Licence Tribunal
Appeal d'appel en Tribunal matière de permis
FILE: 7612/REBBA
CASE NAME: 7612 v. Registrar, Real Estate and Business Brokers Act 2002
An Appeal from a Notice of Proposal by the Registrar, Real Estate and Business Brokers Act, 2002, S.O. 2002, c. 30, Sch. C to Revoke a Registration
Peter Racco Appellant
-and-
Registrar, Real Estate and Business Brokers Act 2002 Respondent
DECISION AND ORDER
ADJUDICATOR: Laurie Sanford, Vice-Chair
APPEARANCES:
For the Appellant: Alan D. Gold, Counsel Melanie J. Webb, Counsel
For the Respondent: Kelvin Kucey, Counsel
Heard in Toronto: August 6, December 4, 5, 2014, and February 19, 2015
REASONS FOR DECISION AND ORDER
OVERVIEW
Mr. Peter Racco has appealed to the Tribunal from a proposed revocation of his registration as a real estate broker. The Registrar, Real Estate and Business Brokers Act 2002 (the “Registrar”) is proposing to revoke Mr. Racco’s registration because of concerns about Mr. Racco’s past conduct and alleged violations of the Real Estate and Business Brokers Act, 2002 (the “Act”).
The issue before the Tribunal is whether or not Mr. Racco remains entitled to registration under the Act. The Tribunal also considered whether any sanction short of revocation might be appropriate. For the reasons given below, the Tribunal has decided that Mr. Racco is not entitled to registration and that his registration must be revoked.
ISSUES
The Registrar originally issued a Notice of Proposal on August 21, 2012 proposing to revoke Mr. Racco’s registration on two principal grounds. First, the Registrar asserts that Mr. Racco’s conduct leading up to his conviction for sexual assault on October 21, 2011 disentitles him to registration under the Act. Second, the Registrar alleges that Mr. Racco either failed to disclose or inadequately disclosed details of his criminal charge and conviction, which the Registrar asserts is a violation not only of the Act but also of certain terms and conditions that Mr. Racco entered into with the Registrar.
On June 10, 2014, the Registrar issued a Supplementary Notice of Proposal to Revoke Registration. The additional grounds for the proposed revocation are twofold. First, the Registrar alleges that Mr. Racco breached the Act by failing to disclose a collateral business, registered corporation number 1237511, PJR Marketing Inc. (“PJR”). Second, the Registrar asserts that Mr. Racco’s conduct towards his then wife, Ms. Josie Racco-Attardo, during their divorce proceedings disentitles him to registration.
Mr. Gold, counsel for Mr. Racco, submits that Mr. Racco has served his sentence for the sexual assault, a single criminal incident in an otherwise blameless career spanning over 28 years. In the submissions of Mr. Gold, there is no reasonable basis for concern about his future conduct. Understanding what his error in judgment has cost him, no reasonable person would believe that he would re-offend. Mr. Racco disputes the allegation that he failed to disclose the criminal proceedings to the Registrar.
Concerning the allegations of non-disclosure of a collateral business, Mr. Gold asserts that PJR Marketing is not an active business that needed to be disclosed under the Act. Finally, Mr. Gold submits that there is no evidence that Mr. Racco behaved improperly towards Ms. Racco-Attardo during what was characterised as a “high conflict divorce.”
EVIDENCE
Mr. Racco was first registered as a salesperson under the Act in 1986. He was registered as a real estate broker, an upgraded registration, in 1989. Mr. Racco does not own or manage a registered real estate brokerage but until recently he had a real estate team within a larger brokerage consisting of salespeople and administrative staff. This real estate team was referred to as “Team Racco” and included Ms. Racco-Attardo, who, at the time, was registered under the Act as a salesperson.
