Exposure of TD’s legal action against StateView kicked off the cascade of legal difficulties from other lenders.Fred Lum/the Globe and Mail
More lenders of Ontario builder StateView Homes are demanding it repay close to $200-million in loans, casting doubt on its ability to cover its debts, according to new court documents.
Filings from KingSett Mortgage Corp. – part of KingSett Capital’s $17-billion portfolio – challenge StateViews’s recent claims that it will finish a half-dozen townhouse projects that include hundreds of future homes, making insolvency and liquidation more likely.
“The debtors have effectively no liquidity … the state of the debtor’s books and records is poor and, and in certain circumstances, non-existent,” says a statement of claim filed April 27 on behalf of KingSett and lender Dorr Capital Corporation.
The lenders are demanding repayment of $167.8-million and $4-million that was advanced to StateView for a variety of residential and commercial properties. They are also asking the court to appoint a third-party receiver to manage a sales process on StateView’s remaining assets.
StateView declined to comment on the latest filings, but issued a statement Wednesday promising the company was still solvent enough to complete its projects.
The latest legal action comes days after Atrium Mortgage Investment Company jointly filed with Dorr to recoup $24.4-million loaned to StateView for one project in Markham. With KingSett’s filing, lenders are seeking close to $200-million in payments, leaving the bulk of the Vaughan-based builder’s active projects subject of court proceedings.
There are five properties in various states of completion to which KingSett, Dorr and Atrium have loaned money: Minu Towns in Markham (147 units, construction not yet begun), High Crown Estates in King City (48 units, construction estimated 30 per cent complete), On the Mark in Markham (164 units, 90 per cent complete), NAO Towns in Markham (construction not yet begun) and BEA in Barrie (218 units).
Only On the Mark is judged by KingSett to be close to completion, and its court filings suggest all the other properties ought be marketed for sale; though KingSett states it already declined to give permission to StateView to sell the Minu project for a proffered $59-million.
KingSett’s filing also adds new allegations of unauthorized money moves, claiming as much as $2.7-million it advanced to StateView for everything from development charges to permits did not make it to the intended municipal offices. KingSett has hired Altus Group to track down the missing cash.
KingSett’s filings also contain more insight into the alleged cheque-kiting fraud that cost Toronto-Dominion Bank $37-million. Exposure of TD’s legal action against StateView kicked off the cascade of legal difficulties from other lenders.
TD discovered the alleged fraud on March 14 and obtained court injunctions to freeze business accounts at Royal Bank of Canada and later also at Bank of Nova Scotia and Duca Financial Services Credit Union Ltd.
According to the filings, various pseudonyms were used to write huge cheques to TD accounts that granted conditional credit for the amounts before the transaction cleared. Money was moved out of the TD accounts and the original bad cheques cancelled, defrauding the bank over the course of a year.
As an example, a Scotiabank account tied to “Tina Taurasi” received cheques and wires adding up to $555,002, though there is no “Tina” among the members of the Taurasi family who are identified as StateView-affiliated corporate officers. Other pseudonyms used to send or receive bad cheques include “ABC Inc., XYZ Inc., Jon Doe and Jane Doe.”
TD Bank has entered into a settlement with several StateView defendants – including company leaders Dino and Carlo Taurasi, but not including former CFO Daniel Ciccone – to recover its money by July, 2023.
KingSett’s filings also levelled a critique at TD’s actions in this case, alleging its settlement with StateView could have an impact on other lenders by giving TD higher priority to recoup money.
“The TD Settlement Agreement, among other things, contemplates significant immediate payments to TD Bank, who ought to be an unsecured creditor, in priority to the Applicants and the Debtors’ other creditors,” KingSett’s filing reads.
The claim also calls out TD for failing to notify KingSett or other first-ranking lenders that it was placing charges on StateView properties. The filings also indicate TD has had a court-appointed “Information Officer” from BDO Canada Ltd. embedded to monitor StateView since April 4.
TD has said it cannot comment while the matter is before the courts.