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$230-million killing _on Cadillac-Fairview deal

How to ‘legally’ fleece tenants

By G. van HOUTEN
Housing is a social need and a social
Tesponsibility. Decent affordable hous-
Ing ought to be a right for all working
People.
However, big businessmen are in the
Ousing business for one purpose — to
make as much profit as possible. The
higher the profit, the more ‘‘successful”’
1S the businessman.
the arely does the depth of corruption of
Privately-owned real estate racket
Ome so obvious as in the case of the
Fecent Cadillac apartments affair.

The Deal

On August 24, 1982, Cadillac-Fairview
greed to sell its interest in 26 apartment
Complexes, totalling 11,000 units, to
Teymac Credit Corporation, a com-

Pany owned by Leonard Rosenberg.
aN sale price was $270,000,000.
a illac arrived at this figure by consult-
8 the Laventhol & Howarth firm. Test
Sales indicated that this price was the
prixet value for the apartments in To-
Onto. Cadillac took back mortgages to-

talling $223,000,000.

ae November 4, one day before the
illac deal closed, Greymac Credit
Sold these very same apartments to
ilderkin Investments Ltd., a company
Ecce by William Player. The price was
292,000,000, giving Greymac Credit an

that Saudi Arabians had bought the
apartments. : :

Circumstantial evidence points in an
entirely different direction. ‘

Firstly, existing property laws require
the signatures of both seller and buyer to
make a transfer of property ownership
legal. Yet not a single signature represent-
ing the 50 numbered was legible. Was
there something to hide?

Secondly, all the numbered companies
agreed to lease the apartment complexes
to Maysfield Property Mangement Inc.,
which just happened to be jointly owned
(%3) by Greymac Credit and (73) by
Kilderkin. This leasing agreement was
made on the same day as the sales —
November 4. This implies that Rosen-
berg and Player in practice never lost con-
trol of the apartments.

Thirdly, all the numbered companies
were incorporated by the law firm
Kitamura, Yates, Margolis, Mastin &
Champagne. This firm also represented
the numbered companies in their deal-
ings with Maysfield.

The fourth partner in this law firm,
A.J.R. Mastin, was a vice-president of
Seaway Trust. The president of Seaway
Trust was Andrew Markle who was the
principal shareholder through a num-
bered company, 435713 Ontario Inc.
Mastin is an expert on numbered com-

fasy $22,000,000 in profit. panies.
[ee
Ownership/control Mortgage sources other
than Cadillac
Cadillac

Greymac Trust (Rosenberg)
. Kild rkin, (Player) _

50 numbered companies
(Rosenberg & Player)

Maysfield
(Rosenberg & Player)

eee

Crown Trust (Rosenberg)
Greymac Trust (Rosenberg)

Seaway Trust
(Rosenberg & Player)

In addition, Greymac Credit trans-
ig the Cadillac mortgages to Kilder-
i for a fee of $20,000,000.
aie total profit for Rosenberg’s

Teymac Credit was $42,000,000 for less

an a day’s paper work.

Again, on the same day, Player’s Kil-
€rkin sold the 26 apartment complexes
© 50 numbered companies in 26 separate

Sere ments. The ‘price this time was
: 00,000,000, giving Kilderkin a hand-
Po profit (after ‘‘costs’’) of
188,000,000 for less than a day’s paper
Work,
wie numbered companies took over
; € Cadillac mortgages. In addition, they
0k another $152,000,000 in mortgages
T M three trust companies — Crown
Tust and Greymac Trust, both owned
by Rosenberg, and Seaway Trust, owned
Y Andrew Markle.

Mystery of Numbered Companies

he owners of the numbered com-
Tae are alleged to be unknown. The
*ronto monopoly media speculated

However, Markle and Mastin are not
independent players in this mystery.

According to Touche Ross Ltd.,
which was appointed by the Ontario
Government to manage Greymac Trust
and Seaway Trust, the relationship be-
tween these two companies was so close
that Seaway ‘“‘may have been subject to
some form of direction by the manage-
ment of Greymac Trust.” In other
words, Markle and Mastin worked for
Rosenberg.

