In a stunning revelation that has sent shockwaves through Alberta’s real estate community, a judge has ruled that Pat Hare, the owner of a prominent Calgary brokerage, not only knew about a multi-million-dollar Ponzi scheme orchestrated by his employee, Eric Drinkwater, but actively advised the fraudster against reporting his illegal activities. This decision by the Court of King’s Bench of Alberta, dated April 24, from Justice Barbara Romaine, paints a grim picture of alleged complicity at the highest levels of a major real estate firm, raising significant questions about accountability and regulatory oversight within the industry.
The ruling shines a spotlight on Hare, a Realtor with over four decades of experience, concluding that he was fully aware of the illicit scheme as early as 2022. This knowledge, coupled with his alleged efforts to impede disclosure, has ignited a firestorm of controversy, leading to severe consequences for his business. Just last week, real estate giant Re/Max announced its decision to sever ties with Hare’s brokerage, Re/Max Central, amidst the escalating scandal. This move underscores the serious nature of the allegations and the potential damage to brand reputation that such a controversy can inflict.
Eric Drinkwater, Hare’s nephew and the alleged architect of the Ponzi scheme, faces criminal charges for approximately $1.9 million in fraud. The financial fallout from his activities has been substantial, with civil litigation already seeing significant judgments. To date, four victims have been awarded a staggering $2.28 million in losses, $185,000 in interest, and an additional $1 million in punitive damages. Drinkwater’s criminal trial is slated to commence this month, promising further revelations and a crucial step towards justice for those impacted by his alleged deceit.
The Deceptive Web: Unraveling Drinkwater’s Ponzi Scheme
A Ponzi scheme, a form of investment fraud, lures investors and pays profits to earlier investors with funds secured from more recent investors. Instead of genuine investment gains, the scheme relies on a constant flow of new money, eventually collapsing when the influx of new capital ceases or demands for withdrawals exceed available funds. In Drinkwater’s case, the specifics of how he leveraged his position within the real estate sphere to entice victims are beginning to emerge, indicating a calculated exploitation of trust and perceived legitimacy within the industry.
The devastating impact on victims extends far beyond financial losses. Many have reported significant emotional distress, loss of savings, and profound damage to their trust in financial professionals. The scale of the fraud highlights the vulnerability of individuals to such schemes, particularly when perpetrated by someone connected to a reputable organization like a real estate brokerage. The subsequent legal battles, both civil and criminal, are a testament to the victims’ arduous journey to reclaim what was lost and hold those responsible accountable.
Incriminating Evidence: The Revealing Email Exchange
Central to Justice Romaine’s decision are the details of several damning email exchanges between Eric Drinkwater and Pat Hare. These communications provide compelling evidence of Hare’s direct involvement and his attempt to obstruct regulatory reporting. In one particularly illustrative exchange, Drinkwater explicitly stated his intention to contact the Real Estate Council of Alberta (RECA), the industry’s regulatory body, to disclose his activities.
Hare’s response, as cited in the decision, was unequivocally obstructive: “you do not have to call reca unless you go bankrupt [sic]. What are you going to do tell them that you stole other people’s money or put them on a Ponzi scheme [sic].” This direct advice against self-reporting is a critical piece of evidence, demonstrating Hare’s clear knowledge of the scheme and his alleged active role in preventing its disclosure. Ultimately, the decision confirms that neither Drinkwater nor Hare, nor anyone else within the brokerage, reported the illicit activities to RECA, allowing the scheme to continue unchecked for an extended period.
The judge’s ruling further emphasizes the gravity of Hare’s inaction, stating, “Despite knowing of the scheme, Mr. Hare did not report Mr. Drinkwater’s conduct to the RECA, and in fact, advised Mr. Drinkwater against reporting himself.” This goes beyond mere negligence; it suggests a deliberate choice to shield Drinkwater from regulatory scrutiny. The decision also noted that “Mr. Hare enabled Mr. Drinkwater to continue the scheme, and he himself received regular payments from (Drinkwater’s company) during the period that Mr. Drinkwater was continuing with the scheme,” suggesting a potential personal financial benefit derived from the ongoing fraud.
A Chain of Command Failure: Management’s Awareness and Inaction
The court’s decision also brings to light the disturbing timeline of awareness within Re/Max Central. According to the ruling, as early as December 2021, David Lem, the brokerage’s broker/manager, became aware of Drinkwater’s concerning financial practices, specifically his habit of borrowing money from individuals and failing to repay it. Lem testified that he reported these concerns to Pat Hare between December 2021 and January 2022, initiating a period where the brokerage leadership was undeniably cognizant of suspicious activities.