PJR
In 1997, Mr. Racco and Ms. Racco-Attardo started PJR. Ms. Racco-Attardo testified that PJR was originally set up as a tax shelter but that it evolved into a property management and investment company. PJR bought rental properties in 1997/98 and, according to Ms. Racco-Attardo, currently owns and leases five residential properties and one commercial site. Ms. Racco-Attardo referred to PJR as being a property management company in addition to leasing the properties. While there is an investment arm of the company, which holds a stock portfolio, Ms. Racco-Attardo’s testimony was that the sole income is rental income. There is a cross-over between the activities of PJR and Team Racco. According to Ms. Racco-Attardo, about ten years ago, PJR began paying the salaries of the administrative staff of Team Racco and this administrative staff would perform administrative functions for PJR as required. Ms. Racco-Attardo testified that there was not a lot of administrative work required to operate PJR. According to Ms. Racco-Attardo, PJR prospered and most of the profits were retained in the company to be used to add new properties. As of October 31, 2011, the shareholder’s equity in PJR was approximately $1.385 million. One of Mr. Racco’s character witnesses characterised PJR as “primarily a holding company”. The Tribunal prefers Ms. Racco-Attardo’s evidence about the nature of PJR as she was a partner in the business and, according to her undisputed evidence, was primarily responsible for its day-to-day operation.
Every two years, registrants under the Act are required to apply for a renewal of their registration. On his 1999 application for renewal, Mr. Racco was asked “”Will you be engaged or employed in any other business, occupation or profession? If yes, attach full particulars.” Mr. Racco answered this question “no”. On his 2001 application for renewal, the wording of the question changed slightly and Mr. Racco was asked, “Are you or will you be engaged or employed in any other business, occupation or profession”. In each renewal application from 2001 to 2013, Mr. Racco answered that question, “no”.
Mr. Brian Scholtzhauer, Deputy Registrar of Industry Standards for the Real Estate Council of Ontario (“RECO”), which administers the Act, gave evidence. His testimony is that the Registrar relies on registrants to correctly complete their applications. There are a very small number of people available to oversee the approximately 32,000 applications received by RECO each year. Mr. Scholtzhauer testified that it is not uncommon for registrants to be engaged in other businesses. According to Mr. Scholtzhauer, the Registrar assesses these other businesses for potential conflicts of interest. A registrant may not trade in real estate except through his or her brokerage, unless the trade is exempt. The term “trade” in the Act is broadly defined and includes a rental transaction.
Mr. Scholtzhauer testified that the Act came into force in 2006 and replaced a previous statute. One of the changes was the introduction, in subsection 34(1) of Ontario Regulation 567/05, of a requirement to disclose any changes in the information required in renewal applications within five days of the change.
Criminal Conviction
In May, 2010, Ms. Racco-Attardo hired an office manager, a woman who will be referred to as Ms. JK, to work for Team Racco. Mr. Racco was not involved in the hiring decision and he met Ms. JK on May 10, 2010, shortly before she began work. Initially, Mr. Racco made flattering comments to Ms. JK but these comments began to escalate. Some of his comments were very crude and one referred to Mr. Racco’s proficiency at certain sexual activities. Ms. JK told Mr. Racco that she was uncomfortable with his words but Mr. Racco brushed off her objections, telling her on one occasion that he was just being a kind guy.
Ms. JK became aware that Team Racco was attempting to rent a property that she felt would be appropriate for her. On May 15, 2010, she signed a lease agreement for the property which was open for acceptance until May 18th. On Sunday, May 16, 2010, Mr. Racco sent Ms. JK repeated text messages asking Ms. JK to either meet with him or telephone him. These text messages persisted into the evening and Ms. JK answered one by saying “Peter, this is very complicated. I would like to set up a time during the day to talk. I am feeling uncomfortable.”
Eventually, Ms. JK met Mr. Racco at a coffee shop close to her home. Mr. Racco told Ms. JK that he found her very attractive, that he couldn’t help himself and that he was just looking for companionship. Mr. Racco changed the topic and asked to see her home. Ms. JK resisted this suggestion saying it was too late. He persisted and she agreed to show him her place. According to Ms. JK, while Mr. Racco was in the apartment, he put his tongue down her throat and his fingers on top of her pants in her vaginal area and pushed her head.
Mr. Racco was charged with sexual assault on September 6, 2010. He testified at the trial that he had suggested meeting with Ms. JK on May 16th to discuss her offer, as there was more interest in the property. His evidence was that he had no idea Ms. JK did not want to meet him. Mr. Racco testified that Ms. JK wanted him to see her apartment. Justice Zisman summarised Mr. Racco’s testimony about the assault at the apartment as follows:
While she was pointing things out to him, she grabbed him by the back of the neck and kissed him. She forcefully put her tongue in his mouth. He told her it was not a good idea and immediately left the apartment.
