Ex-senator Mac Harb cleared of mortgage fraud, blames Tory senators for his legal troubles

Former Liberal senator Mac Harb, who resigned at the height of the Senate expenses scandal while dogged by accusations of criminal wrongdoing, said Monday he's been vindicated after settling a dispute with RBC Royal Bank over claims of mortgage fraud.

In an exclusive interview with CBC News, Harbsaid he has reached a monetary settlement with the bank over its actions in the RCMP's probe of his financial affairs a probe that was triggered by allegations the senator defrauded taxpayers by claiming expenses to which he was not entitled.

Harb and his lawyer,Ottawa-based attorney LawrenceGreenspon, are keeping the details of the settlement confidential.

The Crown ultimately withdrew all criminal charges against Harbafter a judge found Independent P.E.I. Sen. Mike Duffy not guilty of fraud and breach of trust following a highly publicized trial. Justice Vaillancourt ruled the Senate's rules on living and travel expenses were vague.

While free of the threat of a trial, Harbsaid he wanted RBCto acknowledge it supplied inaccurate information to the police information that was then widely publicized and, he said, used to tarnishhis reputation.

"If you were to Google my name you'll still be able to see, according to the internet, I have in fact done something wrong in terms of the Royal Bank and my mortgage arrangement with them. It was bothering me quite a bit," he said.

Harbsaid he was prepared to sueRBC for negligence and breach of fiduciary duty and hired Greenspon to help press his claim in court. The dispute recently was settled to his satisfaction, he said.

"I am pleased, finally, the bank has recognized therewas nothing wrong and they came to an agreement and the record now will be corrected," he said.

'There never was any mortgage fraud ever'

In a letter from RBCtoHarb, and subsequently shared with CBC News,the bank blamed media reports for spreading information its ownmortgage fraud specialist, Sheila Wilson, provided to police.

"You have been a client in good standing and all obligations are up to date. RBC does not ascribe to the past allegations reported in the media re: mortgage fraud," reads the lettersigned by Courtney Anderson, a private banker in Ottawa.

Greenspon, who also is representing Duffy as he pursues a legal challenge against the Senate and the RCMP, said the affair left the bank with eggon its face.

"What the Royal Bank has finally acknowledged is that there never was any mortgage fraud ever. Sen. Harb has done nothing wrong," he said, adding he had to drag the bank "kicking and screaming" to the point where it released a letter conceding it does not believe Harb is a mortgage fraudster.

In 2007, Harb transferred 99.99 per cent of his ownership stake in a Cobden, Ont. property to a diplomat from Brunei, Magdalene Teo.

Harbthen subsequently bought ahouse in nearbyWestmeath, Ont., in 2010 and took out another mortgage from RBC for $240,000. He listedthe Cobden home as an asset to support his loan, according to court documents.

Harbhas always maintained the mortgages were fully secured as he continued to make paymentson theCobdenproperty even afterTeotook a hefty ownership stake in the home. The Cobdenpropertywas subsequently sold.

Harbdid not get into specifics when asked byCBCNews why he transferred ownership to Teo, saying only that there was nothing illegal about the transaction. "I'm a private citizen," he said.

Harbsaid he was simply following the financial advice he received from advisers at the bank, adding there wasnothing untoward about his financial dealings with Teo who has since left Canada for a posting in Asia. Teohas described Harbas a friend.

"Absolutely, unequivocally, I did nothing wrong. All the time I conducted myself as the bank asked me to do so. I was a private client, I pay $125 a month to the bank, so they get to know their clients [and] obviously they knew me very well and provided me with all the advice and I have acted all along according to their instructions,"Harbsaid.

At the time, RBCtold police they were unaware of the transfer and that they had reason to believe the senator had acted inappropriately by transferring the Cobden property toTeoand then applying for financing on the Westmeath home actions the bank claimed put mortgageson the two properties "at risk," according to court documents.

Cpl. Horton, the lead RCMP investigator on the Senate expenses file,published RBC'sclaims in a document known as an Information to Obtain an ITO, or production order which lays out the basis for criminal allegations and requests a court order to produce evidence held by somebody other than the subject of the investigation.

He said Wilson, the RBC fraud specialist, "viewed the misrepresentation of Sen. Harb's ownership of the Cobden property as a fraud."

Greensponsaid the bank overstepped.

"There was a transfer and it was done in a way the bank recommended," he said. "Unfortunately, by providing incorrect information to the RCMP, which found its way into this ITO, the media then accessed that document and that became the story ...it was all founded on what the Royal Bank subsequently acknowledged to be incorrect information," Greenspon said.

In response to questions from CBC News, RBCreplied in anemail Wednesday thatit would have no further comment on the matter, referring back to the letter it sentHarbdisavowing the mortgage fraud allegations.

In February 2014, the Mounties said there wasn't enough evidence to chargeHarbwith mortgage fraud but pushed ahead with the otherfraud and breach of trust charges against him which were eventually withdrawn when Duffy's not-guilty verdict came down.

'Rotten apples'

The police investigation was launched after questions were raised about Harb's designation of the Cobden property as his primary residence.

Senate rules allow senators to claim expenses for two homes if their primary residence is more than 100 kilometres from Parliament Hill. Harb'sCobden home was 123 kilometres away from the Red Chamber and thus he was entitled to about $20,000 a year in support.

The Senate committee charged with oversight of spending which was then dominated by Conservative senators under former prime minister Stephen Harper ordered outside auditors from Deloitte to review spending by Harb and Independent Quebec Sen. Patrick Brazeau. The auditors argued the spending rules were unclear, making it difficult to tell if they'd been broken.

Harb blames the Tory-dominated internal economy committee which healleges was "hijacked" by political operatives in the former prime minister's office for his whole ordeal.

I didn't want to serve with a bunch of Conservative senators who are ruthless, spineless and have no principles whatsoever. There's some rotten apples there.- Former senator Mac Harb

He said there is nothing in the Senate rulespreventing him from claiming theCobdenandWestmeathproperties ashis primary residences at different times.

"The Senate knew, all the officials knew all along everyone, from the clerkto thebureaucrats," he said. "There was nothing sinister about that andeverything was above board.

"Obviously, I wasn't it in for the money. I was in it for public service, to serve the public. And in the end ...no, I don't regret a thing. I believe I have done the proper thing all along," he said, adding he qualified for his Senate pension in 2007 and thus did not have to keep working to collect a cheque.

Harbultimately repaid all $231,649.07 in living expenses claimed since 2005 and then resigned early from the upper house.

"I didn't want to serve with a bunch of Conservative senators who are ruthless, spineless and have no principles whatsoever. There's some rotten apples there," Harb said of his decision to step away some 16 years before his mandatory retirement date.

CBC News was not able to reach Conservative Sen. David Tkachuk, who was chair of the internal economy committee when it requested the forensic audits of living expenses, for comment in time for this story.

However, in a letter to CBC News after this story appeared, Tkachuk said the Prime Minister's Office had "nothing to do" with the Senate's investigation of the expense claims, including Harb's.

"It is worth pointing out ...that [Harb's] mortgage problems with the Royal Bank were of little or no interest to the internal economy committee.We were only interested in whether the house involved was his primary residence or not for the purpose of collecting living expenses.Our concern was that Sen.Harbinvoiced the Senate for a home outside of Ottawa that he did not live in," the Saskatchewan senator said.