Ontario home developer accused of $37M 'cheque-kiting' fraud scheme

A major Ontario home developer is facing startling allegations from one of the big five banks that it orchestrated a "highly sophisticated," year-long fraud totalling over $37 million.

TD Bank has filed a lawsuit against StateView Homes, based in Woodbridge, Ont., north of Toronto, and headed by brothers Carlo and Dino Taurasi, alleging the company carried out a "cheque-kiting" scheme from April 2022 to last month.

The lawsuit also names as defendants 25 associated corporations, five directors of those companies and StateView's former chief financial officer Daniel Ciccone.

TD alleges the defendants wrote thousands of bad cheques for large sums of money from both corporate and personal accounts at other banks, according to its statement of claim, filed in the Ontario Superior Court of Justice in Toronto.

TD alleges the defendants would cash the cheques into TD accounts and TD would conditionally release the money before the cheque cleared. The bank says the defendants would quickly withdraw the funds and then cancel the cheque to prevent the money from actually being transferred to the TD account. 

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Over the course of the year, that left TD being owed $37,028,055.73 plus interest, the bank claims.

"Review of the account histories revealed what appears to be a highly sophisticated cheque kiting fraud spanning about 12 months and dozens of accounts, implicating multiple financial institutions," the bank says in its claim.

To avoid detection, the defendants were routinely doing these "sham transactions" across 22 accounts to create the illusion of fresh funds coming in, TD alleges.  

While StateView did not file a statement of defence, it appears to have a proposed settlement agreement with TD to pay back all the money by July, according to a signed copy of the agreement viewed by CBC Toronto but not contained in publicly available court documents.

Another court document seen by CBC Toronto indicates the lawsuit was filed in order to cement the settlement. 

Neither TD nor StateView would comment on the settlement.

Three other lenders are also suing — to get back nearly $200 million they loaned StateView for developments in King City and Markham, Ont.

Two lenders, KingSett Mortgage Corporation and Dorr Capital Corporation, allege in statements of claim that StateView has not paid development charges and permits, or what it owes contractors for one project, and has tried to sell another without the lenders' consent.

These court actions raise questions about the future of about 1,400 homes StateView has planned across the Toronto area, many of which have already been sold but not yet built. 

Developer blames former executive

In a statement to CBC Toronto, StateView said Carlo and Dino Taurasi didn't know about or participate in the alleged scheme and are co-operating with TD to repay the money.

The alleged fraud "was perpetrated solely at the hands" of the company's former CFO, Ciccone, the statement said.    

"When they were alerted to the situation [in March], Carlo and Dino immediately co-operated with the investigation and were quick to remove the CFO from his position."   

"Neither Carlo nor Dino benefits financially from these activities," StateView said. "This situation has caused extensive disruption to their personal lives and created significant hardships to them personally and to their families as they work towards a resolution." 

CBC Toronto attempted to reach Carlo and Dino Taurasi through both the company and their lawyer, but did not receive a response. Emails and a phone call to Ciccone went unanswered. 

In the proposed settlement, until the money is repaid, TD plans to hold 31 properties including at least three of StateView's pre-construction projects in southern Ontario: Nao Towns II in Markham, Bea Towns in Barrie and Elm&Co in Whitchurch-Stouffville.

StateView has planned to build over 500 homes in those projects, according to its website. 

TD has also proposed taking control of several luxury homes belonging to Carlo and Dino Taurasi in King City and Richmond Hill and ski chalets in Collingwood.  

Second lawsuit

StateView and its subsidiaries are facing other financial challenges.   

The lenders Atrium Mortgage Investment Corporation and Dorr Capital Corporation earlier this week filed a claim against Carlo, Dino and StateView's Nao Towns II corporation — seeking immediate repayment of a $24 million loan for the 96-unit project under construction in Markham.

It's also one of the many StateView properties TD is eyeing. 

When the lenders learned about the cheque-kiting allegations, they demanded their money back from StateView, they said in their statement of claim, also filed in the Ontario Superior Court of Justice.

The lenders also allege StateView failed to make its monthly interest payment of $277,000 in April, and took out additional mortgages on the properties without advising Atrium and Dorr.

KingSett and Dorr filed a separate claim Wednesday, demanding that StateView pay back a further $172 million in loans for a commercial industrial property and four developments: Minu Towns, Nao Towns and On the Mark in Markham, and High Crown Estates in King City, where it plans to build 530 units. 

They allege in their claim that StateView "effectively has no liquidity" and liens are being registered against at least one of the properties, On the Mark, for unpaid taxes, development charges and contractor fees, which could delay the closing of the project.

"KingSett has been made aware that certain funds advanced by KingSett for the explicit purpose of paying development charges to the City of Markham and the Township of King have been diverted and used for other purposes," the lender says in the statement of claim. 

KingSett said it hired a firm to find out where the money went, but StateView's books and records are either incomplete or nonexistent. 

KingSett and Dorr also allege that StateView couldn't pay its monthly interest on the loan because of insufficient funds in their accounts.

According to their claim, they weren't informed that StateView was entering into a settlement agreement with TD to immediately begin repaying the $37 million.

All three lenders are asking the courts to order a receiver to take control and sell off StateView's assets and properties to repay the debt.

StateView has not yet filed a statement of defence for these cases. 

What about the home buyers?

StateView said in its statement it understands buyers and lenders are concerned. But the company said it plans to "complete all projects currently under construction."

"We … are actively working with our partners to move forward with as many projects as possible while also recognizing the position of our lenders."  

Insolvency lawyer David Schatzker, who is not involved in the case, says if lenders succeed in getting a receiver to take control of StateView properties, there's not a lot concerned buyers could do.  

The receiver may allow the project to finish and the buyers would be able to complete their home purchases, he said. 

However if a receiver orders the projects sold to repay lenders, those buyers may never see the homes they bought, or their deposits. 

"Ultimately they may suffer a loss if the project is not completed," Schatzker said. 

"They might theoretically at some point sue the developer but the likelihood is that, after the receivership is completed, there's probably not going to be a lot of money left over."