Justice Zisman, after reviewing the evidence, including multiple text messages between the parties, did not accept Mr. Racco’s account. Justice Zisman accepted Ms. JK’s version of the events and found Mr. Racco guilty of one charge of sexual assault on October 31, 2011.
On April 13, 2012, Mr. Racco was sentenced to 60 days in jail; a 2 year probation order; a DNA order and a weapons prohibition order. Additionally Mr. Racco’s name was ordered placed on the Sex Offender Registry. Mr. Racco was also to attend any counselling recommended by his probation officer.
Mr. Racco appealed his conviction and sentence to the Ontario Superior Court of Justice. After an extensive review of the evidence, Justice Durno upheld Mr. Racco’s conviction, including the findings of credibility. Concerning the sentence, Justice Durno allowed the appeal and varied the sentence to a six month conditional sentence. There is a reference in Justice Durno’s decision to additional terms of sentencing to be determined, including a component of house arrest and community service, but there is no evidence before the Tribunal as to any other elements in the eventual sentence. Mr. Racco sought leave to appeal to the Court of Appeal and was denied.
Mr. Scholtzhauer testified that the interactions between Mr. Racco and Ms. JK were of great concern to the Registrar. He noted that the purpose of the Act is to ensure that in a real estate transaction, the necessary consumer trust and protection is there. Real estate agents often act independently and are alone with their clients, according to Mr. Scholtzhauer. The fact that the assault arose in the context of an employment situation was of particular concern as there was no balance of power between the parties. The Registrar believes that the fact that Mr. Racco is a convicted sex offender might be invisible to the consumer and this too was a concern, according to Mr. Scholtzhauer.
Disclosure of Criminal Conviction
Registrants are required to disclose criminal charges and, if these arise between renewal applications, registrants are required to notify the Registrar in writing of these charges within five days of them. Mr. Racco did not notify the Registrar of the criminal charges in September, 2010. In his 2011 renewal application, Mr. Racco was asked “Are there currently any charges pending, or have you been found guilty, pleaded guilty to or been convicted of an offence under any law? (if yes, refer to page 3 for Completion Instructions.” Mr. Racco circled the words “charges pending” and answered the question: “yes” and submitted a criminal record report showing the nature of the charge.
In December, 2011, Mr. Racco entered into terms and conditions of registration which included conditions obliging Mr. Racco to notify the Registrar “immediately” of the sentencing decision, then scheduled for January 30, 2012. This date was adjourned until April 13, 2012. Mr. Racco did not advise the Registrar of the adjournment but on April 18, 2012, Mr. Racco’s lawyer advised the Registrar of the sentence and of Mr. Racco’s appeal.
Divorce
In February, 2011, Ms. Racco-Attardo began divorce proceedings against Mr. Racco. Ms. Racco-Attardo testified that during the divorce proceedings, Mr. Racco did not agree to continued splitting of commissions in a joint account. When he set up a separate account, she stopped going to the office. Shortly after, Mr. Racco removed her name from his marketing of Team Racco. She also testified that Mr. Racco reported for tax purposes that he had paid her $152,000 but in fact he had not made the payment. She does not believe she was consulted about this; her understanding is that her accountant was advised of the income attribution. The situation was subsequently resolved. Ms. Racco-Attardo referred to a separate business which Mr. Racco was involved with that she believed he did not disclose during the divorce proceedings. Ms. Racco-Attardo also testified that that Mr. Racco has made only partial child support payments and remains in arrears.
The Registrar alleges that four aspects of Mr. Racco’s conduct during the divorce fall below the standard of conduct expected for registrants under the Act: the alleged forcing of Ms. Racco-Attardo out of the business; the allegedly incorrect allocation of income for tax purposes without paying Ms. Racco-Attardo the amount claimed; the alleged non-disclosure of a separate business as an asset in the divorce proceedings and the arrears in child support payments.
