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Fortress Real Developments founders charged with fraud

The two co-founders of mortgage syndication company Fortress Real Developments Inc. have been charged with fraud after a years-long RCMP investigation.

Ex-CEO Jawad Rathore and ex-COO Vince Petrozza were each charged with one count of fraud and one count of offering a secret commission, the RCMP announced this week.

Details of the allegations against Rathore and Petrozza weren’t provided by the RCMP.

Lawyers for Rathore and Petrozza said their clients vowed to fight the charges.

“Mr. Petrozza engaged with the RCMP throughout their investigation and he is surprised and disappointed that they decided to lay charges. We are confident that when the evidence is revealed, it will show there was no fraud or secrecy. Mr. Petrozza is innocent of the charges and we look forward to his day in court,” said Gerald Chan, Petrozza’s lawyer.

“This was a flawed investigation dogged by tunnel vision from the outset. There is no reasonable prospect of a conviction. We look forward to establishing Mr. Rathore’s innocence,” said Rathore’s lawyer Scott K. Fenton.

Fortress was one of the first companies in Canada to offer retail investors the ability to invest in syndicated mortgages. A syndicated mortgage involves a group of investors pooling their money to lend to developers or homeowners.

In 2018, the RCMP raided Fortress’s office amidst complaints from investors that the company hadn’t adequately explained the risk of their investments.

The investigation was carried out by the RCMP’s Integrated Market Enforcement Team, a specialized unit including police, lawyers and accountants that works in conjunction with securities regulators and provincial police forces to fight financial market crime. IMET was created in 2003. In 2015, its Toronto division relocated to the headquarters of the Ontario Securities Commission.

Some real estate developments funded by Fortress ended up going bankrupt, costing investors millions, according to a Star article in 2016.

Among the projects funded by Fortress was Barrie’s Mady Collier Centre condo development, which was granted court protection from creditors in 2015; the project owed creditors $50 million at the time, with the bulk owed to Laurentian Bank. Investors in the project had been told as part of a sales pitch that they’d get an eight per cent annual return.

Court documents revealed that of $16.9 million raised from hundreds of individual investors for the Mady Collier Centre, more than a third went toward marketing and promotional fees, mortgage broker fees and something called co-development/priority returns, according to a Star article in 2016.

Syndicated mortgages had typically been limited to institutional investors or experienced real estate investors, Fortress offered ordinary consumers the opportunity to put their money in.


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