are entitled to compensation only for direct losses,” the commission said. “They are not entitled to have debts wiped out at the expense of the members of the Manitoba Real Estate Association, which fund the reimbursement fund.”

dean.pritchard@freepress.mb.ca