Mr. Racco did not testify but both his divorce lawyer and his accountant did give evidence. Concerning the $152,000, Mr. Racco’s lawyer testified that the attribution was academic. Taxes needed to be paid on the money and in view of the approaching tax deadline some allocation of the funds needed to be made. He believes the decision was made in consultation with Ms. Racco-Attardo’s accountant but that in any event, he understood that a more accurate allocation of the money would be made during the divorce proceedings and that this in fact is what has happened. Mr. Racco was not involved in the decision to allocate the whole of the $152,000 to his wife, according to his lawyer. Mr. Racco’s accountant also testified. His evidence was that Mr. Racco and Ms. Racco-Attardo could not agree on how to allocate the $152,000 between them. The money was income from commissions and it qualified as an expense against gross commissions. It was essential that the income be declared for tax purposes so that it could be claimed as an expense. In the accountant’s testimony, it was less important that the allocation between the business partners be exact than it was that the expense be claimed. The accountant confirmed that the situation has since been resolved.
Concerning the separate business that Ms. Racco-Attardo believed was not disclosed during the divorce proceedings, Mr. Racco’s lawyer explained what the business was and where the assets had been disclosed in the divorce worksheets.
Concerning the alleged non-payment of child support, Mr. Racco’s lawyer testified that this remains an open issue in the divorce. Mr. Racco is moving for reduced child support payments as his income has dropped between 60% and 75% since the divorce proceedings commenced.
Character Witnesses
In addition to Mr. Racco’s lawyer and accountant, three character witnesses testified on behalf of Mr. Racco. All of these witnesses testified that they learned most of what they know about Mr. Racco’s criminal conviction by reading about it in a newspaper. One witness testified that Mr. Racco had alluded to his conviction but was vague about it. Two of these witnesses were business acquaintances who testified that they had no concerns about doing business with Mr. Racco and had not had any issues with his business conduct. Each of them expressed surprise on being told of some of the comments Mr. Racco was found to have made to Ms. JK. They each disapproved of such comments being made in a business context but also said they had never heard Mr. Racco make such comments in their presence. One of the witnesses testified that the Peter Racco he was reading about in the criminal conviction was not the man that he knew.
The third character witness was a woman who will be referred to as “Ms. MC”.
Ms. MC testified that she and Mr. Racco were friends but she characterised their relationship as more professional. She testified that Mr. Racco had been her broker in real estate transactions and had acted for her parents. Her evidence was that she had always found him respectful in his dealings with women. Ms. MC testified that she had noticed changes in Mr. Racco since his criminal conviction but she did not specify what these were. She testified that she has never discussed his criminal conviction with him. Ms. MC’s testimony was that Mr. Racco has begun to practice yoga, attends a church which Ms. MC characterises as a “spiritual” and “healing” church and goes on healing or self-help retreats with his sister. She was surprised to learn during cross-examination details of what Mr. Racco said to Ms. JK and she testified that those comments did not sound like him. She agreed that the comments were inappropriate in a work setting.
During cross-examination, Ms. MC denied being Mr. Racco’s girlfriend or being intimate with him. She denied having sex with him or even holding his hand. While she had been to a few social events with him, she testified that these were not “dates”; she had been his escort as a friend.
Ms. Racco-Attardo was called in reply. She testified that her townhouse faces the townhouse of Mr. Racco and is a few houses up from his in a complex that had originally been owned by PRJ. Mr. Racco’s sister also lives in the complex, next door to Mr. Racco. It was Ms. Racco-Attardo’s testimony that she can see Mr. Racco’s front door from her kitchen. Ms. Racco-Attardo testified that she has seen Ms. MC three, four or five times a week, going in or around Mr. Racco’s townhouse and has seen her leave Mr. Racco’s townhouse between seven and eight in the morning. She has observed Ms. MC’s car parked at the complex at night and has seen it again in the morning. Her evidence was that she has observed this for over a year. Ms. Racco-Attardo testified that she has no issues with Ms. MC and that if they were in an intimate relationship, she saw nothing wrong with it.
DECISION
Under Subsection 10(1) of the Act, an applicant, which includes Mr. Racco, is entitled to be registered unless:
(a) the applicant is not a corporation and, . . . .
(ii) the past conduct of an applicant . . . .affords reasonable grounds for belief that the applicant will not carry on business in accordance with law and with integrity and honesty. or
(iii) the applicant . . . . makes a false statement or provides a false statement in an application for registration or for renewal of registration: . . .
