5-year Canada Revenue Agency investigation into B.C. 'shadow broker' doomed by 'technicality'

Federal prosecutors decided not to laic charges stemming from a five-year Canada Revenue Agency probe into a half-billion-dollar alleged owe fraud lawsuit due to the fact that of a "technicality," according to documents obtained by the CBC.

The documents — released done state of accusation — item attempts by B.C.'s financial regulator to interest law enforcement agencies successful a alleged 'shadow' owe broker and the much than 2 twelve existent property professionals who assisted him.

B.C. Financial Services Agency investigators spoke with Vancouver constabulary and the RCMP about their probe into Jay Kanth Chaudhary. The documents accidental the CRA yet pursued allegations that the unregistered broker had failed to wage astir $1 cardinal successful taxes.

But past summer, a elder researcher with the CRA's occidental portion transgression investigations part wrote to a ineligible manager for B.C.'s Financial Services Agency to tell her the probe was over.

"Unfortunately, owed to a technicality, the Public Prosecution Service of Canada has decided not to laic charges for this investigation," Aaron Altrows wrote successful an email.

"All is not lost, though, arsenic I did notation this lawsuit to the civilian broadside of CRA, wherever assessments were completed. This was an fantabulous referral and precise overmuch appreciated to travel from your agency. Please proceed to nonstop america referrals successful the future."

'Staggering' scope of activities

The documents supply caller penetration into a multi-year investigation into Chaudhary and the web of existent property agents and owe brokers who fronted his efforts to unafraid $500 cardinal successful financing for unqualified homebuyers done altered taxation and slope statements.

The quality of the "technicality" that voided the laying of adjacent tax-related charges is not explained successful the FOI documents, and the Public Prosecution Service said it would "not remark connected investigations that it whitethorn oregon whitethorn not beryllium undertaking."

BCFSA's manager of investigations, Raheel Humayun, has called the scope of Chaudhary's unregistered activities "staggering" — not to notation the fig of licensed professionals who violated ethical and nonrecreational codes to assistance him.

But beyond licence suspensions, cancellations and fines up to a maximum of $50,000, nary 1 associated with the strategy appears to person faced immoderate transgression sanctions.

BCFSA documents amusement it wasn't for deficiency of trying.

'30 perchance associated individuals'

A "case note" claims investigators for the regulator met with members of the Vancouver constabulary department's fiscal transgression portion connected April 3, 2019, "to sermon whether VPD would entertain pursuing this record from a transgression perspective."

Another "case note" for the aforesaid time says unit besides met RCMP "to sermon whether this probe was aligned with the existent mandate of the Financial Integrity Unit and whether determination would beryllium immoderate involvement successful taking connected this record from a transgression perspective."

The documents amusement elder RCMP investigators past appeared to instrumentality a 2nd look astatine the record 4 years aboriginal — agelong aft the lawsuit had started making headlines and aft Chaudhary was summoned arsenic a witnesser to a provincial commission into wealth laundering.

Humayun wrote a memo successful January 2023 to 2 inspectors with the Federal and Serious Organized Crime unit, "describing the perchance transgression enactment we person observed during our regulatory investigations."

"The names, DOBs and basal allegations against ... these 30 perchance associated individuals are contained wrong an appendix to the letter," helium wrote. 

"Our bureau is disposable to supply further details, including the grounds oregon reports successful our possession."

But thing happened.

In a statement, the VPD said the alleged violations were "primarily regulatory successful nature" — meaning the BCFSA was the champion assemblage to investigate.

The RCMP did not explicate its determination not to proceed, refusing to "confirm the individuality of immoderate person, concern oregon entity who whitethorn oregon whitethorn not beryllium taxable of an investigation."

'Falsely reporting their income to CRA'

The Canada Revenue Agency started showing involvement successful the summertime of 2019.

An email written arsenic a "potential lead" from BCFSA researcher Doug Brecknell to CRA Criminal Investigations lays retired the regulator's grounds for suspicion.

"From the grounds and documents produced by the existent property licensees, it appears that the existent property licensees whitethorn person been nether oregon falsely reporting their income to CRA," Brecknell wrote.

"Both mendacious and believed to beryllium genuine taxation documents for the existent property licensees were obtained. A reappraisal of taxation documents ... indicates that it would beryllium improbable that the existent property licensees' reported income would beryllium capable to spend the owe payments being made."

In the months that followed, the CRA got a warrant to prehend records the registrar of owe brokers had already taken from Chaudhary and Shane Christopher Ballard — a erstwhile owe broker who later admitted facilitating 165 applications for Chaudhary.

Allegations of unremitted taxes

The exertion to get the hunt warrant says CRA investigators believed Chaudhary — besides known arsenic Mike Kumar oregon Jay Michaels — "earned $5,283,347 of lawsuit fees and $642,344 of referral fees" betwixt 2009 and 2019.

"It is alleged that betwixt 2012 and 2018 the unreported nett concern income, unremitted income taxation and unremitted Goods and Services Tax/Harmonized Sales Tax is estimated to beryllium $2,967,915, $798,505 and $163,033, respectively," the hunt warrant says.

"It is further alleged that the estimated unremitted Canada Pension Plan contributions for this play is $23,623."

The hunt warrant gives an illustration of a businessman who paid Chaudhary astir $5,000 — 1 per cent of the owe main — to put location financing for his lad utilizing faked taxation documents.

The documents accidental Ballard past paid Chaudhary a $1,250 interest for the owe referral helium got to taxable the exertion to CMLS Financial. 

Ballard allegedly paid Chaudhary a full of $282,900 successful currency arsenic referral fees for the owe applications helium handled betwixt 2015 and 2018.

Earlier this year, Ballard — who present works arsenic a location inspector — was banned for beingness from being a owe broker and ordered to wage a $50,000 fine.

At the clip of Chaudhary's Cullen Commission grounds successful February 2021, his lawyer said the CRA's probe was successful "charge approval." The "technicality" appears to person arisen betwixt then and 2024.

Once the CRA dropped the transgression probe past summer, the bureau returned the probe files to the regulator.

'I don't deliberation it tin beryllium prevented'

Many of the existent property agents who brought clients to Chaudhary took vantage of his services themselves, including 2 individuals stripped of their licenses earlier this twelvemonth successful a bid of actions the regulator took against the "extensive web" of radical astir the shadiness broker.

One of them admitted to utilizing fake fiscal statements to bargain a location a twelvemonth aft she declared a antagonistic yearly income of $459.

Chaudhary was licensed arsenic a owe broker from 2007 to 2008, erstwhile helium was suspended pursuing an probe which recovered helium had submitted falsified records for a scope of clients.

He spoke astir his activities astatine magnitude astatine the Cullen Commission connected wealth laundering successful 2021, maintaining that helium helped clients who mightiness not conscionable an organization lender's qualifications debar the unsafe satellite of backstage lenders.

Chaudhary claimed nary of his clients ever defaulted connected a loan, nary of the banks that gave them wealth were ever hurt, and a booming B.C. existent property marketplace meant helium was ever busy.

"In reality, I don't deliberation it tin beryllium prevented," helium told the committee astatine 1 point.

"Because determination ever volition beryllium a request for individuals similar america and what we did, and due to the fact that the request itself is there. The request comes from the borrowers themselves. The request comes from radical who privation a location and do not acceptable successful the accepted guidelines."