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More than five years after dozens of Greater Toronto Area investors found out they’d lost the millions they collectively invested in syndicated mortgages, their lawyer has been disbarred by the Law Society of Ontario’s tribunal.
Christopher Di Giacomo acted on behalf of 84 clients who invested more than $7.7 million on 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 invest money in a development property instead of going to a bank.
These particular syndicated mortgages were extremely high-risk because the agreements provided no security for the clients’ investments, which were supposed to go toward renovating or building houses in Crystal Beach, Ont., a community about 30 kilometres south of Niagara Falls on the shores of Lake Erie.
Instead, the contracts allowed for the clients’ mortgages to be postponed 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.
‘Deliberately dishonest’
In its scathing decisions in December and March, the Law Society Tribunal Hearing Division determined Di Giacomo never explained any of those risks to his clients and “was deliberately dishonest with his clients and completely failed to protect their interests and investments.”
“The extent of the misconduct, including basic failures to communicate with clients, conflicts of interest, and mishandling of trust funds, spans the gamut of violations of a lawyer’s fundamental duties and obligations,” wrote Frederika M. Rotter for the tribunal’s panel.
WATCH | 120 investors lost millions in mortgages tied to convincted fraudster:
More than 120 people from the Greater Toronto Area’s Chinese community have likely lost nearly $9 million in syndicated mortgage investments solicited by someone they trusted and then loaned to a convicted fraudster, a CBC News investigation has found. 2:32
Details of Di Giacomo’s misconduct include failing to explain the syndicated mortgages were for more than the purchase price of the properties, postponing his clients’ mortgages without their knowledge — in some cases — despite knowing Black Bear Homes had already defaulted on its interest payments to clients, and failing to disclose a conflict of interest before postponing his clients’ mortgages on four projects behind mortgages from Di Giacomo’s own father.
Through his lawyer, Di Giacomo declined to comment for this story because he’s currently appealing the tribunal’s penalty decision to revoke his licence.
Retirees lost more than $150K
Margaret Wong, a retiree who invested and lost $200,000 across four Black Bear Homes projects, says she’s finally regained some faith in lawyers.
“I just hope the law society will stand by their decision to revoke his license,” she said.
“So other lawyers will be made aware that there will be penalties if they’re willfully proceeding with such ignorance and no obligation to their duties.”
Alexander Wong — a friend of Margaret Wong’s from church — lost $160,000 he invested across three projects.
“This affected our lives,” he told CBC News. “I think they made the right decision … to make sure the law society will have confidence from the public in the administration of justice.”
Both of them said they blame Di Giacomo in part for their losses, and other investors’ losses, because he postponed their mortgages on title behind others without informing them.
“By signing that we have totally lost control of the property,” said Margaret Wong. “The value of the property was 100 per cent mortgage and Black Bear has never contributed a cent 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 Greater Toronto Area’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 of the investors knew from church.
Ha received 10 per cent of the funds for each syndicated mortgage he solicited for “mortgage orientation, referral, management and consulting fees,” according to the contracts.
The law society’s panel found that Ha was also one of the principals of Black Bear Homes, a real estate company controlled by Gary Fraser, a convicted fraudster.
Fraser was previously 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 have ever been laid in the Black Bear Homes case. York Regional Police looked into the syndicated mortgages, but closed their investigation in October 2017.
After the CBC News investigation, Ha’s mortgage agent licence was revoked by the provincial regulator in 2018 and he and his company both declared bankruptcy.
Di Giacomo also failed to disclose that Ha was in a conflict of interest by advising his clients on their investments, according to the tribunal decision.
He never told his clients Ha was a principal of Black Bear Homes and was receiving a 10 per cent fee from each mortgage investment.
Di Giacomo submitted to the panel that he was not aware of the fee Ha received from each client. But the panel didn’t believe him, pointing out that the fee is listed in the mortgage documents and Di Giacomo’s client trust ledgers show he advanced the funds for the fee in each project to Ha’s company.
Di Giacomo claims ‘extreme incompetence’
Di Giacomo’s lawyer and a lawyer representing the Law Society of Ontario (LSO) provided a joint submission to the tribunal panel in which Di Giacomo admitted to misconduct, but explained his actions were the result of “extreme incompetence.”
Those submissions argued Di Giacomo did not understand his obligations to his clients, did not understand who he was acting for, and that he thought his client was Black Bear Homes — not the syndicated mortgage investors.
As a result, they proposed a penalty of a one-year licence suspension, alongside a permanent restriction banning Di Giacomo from work involving syndicated mortgages. Di Giacomo would also have to refund the clients roughly $120,000 he received from them in fees.
The panel didn’t accept that Di Giacomo didn’t know what he was doing. Instead, they referred to him as a “seasoned professional” who had practised law in the U.S. for 13 years without incident and completed various transfers of funds for the syndicated mortgages, as outlined in the contracts, without issue.
“The circumstantial evidence leads to an inference, on the balance of probabilities, that the Lawyer was not duped, but acted deliberately or wilfully or recklessly,” reads the decision.
“The lawyer preferred the interests of Black Bear to the interests of his clients. He also preferred the interests of his father.”
In his notice of appeal, Di Giacomo claimed the tribunal panel erred in law by refusing the joint submission penalty, by failing to accept his conduct as extreme incompetence, and by drawing conclusions of dishonesty and/or wilful or reckless misconduct without sufficient evidence.
The panel did accept parts of the joint submission. It ordered Di Giacomo to refund the 84 clients for his services, and to pay $150,000 in costs to the LSO.
Now Margaret Wong and Alexander Wong are hoping the LSO will reconsider their decision to deny the investors compensation through the Law Society’s Compensation Fund, which helps clients who have lost money because of the dishonesty of a lawyer or paralegal.
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