Připojte se k našemu seznamu příjemců newsletteru! 
Klikněte zde.

Closing Arguments (Apr 1-2, 2025)

​​

Day 1

​

Crown Prosecution's Closing Argument

The prosecution began by restating the charges against the defendants, emphasizing the seriousness of the allegations. Originally there were two charges- Fraud and Secret Commissions on four development projects, however the Crown narrowed this to Fraud on two projects: Collier and Sky City.

 

Crown counsel Vallery Bayly highlighted the three elements of fraud. Deceit, Dishonesty & Deprivation. 

​

1. Deceit

2. Dishonesty

3. Deprivation

​

1. Deceit

 

The prosecution argued that promotional contained falsehoods. Documents used terms like "as is" and described Loan to Value "LTV" based on current value, and called the investment secured without clarifying that the values were opinions, not actual appraisals.  

​

Materials shows included a “What is LTV?” slide stating “proper evaluations are essential” without indicating the basis for the LTV, and a pamphlet explaining appraisals and "why LTV matters".  

 

The appraisal section of the FSCO investor disclosure firm, showed an appraisal of $21 Million, however this was this was the opinion of value, ie the future value. ​In some documents the "project value" line was left blank, yet the in the Law Society disclosure form, point #9 indicates “I am satisfied that current value is $21 Million, LTV 85%.

​

The prosecution stressed that investors testified about security and LTV being import to their investments and argued that forms should have been honest. It was not acceptable to tell investors their funds were secure when that was not true. The Crown stated this was not a "buyer beware" situation.   

​

2. Dishonesty

 

The prosecution argued the the failure to disclose actual "as is" appraisals was dishonest.  

​

Evidence suggested that Petrozza had an appraisal as of August 16, 2013, and anther $11 million appraisal, both not provided to investors. Emails discussed a July 24, 2012 appraisal of $6.9 million, demonstrating that Rathore and Petrozza knew real estate appraisals were much lower than the figures presented publicly.  

​

The prosecution anticipated the defence would argue that appraisals had to be kept confidential, however a contractual confidential clause does not negate fraud, and it was not on the investors to request appraisals.

3. Deprivation

 

The prosecution cited the Theroux fraud case, noting that a dishonest act resulting in deprivation alone suffices conviction- even if the defendants honestly believed in the completion of projects.   

Prosecution emphasized evidence showing:

​

• Rathore and Petrozza were investors were told and not told - they provided training and were personally involved in the marketing materials

• Training videos and emails demonstrated knowledge of disclosure omissions . 

 

In an email chain between Rathore & Petrozza July 4-6 2012- Petrozza asked for an appraisal to Jeff Cheung - Subject line is Appraisal. They discuss the $6.9 appraisal. Petrozza knows $6.9 million figure will be a problem and not sufficient. They discuss the Felice evaluation and say “Felice for the win!”

Other evidence from the Sky City documents, and similar email chains. Email between Petrozza and another Fortress employee - Fortress employee Mr Cercosta states “ I don’t even know why we paid or wasted time “ … Petrozza replies “I said get me an appraisal or evaluation of $9.4 million or better! “ Cercosta replies “It’s an insulting joke”, Petrozza replies “ Agreed, but we get what we need to get to the end goal”. 

​

• Evaluators confirmed they did not intend their opinions of value to be shared with mom and pop investors.

​

The Crown concluded that the defendants knowingly marketed the investments as secure when they were not, and this dishonesty caused deprivation to the investors.

​

​

Defence's Closing Argument

​

Scott Fenton began by noting the RCMP lengthy investigation and explaining that the Crown narrowed the charged to two projects. 

 

Fenton argued that: 

​

•  Fortress had over 80 projects, and many were successful. (Note that this statement was not supported by evidence. To review a Fortress project analysis, please refer here.  Out of the 80 projects, 18 exited with no payout at all to investors (total loss of over $240 Million; 28 projects exited with partial payouts to investors with losses of $180 Million. The total amount of investor funds never repaid to date is over $400 Million. During his arguments, he only listed a handful which were successful. )

​

• Brokers had a legal duty under the act to ensure their clients understood risks and the opinions of value, and this responsibility did not lie with Rathore & Petrozza. (Note: Petrozza was actually a licensed broker with Centro/BDMC while also a controlling principal of Fortress and had a duty of care to the investors).

​

• Fortress was developer facing, while Centro/BDMC were investor facing 

 

 

The Defence stressed that:

​​

• Investors could have asked questions or reviews materials more carefully.

• In the case of Collier, that the initial developer Mady went bankrupt and that is the “Elephant in the room” (Fact Check-Collier was initially developed by Mady Development Corp; Mady filed for creditor protection January 30 2015; In November 2015 Fortress purchased the Collier Centre and as lead developer they were responsible to repay the SML investors. Fortress later defaulted on its first loan to Morisson. Morrison then listed the property for sale in 2018; in 2019 the property was sold however there were no recoveries to repay the SML investors.

• Brokers were responsible for explaining terms and conditions to SML investors.

• Independant Legal Advice (ILA) was provided to investors. (Fact Check: the ILA was arranged and paid for by Fortress)

• All documents were conveyed to investors via brokerages.

• The documents that Rathore & Petrozza showed the importance of brokers to disclose information to investors.  

At one point, the judged asked: “Were the fees payable whether the project was successful or not? If they were not profitable and not completed do they have to pay the money back?”  and the the defence replied “ Well investors could have asked” . The judge responded” I’m asking you.” He added: “ It was calculated assuming it will be profitable?” Defence responded “ It’s not a fee based on profitability” and added” Anyone was free to ask”  (Note that the courtroom erupted in laughter from the viewers.)

The defence continued to emphasize risk disclosure and argued that the evidence did not support a finding of fraud.  

​

Day 2

 

Defence Closing Arguments

Defence Gerald Chan reiterated that:  

​

1. Opinions of value were fully disclosed to investors

2. Opinions of value were independent 

3. Fortress was not required to disclose the other valuations/ appraisals in its possession-and in fact was prohibited from doing so

4. Crown's cases are distinguishable (ie. this case differs from a precedent case, and therefore, the precedent's legal reasoning or holding does not apply to the this case due to materially different facts.)

The Defence argued that:

 

• Fortress was not investor-facing, and disclosures to investors were made by brokers and lawyers. Brokers dealt with the investors, and had the duty to disclose to investors per regulations- however that regulation was not applicable to Fortress.​ The Judge responded: “Brokers don’t immunize Fortress from responsibility”.​

• The judge cannot rely on common market judgement about valuation methods.

• Different valuation methodologies exist, and the evidence did not conclusively show misuse. 

​

In exchange with the judge about valuation methodology the defence argued that anticipated future value could legitimately affect valuations and that property valuation is a "murky area".  

​

The defence also stated that email chains did not demonstrate undue interference in valuation information and that working with developers and using independent assessments was lawful. The closing argument ended with the defence maintaining that the case did cannot be deemed as fraud.