The Tribunal has two areas of concern about Mr. Racco’s eligibility for continuing registration. First, the Tribunal is concerned about Mr. Racco’s conduct surrounding his criminal conviction. Second, the Tribunal is concerned about Mr. Racco’s failure to disclose the existence of his business PJR to the Registrar, a failure that continued from the founding of the business through his most recent application for renewal.
Concerning Mr. Racco’s criminal conviction, Mr. Gold, in closing submissions, stated that Mr. Racco was a good person who did a bad thing and that there was no reason to believe he hadn’t learned his lesson. The problem with this line of reasoning is that there is no presumption, either in the Act or in life, that a registrant who has been convicted of an offence and completed his sentence must necessarily have learned enough from the experience to meet the test set out in the Act for registration. The Tribunal must look at the totality of Mr. Racco’s past conduct and use that to determine whether the past conduct affords reasonable grounds for belief that Mr. Racco will not carry on business in accordance with law and with integrity and honesty.
Mr. Gold submits that the Tribunal does not have to look for a change in Mr. Racco since his criminal conviction. What should be obvious is his basic character in Mr. Gold’s submission. His criminal conduct was an aberration, now he is back to the person he always was. He has served his sentence and has suffered severe financial damage to his business as a result of the conviction. Mr. Gold also urged the Tribunal to put the conduct in perspective. According to Mr. Gold, thirty to forty years ago, Mr. Racco’s behaviour in pursuing an employee was perfectly ordinary. Some other woman might have accepted an advance; in this case, Ms. JK did not consent. This was a misunderstanding, in Mr. Gold’s submission.
There are several problems with this framing of Mr. Racco’s conduct. First, it suggests that Mr. Racco was merely the victim of bad luck. Ms. JK’s consent was lacking; another woman might have accepted Mr. Racco’s advances. However, the facts found at the criminal trial make it clear that Mr. Racco persisted in his advances over a period of six days despite Ms. JK telling him at least twice that she was uncomfortable with his words and his proposal to meet her in the evening of May 16th. The trial judge found that Mr. Racco told Ms. JK shortly before the assault that he could not help himself. Mr. Racco testified that he had no idea that Ms. JK did not want to meet him on the evening of the assault, despite a text message stating clearly that she was uncomfortable. It is not only that Mr. Racco did not accept “no” for an answer; he appears not to have recognised the “no” that Ms. JK was telling him.
The fact that, in Mr. Gold’s view, Mr. Racco’s behaviour was “perfectly ordinary” thirty or forty years ago is not relevant. Mr. Racco’s conduct must be assessed in accordance with today’s norms for office and business behaviour. Even his own character witnesses conceded that Mr. Racco’s conduct was inappropriate and unacceptable.
The only evidence the Tribunal has of Mr. Racco’s attitude towards his sexual assault is the evidence he gave at his criminal trial where he testified that it was he who was the victim of a sexual assault by Ms. JK. There is no evidence before this Tribunal that Mr. Racco has ever changed his view of what occurred. While Mr. Gold asserts that Mr. Racco’s basic character should be “obvious”, it is not obvious to the Tribunal that Mr. Racco has ever accepted responsibility for his actions. He was not the victim; he was the perpetrator. It is not obvious that Mr. Racco accepts this.
Mr. Gold submitted that it is not necessary to find that Mr. Racco has changed; he has simply reverted to the man he always was. This is not a persuasive argument. Who Mr. Racco is now includes the fact that he has been convicted of a sexual assault. The character witnesses called by Mr. Racco were not helpful in understanding what Mr. Racco has done since his conviction to accept responsibility for his conduct or to prevent such conduct from recurring. . He apparently did not discuss these issues with the people he called to testify on his behalf.
Mr. Kucey argued that Ms. MC’s credibility had been impugned by the reply evidence of Ms. Racco-Attardo about the nature of Ms. MC’s relationship with Mr. Racco. It appears that Ms. MC has a closer relationship with Mr. Racco than she acknowledged in her testimony. However, the more significant problem with Ms. MC’s testimony is that it does not address the issue of what Mr. Racco has done since his conviction to deal with the conduct which led up to it. Ms. MC’s testimony that Mr. Racco has “changed” and is attending a healing church and healing retreats does not give the Tribunal any evidence of what changes have occurred or what Mr. Racco has learned from his experience. While remorse is a factor to be considered, it is not a pre-condition to continued registration after a criminal conviction. However, without any concrete evidence of a change in understanding, what the Tribunal is left with is conduct which raises legitimate concerns about Mr. Racco’s ability to conduct his business lawfully and with honesty and integrity.
