Years after they lost tens of thousands of dollars by investing with Fortress Real Developments, several investors are hoping to see the company’s principals found guilty of criminal fraud in Toronto Wednesday.
Justice Daniel Moore will deliver his judgment in the judge-alone criminal fraud trial of Jawad Rathore and Vince Petrozza, who stand accused of misleading investors on two never-realized projects: the mixed-use Collier Centre in Barrie, Ont., and a condo tower called SkyCity in Winnipeg.
The charges related to syndicated mortgages, which are loans made by several investors to cover initial development costs like marketing and zoning, with the land itself acting as collateral.
After 38 years as a federal employee, Linda Bilorosek of Burlington Ont., invested her entire retirement savings in the SkyCity project. Of her $63,000 investment, she lost about $56,000.
“I was a single parent and it was all the savings that I had … I was pretty devastated,” said Bilorosek, who is hoping Moore delivers a guilty ruling.
“It’s not going to bring back my money. That’s not going to happen. But at least it’s some kind of satisfaction that they have to pay for what they did,” she said.
The charges the men are facing carry a maximum sentence of 14 years in prison. During closing arguments in April, the defence argued the investments’ risks were made clear to those providing the loans and that Rathore and Petrozza didn’t deal with investors directly, relying instead on mortgage brokers.
Nikolai Chekhmatov, who lives in Toronto, immigrated to Canada from Russia in the late 1990s. It’s a move he made in part to live somewhere where financial services functioned more transparently and were well regulated by the government.
He lost about $90,000 in the SkyCity project. Chekhmatov, who is in his early 50s, said he feels he got off somewhat easier than others.
“I’m devastated, but I can somehow recover from this,” he said.
Barry Stevens, an investor from Orleans, Ont., previously told CBC News he sunk $400,000 into a handful of Fortress projects, including SkyCity. When Rathore and Petrozza were charged, he said he had lost so much of his retirement savings that he was forced back to work full time.
Nicki Peters, who also lives in Toronto, lost $100,000 in the Collier Centre project. She said she felt “heartbroken, defeated, deceived” once it became clear that she had lost money.
In closing arguments in April, Crown prosecutors argued investors had been misled about the value of the land involved in their loans, which was a central theme in the marketing of the investments as safe and secure.
As syndicated mortgage investments are secured against land, the value of that land is key, Crown prosecutors said. The value is so important because if something goes awry with the development, the investments can be recovered by selling the land.
In making the argument that Rathore and Petrozza didn’t deal with investors directly, the defence said the mortgage brokers had a legal duty to ensure the investors were aware of the risk.
But a video entered into evidence showed Petrozza training brokers on what needed to be disclosed to investors in the syndicated mortgages. Prosecutors also said Petrozza and Rathore knew there were property appraisals that had lower values than the opinion of value given to investors, according to internal email discussions.
“They should be found guilty of fraud on this basis,” prosecutor Vallery Bayly told the court in April.
“It’s not honest to conduct one’s business by lying to mom-and-pop investors in plain language while expecting them to untangle the precise meaning of technical documents or follow a trail of breadcrumbs to discover the truth.”
Defence attorney Gerald Chan argued that the opinions of value that were given to investors were independent and based on acceptable, legitimate, legally permissible methodology.
Meanwhile, defence lawyer Scott Fenton said the two ill-fated projects were outliers. He said of the 80 projects Fortress undertook using the same financing and disclosure models, “most were successful, if not fantastically so.”
He said the company had helped 25 developers build 5,200 residential and 1,700 commercial units, using $920 million in syndicated mortgage loans.
