Two Hamilton lawyers face Law Society disciplinary action

Two Hamilton lawyers are facing disciplinary action by the Law Society of Ontario over real estate transactions involving a former mortgage broker found guilty in the past of fraud and sexual assault.

Ross McLeod and Chris Sherk are alleged by the Law Society to have participated in or knowingly assisted in dishonest or fraudulent conduct" in connection with Dennis Khanna, who lost his mortgage broker licence three years ago.

In McLeod's case, an agreed statement of facts has been submitted and a disciplinary hearing was held earlier in December. The Law Society Tribunal has reserved its decision.

In Sherk's case, an agreed statement of facts is still being finalized and a date for a disciplinary hearing has not yet been set.

The disciplinary cases relate to a number of mortgage transactions, dating back more than a decade in some instances, involving several properties in Hamilton where Khanna and his family members arranged mortgages.

Khanna pleaded guilty to fraud in 2018 and was found guilty on three counts of sexual assault in 2019.

In 2017, Ontario's Financial Services Tribunal decided it would not reissue Khanna's mortgage broker licence or renew the licence of his Hamilton-based company, Metro Financial Planning Ltd., because he had forged and falsified documents and registered fraudulent mortgages on title."

He has shown a flagrant predisposition for deceit and dishonesty in every aspect of his business," the tribunal ruled. In conducting his business, he has preyed upon vulnerable borrowers in financial and personal distress to his own advantage."

In the agreed statement of facts in McLeod's disciplinary case, the Law Society also had harsh words about Khanna's conduct.

It is the Law Society's position that the evidence in its totality demonstrates, at a minimum, dishonest and fraudulent conduct by Khanna," the Law Society stated. It would be open to conclude that Khanna even engaged in an apparent predatory lender scheme."

Attempts to reach Khanna were unsuccessful.

According to the agreed statement of facts in McLeod's case, the allegations revolve around several properties where Khanna, through his spouse or other family members, obtained second or third mortgages and then took action to have the homeowners evicted when there was a problem or a missed payment. In most of the cases, the properties were eventually transferred into Khanna's name and sold, sometimes years later.

In some cases, the Law Society stated, there was evidence that the homeowners weren't even aware that a second or third mortgage had been registered on the property. In one case, a homeowner stated she had never signed an authorization for a mortgage registered against her property.

McLeod acted as the lawyer for either Khanna or his spouse in the transactions.

According to McLeod's agreed statement of facts:

• In some cases, McLeod didn't prepare an Agreement of Purchase and Sale for property transfers, nor did he prepare statements of adjustment, reporting letters, certification of title, and account or other documents typically required in a bona fide transfer."

• In some cases, first mortgages were held in the homeowners' names by arm's-length financial institutions, such as a trust company, but the title of the property would get switched to Khanna or a relative without the approval - or even the knowledge - of the financial institution holding the first mortgage.

• There were occasions when legal documents were served to mortgagors at the property's address even though McLeod knew they had been evicted from the home and wouldn't receive them. No attempts were made to find current addresses for the evicted people.

• In some cases, appraisals weren't obtained and properties changed hands between Khanna and his spouse under a power of sale for less than true market value. The Law Society noted that there was a duty owed to the evicted homeowners to obtain proper value because the homeowners could have had a claim to some of the proceeds.

The evidence, the Law Society states, supports an inference that (McLeod) knew or was wilfully blind or reckless to the risk to the mortgagor's position and to the apparent dishonesty of Khanna's actions."

There were numerous suspicious features in these transactions into which (McLeod) made no inquiries," the Law Society states. These were inquiries that a reasonably competent lawyer would have made because the features could not be reconciled with a valid transaction."

McLeod's failure to make reasonable inquiries into any of these circumstances, the Law Society continued, even though a reasonably competent lawyer would make those inquiries, supports an inference that he had knowledge of Khanna's dishonest conduct and the risk created for the mortgagor's economic interests."

In an interview, McLeod said he regrets ever becoming involved with Khanna.

You better be sure of that one," McLeod said. He was such a small part of my practice and it's just unbelievable how much I've been through as a result of his files."

I couldn't be more embarrassed and ashamed that I am involved in this matter at all," McLeod said. I'm so embarrassed for my friends and my colleagues."

I admit I was a dupe," McLeod added. I was stupid for doing these files."

McLeod said he became uncomfortable with some of Khanna's practices in early 2015 and I told him he had to move his files to other law firms."

I was done with him in the fall of 2015 and I thought that's the end of it," McLeod said.

Shortly after, the Law Society opened an investigation into McLeod.

I've spent five years working with this hanging over my head," said McLeod.

He said he tried to retire a year ago, but the Law Society wouldn't allow it until the disciplinary case was settled.

McLeod disputes the Law Society's interpretation of his actions, but said he decided not to participate in the disciplinary hearing because he's liable for the Law Society's costs as well as his own. He agreed to a statement of facts, he said, so that dozens of witnesses wouldn't have to be called, which could have left him with a bill he suggested could total more than $100,000.

McLeod said he expects his licence to practice law will be revoked.

Realistically, I think the decision is going to be scathing," he said. I think the penalty is going to be a foregone conclusion."

Sherk's disciplinary case involves three properties that intersect with McLeod's case.

The Law Society alleges Sherk participated in or knowingly assisted in dishonest or fraudulent conduct by his purchaser client, or associated persons," to obtain the title, equity and mortgage funds for the properties under false pretences."

In the alternative, he failed to be on guard against being duped by unscrupulous clients or associated persons in connection with the same transactions," the Law Society stated.

Sherk could not be reached for comment.

Steve Buist is a Hamilton-based investigative reporter at The Spectator. Reach him via email: sbuist@thespec.com