CALGARY - The Royal Bank of Canada has filed an $8.9-million lawsuit against one of its former employees and members of his family over allegations they orchestrated a complex mortgage fraud scheme that has left the financial institution facing millions in losses for properties with artificially inflated values.

At the heart of the lawsuit are allegations the defendants -- including Ilan Levy, who worked with the bank as a mortgage specialist between August 2004 and March 2009 --approached people to allegedly buy real estate at prices that had been intentionally inflated over market value in exchange for fees between $20,000 to $70,000, according to court documents obtained by the Herald.

The defendants then apparently received payments of part of the mortgage loan proceeds, for Levy or companies under his control, that translated into at least $2.46 million, the documents allege.

As a result, the bank claims it was "intentionally misled" into agreeing to loan more money than the properties were worth.

In the documents filed by the Royal Bank last month in the Court of Queen's Bench, the bank indicates Levy was terminated because it was "discovered that he planned, organized, participated in and executed the fraudulent transactions."

The documents state Levy or companies under his control received at least $2.46 million from the proceeds of mortgages obtained fraudulently.

He is among eight people and six corporations named as defendants in the suit, including his wife, two of his brothers and a lawyer.

None of the allegations have been proven in court.

In all, the bank claims the group was involved in at least 20 transactions using a so-called straw buyer scheme, most for properties in the Elbow Valley area, some with mortgages for more than $2 million.

The bank, in its statement of claim, alleges Levy--whose duties included helping people apply for and obtain residential mortgages from the Royal Bank--organized, planned and executed each of the 20 transactions and that either he or another defendant found the properties, drafted documents and retained an appraiser for the fraudulent purchases.

The bank is suing for $8.9 million in damages, along with interest.

The bank has also called for all of the defendants' assets to be frozen.