Ottawa real estate investor found guilty on 27 counts of fraud

Ottawa real estate investor found guilty on 27 counts of fraud

A judge ruled that James Edward “Jim” Pellerin made false representations to his lenders about the security interest of their loans, then paid himself about $150,000 in salary — plus other personal fees and expenses — with funds withdrawn from their investments.

Article content

A prominent Ottawa real estate investor who has authored multiple books on the subject has been found guilty of defrauding 17 different lenders of $30,000 each on a failed house-flipping scheme in Carleton Place.

James Edward “Jim” Pellerin was found guilty on 27 counts of fraud by Superior Court Justice Robert J. Smith after the judge found Pellerin made false representations to his lenders about the security interest of their loans, then paid himself about $150,000 in salary — plus other personal fees and expenses — with funds withdrawn from their investments.

Advertisement 2

Article content

Article content

Pellerin, 68, denied having any intent to defraud his lenders “by any false pretense, by deceit, by falsehood, or other fraudulent means,” according to the judge’s summary of the trial, which concluded in early December.

Pellerin entered into business arrangements with the 17 investors between February 2016 and June 2017, according to the summary, after offering the “investment opportunity” through his company, Innovalty Investments Ltd., which has since ceased operations.

Pellerin most recently operated as an investment advisor under the Street Rock Group, which he founded in March 2021, according to his online profile, about three months after he was charged with fraud by Ottawa police.

Pellerin billed himself as an expert in real estate investment with numerous years of experience in the field, and many of his victims learned of the investment during a slideshow presentation at a monthly meeting of the Ottawa Real Estate Investors Group.

Pellerin collected each $30,000 loan, with $25,000 from each investment supposedly going to a deposit on a specified townhome that was to be built in Carleton Place, while the remaining $5,000 was to be used by Pellerin for any expenses he incurred while trying to sell the units.

Advertisement 3

Article content

The lenders would front the money, while Pellerin would be responsible for selling the homes, according to the summary. Pellerin also presented his investors a second option to buy the homes themselves in case they didn’t sell.

Each investor was told their $30,000 loan would be secured in a specified townhome and their financial stake in the home would be registered and acknowledged by the builder.

Pellerin laid out the conditions in promissory notes guaranteeing a 20-per-cent return on their investment — a tidy profit of $6,000 each — to be repaid within nine months.

As the due date approached, according to the prosecution’s case, the investors made “numerous” requests about their loans until Pellerin told them by email he had failed to sell any of the homes and their deposits had been forfeited to the builder.

The initial project called for 10 townhouse units to be constructed on Taber Street in Carleton Place, but when that plan fell through, according to the summary, the developer instead built 12 townhomes on Code Crescent.

Pellerin told his investors he was in partnership with the developer, Grizzly Homes, and with a Century 21 real estate agent, though both denied that at trial and testified they were “unaware” of any partnership with Pellerin.

Advertisement 4

Article content

The developer told the court he was “unaware of the existence of any lenders” and was “unaware they had any interest in any of the townhouse units he built on Code Crescent,” with the exception of one lender who had opted to purchase one of the homes.

The realtor was unable to sell any of the homes before the closing dates and the $275,000 deposit was forfeited “as a result of (Pellerin’s) failure to close the transactions on the date agreed upon.”

Several of the lenders began to communicate with each other and, after comparing notes, discovered Pellerin had “oversold” the units by issuing 17 promissory notes for only 11 properties. In one case, three victims had been issued promissory notes for the same unit.

Pellerin testified in his defence at trial and blamed a “clerical error,” though the judge rejected that argument.

The investors were not told they were at risk of losing their investment as the term of the agreement of purchase and sale with Grizzly Homes was approaching its expiration, the judge wrote.

Several victims sued Pellerin in civil court and were awarded damages, Crown prosecutor François Dulude told the judge during his criminal trial, though none of those funds have yet been recouped.

Advertisement 5

Article content

Ottawa police fraud investigators seized Pellerin’s bank records and calculated $630,000 was collected from investors, while only $275,000 was ever deposited to Grizzly Homes.

None of the lenders knew that Pellerin had paid himself $100,000 in salary from the funds in 2016, with an additional $50,000 salary in 2017. He also used the funds to pay for “operating expenses” for his other businesses and “personal expenses” for coaching and other overhead expenses.

The promissory notes, the judge ruled, contained “a false representation that the lenders would have a valid security interest” in specified townhouse units, “which caused them to advance the $30,000 loans to (Pellerin) and put their economic interests at risk.”

Each lender listed in the indictment lost all $30,000 of their investment, except for one who managed to recover $25,000.

Another lender was repaid the entire amount, plus the $6,000 in interest, after he refused to extend the promissory note “and demanded the return of the money,” the judge wrote.

Pellerin’s defence lawyer, Bruce Engel, argued the lenders lost their money “as a result of unforeseen events that occurred, namely bad luck and bad management and that (Pellerin) never lied about any material fact,” the judge wrote.

Pellerin and his lawyer did not return requests for comment.

The judge also found Pellerin guilty of fraud for the “dishonest act” of taking more than $60,000 for his personal use.

His sentencing is scheduled for March 15, when a number of the lenders are expected to read victim impact statements into the court record.

[email protected]

Recommended from Editorial

Article content