Following this initial report, the decision indicates that Lem and Hare engaged with and negotiated a release with a complainant on behalf of Drinkwater and RE/MAX Central, suggesting an attempt to manage early complaints internally rather than involving external regulators. The situation escalated significantly in August 2022, when more details of the scheme emerged, and by early 2023, the “floodgates opened,” as described in the decision, with numerous additional complaints pouring in.
A pivotal meeting occurred in March 2023, where Lem, Hare, and Drinkwater met to discuss Drinkwater’s conduct. At this critical juncture, a “deliberate decision was made not to report Drinkwater to RECA,” according to the court document. Days later, Lem sent an email to both Drinkwater and Hare, reinforcing this internal approach: “In short, we’ll make every effort to diffuse any situation that comes to our attention that you make us aware of and we will leave it to an internal matter at this time. However, I will be bound by RECA’s requirement to report any further instances we have not be made aware of in advance. Thank you.”
Lem’s testimony revealed his rationale for not reporting to RECA: he believed Hare, given his personal relationship with Drinkwater, would resolve the issue. This illustrates a severe breakdown in professional responsibility and a fundamental misunderstanding of regulatory obligations, where personal relationships seemingly trumped legal and ethical duties to protect the public and the integrity of the real estate profession.
Safeguarding Assets: The Mareva Injunction and Financial Entanglements
In a crucial step towards protecting the victims’ interests, Justice Romaine’s decision includes the issuance of a Mareva injunction. This temporary court order, sought by four of Drinkwater’s victims, effectively freezes specific assets, preventing their disposal or dissipation pending a future court order. This legal instrument is often employed in cases where there is a real risk that assets might be moved or hidden to avoid repayment to creditors or victims.
The victims argued that a Calgary home was fraudulently transferred from Eric Drinkwater to Pat Hare. While Justice Romaine found insufficient direct evidence to support a fraudulent transfer of the property itself at this stage, her ruling highlighted compelling financial ties: Drinkwater transferred money to Hare during the period the scheme was active, and these funds were subsequently used to pay the mortgage on the home, directly benefiting Hare. Furthermore, the judge noted evidence indicating that Hare had been attempting to sell the property despite his full knowledge of the claims involving it, reinforcing the need for the injunction. This order temporarily prohibits any transactions related to the home, ensuring that this significant asset remains available for potential claims by the victims.
The Broader Implications for Real Estate Ethics and Regulation
The unfolding saga surrounding Pat Hare, Eric Drinkwater, and Re/Max Central transcends a simple case of individual fraud; it raises profound questions about the ethical framework and regulatory effectiveness within the broader real estate industry. For a seasoned professional and brokerage owner like Pat Hare to allegedly actively advise against reporting a serious financial crime speaks volumes about potential systemic vulnerabilities. The Real Estate Council of Alberta (RECA) is the provincial regulator responsible for licensing, governing, and disciplining real estate professionals. Its mandate is to protect consumers and ensure the integrity of the real estate market. The failure to report Drinkwater’s scheme, despite multiple individuals being aware, represents a significant lapse in this protective function.
This incident will undoubtedly prompt RECA to scrutinize its reporting mechanisms, enforcement protocols, and the ethical training provided to its licensees. The public’s trust in real estate professionals hinges on the assurance that such serious breaches of conduct will be promptly identified, reported, and dealt with. When a brokerage owner allegedly prioritizes internal management over external regulatory compliance, it erodes that trust and leaves consumers exposed to harm.
Moreover, the decision by Re/Max to cut ties with Re/Max Central serves as a stark warning to other brokerages about the reputational and business consequences of failing to uphold ethical standards and regulatory obligations. Major real estate brands operate on a foundation of trust, and associations with alleged criminal activity or regulatory cover-ups can be catastrophic. This high-profile case is likely to spur renewed discussions within the industry regarding the responsibilities of managing brokers, the clarity of reporting requirements, and the consequences for those who knowingly shield fraudulent activity.
Conclusion: A Call for Accountability and Integrity
The ongoing legal proceedings involving Pat Hare and Eric Drinkwater underscore a critical juncture for Alberta’s real estate sector. The judge’s findings expose not only the alleged criminal actions of a single individual but also a distressing failure of ethical leadership and regulatory compliance within a prominent brokerage. The victims, already having endured substantial financial and emotional hardship, are now navigating complex legal avenues to seek justice and recover their losses, with the Mareva injunction offering a ray of hope for asset preservation.
As Eric Drinkwater’s criminal trial approaches, and as the full implications of Justice Romaine’s decision unfold, the real estate community faces an imperative to reflect on its commitment to transparency, accountability, and integrity. This case serves as a powerful reminder that robust regulatory enforcement, coupled with an unwavering adherence to ethical principles by every professional, is paramount to safeguarding the public interest and maintaining the credibility of the real estate industry.