The Tribunal is mindful of the fact that this was a first offence and that there have been no further criminal charges. The Tribunal does not accept Mr. Scholtzhauer’s contention that there is a separate head of concern stemming from the fact that Mr. Racco;s status as a registered sex offender might be “invisible” to consumers. The same may be said for most criminal convictions. The Tribunal also rejects Mr. Gold’s contention that this is the only misconduct in an otherwise blameless career.
The Tribunal has a second concern about Mr. Racco’s conduct. The term “business” in the Act as “means an undertaking carried on for gain or profit and includes any interest in such undertaking.” Mr. Gold submits that PJR is a passive holding company which did not need to be disclosed. PJR may have started as a tax shelter but it grew into a substantial property holding, management and rental company. It was Ms. Racco-Attardo’s testimony that beginning about ten years ago, PJR began paying the salaries of the administrative staff of Team Racco, who also performed administrative functions at PJR. Even if Mr. Racco originally believed the business did not need to be disclosed, by the time PJR began paying salaries, he either knew or ought to have known that it had become a “business” as defined under the Act. Moreover, PJR was a business engaged in the holding and rental of real estate. As such, the Registrar might reasonably have been expected to have questions about a possible conflict of interest. Despite this, Mr. Racco persisted in the non-disclosure of PJR, even on his most recent application for renewal.
Ms. Racco-Attardo testified that she did not believe she had to disclose her interest in PJR because she was not paid a salary. This is not an acceptable explanation. There is nothing in the wording of the renewal application that limits a business or occupation to one which pays a salary. The wording refers to being “engaged or employed in any other business...” Mr. Racco and Ms. Racco-Attardo were engaged in a business which grew to have shareholder equity well in excess of a million dollars. It was an active business that involved owning and renting out property. There was also a component of property management. There is no evidence before the Tribunal as to why Mr. Racco chose not to disclose the business. What is clear is that the business should have been disclosed.
The non-disclosure was material and persistent. Mr. Scholtzhauer testified as to the importance of disclosing other business interests. The Tribunal agrees that honest disclosure of material facts in a registration application is an important requirement under the Act. As a result of the non-disclosure, Mr. Racco cannot be said to have had an unblemished track record prior to his criminal conviction. In fact, the non-disclosure of PJR on his applications constitutes a separate ground for revocation under the Act. It is also evidence of past conduct that the Tribunal must consider in assessing the future conduct of Mr. Racco’s business.
Mr. Gold cited the case of Nagy (Re) [2009] O.L.A.T.D. No. 325, a decision of the Tribunal, upheld by the Divisional Court in Nagy v Ontario (Real Estate Business Brokers Act, Registrar) [2012] O.J. No. 517. In the Nagy case, Mr. Nagy stabbed his estranged girlfriend and subsequently violated the conditions of his conditional sentence, resulting in a 30 day jail sentence. The Tribunal imposed conditions on Mr. Nagy’s registration but did not revoke it. The Tribunal reached this conclusion in large part because it did not find a nexus between Mr. Nagy’s criminal behaviour and the conduct of his real estate business, which it characterised as “exemplary”. The Divisional Court did not decide directly that a nexus between the conduct at issue and the conduct of a real estate business was a requirement for revocation. The Court found that the Tribunal did focus on the link between past conduct and future risk and upheld the decision.
In the subsequent case of Registrar, Alcohol and Gaming Commission of Ontario v. 751809 Ontario Inc. (Famous Flesh Gordon’s) 2013 ONCA 157, the Ontario Court of Appeal did consider the issue of whether a nexus between past conduct and the conduct of a regulated business was required. In that case, an owner of a bar was also a full patch member of the Hells Angels. There was no evidence that the owner had a criminal record or had any issues with his liquor licence. The sole grounds for proposing revocation was his membership in the motorcycle gang. The wording of the past conduct grounds for revocation in that case is parallel to the wording in the Act. The Court of Appeal held:
. . . . The Registrar is entitled to rely on any past or present conduct, whether in the operating of the licensed establishment or not, that affords reasonable grounds for belief that the individual will not carry on business as required by s. 6(2)(d). The words of the subsection, “past or present” conduct, are not limited to the operation of the business or in any other way. Their ordinary and grammatical meaning, in the context of legislation that is designed to ensure the licensed establishments will be operated by those who can be counted on to properly serve the public interest, requires that past and present conduct not be confined to the individual’s operation of the licensed establishment.
