StateView Homes founders sue former CFO for alleged $37 million fraud

Two brothers who founded a now-bankrupt Ontario home-building company are suing its former chief financial officer, accusing the longtime family friend of masterminding a $37 million fraud that caused the company's downfall, according to court documents.

Carlo and Dino Taurasi, who founded Woodbridge-based StateView Homes in 2010, accuse Daniel Ciccone of running a year-long “check writing scheme” involving hundreds of bounced checks, 22 accounts in two banks and forged signatures, according to a statement of claim. filed in April with the Ontario Superior Court of Justice in Toronto.

The alleged scheme took place between April 2022 and March 2023.

The brothers claim Ciccone wrote “hundreds, if not thousands, of unauthorized checks” drawn from inactive Royal Bank of Canada (RBC) accounts linked to former projects.

According to the complaint, he allegedly deposited the checks into TD Bank accounts and then stopped their payment – ​​after TD temporarily credited the accounts and before the funds were transferred from RBC.

“Mr. Ciccone exploited the failure of TD and RBC to provide sufficient safeguards against check kiting schemes to perpetrate a $37 million fraud on Taurasi's business accounts,” the complaint states.

None of the allegations have been tested in court. Ciccone indicated in a court filing that he intends to defend himself against the suit, but has not yet filed a statement of defense. Ciccone does not face criminal charges. His lawyer declined further comment.

The complaint alleges that Ciccone used the funds for “unknown purposes” and covered the overdraft with legitimate funds or by writing more checks.

The suit also names RBC and TD Bank as defendants, arguing that the financial institutions allowed the kite flying to continue for a year undetected. And he says the Taurasis, who were the account holders, should have been informed sooner.

“Due to the negligence of RBC and TD, Mr. Ciccone was able to defraud Taurasi’s business accounts…causing the complete collapse of StateView’s business and significant personal liability for Carlo and Dino.”

Spokespeople for TD and RBC said the banks could not comment while the matter was before the courts.

8 StateView projects enter into receivership

The alleged check-issuing scheme became public last April when TD Bank filed a lawsuit against StateView Homes and 25 associated companies, seeking to recover the $37 million in overdraft.

At the time, the brothers said they were not involved in Ciccone's “misconduct” and had fired him. StateView has entered into a settlement agreement to begin repaying the money immediately.

In response, four of StateView's largest creditors successfully requested the appointment of a receiver to collect their outstanding loans.

The Ontario Superior Court of Justice appointed KSV Restructuring as receiver in May 2023, giving it control of the Nao Towns, Nao Towns II, BEA Towns, Highview, Minu Towns, High Crown Estates, Elm and On the Mark projects of StateView, as well as participation. company controlled by the Taurasi brothers.

Former StateView Homes vice president Dino Taurasi, left, and CFO Daniel Ciccone. Ciccone intends to file a statement of defense, according to his attorney. (Instagram/StateView Houses)

The receiver reported later that month that StateView companies had received $77.2 million in deposits from 765 homebuyers for those projects, but as of May 1, 2023, the receivership companies had only 1,095 million dollars in their bank accounts. It revealed creditors owed $349 million in mortgages.

The Residential Building Regulatory Authority then suspended the licenses of 14 StateView companies in June, saying it was concerned about allegations of financial mismanagement. According to the HCRA, there are currently no StateView entities with an active license, meaning they cannot legally build homes in Ontario.

Brothers say CFO told them 'I screwed up': lawsuit

The Taurasis say Ciccone, a childhood friend of their younger brother, was hired a year after the company was founded. As CFO, he managed the company's finances, controlled all StateView companies' bank accounts and was the only one with credentials allowing him to access the online accounts, according to the claim.

The complaint says the business appeared to be doing well until one day in March 2023, when Ciccone asked the brothers to meet him at the company's office.

“Dino arrived to find Mr. Ciccone in distress, refusing to speak and visibly shaking while repeating, 'I screwed up,'” it read.

Ciccone eventually informed them that “with the assistance of certain TD employees” he had overdrawn the companies' TD accounts to “support capital financing of the company,” according to the statement. The Taurasis claim Ciccone told them that in three weeks he would receive funds that would “make TD whole” but that the overdraft was about to be discovered and that “his contacts at TD were on vacation.”

“Mr Ciccone broke down in tears, saying he had acted in the best interests of the company and the 'family' but that it would appear to the bank that he was 'kiting' and at risk of 'go to prison,' the statement read. said.

Eight of StateView Homes' residential projects went into receivership in May 2023 after TD Bank sued StateView Homes to recover the $37 million and several of the developer's creditors stepped in after their unpaid loans. (Paul Smith/CBC)

The Taurasis claim they were unaware of the blocked RBC checks and did not know their TD accounts had accumulated a $37 million overdraft until a few days after this conversation.

The brothers say RBC investigators eventually showed them some of the blocked checks, which they said showed that Ciccone had signed his own name instead of Carlo's and that “Dino's signature had clearly been forged.”

Shortly after, TD froze all accounts associated with the Taurasi name and RBC froze the brothers' business and personal accounts, as well as those of their spouses and children, according to the complaint.

The Taurasis claim they are now personally liable for at least 10 ongoing lawsuits from StateView's creditors and buyers, including a proposed class-action lawsuit seeking restitution for deposits lost when StateView became insolvent .

“Daniel's wrongdoing and the failure of TD and RBC to detect it has caused harm to us, our business, our customers and our stakeholders,” Taurasis said in a statement.

“We must seek justice in the courts and we will do so vigorously.”

Buyer contracts canceled as projects are sold

Last June, Superior Court Judge Michael A. Penny approved the receiver's plan to sell seven StateView housing projects and four industrial properties owned by the holding company. Some of these sales have already closed.

The sales process stipulates that buyers of the stalled StateView projects are not required to honor agreements signed by individual buyers who each put down thousands of dollars in deposits for the homes before going into escrow.

Tarion, Ontario's home warranty agency, has warned buyers with contracts to sell units in several of the projects in receivership that those contracts have already been canceled or will be canceled soon, and that they will not have no chance of buyers getting their deposits back through escrow. Buyers whose contracts are canceled can submit claims through Tarion and could receive a refund for deposits up to $100,000.