But this is not all. Player’s Kilderkin
was heavily in debt to both Greymac
Trust and Seaway Trust. In fact, it was
seriously behind in its payments to Sea-
way Trust. According to Touche Ross,
Seaway’s apparent disregard ‘‘of the
growing dependence of Seaway on the
financial capacity of Kilderkin raises at
least an inference that Seaway may be in
some ‘measure controlled by William
Player.’ (our emphasis)

In short, Markle and Mastin played the
role of proxies. One cannot help but con-

clude that Mastin’s activities on behalf of

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price

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the numbered companies were also those
of a proxy.
The Real Picture

What at first appears as a very com-
plex series of transactions involving a
number of apparently different com-
panies (see diagram) turns into quite a
simple picture if we replace the names of
the companies with the names of the per-
sons who own or effectively control them.

Done this way, Cadillac sold to
Rosenberg (Greymac Credit). He then
sold to Player (Kilderkin). Player then
sold to himself and Rosenberg (through
control of the numbered companies) who
used these proxies to borrow from them-
selves (Crown, Greymac and Seaway
Trusts). They then leased the property to
themselves.

The whole process took only a day.
When the Cadillac part of the deal closed
on November 5, Cadillac merely trans-
ferred its property division directly to
Maysfield.

There were many ‘‘smaller’’ ir-
regularities too. The numbered com-
panies were supposed to pay $15,000,000
to Seaway, but no receipt was issued. At
the same time, Kilderkin substituted it-
self for Seaway so that it ended up with
the $15,000,000.

In another case, Greymac Credit,
which owned Crown Trust, caused the
latter to advance about $63,000,000 in
mortgage money to the numbered com-
panies. Yet no mention was made of
Crown Trust in the mortgage documents.

Purpose of Flipping

Flipping is the rapid sequential sale of
revenue producing property. Its two
principal aims as far as Rosenberg and
Player were concermed were: (1) to make
a quick easy buck (Greymac Credit and
Kilderkin came away with a total of
$230,000,000 in profit); (2) to raise artifi-
cially the market value of the apartment
complexes so as to justify hefty rent in-
creases as a source of future super-
profits. Rent increases were to be jus-
tified on the grounds that mortgage costs
had skyrocketed. But even then, Rosen-
berg and Player would have made huge
profits since the mortgages were held by
their own companies.

Tory Connection

From the outset, it should be made
clear that the Government of Ontario did
not act just because there were irregular:

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ities. It intervened for selfish political ©
reasons.

It had become quite clear that the debt
load of the three trust companies could

Analysis

very well lead to bankruptcy. According
to Touche Ross, Greymac, Trust had a
$62,000,000 deficiency in assets and
Seaway Trust was $75,000,000 in debt.
Crown Trust was in worse shape.’

What the Ontario Government feared
was that the three trust companies would
go bankrupt putting the savings of
thousands of depositors at risk. The To-
ries did not want an Argosy or a Re-Mor
on a huge scale.

Further, the government did not want
the involvement of prominent Tories to
become too well known.

A former president of Greymac Trust
was David Cowper who, at the time of
the Cadillac deal, was still serving “‘in
some capacity with Greymac Trust.”
Cowper, according to the same article in
the November 20 Financial Post is ‘‘an
Ontario Tory with a long track record in
fund raising and campaign manage-
ment.””

Once a minister of Consumer and
Commercial Relations and then Attor-
ney General until his defeat in the 1975
Ontario election, John Clement was a
director of Greymac Mortgage for six
years. Although Greymac Mortgage,
which was sold by Rosenberg to Player
in 1982, was fot directly involved in the
Cadillac deal, it nevertheless implicates
Clement with Rosenberg and Player.

Was it accidental that Rosenberg and .
Player made friends with Tories directly
connected to the Attorney General’s
office? Clearly, Rosenberg and Player
had a pipeline to the higher echelons of
the Tory government.

In short, the Tories acted quickly to
prevent the scandal from blowing up in
their faces. Their aim was to prevent the
public from drawing the conclusion that
the Ontario Government was in some
way helping Rosenberg and Player rook
almost 11,000 tenants and thousands of
depositors of millions of dollars.

Corruption for profits is not particu-
larly new either for big business or for the
governments they control. It is a fact of
life in a society run by a small number
of huge corporations whose main if not
sole motive is profit.

What is needed is public non-profit
housing. By taking the profit motive out
of this vital social need, working people
will be able to obtain decent, affordable
housing.

PACIFIC TRIBUNE—MAY 13, 1983—Page 5

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