The Nagy case can be distinguished from the present case. In this case there is a clear connection between Mr. Racco’s conduct and the running of his business. The sexual assault was of an employee of Mr. Racco’s and, although it occurred outside the office, it was nevertheless in the larger context of Ms. JK’s employment with Team Racco. In addition, the non-disclosure of a second business to his regulator is clearly directly related to Mr. Racco’s real estate business. It is also important to note that since the Nagy decision, the Court of Appeal in the Famous Flesh Gordon decision makes it clear that a nexus between conduct and the operation of a regulated business need not be established. It is the entirety of the past conduct which must be assessed in applying the test for entitlement to registration set out in the Act.
Mr. Gold also cited a variety of other cases before different boards and committees where the commission of a sexual offense was found not to be sufficient grounds for revocation of a licence. Each case must be decided on its particular facts and under the specific legislation governing the behaviour. Caution must be used in importing the deciding principles of one board or tribunal to another. For example, in the Nagahara (Re) [1996] O.C.P.S.D. No. 8, the Ontario College of Physicians and Surgeons Discipline Committee decided that an appropriate consideration in reaching its decision was the “fact that Dr. Nagahara has already been punished by the criminal court, the publicity, and the loss of work time.” In the present case, the object of the Act is not to punish Mr. Racco but to protect the real estate consumer. The Nagahara case may be distinguished from the case before this Tribunal. In the Nagahara case there was evidence that Dr. Nagahara, although denying his guilt, had received relapse prevention therapy and sensitivity training. There is no evidence before this Tribunal that Mr. Racco has received similar therapy or training. .
In the case of Law Society of Upper Canada v Coccimiglio [1991] L.S.D.D. No. 103 the Discipline Committee was considering a proposal to suspend rather than disbar Mr. Coccimiglio. In deciding to reduce the proposed period of suspension, the Discipline Committee considered as mitigating factors the changes which had occurred in Mr. Coccimiglio’s life in the period following the allegations of sexual misconduct and the strong support he continued to receive in the community. In the present case, there is no evidence of change since Mr. Racco’s conviction other than the completion of the sentence and the absence of further criminal charges. The evidence of the character witnesses did not address any changes Mr. Racco may have made in his life following his conviction. While the character witnesses said that Mr. Racco’s criminal conduct did not affect their opinion of him, they appeared to have little understanding of the circumstances of the assault as found by the trial judge. .
Similarly, in the case of Law Society of Manitoba v Davis [2001] L.S.D.D. No. 29, the Judicial Committee of the Law Society of Manitoba found as mitigating factors Mr. Davis’ “genuine remorse, his history of service to the legal and volunteer communities as well as his prior good character...” In the present case, the Tribunal has no evidence of remorse or service to the community. As well, Mr. Racco’s conduct prior to his conviction must include a consideration of the persistent failure to disclose a separate business to his regulator. The Tribunal reviewed the other cases cited by Mr. Gold and did not find them relevant.
The Tribunal considered whether some sanction short of revocation might be possible. The Tribunal considered whether, for example, a suspension to permit both counselling and the completion of a RECO course together with ongoing terms and conditions might be sufficient to address the Tribunal’s concerns. The Tribunal concluded that in this case, each component of Mr. Racco’s past conduct is a matter of serious concern. The non-disclosure of PJR is sufficient grounds for revocation. The cumulative effect of Mr. Racco’s past conduct regarding his sexual assault and his non-disclosure of an ongoing business is such that revocation is called for.
The purpose of the Act is to protect the consumer in what is, for most people, the single most significant financial decision they will make. Real estate brokers frequently act independently in situations where they are alone with clients. These realities underscore the importance of determining whether a broker can conduct his business with honesty, integrity and in accordance with the law. The Act makes a registrant’s past conduct the basis for this determination
Mr. Racco’s past conduct, including his conduct surrounding his criminal conviction and his failure to disclose the PJR business to the Registrar, taken together, afford reasonable grounds for belief that Mr. Racco will not carry on business in accordance with law and with integrity and honesty.
