More than five years after dozens of Greater Toronto Area investors discovered they had lost the millions they had collectively invested in syndicated mortgages, their lawyer has been disbarred by the Bar Court of Ontario.
Christopher Di Giacomo acted on behalf of 84 clients who invested more than $7.7 million in 16 real estate projects with Black Bear Homes, a company controlled by a convicted fraudster.
In a syndicated mortgage, a borrower – in this case Black Bear Homes – finds more than one private lender to put money into a development property instead of going to a bank.
These particular syndicated mortgages were extremely high risk because the agreements offered no security for the clients’ investments, which were supposed to be used to renovate or build homes in Crystal Beach, Ontario, a community about 30 miles south of Niagara Falls on the shores of Lake Erie.
Instead, the contracts allowed the deferral of customer mortgages behind future mortgages for construction financing, and there were no restrictions on Black Bear’s use of the funds. So when the developer defaulted on its loans, the new first mortgagees sold the properties under power of sale, leaving the syndicated mortgage investors with nothing.
In its scathing decisions in December and March, the Law Society Tribunal’s Hearings Division determined that Di Giacomo never explained any of these risks to his clients and “deliberately was dishonest with his clients and completely failed to protect their clients.” interests and their investments.
“The scope of the misconduct, including fundamental failures to communicate with clients, conflicts of interest and mismanagement of trust funds, runs the gamut of breaches of a lawyer’s fundamental duties and obligations” , wrote Frederika M. Rotter for the court panel.
WATCH | 120 investors have lost millions in mortgages linked to a convicted fraudster:
Details of Di Giacomo’s misconduct include failing to explain that syndicated mortgages were above the purchase price of the properties, deferring his clients’ mortgages without their knowledge – in some cases – when he knew that Black Bear Homes had previously defaulted on its interest payments to customers, and by failing to disclose a conflict of interest before deferring its customers’ mortgages on four projects behind Di Giacomo’s own father’s mortgages.
Through his lawyer, Di Giacomo declined to comment on this story as he is currently appealing the court’s penalty decision to revoke his license.
Retirees lost over $150,000
Margaret Wong, a retiree who invested and lost $200,000 in four Black Bear Homes projects, says she has finally regained some faith in lawyers.
“I just hope the bar association sticks with their decision to revoke her license,” she said.
“Thus, other lawyers will be informed that there will be penalties if they deliberately proceed with such ignorance and without any obligation of their office.”
Alexander Wong – a friend of Margaret Wong from the church – lost $160,000 which he invested in three projects.
“It affected our lives,” he told CBC News. “I think they made the right decision…to ensure that the bar will have public confidence in the administration of justice.”
Both said they partly blamed Di Giacomo for their losses and those of other investors, as he had deferred their mortgages on the title behind others without informing them.
“By signing this, we totally lost control of the property,” Margaret Wong said. “The value of the property was 100% mortgage and Black Bear never contributed a dime to the properties.”
CBC News first reported on these syndicated mortgages in a 2017 investigation, which revealed how Wong and more than 100 others from the GTA’s Chinese community invested, and likely lost, $9 million. in investments with Black Bear Homes.
The syndicated mortgages were solicited by Dominic Ha, a then-registered mortgage agent, whom many investors knew from the church.
Ha received 10% of the funds for each syndicated mortgage he applied for “mortgage referral, referral, management and consulting fees,” according to the contracts.
The bar panel found that Ha was also an executive of Black Bear Homes, a real estate company controlled by convicted fraudster Gary Fraser.
Fraser had previously been convicted of 28 counts of fraud over $5,000 in 2008 for defrauding 13 victims of more than $2 million between 2000 and 2007, according to Niagara police.
No criminal charges
No criminal charges were ever laid in the Black Bear Homes case. York Regional Police looked into the syndicated mortgages, but closed their investigation in October 2017.
After CBC News’ investigation, Ha’s mortgage agent license was revoked by the provincial regulator in 2018 and he and his business both filed for bankruptcy.
Di Giacomo also failed to disclose that Ha was in a conflict of interest advising clients on their investments, according to the court ruling.
He never told his clients that Ha was a director of Black Bear Homes and received a 10% commission on every mortgage investment.
Di Giacomo told the panel that he was unaware of the fees Ha received from each client. But the panel didn’t believe him, pointing out that the fees are listed in the mortgage documents and that Di Giacomo’s client trust records show he advanced the funds for the fees for each project to Ha’s company. .
Di Giacomo claims “extreme incompetence”
Di Giacomo’s attorney and an attorney representing the Law Society of Ontario (LSO) provided a joint submission to the court panel in which Di Giacomo admitted misconduct, but explained that his actions were the result of ” extreme incompetence”.
These submissions argued that Di Giacomo did not understand his obligations to his clients, did not understand who he was acting for, and that he believed his client was Black Bear Homes – not the syndicated mortgage investors.
As a result, they proposed a one-year license suspension sentence, alongside a permanent restriction barring Di Giacomo from working on syndicated mortgages. Di Giacomo is also expected to reimburse clients for approximately $120,000 he received from them in fees.
The panel did not accept that Di Giacomo did not know what he was doing. Instead, they called him a “seasoned professional” who had practiced law in the United States for 13 years without incident and made various transfers of funds for syndicated mortgages, as stated in the contracts, without issue.
“The circumstantial evidence leads to an inference, on a balance of probabilities, that counsel was not duped, but acted deliberately or willfully or recklessly,” the decision reads.
“The attorney put Black Bear’s interests ahead of his clients’ interests. He also preferred his father’s interests.”
In his notice of appeal, Di Giacomo claimed that the tribunal panel erred in law by denying the joint submission penalty, failing to accept his conduct as grossly incompetent, and making findings of dishonesty and/ or willful or reckless misconduct without sufficient evidence.
The panel accepted parts of the joint submission. He ordered Di Giacomo to reimburse the 84 clients for his services and to pay $150,000 in fees to the LSO.
Margaret Wong and Alexander Wong now hope the LSO will reconsider its decision to deny compensation to investors through the Law Society’s Compensation Fund, which helps clients who have lost money due to the dishonesty of a lawyer or paralegal.