Developers found guilty of defrauding investors out of retirement savings in Barrie, Winnipeg

Two men have been found guilty of fraud over $5,000 after misleading investors on two never-realized projects in Barrie, Ont., and in Winnipeg.

Justice Daniel Moore delivered his judgment in the judge-alone criminal fraud trial of Jawad Rathore and Vince Petrozza in a downtown Toronto courtroom Wednesday. 

"Mr. Rathore and Mr. Petrozza are smart, sophisticated businessmen," Moore said, before telling the two men to stand as he delivered his judgment. 

"I find beyond a reasonable doubt that they both intentionally misled investors about the value of their secured interest in order to induce them into investing," Moore said. "While they likely hoped that all the projects would be successful and the investors would be paid back, I find beyond a reasonable doubt that they knew they were putting investor funds at risk."

Investors lost tens of thousands of dollars after using the pair's company, Fortress Real Developments, to invest in the mixed-use Collier Centre in Barrie, Ont., and a condo tower called SkyCity in Winnipeg. 

The charges related to syndicated mortgages, which are loans made by several investors to cover initial development costs like marketing and zoning, with the land itself acting as collateral. 

Savings wiped out for some

After 38 years as a federal employee, Linda Bilorosek of Burlington Ont., invested her entire retirement savings in the SkyCity project. Of her $63,000 investment, she lost about $56,000. 

Her relief was evident speaking to CBC News after the verdict was handed down. 

"I am so happy. I can't tell you — I am very emotional," Bilorosek said, her voice warbling with emotion. "It's been really stressful … it's a relief."

In the beginning of this ordeal, Bilorosek said she didn't even tell people in her family that she'd lost money.

"I was ashamed that I was duped into doing this investment — I thought that I was smarter than that. This just proves how we were conned," she said.

Eduardo Cavaco invested over $269,000 in the Collier Centre project. "I lost every penny of that money," he told CBC News. 

Seeing Moore's verdict handed down brought "a little bit of satisfaction," Cavaco said, but he still worries that investors in these projects are "not going to see any of their money."

"This is terrible. I feel terrible about that," he said.

The maximum sentence for fraud over $5,000 is 14 years in prison. The proceedings are set to resume again next month.

Crown says investors misled

During closing arguments in April, the defence had argued the investments' risks were made clear to those providing the loans and that Rathore and Petrozza didn't deal with investors directly, relying instead on mortgage brokers. 

But Crown prosecutors argued at the time that investors had been misled about the value of the land involved in their loans, which was a central theme in the marketing of the investments as safe and secure.

As syndicated mortgage investments are secured against land, the value of that land is key, Crown prosecutors said. The value is so important because if something goes awry with the development, the investments can be recovered by selling the land.

In making the argument that Rathore and Petrozza didn't deal with investors directly, the defence said the mortgage brokers had a legal duty to ensure the investors were aware of the risk. 

But a video entered into evidence showed Petrozza training brokers on what needed to be disclosed to investors in the syndicated mortgages. Prosecutors also said Petrozza and Rathore knew there were property appraisals that had lower values than the opinion of value given to investors, according to internal email discussions.