Deficiencies in Patrick Brown’s Response to the Integrity Commissioner
Patrick Brown responded to Randy Hillier’s complaint to the Integrity Commissioner J. David Wake. The document Patrick Brown released to the public is a fusion of attempting to divert attention from the real issues and stump speech. Patrick Brown’s response did not seem serious and was inappropriate in light of what appears to be insurmountable evidence of undocumented sources of income.
tl;dr Cliff Notes:
•Patrick Brown's explanation of the affidavit is an attempt to cause confusion rather than to clearly address a transaction that has a high probability of being a successful attempt at money laundering.
• Patrick Brown’s attempt to explain his housing expenses neglected to include property taxes in the calculations. Including property taxes increases his housing expense to $105,000 a year on after-tax income of $119,000.
Why Should I Care?
An individual aggressively pursuing control of the public purse has a financial history that is highly suspicious and which cannot be explained without funds from an unknown source.
Patrick Brown responded to four items but I am only going to concern myself with the first issue of his inability to afford his home, and the last issue of the affidavit dated June 11, 2016, which documents a transaction involving the sale of travel miles and an interest in a restaurant for an excessively inflated price. I will address the affidavit first then return to the affordability of the home purchase second.
Patrick Brown has attempted to address the issue of the affidavit dated June 11, 2016 by presenting a second affidavit dated June 16, 2016 that attests that the transaction did not occur. Attempting to address the first affidavit by providing evidence that the transaction never occurred in no way addresses the issue. The issue at hand it not if the transaction occurred but rather why was the original affidavit needed in the first place?
An affidavit is not a document created during a commercial transaction. The only situation where a sworn affidavit regarding a financial transaction would be required would be to document to a third-party that a transaction occurred. In this instance the specific and only purpose of the affidavit dated June 11, 2016 is to prove to a third-party that Patrick Brown had received $375,000. To address this issue Patrick Brown must explain in what context he had the need for the affidavit in the first place
Further, the transaction outlined in the affidavit involves the sale of two million Aeroplan miles, which would have a valuation that does not exceed $30,000, and an interest in a restaurant, the valuation of which would not exceed $50,000. Even if the transaction did not occur Patrick Brown is required to explain why Mr. Jahal-- who Brown would then go on to acclaim as a candidate to run in the 2018 Ontario election-- was willing to create a legal document stating he paid $375,000 for assets that do not exceed $80,000 in value and realistically were worth $60,000 or less.
1) Why was the affidavit dated June 11, 2016 created? Specifically, in what context was a third-party requesting proof that Patrick Brown had received $375,000?
2) The value of the two assets discussed in the affidavit dated June 11, 2016 even under the most optimistic valuation do not exceed $80,000. Why had Mr. Johal agreed to state that he had paid Patrick Brown $375,000 for assets worth a fraction of that amount?
3) On July 11, 2016 the amount of $375,000 was deposited into Patrick Brown’s CIBC account. Patrick Brown has told the media that these funds were provided by his parents. Given the deposit matches the exact amount listed in the affidavit dated June 11, 2016 it is imperative that the lineage of these funds be determined. Patrick Brown must supply documentation detailing the funds history going back a minimum of 90 days.
The fact situation as it is currently known fits perfectly with a common technique used in money laundering. The affidavit created on June 11, 2016 has no conceivable function other than to satisfy the documentation requirements under federal anti-money legislation that creates a duty on real estate professionals to report suspicious transactions. The lack of an alternative explanation indicates a very high probability that the affidavit was created to avoid FINTRAC scrutiny with respect to the source of the $375,000. Given the seriousness of the situation I will be gathering all the evidence and submitting an incident of suspicion of non-compliance to FINTRAC.
As an additional issue I would like to draw attention to two other items that are of concern regarding the two affidavits. The first is that the notarization is done by an individual with the same last name as Mr Johal who appears to operate out of the same address as Mr. Johal does. It appears that the individual who notarized the both affidavits is the daughter of Mr. Johal. The second item is the very noticeable difference in the mastery of the English language between the two affidavits. Both of these items raise additional concerns worth noting.
In responding to the question of how can Patrick Brown afford his $2.3MM property Brown offered that he makes about $180,000 of which he keeps approximately $120,000 and that his mortgage is then approximately $90,000. While most of this is basically accurate Patrick Brown neglected to account for property taxes in his calculations.
The property taxes for Patrick Brown’s property were estimated at $16,500 on the original listing. Using comparable properties in the area I calculated that his property tax would be at least $14,950. There have been media reports that his property taxes would exceed $17,000 in 2018. Further, while it is true that some mortgages include property taxes as part of the mortgage payment Patrick Brown’s mortgage does not. Patrick Brown is responsible for paying his own property taxes
As such this has a significant impact on Patrick Brown’s explanation of how he is able to afford the property. While the original explanation that he maintains his lifestyle on the $30,000 that remains after paying for his mortgage was already highly suspect, now that the amount has been reduced to under $15,000 it becomes even more ridiculous. It should be noted that we are ignoring utilities at this point.
Patrick Brown has not spoken on why a bank would approve a mortgage this large on an income that is not sufficient to service it. Without even considering utilities Patrick Brown’s housing cost are 88.6% of his after-tax income. That is considerably outside the lending criteria for any of the major banks.
Using TD Bank’s mortgage affordability calculator an individual with an income of $180,885 and $575,000 for a down payment could afford a $694,000 mortgage assuming zero debt and no other expenses. Patrick Brown qualified for a $1,725,000 mortgage – that is 2.5 times as much as Patrick Brown’s income would allow him to qualify for under his lender's published standards.
1) Patrick Brown must provide the original loan documents certified by TD Bank. This will resolve many of the issues regarding the mortgage.
2) Documentation of the income used by TD Bank to approve this mortgage application must be provided.
3) Anti-money laundering regulations required TD Bank to determine the lineage of all funds used toward the down-payment. Patrick Brown has a $375,000 deposit that would have required documentation. The documentation presented to TD Bank to explain that deposit must be provided and certified by TD Bank.
4) Patrick Brown must reconcile living how he lives on under $15,000 a year with his well documented lifestyle?