Poor Judgement or Shady Business: The Sale of the Toronto Police Union Buildings
Background
A pair of Toronto police union buildings were sold to a developer who re-sold the properties a year later for 4.1 million more than they purchased them. The developer made a 55% profit in 13 months despite making no significant improvements to the property.
The police union is responsible for handling funds in a way that benefits its members. Some police officers now suspect that the police union mishandled the sale leading to calls for a forensic audit. Officers have reported they were not told about the union providing a mortgage to the developer nor that it was re-sold for a huge profit only a year later. Mike McCormack—president of the police union—said that an audit of the transaction is unnecessary and that he has been open about the transaction. McCormack announced he would be retiring five months after this story was reported by the CBC. This announcement also occurred one month after a Human Rights Tribunal concluded that sexual misconduct was pervasive in Toronto police forces (read summary of cases here).
Details of the sale:
- The Toronto police union properties (130 & 180 Yorkland Blvd.) were sold in 2014 for $7.4 million to a developer.
- The union provided a $4.8 million mortgage with an interest rate of 4.5 per cent to the developer, who agreed to make monthly payments to the union of about $18,000.
- By early August 2015, the developer sold the property to a charity (Bodhi Meditation) based in British Columbia for $11.5 million.
This was where the information ended in the CBC story.
What do we know about the buyer?
Records show that the authorized person listed on the purchase of the properties was Babak Sarshar, president of Format Group (a combination of the companies Pegah Developments Ltd. and Terracomm Group). His main partner appears to be Ali Mohtashami (owner of Pegah).
History of buyers’ behaviour
Ali Mohtashami and Babak Sarshar have a history of not paying workers and contractors what they are owed, not cooperating with court proceedings, and being involved with developing land without a permit. They were also previously awarded a $407,394 contract by the city for construction at a police division.
- A report by the city in 2017 found that on two separate occasions within three years Pegah did not adequately pay its workers for city contracts. In one case (1300 Wilson Avenue) Pegah was ordered to pay four of its workers the back wages they were owed as well as administrative penalties totaling $24,774.10. Pegah’s sub-contractor (which they were legally responsible for) Azores Landscape & Renovating was found to be in non-compliance in the amount of $16,412.93, including penalties, for failing to pay fair wages to its workers. Azores did not maintain payroll records for its workers who were paid in cash and could not be tracked. According to Azores, their workers came from another country and were no longer in Canada. In a second case (Toronto Police Services 33 Division, 2 Dyas Road) Pegah had another pay violation involving three workers amounting to $16,653.56. The city report (conducted by the Fair Wages Office) recommended that Pegah be disqualified from Toronto city contracts in 2017 for two years and on probation for one year afterwards. Mohtashami wrote a letter in response to the report’s findings arguing that the punishment should only be one year on probation. City Council agreed, and decided to put them on probation for one year. Although recommended by the Fair Wages report, they did not disqualify them from city contracts for any amount of time.
By adopting the recommendation in this report, City Council will clearly communicate to Pegah and the wider construction industry that unpaid wages for work performed will not be tolerated on City of Toronto contracts.
- Mohtashami is vice-president of Plus Development Group Corp. (“Plus”). Plus was recently in the courts for failing to pay a contractor—Roni Excavating Limited (“Roni”)—$857,374.49 for excavating and disposing of soil and fill from a site. Roni submitted a claim for the money in 2014. Plus responded by filing a counterclaim for $500,000.00 for deficiencies and delay but later withdrew the claim and agreed to pay Roni $332,131.80. The Ontario Superior Court of Justice in 2018 concluded Plus had not paid Roni what they were owed and ordered Plus to pay Roni an additional $523,241.99 (plus interest). Mohtashami was described as a “difficult and argumentative witness” and “refused to admit obvious facts”. The evidence he provided was “evasive, argumentative and contradictory” and was concluded as being “unreliable” and “not credible”.
- In 2009, a complaint was made about Pegah not compensating J. V. Mechanical Limited for $20,000 of work. A complaint was also made about Pegah not compensating Vicor Mechanical Limited (unclear if same case).
- Mohtashami and Sarshar were involved in violating various municipal by-laws by removing 40 trees without a permit on 103 and 108 Bayview Ridge across from the Canadian Film Centre in 2016. They filed a motion to delay court proceedings because they felt they were tricked by city officials into providing evidence, their motion was denied. Their company has been ordered to pay $155,064 and replant 200 trees.
- Sarshar was listed with Parkset Developments Inc. (“Parkset”) on a Local Planning Appeal Tribunal document, suggesting they work together. Parkset was also accused of removing trees without permits in 2014.
Police union head Mike McCormack’s history of misconduct has been previously summarized here.
Was this transaction just poor judgement on McCormack’s part that led him to miss out on an easy additional 4 million dollars for the union? Or was there shady business going on between the Toronto Police Association and the Format Group? At present it’s unclear.
What is clear is that both McCormack and the owners of the Format Group companies have histories of misconduct and that McCormack has stated he does not support a forensic audit of the transaction.
Read more about corruption within the Toronto police force here.
