BUSINESS

Bank of Montreal settles 2010 lawsuit over alleged $70M mortgage scam

06/04/2013 04:45 EDT | Updated 08/04/2013 05:12 EDT
CALGARY - The Bank of Montreal (TSX:BMO) has reached a settlement in a 2010 lawsuit over an alleged $70-million mortgage scam in Alberta.

The bank had sued more than 100 people — including lawyers, mortgage brokers and staff — for allegedly participating in mortgage fraud that cost the bank about $30 million.

BMO claimed that some of the defendants bought houses that cost less than average price in upscale neighbourhoods, then forged papers to make the homes seem to be worth as much as others in the area.

The bank alleged that people known as "straw buyers" were paid a few thousand dollars to put their names on mortgage applications and that forged documents made it look like the buyers had the ability to pay.

The lawsuit claimed that fraudsters took the difference between what they paid for a house and the mortgage they were able to get and sent the money overseas.

The allegations were not proven in court.

There was no comment from the Alberta Lawyers Insurance Association, the insurance fund responsible for paying the settlement on behalf of the lawyers named in the lawsuit.

"If BMO wants to talk about the settlement that they got, that's fine, but it's not our message to tell," said Ally Taylor, manager of communications for the Law Society of Alberta, which runs the insurance fund.

The Bank of Montreal also declined to comment. It said it was bound by a confidentiality agreement.