The Registrar raised a variety of other alleged improprieties on the part of Mr. Racco. The Tribunal considered these other allegations and concluded they were either not proven or not in themselves grounds for revocation. Concerning non-disclosure, the Registrar alleges that Mr. Racco did not disclose either his criminal charge or the existence of PJR within 5 days as required by Subsection 34(1) of Ontario Regulation 567/05. It is true that the non-disclosure occurred. The breach of a requirement under a regulation to the Act may well give rise to an administrative sanction in some cases. However, in this case, the violations were not grounds on their own for revocation. The non-disclosure of the criminal charge was rectified on Mr. Racco’s next renewal application. The non-disclosure of PJR within five days may be seen as being subsumed into the more serious conduct of making a false statement on a renewal application.
The Registrar also alleges that Mr. Racco failed to adequately disclose his criminal charge on the renewal application that next followed the charge. Further, the Registrar asserts that Mr. Racco breached the terms and conditions of his registration by not disclosing that his criminal proceedings had been adjourned and by not “immediately” disclosing the result. While these disclosures may have been unsatisfactory to the Registrar, the Tribunal finds that Mr. Racco did disclose his criminal charge and, ultimately, his conviction and sentence. There is no evidence that he was under an obligation to disclose an adjournment of the sentencing phase of his trial.
The Registrar asserts that Mr. Racco’s conduct during his divorce proceeding was such to call his ability to conduct his business with honesty and integrity into question. The Tribunal does not agree. Concerning the alleged improper allocation of income to Ms. Racco-Attardo, the Tribunal accepts the evidence of Mr. Racco’s divorce lawyer and his accountant that the misallocation was done to preserve a legitimate business expense for tax purposes and for no improper purpose. Concerning the alleged non-disclosure of a business in which Mr. Racco had an interest, the Tribunal accepts the evidence of Mr. Racco’s accountant that the business value was disclosed. Concerning the allegation that Mr. Racco shut Ms. Racco-Attardo out of the Team Racco business, the Tribunal is not persuaded that Mr. Racco was acting improperly in setting up a separate business account. It was Ms. Racco-Attardo, on her own evidence, who stopped going to work at Team Racco. The ongoing issue of non-payment of child support was adequately explained by Mr. Racco’s lawyer.
The Registrar alleges that in addition to the non-disclosure of PJR, Mr. Racco failed to disclose to the Registrar the existence of a second business. The Tribunal heard evidence that this was a holding of some property but there is not sufficient evidence before the Tribunal to determine if this was a “business” as defined in the Act or an occupation or profession requiring disclosure.
The Registrar alleged that Mr. Racco had attempted to mislead the court during his criminal trial by presenting himself as the owner of the real estate business where he and Ms. JK were working. In fact, according to the evidence of Ms. Racco-Attardo, Mr. Racco was an employee of the real estate brokerage and an employer of Ms. JK. On reviewing the judgement of Justice Zisman, the Tribunal is satisfied that the trial judge’s conclusion that Mr. Racco owned the business did not form a basis of her decision. The fact that Mr. Racco was Ms. JK’s employer was a factor in Justice Zisman’s sentence and that fact is not in contention. The Tribunal does not have sufficient evidence before it to determine whether or not Mr. Racco held himself out as the owner of the real estate brokerage during his trial.
Mr. Kucey, on behalf of the Registrar, submitted that the Tribunal ought to draw an adverse inference from Mr. Racco’s choice not to testify. In view of the decision in this matter, it is not necessary or appropriate to make an adverse inference. The Registrar has made out his case in regards to the two most significant issues of concern to the Tribunal.
Mr. Kucey also submitted that the provision of a false statement on an application ought to be regarded as a strict liability offence. It is not necessary to decide this matter in light of the decision which has been made. In this case, the non-disclosure of PJR was material and is a ground for the revocation.
ORDER
Accordingly, under the authority of Subsection 14(5) of the Act, the Tribunal directs the Registrar to carry out his Proposals to revoke the registration of Mr. Racco as a broker under the Act.
LICENCE APPEAL TRIBUNAL
Laurie Sanford, Vice-Chair
Released: March 18, 2015