Ontario landlords hand over control of real estate empire after allegation of 'misappropriated' investor funds
CBC
An Ontario Superior Court justice has ordered four landlords to hand over control of their real estate empire after it was alleged they spent millions of dollars of investors' money on a lavish lifestyle, let rental properties fall into ruin and continued borrowing funds as their business failed.
The order, signed last week by Justice Peter Osborne, transfers power of the 11 corporations based in the Hamilton area to KSV Advisory — a court-appointed monitor already given special powers to investigate the business.
The corporations have been under bankruptcy protection — shielding them from dozens of lawsuits — since January.
But, through an investigation this spring, KSV alleged the landlords "diverted, misused or misappropriated funds that were borrowed from investors," according to the accounting firm's report.
Lawyers for KSV and hundreds of investors, who are owed around $144 million, said at a hearing last week they'd only support an extension of bankruptcy protection if KSV was allowed to take control.
"What we have here is a complete loss of confidence in management," noted Osborne at the hearing.
The landlords — former YTV actor Robby Clark, Hamilton real estate agent Dylan Suitor and Burlington business owners Aruba Butt and Ryan Molony — have disputed KSV's findings, arguing they've not been given enough time to respond to lengthy requests for documents.
Their lawyer, Joseph Blinick, said at the hearing that while they've been under intense financial scrutiny, they've also worked hard to renovate their properties to sell and recoup investors' funds.
"The manner in which the applicants have been portrayed is exceptionally unfair and it ignores all the good they have done," said Blinick.
They agreed to hand over keys to hundreds of rental properties to KSV, Osborne wrote in his order.
KSV is now in charge of managing the business, including overseeing all lease agreements, renovations and property sales.
Clark's company SID Developments, not among the corporations with bankruptcy protection, will continue to manage 27 properties and their renovations, the court order says.
The terms of the order are almost the same as the landlords pitched earlier in June, noted spokesperson Steven D'Amico on behalf of Clark, Suitor, Butt and Molony, in a statement to CBC Hamilton on Tuesday.
"Given the false perceptions created by the monitor's deeply inaccurate report, this agreement is the best outcome to ensure value for the creditors," D'Amico said.
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