SkyCity developers intentionally misled investors about value of Winnipeg land, Crown argues at fraud trial

Joanne Levasseur · CBC News

· Posted: Apr 04, 2025 11:23 AM EDT | Last Updated: 5 minutes ago

Lawyers wrapped up closing arguments Wednesday successful a transgression fraud lawsuit against the developers of the never-built SkyCity condo project, whose developers are accused of misleading investors.

Fortress Real Developments principals Jawad Rathore and Vince Petrozza, who are connected proceedings successful the Ontario Court of Justice successful Toronto, headed up SkyCity, a failed $200-million 45-storey condo task that was expected to emergence from a parking batch astatine the country of Graham Avenue and Smith Street successful Winnipeg.

The 2 were charged with fraud successful 2022 successful transportation with a benignant of concern called syndicated mortgages — loans made by respective investors to screen archetypal improvement costs similar selling and zoning, with the onshore itself acting arsenic collateral.

Crown prosecutors argued Rathore and Petrozza committed fraud by misleading investors astir the worth of onshore underlying syndicated mortgages connected the SkyCity task successful Winnipeg and the Collier Centre successful Barrie, Ont., portion the defence countered that investors were made alert of the risks of the investments and that it was the brokers' not the developers' work to pass investors.

Since syndicated owe investments are secured against land, the worth of that plus is key, due to the fact that if there's a occupation with the project, the concern tin beryllium recovered by selling the property, Crown authoritative Vallery Bayly said.

Information fixed to investors was purported to amusement the existent marketplace worth of the land, "but these were lies," she said.

"It's not honorable to behaviour one's concern by lying to mom-and-pop investors successful plain connection portion expecting them to untangle the precise meaning of technical documents oregon travel a trail of breadcrumbs to observe the truth," Bayly said.

Fortress made the worth of the onshore securing syndicated mortgages a cardinal taxable successful marketing, Bayly said.

"A tenable idiosyncratic would see it dishonest to neglect to disclose to investors that appraisals were done and showed drastically little values than the opinions of value, due to the fact that that accusation bore straight connected 1 of the cardinal information features that were advertised to investors."

Rathore and Petrozza knew what investors were being told and met personally with investors to beforehand the investments, Bayly said.

Bayly quoted a witnesser who testified astir a presumption wherever Petrozza and Rathore spoke astir however harmless and unafraid the syndicated mortgages were, due to the fact that investors are registered connected the onshore title.

A SkyCity video that was entered into grounds showed Petrozza grooming brokers connected what needed to beryllium disclosed to investors successful the syndicated mortgages.

Bayly said determination were interior email discussions that show beyond a tenable uncertainty that Petrozza and Rathore knew determination were spot appraisals that had little values than the sentiment of worth fixed to investors.

"They should beryllium recovered blameworthy of fraud connected this basis," Bayly said.

Fortress defence lawyer Scott Fenton opened by saying 2 of the 4 projects that were initially part of this fraud lawsuit were dropped. He said of the 80 projects Fortress undertook utilizing the aforesaid financing and disclosure models, "most were successful, if not fantastically so."

Fortress was progressive successful raising $920 cardinal by mode of syndicated owe loans, which helped 25 developers physique 5,200 residential and 1,700 commercialized units, Fenton said.

He quoted a Fortress study that said 19 of 20 projects provided syndicated owe investors a complaint of instrumentality that was supra 8 per cent, and 7 of those projects had a complaint of instrumentality betwixt 10.4 and 14.32 per cent.

"Not perchance fraud — rather, a palmy concern endeavour lawfully conducted," Fenton said.

Defence lawyer Gerald Chan said an important portion of this lawsuit is that Petrozza and Rathore did not woody with the investors straight successful presumption of selling these loans. Rather, they relied connected licensed owe brokers who person the ineligible work to guarantee their clients recognize the loans and the risks involved.

Chan said the opinions of worth that were fixed to investors were autarkic and based connected acceptable, legitimate, legally permissible methodology.

"Fortress was not required to disclose different valuations and appraisals successful its possession connected which it was not relying to get financing and, successful fact, it was contractually prohibited from doing so," said Chan.

The syndicated mortgages "were not and were ne'er advertised arsenic risk-free investments," Chan said.

Justice Daniel Moore's determination is expected May 28.