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Toronto Star July 28 2000, - by Tony Van Alphen, Business Reporter
Employees colluded with developers: Ontario Realty
Public servants colluded with a Vaughan-based developer and related companies for concessions and price breaks worth millions of dollars on land deals after their sale, the Ontario government's real estate arm charged yesterday.
In new allegations of fraud and breach of trust, Ontario Realty Corp. claimed that one former senior employee authorized more than $1.1 million in concessions to the Gabriele Group of companies in only two months last year.
Furthermore, Ontario Realty charged in an amended lawsuit that an agency employee acted for a developer to get municipal subdivision approvals after selling it provincial government land.
The agency indicated it has increased the list of defendants by 17 to 40 and is suing them for $37 million. New defendants include a fourth former government employee and several firms with ties to the Gabriele Group. One defendant is Mauro Tonietto, a director and officer of several Gabriele-related companies. Another is his wife, listed as the head of two Tonietto companies, Rosebury Holdings and Nima Investments.
The latest allegations of collusion in sweetheart real estate deals and site clean-up contracts extend a controversy that has plagued the provincial agency for months.
Ontario Realty has hired outside forensic auditors to investigate its affairs and the Ontario Provincial Police is probing the agency. Police have laid no charges.
In its initial statement of claim in May, Ontario Realty alleged bid rigging, fraudulent invoicing and kickbacks involving cleanup contracts.
The latest claim filed yesterday in Ontario Superior Court of Justice makes more allegations of that activity, including payment of secret commissions to two ex-agency staff.
It includes for the first time allegations of staff slashing prices and granting concessions on land deals.
The claim, which has not been proven in court, says the agency's findings ``demonstrate a clear pattern of collusion'' among former Ontario Realty managers Vince Catalfo, John Perdue and other unknown employees, the Gabriele companies and the Vaughan-based Tonietto firms.
The claim says the employees, Gabriele and Tonietto firms conspired to defraud Ontario Realty through ``unjustifiable price reductions and consessions. Some properties were sold at substantially less than fair market value.''
Ontario Realty alleges that six months after the sale of 88 acres in Bowmanville to Rosebury for $1,725,000 in 1996, an unknown agency employee or employees agreed ``without justification'' to cut the price by $291,861 because of servicing costs - despite a clause disallowing such claims.
Ontario Realty also says Perdue acted as ``project manager'' for Rosebury to secure municipal approvals for a subdivision in a ``blatant and untenable conflict of interest.''
Perdue, who could not be reached for comment last night, was Ontario Realty's co-ordinator of land development when he left last October after more than 20 years at the agency.
Ontario Realty said the sale closed almost a year later and the property was registered in the name of St. Stephen's Estates, a Gabriele company. St. Stephen's Estates asked Catalfo for a $650,000 reduction in the mortgage the agency had provided the firm.
Ontario Realty then credited $508,361.20 against the vendor-take-back mortgage "for no apparent justifable reason'' and no benefits, the agency says in its statement of claim.
In addition to the mortgage credit, Ontario Realty provided a further $86,128.74 discount to St. Stephen's, the agency says.
The price cut and mortgage discount shaved more than 51 per cent off the purchase price, according to the agency.
Catalfo, the agency's former manager of institutional and environmental services, could not be reached for comment yesterday. Earlier, he declined comment on other allegations on the advice of his lawyer.
The claim said Ontario Realty employees cut $300,000 off the purchase price of $2.2 million for P. Gabriele & Sons for a Mississauga property in 1998.
The agency says Catalfo, who left last year, authorized a $622,047 reduction on the $2.6-million sale of an Aurora property to P. Gabriele & Sons in 1999. "Catalfo authorized in excess of $1.1 million in concessions to the Gabriele companies alone in the period April and May, 1999,'' the claim says.
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